porphyry exploration in Peru porphyry exploration in Peru Page II | ANNUAL REPORT 2015 porphyry exploration in Peru Table of Contents 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 Particulars 3 12 19 27 28 29 30 31 55 56 57 59 61 66 Page 1 | ANNUAL REPORT 2015 porphyry exploration in Peru porphyry exploration in Peru Operational Review Operational Review MANAGING DIRECTOR’S SUMMARY Inca’s focus of activity during 2014-2015 continued to be on the Chanape Project in Peru. On the back of proof of concept exploration results in 2013-2014, whereby epithermal and porphyry style mineralisation were confirmed at Chanape, the Company sought to obtain a Category II drill permit, known as a Semi Detailed Environmental Impact Assessment permit (or “sdEIA”) from Peru’s mining authority in preparation for sustained follow-up drilling. In the latter stages of 2014-2015 the sdEIA permit and certificate to commence work were granted and finally, by the close of the report period, a drill rig was mobilising to site to commence drilling. Surface exploration at Chanape in 2014-2015 continued to deliver strong results with strong gold and copper coming from sampling programmes in a number of different locations. We reported that the “prospectivity of Chanape tripled” in the 2014-2015 period with the list of drill targets increasing significantly. A tweak of value propositions and a successful capital raising late in the report period sees Inca well positioned for the new financial year. The sdEIA permit process took frustratingly longer than expected to obtain. What is supposedly a maximum 90 business day granting process for this highly important permit took nearly twice this time. During this period the Company undertook a thorough review of all previous data. Extensive surface sampling programmes were designed and executed and a comprehensive list of drill targets were generated. Several major mining companies committed resources to Inca’s Chanape Project during the 2014-2015 year and Chanape remains in the cross-hairs of an ever- increasing number of boardroom scopes and dialogue with majors continues. The new sdEIA has a significant drilling allowance of 22,500m of drilling on 59 drill platforms that covers nearly 100% of the project area, that lasts for a 24 month period. The permit was designed to cover the broad spread of known and likely mineralisation at Chanape, as well as provide the capacity required for large exploration budgets of majors. This was something identified as being critical to their potential participation. Ross Brown Page 3 | ANNUAL REPORT 2015 Operational Review CHANAPE EXPLORATION HIGHLIGHTS Several phases of surface sampling were conducted at Chanape during the 2014-2015 report period. The focus of the work was on the summit area of Mount Chanape and in the southern part of the project. Programmes included channel-sampling and talus sampling (the latter conducted in collaboration with a visiting major mining house). A detailed review of all previous drilling results and remodelling of geophysical data was also carried out in the report period. The principal purpose of this work, in combination with concomitant surface sampling results, was the identification of drill targets for the pending sdEIA. Highlights of this year’s operations at Chanape include: Strong gold, silver and lead mineralisation identified at the summit area of Mount Chanape. A follow-up channel-sample programme targeted previously sampled, but as yet undrilled, breccia occurrences in the summit and southern areas of Chanape. A number of high grade breccia zones were identified (Figure 1). The very high values of Gold (Au), Silver (Ag) and Lead (Pb) are indicative of strong epithermal mineralisation which is a style of mineralisation that typically occurs above porphyry deposits. Elevated levels of Copper (Cu) and Molybdenum (Mo) are also recorded in this part of the project and are an indication that hotter mineralising conditions, like that associated with porphyry mineralisation, occur in proximity to the summit and southern areas. Peak values of channel samples include: M183375: 12.65g/t Au, 746g/t Ag, 14.95% Pb M183365: 9.11g/t Au, 88.40g/t Ag M183356: 7.25g/t Au, 94.10g/t Ag M183419: 4.17g/t Au, 17.30g/t Ag, 1.85% Pb M183413: 3.96g/t Au, 59.20g/t Ag, 2.28% Pb Large chargeability anomaly identified in data remodelling. The Company also reviewed its IP geophysical data of the Chanape Project in the report period. The data of two IP surveys were remodelled and new 3D inversions were generated. Two discrete chargeability anomalies have been identified at Chanape (Figure 2). The largest is a twin- bell-shaped anomaly approximately 1,500m x 750m in area (surface projection). The second chargeability anomaly is smaller but is open to the north (occurring on the limit of the IP survey). The discovery of a copper-rich breccia pipe at surface north of the gold-silver-copper-bearing Clint/Pipe 8 Breccia complex. The newly recognised breccia contains the highest Cu values of any outcropping breccia pipe at Chanape to date. Cu values range from 0.01% to 5.5%, with Au values ranging from 0.034g/t Au to 2.2g/t Au (av. 0.5g/t Au) and Ag values ranging from 1.7g/t to 51.1g/t Ag. The breccia was discovered 300m north of CH-DDH012 and is a hydrothermal tourmaline breccia with visible Cu-mineralisation (chrysocolla and malachite). The high Cu levels and extent of tourmaline alteration makes it similar to the Clint Breccia, which was identified in CH-DDH012 drilled in the previous report period. New zones of surface mineralisation indicated in talus sampling. Assay results of a talus sampling programme has identified several Cu, Au and Ag anomalies. The programme included the collection of 103 talus samples. Approximately 50% of the talus samples are anomalous and indicative of mineralisation upslope from the sample location. The lateral spread of anomalous talus samples is indicative of widespread mineralisation in the northern, central and southern areas of Chanape and brings into sharp focus the high levels of prospectivity of the breccias and intrusive rocks that were recently discovered in the summit and southern areas of Chanape. Page 4 | ANNUAL REPORT 2015 Operational Review Figure 1: Channel-sample results (Au) with the highlighted breccia zones with strong Au mineralisation. The seven breccias with >1g/t Au are indicated by red circles. The very high Ag and Pb values largely coincide with the Au-bearing breccias. The polymetallic nature of the breccias at the summit reflect the relatively higher position this area has in relation to the porphyry system occurring below. Page 5 | ANNUAL REPORT 2015 Operational Review Mount Chanape summit area S Tourmaline Breccia Pipe 8 hosts epithermal mineralisation and occurs immediately above the northern bell Violeta breccia cluster N Largest tourmaline breccia pipe and largest breccia cluster at Chanape occur at the summit Southern Bell 500m CH-DDH011 drilled into porphyry mineralisation Northern Bell CH-DDH012 skirts the outer limit of the anomaly Figure 2: A 3D projection facing WSW showing chargeability anomalies (pink/red) and drill hole projections. The main chargeability anomaly closely coincides with the known porphyry and extends to and surfaces at the summit. The second chargeability anomaly, further north, occurs below the Violeta cluster of breccia pipes. The talus sample results indicate the occurrence of Cu, Au and Ag mineralisation in close association with a large (1,000m x 600m) monzonite/monzodiorite intrusion in the southern part of Chanape (Figure 3). The monzonite/ monzodiorite intrusion is the same rock type that forms part of the mineralised porphyry sequence encountered in the Company’s seminal drill holes CH-DDH001, CH-DDH011 and CH-DDH012. The spread of talus sample anomalies in this area also indicates proximal mineralisation associated with veins and breccias that occur beyond the outer limits of the intrusion. The talus sample results also indicate the occurrence of Cu, Au and Ag mineralisation in close association with the largest individual tourmaline breccia and largest breccia cluster occurring at Chanape at the summit area. The summit area also hosts two intrusive stocks and widespread argillic and phyllic alteration. The discovery of significant levels of tungsten in Breccia Pipe 8. Assay results from a core re-sampling programme of CH-DDH012 has revealed strong tungsten (W) mineralisation over an interval of 30m from 41m down-hole depth. Selected contiguous intervals of core from pertinent sections of CH-DDH012 were re-sampled (84 samples) and re-assayed using lithium-borate fusion ICP-MS analysis to obtain a more precise measure of WO3 levels that was identified in initial testing (using four-acid ICP-MS). The new results indicate a zone of WO3 mineralisation from 41m down-hole depth to 62m down-hole depth, with high-grade mineralisation of 1.22% WO3 over 6m from 54m. This 6m zone occurs within a 9m zone of 1.08% WO3, which in turn occurs within a broader 21m zone of 0.65% WO3. Page 6 | ANNUAL REPORT 2015 Operational Review Figure 3:Talus sample locations on contour plan of Chanape, showing location of Cu/Au anomalies “up-slope” from talus sample anomalies. High Low PERMITTING sdEIA Approved On 24 March 2015 the Company’s sdEIA permit application was approved by the Ministerio de Energia y Minas (MEM). The approval of the sdEIA was a significant milestone in a vigorous process of appraisal conducted by the MEM. Peru’s exploration and mining permitting system is governed by relatively new mining legislation that has been subject to significant amendment as recently as January 2015. The incrementally thorough permit system progressively protects and extends the rights of the permit holder, whilst at the same time increases protection of the environment and affected communities. Inca is operating in a country with a robust albeit frequently changing permit system that enshrines social and environmental responsibility not unlike that operating in Australia. Importantly, once afforded the holder, sustained and sustainable exploration can be planned and executed and Inca’s sdEIA provides for up to 22,500m of uninterrupted drilling over 2 years. The capability to undertake a meaningful drill evaluation of Chanape is also a key aspect in the evaluation by potential project partners for the project. The approval of the sdEIA paved the way for the next stages of granting involving ministerial sign-off and culminating in the issuing of a certificate to commence work. Certificate to Commence Operations (Exploration Permit) Approved On 29 June 2015 the certificate to commence operations (also known as an Exploration Permit) was approved by the MEM. This was the final step in the ministry’s permitting process and means that Inca’s semi-detailed Environmental Impact Assessment drill permit (sdEIA or Permit) was activated as at that date. In anticipation of the full granting of the sdEIA and Exploration Permit the Company had begun establishing its own 35-40 person camp facility, so that drilling could commence without delay. Page 7 | ANNUAL REPORT 2015 Operational Review SUBSEQUENT ACTIVITIES AND FUTURE EXPLORATION At the time of writing the Company had completed 13 drill holes under its sdEIA drill permit. A total of 2,597.35m had been drilled for an average hole depth of 195m. Various targets had been tested including the Clint Breccia (CH-DDH013), parallel breccia veins (CH-DDH014/15/16), the Summit Breccia (CH-DDH017), the Cerro Ver Breccia (CH- DDH018/19), the Oro Doble Breccia (CH-DDH020), the Water Tank Breccia (CH-DDH021/22) and the Trinity Breccia (CH-DDH023/24/25). Assay results for Ch-DDH013 through to CH-DDH020 were available and made public at the time of writing. Future exploration is planned to include continued drilling under the current sdEIA and resource modelling to establish a possible maiden resource at various drill centres at Chanape, namely at the Clint/pipe 8 Breccia complex, the summit area and possibly the Oro Doble Breccia complex. SOCIAL LICENCE Social licence is the ability of a company to undertake sustained and sustainable exploration activities within the framework of community and environmental protection guidelines and best-practices. The Company has achieved a perfect record in this respect. Social licence is by default warranted by virtue of a valid sdEIA. Nevertheless, the Company’s approach to social licence extends beyond mandated obligations. We have a dedicated community liaison officer who manages the relations with the Chanape communities in a personable manner, interacting on a daily basis, providing clarification on any concerns they may have, tending to large and small needs as and when required and utilising them where possible in the exploration programs. It is fair to say, Inca has the 100% support of its communities in our activities at Chanape. PARTNERSHIPS During the report period several mining houses visited Chanape. A number of companies committed to multiple trips. Whilst no partnership was consummated during the report period, Chanape continues to attract attention from majors. However the lack of progress regarding the major mining houses that have already visited Chanape can be principally attributed to a global down-turn in majors’ reduced exploration budgets, a concentration on their core operations and also the lack of a drill permit. At the time of writing (as a subsequent event) two additional global mining houses are visiting Chanape. The Company continues to assess the timing and nature of a potential partnership at Chanape. In the context of a granted sdEIA and with many high priority drill targets the Company feels value can be added to the projects at the same time as welcoming majors to the project. TENURE The Chanape Project comprises a group of 20 mining concessions covering an area of 805 hectares (Figure 4). These concessions are the subject of the Mining Assignment Agreement (MAA) (described below). For the duration of the MMA the concessions are assigned to Inca. The Company also owns 10 mining concessions immediately SW of Chanape. They cover a large area of approximately 10,000 hectares. Their proximity to Chanape, occurrence of “remote-sensing” anomalies, occurrence of satellite mineralisation (about the centrally located Chanape porphyry system), marks them as being prospective for porphyry and porphyry-related mineralisation. LOCATION Chanape is located approximately 90km east of Lima, in the Miocene Porphyry Belt (Figure 4). Chinalco’s Toromocho 1.4Bt 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 NW 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. Page 8 | ANNUAL REPORT 2015 Operational Review Figure 4: 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. OWNERSHIP The Company is in its fourth year of a 5-year mining assignment agreement (“Agreement”) with the concession owner of Chanape. By virtue of this Agreement the concessions are effectively leased to Inca via public deed. 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 (±$1,050,000 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 (±$1,900,000 spent to date) Inca has the right to purchase the project (100% transfer of concessions) at any time Inca has a right to withdraw at any time (no separation penalty) Page 9 | ANNUAL REPORT 2015 Operational Review OTHER PROJECTS MOQUEGUA – PERU The Moquegua Project comprises three separate prospects called Jose Alonso, Agua Blanco and Oscar Alberto. Moquegua is 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 a triangular 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 Cuajone porphyry mine and Metminco’s Los Calatos Deposit. The Moquegua concessions are 100%-owned by Inca Minerales S.A.C., a subsidiary of Inca Minerals. The prospects are considered early stage exploration though walk-up targets already exist. Several major mining houses hold ground in the vicinity and the Company believes that the Moquegua concessions are not only prospective in their own right but strategic in their location. OTHER OPPORTUNITIES – PERU The Company continues to assess new projects in Peru to compliment the company’s flagship Chanape Project and to take advantage of the Company’s well-established operational capacity. The advantages of Peru in terms of acquiring additional projects include, among other reasons, that: Peru is ranked first in Latin America in terms of zinc, tin and gold production, and is ranked second in Latin America for copper, silver, lead and molybdenum production (USGS, 2013). less than 35% of Peru’s land surface is covered by concessions. Peru attracts billions of dollars of mining investment each year. This figure is increasing especially from Asian countries (China, Japan, Korea). Global mining houses have a large presence in Peru. Many mines are mature and, with large mining investments, majors may look to replenish mine supply through expansion, joint ventures and/or project acquisition. Peru is considered under-explored, yet is ranked highly among countries likely to achieve mine discoveries. Fittingly, Peru is an attractive destination in terms of exploration and brown-fields development. The Company believes its competitive advantage among global juniors will serve well in the pursuit of quality exploration and/or brown-field projects in Peru. DINGO RANGE – WESTERN AUSTRALIA Located approximately 200kms East of Leinster, Dingo Range is a project covering a significant portion of the Dingo Range Greenstone Belt. The project comprises five tenements. The tenements are held in the name of Inca and the Company owns all rights to the tenements. The Dingo Range Project is prospective for Nickel (Ni) and Au. In recent years the Mt Fisher Greenstone Belt has risen to prominence through the progressive development of Rox Resources’ Mount Fisher Nickel Project. The Company is currently defending a plaint lodged over certain Dingo Range exploration licences. Page 10 | ANNUAL REPORT 2015 Operational Review 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 Australasian 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 Australasian 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. Page 11 | ANNUAL REPORT 2015 Corporate Governance Statement Corporate Governance Statement The Board of Directors of Inca Minerals Limited (Inca or Company) is responsible for the corporate governance of the Company. In developing its corporate governance policies Inca has referred to recommendations within the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations 3rd edition (CGPR) and developed the following policies which can be found on the Company’s website at www.incaminerals.com.au under the section titled “Corporate/Corporate Governance”: Corporate Governance Policy Continuous Disclosure Policy Code of Conduct & Securities Trading Policy Diversity Policy The Company’s corporate governance practices during the financial year ended 30 June 2015 (Reporting Period) are reported below. Where the Company’s corporate governance practices follow the CPGR the Board has provided appropriate statements reporting on the adoption of the CPGR. In compliance with the “if not, why not” reporting framework, where the Company’s corporate governance practices differ from the relevant CPGR, the Board has explained its reasons for doing so and any alternative practice the Company may have adopted. CORPORATE GOVERNANCE PRINCIPLES & RECOMMENDATIONS ADOPTED / NOT ADOPTED AND COMMENT Principle 1: Lay solid foundations for management and oversight 1.1 1.2 1.3 1.4 1.5 Companies should disclose the roles and responsibilities of its board and management, those expressly reserved to the board and those delegated to management. Companies should undertake appropriate checks prior to the appointment or election of a director and provide shareholders with information relevant to the election of the director. Companies should have written agreements as to the appointment of directors and senior executives. The company secretary should be accountable directly to the board, through the chairman, as to the proper functioning of the board. Companies should have and disclose a diversity policy setting measurable objectives for achieving gender diversity and annually assess and disclose the objectives and progress towards their achievement. A A A The Company has formalised and disclosed on its website (at www.incaminerals.com.au) the functions reserved to the Board and those delegated to management within its Corporate Governance Policy. The Company undertakes appropriate checks before appointing a person or putting forward to shareholders a candidate for election or re-election as a Director and provides shareholders with all material information in its possession relevant to a decision on whether to elect or re-elect a Director. The Company has set out the terms of appointment with each Director and senior executive in written agreements. NA The Company Secretary is accountable directly to the Board as to the proper functioning of the Board. However, the Board did not appoint a Company Chairman during the Reporting Period. NA The Company has disclosed its Diversity Policy on its website (at www.incaminerals.com.au). The Company’s Diversity Policy does not mandate setting measurable objectives for achieving gender diversity as it is impractical to do so at this time. The proportion of women across the whole organisation, in senior executive positions, and on the Board, as at the date of this statement, is as follows: • Whole organisation – 33% • Senior Executive Positions – 40% • Board – 0% For the purposes of this statement and the Company’s gender diversity, “senior executive” means a person who reports directly to the Board or Managing Director and/or who makes or participates in making decisions that could significantly affect the Company’s operations. Legend: A = Adopted. NA = Not Adopted. Page 12 | ANNUAL REPORT 2015 Corporate Governance Statement CORPORATE GOVERNANCE PRINCIPLES & RECOMMENDATIONS ADOPTED / NOT ADOPTED AND COMMENT Principle 1: Lay solid foundations for management and oversight (Ctd) 1.6 Companies should have and disclose processes for evaluating board, committee and director performance and disclose any performance evaluation undertaken. 1.7 Companies should have and disclose the process for evaluating senior executive performance and disclose any performance evaluation undertaken. Principle 2: Structure the Board to add value 2.1 (a) The Board should establish a nomination committee of at least three non-executive directors (a majority of whom are independent) chaired by an independent director and disclose: • The committee charter • The committee members • The frequency and attendees of the committee’s meetings; or 2.2 2.3 (b) If a nomination committee is not established then disclose its processes that ensure board succession, skills, knowledge, experience, independence and diversity. Companies should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. Companies should disclose the names of directors considered by the board to be independent directors, any interest, position or association that the board considers does not compromise independence and why, and the length of each directors service. Legend: A = Adopted. NA = Not Adopted. A A A A A The Company’s processes for evaluating the performance of the Board and its Directors are disclosed on the Company’s website (at www.incaminerals.com.au) in the Company’s Corporate Governance Policy. During the Reporting Period these evaluations took place in accordance with the process outlined in the Corporate Governance Policy. The Company’s processes for evaluating its Managing Director and key executives are disclosed on the Company’s website (at www.incaminerals.com.au) in the Company’s Corporate Governance Policy. During the Reporting period the Board evaluated the performance of its Managing Director in accordance with the process outlined in its Corporate Governance Policy and this involved determining and agreeing key performance outcomes (consistent with the Company’s strategic and operational objectives) against which performance was both monitored and measured by the Board. A similar process, with respect to certain key executives, was completed by the Managing Director. 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 Company’s Corporate Governance Policy and Diversity Policy disclose (on the Company’s website at www.incaminerals.com. au) processes pertaining to board succession, skills, knowledge, experience, independence and diversity. The Company has, in its Corporate Governance Policy and Diversity Policy, disclosed on its website (at www.incaminerals.com.au) the mix of skills and diversity the Board currently has and considers desirable in its membership given the Company’s stage of development. 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 none of the current three Directors are considered independent. The Company has disclosed the names of its Directors, their position, relevant interests or associations and their length of service in the Company’s 2015 Annual Financial Report for the Reporting Period. Page 13 | ANNUAL REPORT 2015 Corporate Governance Statement CORPORATE GOVERNANCE PRINCIPLES & RECOMMENDATIONS Principle 2: Structure the Board to add value (Ctd) 2.4 A majority of the board should be independent directors. 2.5 The Chairperson should be an Independent Director and, in particular, should not be the same person as the CEO of the entity. ADOPTED / NOT ADOPTED AND COMMENT NA As discussed above, none of the Company’s Directors are considered independent directors. As either shareholders or commercial advisors, the interests of Inca’s Directors should, in their judgements and decisions, be directly aligned with those of all other shareholders. NA The Company operated without a Chairperson during the Reporting Period. 2.6 Companies should have an induction program A for new directors and provide professional development opportunities for directors to develop and maintain the skills and knowledge to perform their role as directors effectively. The Company has a stable board comprised of Directors who have been with the Company since 2012. An induction program will be provided to any new directors if and when a new director is appointed. Professional development opportunities are provided to the Directors as and when needed. Principle 3: Act ethically and responsibly 3.1 A company should have a code of conduct for its directors, senior executives and employees and disclose that code or a summary of it. A The Company has disclosed its Code of Conduct & Securities Trading Policy on the Company’s website (at www.incaminerals.com.au). Principle 4: Safeguard integrity in corporate reporting 4.1 Companies should: (a) Have an audit committee which: (1) Has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and Is chaired by an independent director, who is not the chair of the board, and disclose: (2) (3) The charter of the committee; (4) The relevant qualifications and experience of the members of the committee; and (5) In relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) If it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. 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 regarding the Company’s audit and the Company’s external auditors. All three Directors are financially literate. One of the Directors has previously worked as an external auditor, holds three tertiary qualifications in accounting/auditing including a PhD and is a Fellow of CPA Australia. On behalf of the Board, this Director communicates directly and works with the Company’s auditors during the half-year and full year audits. 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 and reports through to the Board on all matters pertaining to the half-year and full-year external audits. In June 2012 the Company engaged its current accountant – a person with considerable experience as both an external auditor and group accountant in mineral exploration companies. The Company’s external auditors were appointed in November 2012. Prior to their appointment the Board sought and obtained proposals from reputable audit firms and appointed the Company’s current auditor after considering their experience with listed exploration companies operating in foreign and domestic jurisdictions, the experience and quality of personnel involved with the Company’s audit, their internal quality control measures, their approach and methodology in conducting the audit, references, and their awareness of professional requirements attaching to accounting and auditing standards including those pertaining to independence, confidentiality and conflicts of interest. At this stage, the Board intends to address rotation of the audit engagement partner in 2017. Legend: A = Adopted. NA = Not Adopted. Page 14 | ANNUAL REPORT 2015 Corporate Governance Statement CORPORATE GOVERNANCE PRINCIPLES & RECOMMENDATIONS ADOPTED / NOT ADOPTED AND COMMENT Principle 4: Safeguard integrity in corporate reporting (Ctd) 4.2 The board of a listed entity should, before it A approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. 4.3 Companies should ensure that its external A auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Principle 5: Make timely and balanced disclosure 5.1 Companies should have a written policy for complying with its continuous disclosure obligations under the Listing Rules and disclose that policy or a summary of it. Principle 6: Respect the rights of security holders 6.1 Companies should provide information about itself and its governance via its website. 6.2 Companies should design and implement an investor relations program to facilitate effective two-way communication with investors. A A A 6.3 Companies should disclose the policies and A processes it has in place to facilitate and encourage participation at meetings of security holders. Prior to approving the financial statements for the half- year ended 31 December 2014 and the full year ended 30 June 2015 Inca’s Board received from the Managing Director and Chief Financial Officer declarations that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. During the Reporting Period and prior to the Company’s AGM the Company contacted its external auditors who agreed to host the Company’s AGM in their offices and attend the AGM. In accordance with section 250S of the Corporations Act the external auditor attended the AGM and the Chair expressly provided the opportunity for shareholders attending the meeting to ask questions relevant to the audit. Had there been any written questions submitted to the auditor (there were none) the Chair would also have ensured the opportunity for the external auditor to answer questions as required under section 250PA of the Corporations Act. The Company has established written policies for complying with continuous disclosure obligations under the ASX Listing Rules which are disclosed within the Company’s Continuous Disclosure Policy on the Company’s website (at www.incaminerals.com.au). The Company provides information about itself and its governance to investors via its website (at www.incaminerals.com.au). The Company has designed and implemented an investor relations program to facilitate effective two-way communication with investors. The program is set out in the Company’s Corporate Governance Policy (in the section entitled “Shareholder Communication Policy”) and the Company’s Continuous Disclosure Policy as disclosed on its website (at www.incaminerals.com.au). Refer above – the Company’s Corporate Governance Policy (containing its “Shareholder Communication Policy”) and the Company’s Continuous Disclosure Policy are disclosed on the Company’s website (at www.incaminerals.com.au). 6.4 Companies should provide security holders with the option to receive communications from, and send communications to the entity and its share registry electronically. Legend: A = Adopted. NA = Not Adopted. A Shareholders are given the option to receive communications from, and send communications to the Company and its share registry electronically. Page 15 | ANNUAL REPORT 2015 Corporate Governance Statement CORPORATE GOVERNANCE PRINCIPLES & RECOMMENDATIONS Principle 7: Recognise and manage risk ADOPTED / NOT ADOPTED AND COMMENT 7.1 The Company’s Board should: (a) Have a committee or committees to oversee A risk, each of which: (1) Has at least three members, a majority of whom are independent directors; and Is chaired by an independent director, and disclose: (2) (3) The charter of the committee; (4) The members of the committee; and (5) As at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) If it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework. The Company’s Board or a committee of the Board should review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound and disclose, in relation to each reporting period, whether such a review has taken place. Companies should disclose if they have an internal audit function, how the function is structured and what role it performs or, if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. 7.2 7.3 Given the size and composition of the current Board it believes that no efficiencies are to be gained by establishing a separate Risk Committee. During the Reporting Period, responsibility for overseeing the Company’s risk management rested with the Board. The Company’s Risk Management Policy is disclosed within its Corporate Governance Policy on the Company’s website (at www.incaminerals.com.au). During the Reporting Period the full Board reviewed and where necessary amended its risk management matrix and in so doing identified or confirmed business risks, assessed the likelihood and materiality of these risks, developed and implemented measures to mitigate these risks and during the Reporting Period the Managing Director reported on and confirmed that the Company’s economic, social and environmental risks are being managed effectively. A Refer above. A The Company does not have an internal audit function. Refer above (7.1) for further discussion. 7.4 Companies should disclose whether they have any A material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. The Company faces economic, social and environmental risks that are largely inherent to the global and domestic economies, the industry, capital markets and the jurisdictions in which it operates. During the Reporting Period these risks were disclosed on the ASX portal 25 June 2015 in the Company’s Prospectus. The Board has considered these risks in relation to a “material exposure threshold”, as required under the CPGR, and put in place measures to reduce these risks to tolerable levels and, as defined in CPGR, there does not appear to be “a real possibility that the risk could substantively impact the Company’s ability to create or preserve value for security holders …” in the foreseeable future. Legend: A = Adopted. NA = Not Adopted. Page 16 | ANNUAL REPORT 2015 Corporate Governance Statement CORPORATE GOVERNANCE PRINCIPLES & RECOMMENDATIONS Principle 8: Remunerate fairly and responsibly ADOPTED / NOT ADOPTED AND COMMENT 8.1 Companies should: (a) Have a remuneration committee which: A (1) Has at least three members, a majority of whom are independent directors; and Is chaired by an independent director, and disclose: (2) (3) The charter of the committee; (4) The members of the committee; and (5) As at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) If it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives ensuring that such remuneration is appropriate and not excessive. Given the size and composition of the current Board it believes that no efficiencies are to be gained by establishing a separate Remuneration Committee. During the Reporting Period the Board followed the Company’s Remuneration Policy as disclosed in the Corporate Governance Policy on the Company’s website (at www.incaminerals.com.au) and in the Director’s Report on p. 6 of the Company’s Annual Financial Report for the year ended 30 June 2015. In doing so the Board employed policies and processes designed to ensure equitable and responsible levels and composition of remuneration to Directors and senior executives. 8.2 Companies should separately disclose their A policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives During the Reporting Period the Board followed the Company’s Remuneration Policy which is disclosed in the Corporate Governance Policy on the Company’s website (at www.incaminerals.com.au) and in the Director’s Report on p.6 of the Company’s Annual Financial Report for the year ended 30 June 2015. 8.3 Companies which have an equity-based remuneration scheme should have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme and disclose that policy or a summary of it. Legend: A = Adopted. NA = Not Adopted. A The Company does not presently have an equity based remuneration scheme. Page 17 | ANNUAL REPORT 2015 Annual 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 19 27 28 29 30 31 55 56 57 porphyry exploration in Peru porphyry exploration in Peru Directors’ Report The Directors of Inca Minerals Limited (“Inca” or “the Company”) present their financial report on the Company and its controlled entities for the year ended 30 June 2015. 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 over 30 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 an 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 2015, 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. Page 19 | ANNUAL REPORT 2015 Directors’ Report INFORMATION ON DIRECTORS (CONTINUED) JUSTIN WALAWSKI BBus.,P.Grad.Dip., PhD, FCPA, MAICD Director and Company Secretary As at 30 June 2015, 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 2015, 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. Page 20 | ANNUAL REPORT 2015 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 2015 was $4,503,572 (2014: loss of $2,952,310). 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 2015 (report period) and should be read in conjunction with this report. During the reporting period the Company continued to focus on the exploration and evaluation of its Peruvian projects and in particular, the Company’s flagship Chanape Project (Chanape). Exploration throughout the reporting period and unsolicited interest from major diversified mining companies continued to confirm the importance of Chanape’s 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 Chanape’s 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. During the report period the Company’s exploration efforts delivered and refined new and highly prospective drill targets including very high grades of gold, silver and lead in channel sampling in the summit and southern areas of Chanape (eg peak values of two-metre channel samples included 12.65g/t gold, 746g/t silver and 14.95% lead – refer ASX announcement 22 October 2014), and a new breccia with peak values from rock chip sampling including 5.5% copper, 2.2g/t gold and 51.1g/t silver (refer ASX announcement 22 October 2014). During the report period the Company applied for and secured its Semi-Detailed Environmental Impact Assessment (sdEIA) permit which allows up to 22,500 metres of drilling and approximately 60 drill platforms on the Chanape project area. At the time of writing the 2015 drill campaign is underway with the initial drilling results to be reported in the September 2015 quarter. The Company’s exploration and permitting success underpinned its ability to raise capital throughout the reporting period with the completion of a $3.2million placement (before broker commissions) to investors in July 2014, and a $3 million rights issue and placement (before broker commissions) successfully completed in July 2015. FINANCIAL POSITION The net assets of the Group were $9,047,284 as at 30 June 2015 ($10,603,260 as at 30 June 2014). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS The Company raised $3,200,000 (before broker commissions) in capital during the financial year via the issuance of 139,130,432 fully paid ordinary shares. In addition to this, the Company issued a further 2,288,793 fully paid ordinary shares for non-cash proceeds of $43,600. 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. Page 21 | ANNUAL REPORT 2015 Directors’ Report OPERATING AND FINANCIAL REVIEW (continued) SIGNIFICANT EVENTS AFTER REPORTING DATE The Company completed a capital raising in July 2015 raising $3,004,454 (before broker commissions and other costs of the capital raising) through the issue of 300,445,453 fully paid ordinary shares. In August 2015 the Company completed a placement of 130,000,000 fully paid ordinary shares to one of the world’s largest specialist resources funds – Resource Capital Funds VI L.P. raising $1,300,000. 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. 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 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 $14,554 (2014: $17,116). 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, 12 meetings of directors were held. Attendances by each director during the year were as follows:– No. of meetings eligible to attend Number attended Board Meetings Mr Justin Walawski Mr Ross Brown Mr Gareth Lloyd 12 12 12 12 12 11 Page 22 | ANNUAL REPORT 2015 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 There was nil performance based remuneration for the year ended 30 June 2015. 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 *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. Page 23 | ANNUAL REPORT 2015 Directors’ Report REMUNERATION REPORT (AUDITED) (continued) KEY MANAGEMENT PERSONNEL REMUNERATION (a) Key management personnel compensation 2015 Short-term benefits Post-employment benefits Cash salary and fees Perfor- mance Bonus Non- monetary benefits Super- annuation Retire- ment benefits Other Total Name Directors Ross Brown Gareth Lloyd 220,000 50,000 Justin Walawski 218,363 Executives David Bent* Totals 52,915 541,278 $ $ $ $ $ $ $ – – – – – – – – – – 20,900 4,750 – – 25,650 – – – – – 3,600 244,500 – – – 54,750 218,363 52,915 – – – – 3,600 570,528 0.0% *Ceased to be key management personnel during the year. 2014 Short-term benefits Post-employment benefits Cash salary and fees Perfor- mance Bonus Non- monetary benefits Super- annuation Retire- ment benefits Other Total Name Directors Ross Brown Gareth Lloyd 216,812 50,000 Justin Walawski 249,741 Executives David Bent Totals 144,669 661,222 $ $ $ $ $ $ $ 38,325 – – – 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% Performance related compen- sation as % of total remuner- ation Performance related compen- sation as % of total remuner- ation b) Options and rights granted as remuneration No options or rights were granted as remuneration during the year (2014: $nil). Page 24 | ANNUAL REPORT 2015 Directors’ Report REMUNERATION REPORT (AUDITED) (continued) KEY MANAGEMENT PERSONNEL REMUNERATION (CONTINUED) c) Share Based Payments During the year ended 30 June 2014, Ross Brown earned a performance related share based bonus of $15,000. The amount was unpaid and accrued as at 30 June 2014. The shares were subsequently approved by shareholders for issue on 28 November 2014, and 988,793 fully paid ordinary shares were issued on 3 December 2014 in satisfaction of the $15,000. 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 Ross Brown Gareth Lloyd Justin Walawski No of Ordinary Shares No of Options over Ordinary Shares 24,274,508 – 2,002,000 – – – END OF REMUNERATION REPORT NON-AUDIT SERVICES The Directors are 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. Page 25 | ANNUAL REPORT 2015 Directors’ Report AUDITOR’S INDEPENDENCE DECLARATION We have obtained an Auditor’s Independence Declaration. Please refer to “Auditor’s Independence Declaration” included on page “Auditor’s Independence Declaration” on page 56 of the financial statements. 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 23rd day of September 2015 Page 26 | ANNUAL REPORT 2015 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2015 Revenue Management and directors’ fees Wages and salaries Administrative expenses Advertising and promotional costs Professional fees Listing and share registry expenses Depreciation Impairment of 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 Plant and equipment written off (Loss) before income tax Income tax benefit (Loss) after income tax Other comprehensive income Items that will not be reclassified to profit or loss Items that may be reclassified subsequently to profit or loss Note 2 2015 $ 2014 $ 33,899 54,482 (84,939) (78,362) (849,111) (16,895) (381,458) (51,694) (15,616) (9,800) – (9,625) – (445,069) (2,592,640) (2,262) (125,967) (70,946) (1,307,174) (30,287) (367,379) (64,878) (12,733) (1,400) (16,425) 8,029 (8,278) (131,098) (893,583) – (4,503,572) (2,967,637) – 15,327 (4,503,572) (2,952,310) – – 6 5 7 7 3 Exchange differences on translation of foreign operations, net of tax (51,279) (415,263) Total comprehensive (loss) (4,554,851) (3,367,573) (Loss) for the year attributable to members of Inca Minerals Limited (4,503,572) (2,952,310) Total comprehensive (loss) attributable to members of Inca Minerals Limited (4,554,851) (3,367,573) Basic and diluted (loss) per share (cents) 12 (0.71) (0.67) The accompanying notes form an integral part of these financial statements. Page 27 | ANNUAL REPORT 2015 Consolidated Statement of Financial Position as at 30 June 2015 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets 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 6 7 8 2015 $ 2014 $ 208,810 479,496 688,306 580,880 349,916 930,796 129,367 8,517,647 8,647,014 51,362 9,973,665 10,025,027 9,335,320 10,955,823 288,036 288,036 352,563 352,563 288,036 352,563 9,047,284 10,603,260 9 25,092,164 22,093,289 (15,632,473) (11,128,901) (412,407) (361,128) TOTAL EQUITY 9,047,284 10,603,260 The accompanying notes form an integral part of these financial statements. Page 28 | ANNUAL REPORT 2015 Consolidated Statement of Changes in Equity for the year ended 30 June 2015 2014 Balance at 1 July 2013 Total comprehensive loss for the year Shares issued during the year Cost of equity issue Contributed Equity $ Accumulated Losses $ Foreign Currency Translation Reserve $ Total $ 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 2015 Balance at 1 July 2014 22,093,289 (11,128,901) (361,128) 10,603,260 Total comprehensive loss for the year – (4,503,572) (51,279) (4,554,851) Shares issued during the year Cost of equity issue 3,243,600 (244,725) – – – – 3,243,600 (244,725) Balance at 30 June 2015 25,092,164 (15,632,473) (412,407) 9,047,284 The accompanying notes form an integral part of these financial statements. Page 29 | ANNUAL REPORT 2015 Consolidated Statement of Cash Flows for the year ended 30 June 2015 Cash flows from operating activities Payments to suppliers and employees ATO R&D income tax rebate received Interest received Peruvian VAT credit received Note 2015 $ 2014 $ (761,156) (890,156) – 23,899 101,215 15,327 24,482 – Net cash (used) in operating activities 13 (a) (636,042) (850,347) 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) in cash held Cash and cash equivalents at the beginning of the financial year Effect of exchange rate changes on cash and cash equivalents (2,649,902) (3,636,064) (76,186) 10,000 (4,107) – (68,031) 20,000 (7,531) 10,000 (2,720,195) (3,681,626) 2,977,625 2,977,625 1,646,193 1,646,193 (378,612) (2,885,780) 580,880 3,468,841 6,542 (2,181) Cash and cash equivalents at the end of the financial year 13 (b) 208,810 580,880 The accompanying notes form an integral part of these financial statements. Page 30 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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 23 September 2015 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 2015, 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 2015, the consolidated entity incurred after tax losses of $4,503,572 (2014: loss of $2,952,310) and the consolidated entity had net cash outflows of $378,612 (2014: net cash inflows of $2,885,780). 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 $208,810, net working capital of $400,270 and net assets of $9,047,284; The Company completed a capital raising in July 2015 raising $3,004,454 (before broker commissions and other costs of the capital raising) through the issue of 300,445,453 fully paid ordinary shares; The Company completed a placement of 130,000,000 million shares raising $1,300,000 in August 2015; 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. Page 31 | ANNUAL REPORT 2015 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 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. Page 32 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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 for 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 for 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. Page 33 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 1: Statement of Significant Accounting Policies (continued) 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. 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 the 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. Page 34 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 1: Statement of Significant Accounting Policies (continued) e) Financial Instruments (continued) 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. 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. Page 35 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 1: Statement of Significant Accounting Policies (continued) e) Financial Instruments (continued) 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. 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. Page 36 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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 Leasehold improvements Depreciation rate 20–33% 20–33% 33% 20% 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. Page 37 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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. Page 38 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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). Page 39 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 1: Statement of Significant Accounting Policies (continued) s) New Standards and Interpretations Adopted in 2014/15 Financial Year The Group has applied the following standards and amendments for the first time in their annual reporting period commencing 1 July 2014: Investment Entities – Amendments to AASB 10, AASB 12 and AASB 127 These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under AASB 10 Consolidated Financial Statements and must be applied retrospectively, subject to certain transition relief. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments have no impact on the Group, since none of the entities in the Group qualifies to be an investment entity under AASB 10. AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets The amendments include the requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. This amendment has resulted in increased disclosures in the Group’s financial statements. Offsetting Financial Assets and Financial Liabilities – Amendments to AASB 132 These amendments clarify the meaning of ’currently has a legally enforceable right to set-off’ and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting and is applied retrospectively. These amendments have no impact on the Group, since none of the entities in the Group has any offsetting arrangements. AASB 2014-1 Amendments to Australian Accounting Standards The adoption of AASB 2014-1 has required additional disclosures in our segment note. Other than that, the adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods. 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 2018). 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. Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments it is impractical at this stage to provide a reasonable estimate of such impact. AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods commencing on or after 1 January 2017). Page 40 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 1: Statement of Significant Accounting Policies (continued) t) New Standards and Interpretations Not Yet Adopted (continued) When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles-based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers. identify the contract(s) with a customer; identify the performance obligations in the contract(s); The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step process: – – – determine the transaction price; – allocate the transaction price to the performance obligations in the contract(s); and – recognise revenue when (or as) the performance obligations are satisfied. This Standard will require retrospective restatement, as well as enhanced disclosures regarding revenue. Although the directors anticipate that the adoption of AASB 15 may have an impact on the Group’s financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact. Other standards not yet applicable There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. u) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Note 2: Revenue Interest Received Sale of assets Sundry income Consolidated 2015 $ 2014 $ 23,899 10,000 – 33,899 24,482 20,000 10,000 54,482 Page 41 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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 Tax effect of permanent differences 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 2015 $ 2014 $ (4,503,572) (2,967,637) (1,351,071) (890,291) 1,351,261 890,291 (190) – – – 15,327 15,327 13,359,976 11,436,550 4,007,992 3,430,965 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. Note 5: Trade and Other Receivables Current Other receivables GST and VAT Loans (ii) Less: provision for impairment Consolidated 2015 $ 2014 $ 30,137 429,759 239,480 (219,880) 479,496 97,636 222,880 239,480 (210,080) 349,916 (i) None of the trade and other receivables are past due date. (ii) Loans consist of interest-free loans given to former senior executives in order to purchase shares in the Company. Page 42 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 6: Plant and Equipment Plant and equipment Motor vehicles IT equipment $ 3,468 45,888 $ 11,325 (29,270) $ 9,701 6,358 (7,832) 17,945 (6,221) Balance at 1 July 2013 Additions / (disposals) Depreciation / writeback on disposals Balance at 30 June 2014 41,524 – 9,838 At cost Accumulated depreciation 57,673 (16,149) 10,756 (10,756) Balance at 30 June 2014 Balance at 1 July 2014 Additions / (disposals) Depreciation / writeback on disposals Balance at 30 June 2015 At cost Accumulated depreciation 41,524 41,524 90,714 (11,025) 121,213 137,180 (15,967) – – – – – 1,124 (1,124) 21,760 (11,922) 9,838 9,838 (4,000) (3,213) 2,625 17,760 (15,135) Leasehold Improve- ments $ Total $ – – – – – – – – 6,907 (1,378) 5,529 6,907 (1,378) 24,494 22,976 3,892 51,362 90,189 (38,827) 51,362 51,362 93,621 (15,616) 129,367 162,971 (33,604) Balance at 30 June 2015 121,213 – 2,625 5,529 129,367 Page 43 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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 2015 $ 2014 $ 9,973,665 1,581,691 (2,592,640) (445,069) 8,829,955 2,168,391 (893,583) (131,098) 8,517,647 9,973,665 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: Trade and Other Payables (current) Trade and other creditors 288,036 352,563 None of the payables are past due date. Note 9: Contributed Equity a) Paid up capital 646,336,363 ordinary shares (30 June 2014: 504,917,138 ordinary shares) 25,092,164 22,093,289 Consolidated 2015 $ 2014 $ b) Movements in shares on issue Balance at 30 June 2013 Issued 19 December 2013 Issued 2 May 2014 Transaction costs from issue of shares Balance at 30 June 2014 Issued 6 August 2014 Issued 22 August 2014 Issued 3 December 2014 Transaction costs from issue of shares Balance at 30 June 2015 No of shares Paid up capital $ 420,487,615 20,447,096 14,657,190 69,772,333 513,001 1,255,902 – (122,710) 504,917,138 22,093,289 139,130,432 3,200,000 1,300,000 988,793 28,600 15,000 – (244,725) 646,336,363 25,092,164 Page 44 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 9: Contributed Equity (continued) 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. Note 10: Interests of Key Management Personnel a) Key management personnel compensation Refer to the Remuneration Report contained in the Director’s Report for details of the remuneration paid to each member of the Company’s key management personnel for the year ended 30 June 2015. 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 2015 $ 2014 $ 541,278 – 3,600 25,650 570,528 661,222 38,325 3,600 25,013 728,160 (i) Includes payments for salaries, director fees and consulting fees. (ii) During the year ended 30 June 2014, Mr Ross Brown earned a performance related cash bonus of $20,000 plus superannuation and a performance related share based bonus of $15,000 plus superannuation. (iii) Includes allowances. (iv) Includes superannuation contributions. Page 45 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 10: Interests of Key Management Personnel (continued) 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: 2015 Directors Ross Brown Gareth Lloyd Justin Walawski Executives David Bent* Totals Balance 1 July 2014 At Appointment (if after 1 July 2014) Acquired/ Disposed At Resignation Balance 30 June 2015 23,285,715 – 1,002,000 – 24,287,715 – – – – – 988,793 – – – 988,793 – – – – – 24,274,508 – 1,002,000 – 25,276,508 * Ceased to be key management personnel during the year. Shareholding is as at date of resignation. 2014 Directors Ross Brown Gareth Lloyd Justin Walawski Executives David Bent Totals Balance 1 July 2013 At Appointment (if after 1 July 2013) Acquired/ Disposed At Resignation Balance 30 June 2014 23,000,000 6,900,000 752,000 – 30,652,000 – – – – – 285,715 (6,900,000)* 250,000 – (6,364,285) – – – – – 23,285,715 – 1,002,000 – 24,287,715 * Mr Lloyd ceased to hold a relevant interest in the entity that held these shares. Mr Lloyd did not directly dispose of these shares. Page 46 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 11: Related Party Transactions Other transactions and balances with directors and other key management personnel. Corporate Advisory During the financial year, $55,000 (2014: $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, $59,221 (2014: $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. Note 12: Loss Per Share a) Basic Earnings Per Share Consolidated 2015 $ 2014 $ Loss used in calculating basic earnings per share (4,503,572) (2,952,310) Weighted average number of ordinary shares on issue during the year used as the denominator in calculating basic loss per share 631,621,356 439,516,123 Basic loss per share (cents) (0.71) (0.67) 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. Page 47 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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 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 Plant and equipment written off 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 Consolidated 2015 $ 2014 $ (4,503,572) (2,952,310) 15,616 9,800 – 9,625 445,069 2,592,640 988,050 – 2,262 (129,580) (65,952) (636,042) 12,733 1,400 16,425 (8,029) 131,098 893,583 1,042,478 8,278 – (188,007) 192,004 (850,347) 208,810 580,880 (c) Non-cash financing activities There were no non cash financing activities during the year ended 30 June 2015 other than: – On 22 August 2014, the Company issued 1,300,000 fully paid ordinary shares at an implied value of $0.10 per share for the acquisition of six tenements integral to the Moquegua Project pursuant to a Mining Option, Mining Assignment and Option of Future Asset Agreement. – On 3 December 2014, the Company issued 988,793 fully paid ordinary shares at a value of $0.01517 per share to Mr Ross Brown, a director, as performance based remuneration. The issue of shares was approved by shareholders at the Company’s Annual General Meeting held on 28 November 2014. Page 48 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 14: Expenditure Commitments The Group has certain commitments to meet minimum expenditure requirements on the mineral exploration assets in which it has an interest. These commitments are optional and only required if the Company wishes to maintain its rights of earn-in or rights of tenure. 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 30 June 2015 $ Consolidated 30 June 2014 $ 2,294,435 6,303,757 8,598,192 1,800,818 7,311,149 9,111,967 The exploration expenditure commitments above include commitments related to an agreement for the acquisition of interests in mining concessions pertaining to the Group’s Chanape project in Peru. As at 30 June 2015 the Group has met all of its obligations in respect of the agreement and all future exploration commitments are payable at the Group’s discretion and dependent upon the Group acquiring the exclusive rights to the mining concessions. The key terms of the agreement pertaining to the Chanape project are set out below. 1. Mining option and assignment agreements dated 24 June 2011 granting the Group the exclusive option to acquire Minera Altas Cumbres S.A.C.’s (MAC) interest in 20 mining concessions over land totalling 805.346 hectares referred to as the Chanape Project. The Group has the exclusive right to terminate at any time during the option period and any unpaid amounts are not payable to the vendor. Other key terms are: Option consideration US$1,500,000 consisting of 60 payments of US$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 Exclusive option & assignment fees Shares in the Company to the Vendor’s major shareholder to the value of US$500,000 at an issue price of no less than AUD$0.20 cents per share twelve months after the Company lists.* US$50,000* Mining assignment period 5 years from the Commencement Date (i.e. 5 years from 31 December 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 exclusive 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 agreement with MAC. Page 49 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 14: Expenditure Commitments (Continued) In addition to exploration expenditure commitments the Group has certain operating commitments pertaining to non-cancellable operating leases and other non-cancellable agreements contracted for but not recognised in the financial statements: Not later than one year Between one and five years 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 Consolidated 30 June 2015 $ Consolidated 30 June 2014 $ 92,330 21,620 113,950 66,170 – 66,170 24,035 950 24,985 28,093 950 29,043 Statutory audit by auditor of Inca Minerales SAC 11,056 6,744 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 (2014: 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 2015 2014 Segment result 2015 2014 Australia $ Peru $ Consolidated $ 33,899 54,482 – – 33,899 54,482 (1,226,481) (3,277,091) (4,503,572) (1,937,941) (1,014,369) (2,952,310) Page 50 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 16: Segment Information (continued) Reportable segments: Segment assets 2015 2014 Segment liabilities 2015 2014 Depreciation and amortisation expense 2015 2014 Australia $ Peru $ Consolidated $ 560,330 1,472,345 8,774,990 9,483,478 9,335,320 10,955,823 (132,138) (194,044) (155,898) (158,519) (288,036) (352,563) (15,616) (12,733) – – (15,616) (12,733) Note 17: Financial Risk Management Objectives and Policies Interest rate risk a) 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 as set out below: Weighted average interest rate Floating interest rate Fixed interest maturing 1 year or less Fixed interest maturing 1 to 5 years Total (%) $ $ $ $ 30 June 2015 Cash and cash equivalents 0.92 188,810 20,000 30 June 2014 Cash and cash equivalents 1.67 560,880 20,000 – – 208,810 580,880 Interest rate sensitivity analysis At 30 June 2015, 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 $987 higher/lower (2014: $5,062), 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. Page 51 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 17: Financial Risk Management Objectives and Policies (continued) (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. (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 2015 Financial liabilities due for payment Trade and other payables Financial assets – cash flows realisable Cash assets Trade and other receivable (288,036) (288,036) 208,810 479,496 688,306 Net (outflow)/inflow on financial instruments 400,270 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 There were no Level 2 or Level 3 financial instruments. – – – – – – – – – – – – – – – – – – – – – – – – (288,036) (288,036) 208,810 479,496 688,306 400,270 (352,563) (352,563) 580,880 349,916 930,796 578,233 Page 52 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Note 17: Financial Risk Management Objectives and Policies (continued) (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. Note 18: Events Subsequent to Reporting Date The Company completed a capital raising in July 2015 raising $3,004,454 (before broker commissions and other costs of the capital raising) through the issue of 300,445,453 fully paid ordinary shares. In August 2015 the Company completed a placement of 130,000,000 fully paid ordinary shares to one of the world’s largest specialist resources funds – Resource Capital Funds VI L.P. raising $1,300,000. There were no other events of significance subsequent to 30 June 2015. 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 (%) 2015 2014 Australia Peru Australia Australia 100 100 100 100 100 100 100 100 Page 53 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 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 2015 $ 2014 $ 200,925 8,978,497 9,179,422 470,593 10,326,711 10,797,304 (132,138) (194,044) – – (132,138) (194,044) 9,047,284 10,603,260 25,092,164 22,093,289 (16,044,880) (11,490,029) 9,047,284 10,603,260 (4,554,851) (4,308,526) – – (4,554,851) (4,308,526) 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 Suite 1, 16 Nicholson Road Subiaco, WA, 6008 Australia Page 54 | ANNUAL REPORT 2015 Notes to the Financial Statements for the year ended 30 June 2015 Directors’ Declaration Directors’ Declaration The Directors of the Company declare that: 1. the financial statements and notes, as set out on pages 27 to 54, 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); b. give a true and fair view of the financial position as at 30 June 2015 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 S286 of the Corporations Act 2001; b. the financial statements and notes for the financial year comply with Accounting Standards; c. the financial statements and notes for the financial year give a true and fair view; 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 23rd day of September 2015 Page 55 | ANNUAL REPORT 2015 Auditor’s Independence Declaration 56 Independent Auditor’s Report 57 58 Shareholder Information The shareholder information set out below is applicable as at 8 October 2015 unless otherwise stated. Capital Structure The Company currently has issued capital of 1,076,781,816 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 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Resource Capital Fund VI Zoric & Co Pty Ltd Ross Brown* Pathold No. 77 Pty LtdStephen & Margaret Chewter Susan Carr Darryl White Nicholas & Melinda Draper Russell Creagh Terence & Dawn Risby Mr Andrew Fisher Chihong International Mining Ltd Vikrant Jindal Namrof WA Pty Ltd Berne No. 132 Nominees Pty Ltd Leet Investments Pty Ltd Nick Lazaris Swancave Pty Ltd Kerogen Pty Ltd 20 Christopher Chandler Total * Company Director. Number of Shares % Total Issued Capital 130,000,000 12.07 40,000,000 24,274,508 16,784,749 16,741,222 12,800,000 11,340,591 11,066,667 10,808,822 10,000,000 10,000,000 9,747,209 9,200,000 8,533,334 8,266,668 8,000,000 6,993,243 6,300,000 6,000,000 6,000,000 3.71 2.25 1.56 1.55 1.19 1.05 1.03 1.00 0.93 0.93 0.91 0.85 0.79 0.77 0.74 0.65 0.59 0.56 0.56 362,857,013 33.70% Page 59 | ANNUAL REPORT 2015 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 159 92 115 704 935 2,005 59,082 285,350 1,013,163 35,294,234 1,040,129,987 1,076,781,816 0.005% 0.027% 0.094% 3.278% 96.596% 100.00% Based on $0.008 per share as the market price at the close of business on 8 October 2015 there were 853 shareholders holding less than a marketable parcel of shares (a total of 17,267,481 shares). Substantial Shareholders Since the Company’s previous Annual Report the Company has received one Notice of Initial Substantial Shareholder (ASIC Form 603) from the Company’s single largest shareholder being: Resource Capital Fund VI as the beneficial holder of 130,000,000 fully paid ordinary shares in the Company (12.07% of issued capital) with the Registered Holder being Merrill Lynch (Australia) Nominees Pty Limited. The Form 603 was announced 21 August 2015 on the ASX portal. 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 Institute of Professional Development Pty Ltd Number of Ordinary Shares Date Escrow Ends 1,000,000 400,000 818,728 Company’s Discretion Company’s Discretion Shareholder Approval Page 60 | ANNUAL REPORT 2015 List of Tenements Tenement Identification Country/ State Project Prospect Mining Concession Name Code Mining Public Registry 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. Violeta 1 De Chanape Violeta 2 Violeta 3 Violeta 4 Violeta 5 10 De Julio De Chanape 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. Chanape SW INCA M1 010509211 12866246 100% Inca Minerales S.A.C. INCA M2 INCA M3 INCA M4 INCA M5 INCA M6 INCA M7 INCA M8 INCA M9 010509111 12867483 010509011 12866294 010508911 12867121 010508811 12914428 010508711 12914453 010508611 12866014 010508511 12865832 010508411 12865701 INCA M10 010508311 12865724 Moquegua Oscar Alberto Ana Melva Cobresur II 050011410 11204479 100% 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 Minerales S.A.C. Ana Melva Cobresur III 680002211 11219342 100% Inca Minerales S.A.C. Page 61 | ANNUAL REPORT 2015 List of Tenements Tenement Identification Country/ State Project Prospect Mining Concession Name Code Mining Public Registry Ownership Titleholder Agua Blanca Jose Alonso Cobresur III 680002911 11260770 100% 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% 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% Inca Minerales S.A.C. 680003311 11219355 100% Inca Minerales S.A.C. Country/ State Project WA Dingo Range Tenement Number (WA) EL37/1124 EL53/1352 EL53/1377 EL53/1380 EL53/1407 Tenement Identification Mining Concession Name Code N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Mining Public Registry N/A N/A N/A N/A N/A Ownership Titleholder 100% Inca Minerals Ltd 100% 100% 100% 100% Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd 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). Page 62 | ANNUAL REPORT 2015 Notes Page 63 | ANNUAL REPORT 2015 Notes Page 64 | ANNUAL REPORT 2015 Corporate Particulars Corporate Particulars Directors Mr Ross Brown Mr Justin Walawski Mr Gareth Lloyd Managing Director Director Director Company Secretary Mr Justin Walawski Registered Office Corporate Office Mailing Address Share Registry Auditor Suite 1, 16 Nicholson Road Subiaco, WA, 6008 Suite 1, 16 Nicholson Road Subiaco, WA, 6008 PO Box 38 West Perth, WA, 6872 Advanced Share Registry Services Pty Ltd 110 Stirling Highway Perth WA 6009 Stantons International Level 2, 1 Walker Avenue West Perth, WA, 6005 Page 65 | ANNUAL REPORT 2015 Unit 1 / 16 Nicholson Road, Subiaco West Perth WA 6008 | PO BOX 38, West Perth WA 6872 Phone: +61 (0) 8 6145 0300 | Email: info@incaminerals.com.au www.incaminerals.com.au porphyry exploration in Peru