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2023 Reportannual RepoRt foR the peRiod ended 31 decembeR 2013 Competent person’s statement information in this report that relates to exploration targets, exploration results, mineral resources or ore reserves is based on and fairly represents information and supporting documentation prepared and compiled by david Jones bSc (hons) mSc of ascidian prospecting pty ltd, who is a corporate member of the australasian institute of mining and metallurgy. mr Jones is a director of lucapa diamond company. mr Jones has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a competent person as defined in the 2012 edition of the australasian code for Reporting exploration Results, mineral Resources and ore Reserves. mr Jones consents to the inclusion in the report of the matters based on this information in the form and context in which it appears. Some of the information in this report may relate to previously released exploration data 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 and fairly represents information and supporting documentation prepared and compiled by david Jones bSc (hons) mSc of ascidian prospecting pty ltd, who is a corporate member of the australasian institute of mining and metallurgy. mr Jones is a director of lucapa diamond company. mr Jones has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a competent person as defined in the 2012 edition of the australasian code for Reporting exploration Results, mineral Resources and ore Reserves. mr Jones consents to the inclusion in the report of the matters based on this information in the form and context in which it appears. Forward-Looking statements this document has been prepared by lucapa diamond company limited. this document contains background information about lucapa diamond company limited and its related entities current at the date of this document. this is in summary form and does not purport to be all inclusive or complete. Recipients should conduct their own investigations and perform their own analysis in order to satisfy themselves as to the accuracy and completeness of the information, statements and opinions contained in this document. this document is for information purposes only. neither this document nor the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of shares in any jurisdiction. this document may not be distributed in any jurisdiction except in accordance with the legal requirements applicable in such jurisdiction. Recipients should inform themselves of the restrictions that apply in their own jurisdiction. a failure to do so may result in a violation of securities laws in such jurisdiction. this document does not constitute investment advice and has been prepared without taking into account the recipient’s investment objectives, financial circumstances or particular needs and the opinions and recommendations in this document are not intended to represent recommendations of particular investments to particular persons. Recipients should seek professional advice when deciding if an investment is appropriate. all securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments. no responsibility for any errors or omissions from this document arising out of negligence or otherwise is accepted. this document does include forward-looking statements. forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions which are outside the control of lucapa diamond company limited. actual values, results, outcomes or events may be materially different to those expressed or implied in this document. Given these uncertainties, recipients are cautioned not to place reliance on forward-looking statements. any forward-looking statements in this document speak only at the date of issue of this document. Subject to any continuing obligations under applicable law and aSX listing Rules, lucapa diamond company limited does not undertake any obligation to update or revise any information or any of the forward-looking statements in this document or any changes in events, conditions or circumstances on which any such forward-looking statement is based. Lucapa is without doubt in the best position the company has ever been. | 1 Contents 2 Chairman’s Report 3 Directors’ Report 13 Auditor’s Independence Declaration 14 Statement of Profit or Loss and Other Comprehensive Income 15 Statement of Financial Position 16 Statement of Changes in Equity 17 Statement of Cash Flows 18 Notes to the Financial Statements 38 Directors’ Declaration 39 Corporate Governance Statement 45 Independent Auditor’s Report 47 Additional Shareholder Information ChAIRm AN’S REPOR t - 31 decembeR 2013 Dear Shareholders it is with much pleasure that i present to you a review of the progress made by lucapa diamond company limited during 2013. in last year’s annual report, i stated my belief that the year ahead was one of great excitement for lucapa shareholders as we continued our efforts to unlock the value of the lulo diamond concession in angola – a country where both of the world’s biggest diamond miners, alrosa and de beers, are stepping up their exploration activities. and so it has been, with lucapa in what is without doubt the best position the company has ever been. consider some of the achievements made since the last annual report. after some frustrating delays, we have commissioned our new dense media Separation (dmS) diamond plant, which has operated smoothly and well above its 50 tonne per hour nameplate capacity. We have continued to recover large and valuable diamonds through our new dmS plant, including gems weighing 95.45 carats and 32.2 carats. We have sold our first parcel of lulo diamonds (496.2 carats) for $a3.12 million, proving that the diamonds we are recovering from lulo are indeed world class. We have since had a second parcel of 371.35 carats of lulo diamonds independently valued at $a3.52 million. We have completed an aeromagnetic survey over the entire 3,000km2 lulo concession, identifying a potential new kimberlite province in the north and a cluster of new kimberlite targets around the priority Se251 kimberlite pipe. Significantly, this is the same area where lucapa has been recovering the biggest alluvial diamonds, many of which are valuable type 2a gems. and further underlining your board’s confidence in lulo, we have, since period end, advanced a mining lease application (mla) for an alluvial area covering 218km2. this application is supported by an exploration target generated by our geological team which indicates the mla area could host economic diamonds deposits containing at least 500,000 carats. these achievements have enabled lucapa to take its story to an international audience, with the company making presentations to brokers and investors in london, dubai and cape town, South africa. not surprisingly, a $5.55 million capital raising undertaken by lucapa in april 2014 was heavily over-subscribed, with the company now attracting much broader investment recognition. as a result, lucapa is now well funded to pursue its goals of securing a mining lease for the alluvial diamonds at lulo to generate sustainable cash flows for the company and identifying the kimberlite pipes at lulo which are the primary source, or sources, of these world-class gems. With all of this in place, we look forward to another year of great excitement and anticipation for all shareholders. GoRdon GilchRiSt 2 | Lucapa is now weLL funded to pursue its goaLs of securing a mining Lease for the aLLuviaL diamonds at LuLo to generate sustainabLe cash fLows for the company the directors present their report together with the financial report of lucapa diamond company limited (the company or lucapa) for the financial period ended 31 december 2013 and independent auditor’s report thereon. the company changed its financial year end to 31 december to synchronise with that of its operations in angola, effective 1 march 2013. 1. direCtors the directors of the company at any time during or since the end of the financial period are: Name m Kennedy d Jones G Gilchrist Position Date of appointment chief executive officer 12 September 2008 technical director 26 february 2010 non-executive chairman 27 march 2012 the qualifications, experience and other directorships of the directors in office at the date of this report are: miles Kennedy chief executive officer mr Kennedy has held directorships of australian listed resource companies for the past 31 years. he is chairman of Resource and investment nl and mod Resources ltd. mr Kennedy was chairman of Sandfire Resources nl, Kimberley diamond company nl, blina diamonds nl, macraes mining company ltd and has extensive experience in the management of public companies with specific emphasis in the resources industry. he lives in perth, Western australia. David Jones technical director mr Jones is one of australia’s most experienced and successful diamond exploration geologists. he began his diamond exploration career in 1976 as part of the ashton Joint Venture team conducting regional exploration programs in the Kimberley including preliminary exploration in the ellendale field. he has held senior exploration and management positions with a number of diamond exploration companies including ashton mining, cluff Resources, metana minerals, Western Reefs, Kimberley diamond company nl and was managing director of blina diamonds nl. he lives in perth, Western australia. Gordon Gilchrist non-executive chairman mr Gilchrist holds a mSc in business and ma in physics. in 1993, mr Gilchrist was appointed managing director of argyle diamond mines in Western australia, a position he held until 2002. during that time, argyle grew to become the world’s biggest diamond producer, by volume. mr Gilchrist then became the founding managing director of Rio tinto diamonds, based out of antwerp in belgium, and served in that capacity until 2005. he lives in perth, Western australia. | 3 2. Company seC retary mr mark clements was appointed to the position of company Secretary on 2 July 2012. mr clements holds a bachelor of commerce degree from the university of Western australia and is a fellow of the institute of chartered accountants of australia. mr clements is also a member of the australian institute of company directors and an affiliated member of the institute of chartered Secretaries in australia. 3. direCtors’ meetings there were 6 directors’ meetings held during the period which were attended by Gordon Gilchrist, david Jones and miles Kennedy. there were 6 other occasions when resolutions of the board were made by circular resolution. 4. nature oF operations and prinCipaL aCtivities the company’s principal activity during the course of the financial period was the exploration of diamond projects in angola. Directors’ report for the period ended 31 december 2013 5. operating and FinanCiaL review the total comprehensive loss for the period attributable to owners of the company for the period ended 31 december 2013 was $1,173,029 (28 feb 2013: $2,327,826). OvERvIEw lucapa diamond company limited is exploring for diamonds within the lulo diamond concession in angola. the lulo project covers an area of 3,000km2 and is located in the cuango River basin within angola’s lunda norte province. lulo hosts a major kimberlite field and extensive diamond-bearing alluvials occurring along the cacuilo and lulo Rivers. the concession is located about 150km west of the world-class catoca diamond mine operated by the world’s biggest diamond miner, alrosa, and on the same favourable geological structure. lucapa has recovered alluvial diamonds of up to 131.4 carats from lulo and is now testing priority kimberlite targets to find the source, or sources, of these rare diamonds. NEw DmS PLANt COmmISSIONED lucapa achieved another significant milestone during the period with the long-awaited commissioning of the company’s new dense media Separation (dmS) diamond plant in november 2013. the new dmS plant has operated well above its nameplate capacity of 50 tonnes per hour (tph), enabling lucapa to significantly increase the amount of material the company can test for diamonds. lucapa had been stockpiling gravels from the blK_18 composite bulk sample to use as commissioning material for the new dmS plant. the blK_18 commissioning sample comprised calonda gravels from four separate pits excavated from the northern part of the priority Se251 kimberlite pipe. 4 | neW dmS diamond plant as announced to the aSX on 29 november 2013, lucapa recovered diamonds from the first day of processing of the commissioning sample through the new dmS plant. the plant operated at throughput rates of up to 70tph, with no difficulties encountered. in addition to the blK_18 commissioning sample, lucapa also treated alluvial material from the blK_19 bulk sample during december 2013. lucapa began processing this sample to directly compare the treatment results and metallurgical parameters for gravel treated through the new dmS plant and the old plant previously used by lucapa. blK_19 is located ~1,600m south-east of Se251. the processing of this sample through the new dmS plant produced some exceptional results. this included the recovery of a 32.2 carat type 2a diamond, the fourth biggest gem recovered from lulo. Subsequent to the 31 december balance date, lucapa announced the recovery of a 94.45 carat type 2a diamond from blK_19, the second largest stone recovered behind the 131.4 carat stone discovered in 2012. as at 28 January 2014, lucapa had recovered 66 diamonds weighing 206 carats from 335m3 of material from blK_19 and 110 diamonds weighing 74.5 carats from 1,555m3 of the blK_18 commissioning sample. Directors’ report for the period ended 31 december 2013 E46 ALLuvIAL DIA mOND AREA earlier in the reporting period, lucapa completed processing of blK_14, a bulk sample located in an area of gravels known as the e46 alluvial area, proximal to the Se046 kimberlite. the e46 alluvial area is located ~12km south-east of the priority Se251 kimberlite pipe. blK_14 was the second sample processed from the e46 alluvial area. the smaller blK_11 sample was collected from around garimpeiro workings and returned an exceptional grade of 27.7 cphm (carats per 100 cubic metres). a larger sample was excavated to determine whether diamonds occurred throughout the gravels in this area. a total of 256m3 of sample from blK_14 yielded 52 diamonds weighing 52.45 carats. the exceptional grades from blK_14 and blK_11 encouraged lucapa to complete a detailed review of the e46 alluvial area. this review highlighted extensive old terraces of the cacuilo River at elevations similar to those recorded from the known diamond mineralisation at e46. lucapa considered those terraces could represent extensions and/or repetitions of the known diamond deposits, covering hundreds of hectares. in addition, the area covered by the terraces contains many magnetic targets that are likely to be kimberlites. more than 10 of these magnetic targets occur within the map area alone and many more occur within the headwaters of the creeks that drain into the cacuilo River. these kimberlites targets include Se19, where lucapa recovered a 0.6 carat kimberlite diamond in early 2013. Subsequent to the december 31 balance date, lucapa announced it had received approval from its Joint Venture partners to apply for an alluvial mining lease over an area of 218km2 within the lulo concession. this area encompasses both lucapa’s main alluvial area and the e46 alluvial area. | 5 32.2 caRat type 2a diamond fRom blK_19 lulo diamondS included in 371.35 caRat paRcel appRoVed foR Sale KImbERLItE DIAmOND PROGRAm lucapa’s kimberlite evaluation program aims to find the kimberlite source, or sources, of the valuable alluvial diamonds being recovered from within the lulo concession. magnetic surveys over the concession have identified more than 250 anomalies with magnetic signatures similar to known kimberlite pipes. to date, lucapa has classified ~70 of the anomalies as confirmed or probable kimberlite pipes. this work is ongoing. the priority Se251 pipe remained the focus of lucapa’s kimberlite exploration program during the period. With an estimated surface area of ~220ha, Se251 is the largest kimberlite pipe identified within the lulo field to date. Se251 is strategically located adjacent to, and within, the main alluvial diamond workings of the cacuilo Valley. lucapa believes Se251 is a likely source for many of the alluvial diamonds the company has been recovering from gravels on, or adjacent to, the kimberlite pipe. lucapa has commenced a systematic drilling, pitting and bulk sampling program over the Se251 kimberlite to establish the internal geometry and locate all the eruptive phases within the pipe. by late 2013, lucapa has drilled 19 core holes in Se251 to establish the internal geometry of the kimberlite. in general Se251 is covered by a blanket of sandy re-sedimented volcaniclastic kimberlite (SRVK). during the reporting period lucapa processed the Kim-4 bulk sample – the first of several large bulk samples lucapa will excavate from Se251 and process through the company’s new dmS plant. Kim-4 is located on the west central section of Se251 and was initially logged as pyroclastic kimberlite (pK) in test pits. better exposures in the bulk sample pit suggested that the lithology is more likely to be SRVK, which is generally fine-grained and considered an unlikely source for the coarse alluvial diamonds. lucapa decided to proceed with the processing of the sample because SRVK is widespread over the Se251 pipe and it was thought prudent to determine whether this material contained commercial sized diamonds. Directors’ report for the period ended 31 december 2013 no diamonds were recovered from the 236m3 of SRVK material processed from Kim-4. While this result was not unexpected, it has reinforced lucapa’s view that if diamonds have been weathered from Se251, they are likely to have weathered from the coarser pK material identified along the southern margin of the Se251 kimberlite pipe. lucapa plans to test one or two other sites on Se251 in 2014. the company will begin excavating and processing these pK kimberlite samples as soon as the ground conditions allow for the safe excavation of deeper pits. in addition, lucapa also plans to bulk sample the Se248 kimberlite as soon as ground conditions permit. Se248 sits strategically between the blK_6/19 pits - which produced the 95.45 carat and 32.2 carat diamonds - and blK_08, which produced the 131.4 carat gem. lucapa also plans to test several kimberlites in the broader e46 alluvial area. NEw KImbERLItE PROvINCE early in 2013, lucapa completed a detailed aeromagnetic survey that covered about 2000km2 of the northern part of the lulo concession. a number of magnetic targets suggestive of kimberlites were recognised in the area. during the period, lucapa geologists visited one of these targets (d30) and collected alluvial samples from tributaries of the lulo River which drain the area. Samples were processed in the field and were found to contain significant concentrations of coarse (+1mm) kimberlitic indicator minerals (picroilmenite and chrome spinel). many of these indicator minerals retained primary surface textures suggesting they were coming from a very close source. based on the indicator mineral results, lucapa has classified d30 as a probable kimberlite. the cluster of magnetic anomalies that include d30 is geographically distinct from the main kimberlite cluster and, as such, this could indicate a new kimberlite province at lulo. lulo diamonds included in 371.35 carat parcel approved for sale RE vIEw OF FINANCIAL CONDI tION for the period ended 31 december 2013 the company recorded a loss of $1,173,029 and had net assets of $27,276,644. the company is focused on its angolan diamond exploration interests in the lulo project. this project requires ongoing exploration work and funding. based on the cash flow forecasts, the directors are satisfied that the going concern basis of preparation is appropriate. 6 | Significant changes in the state of affairs corporate the company completed the following issued capital and option transactions during the period. transaction expiry of options issue of shares issue of options issue of shares issue of options issue of shares issue of options expiry of options issue of options Number 30,000,000 318,000,000 159,000,000 216,112,236 216,112,236 134,124,421 134,124,421 1,658,701,535 286,200,000 Issue/ exercise price $0.02 $0.004 $0.01 $0.004 $0.01 $0.004 $0.01 $0.02 $0.01 Funds raised - $1,272,000 Option expiry 1 august 2013 - - 29 august 2015 $864,449 - - 29 august 2015 $536,498 - - - 29 august 2015 2 december 2013 $63,600 29 august 2015 Directors’ report for the period ended 31 december 2013 6. dividends no dividends were paid or declared during the current period or prior financial year. 7. environmentaL reguLation the company’s exploration activities are subject to various environmental regulations. the board is responsible for the regular monitoring of environmental exposures and compliance with environmental regulations. the company is committed to achieving a high standard of environmental performance and conducts its activities in a professional and environmentally conscious manner and in accordance with applicable laws and permit requirements. the board believes that the company has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the company. 8. events subsequent to reporting date on 3 January 2014 the company announced the recovery of a 32.2 carat type 2a diamond from its lulo concession in angola. the diamond measured 32x10x8mm and is the largest recovered by lucapa through the new dense media Separation (dmS) plant which the company commissioned in november 2013 and is the fourth largest diamond recovered at lulo to date. on 10 January 2014 the company released an updated investor presentation highlighting progress at the lulo diamond project in angola. the presentation was given to brokers and fund managers in london on 14-16 January 2014. on 13 January 2014 the company announced that an additional 410 cubic metres of gravel from blK_18 had been processed and an additional 32 diamonds weighing 25.35 carats had been recovered. on 28 January 2014 the company announced the recovery of more large, valuable diamonds from its lulo diamond concession in angola, including a 95.45 carat type 2a gem. it is the second largest diamond recovered by lucapa from lulo behind the 131.4 carat type 2a stone discovered in 2012. on 31 January 2014 the company confirmed that the 95.45 carat type 2a stone was a d colour gem. on 25 february 2014 the company announced that the lulo project Joint Venture approved the sale of a second parcel of diamonds weighing 371.35 carats which were independently valued by Jaguar consultants limited at $uS3.164 million ($a3.52 million). this equates to an exceptional price of $uS8,521 ($a9,500) per carat. | 7 on 3 march 2014, the company announced that its diamond inventory totalled 533.1 carats (including the 371.35 carat parcel valued at $a3.52 million), taking total diamond recoveries at lulo to more than 1,000 carats. on 5 march 2014 the company announced that it had received the support of its Joint Venture partners to apply for an alluvial diamond mining lease over part of the lulo diamond concession in angola. the mining lease application (mla) will cover an area of ~218km2 and will include the recent alluvial and terrace deposits associated with cacuilo River. other than the above, there has not arisen in the interval between the end of the period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly the operations of the company, the results of those operations, or the state of affairs of the company, in future financial years. 9. LikeLy deveLopments as outlined in the Review of operations and events subsequent to reporting date sections of the directors’ Report, the directors consider the following as a summary of the likely developments and expected results for the next 12 months. as previously announced, lulo hosts a major kimberlite field and extensive diamond-bearing alluvials occurring along the cacuilo and lulo Rivers. the concession is located about 150km west of the world-class catoca diamond mine operated by the world’s biggest diamond miner, alrosa, and on the same favourable geological structure. lucapa has recovered alluvial diamonds of up to 131.4 carats from lulo and is now testing priority kimberlite targets to find the source, or sources, of these rare diamonds. Subsequent to the 31 december balance date, lucapa announced the recovery of a 94.45 carat type 2a diamond from blK_19, the second largest stone recovered behind the 131.4 carat stone discovered in 2012. as at 28 January 2014, the company announced that it had recovered 66 diamonds weighing 206 carats from 335m3 of material from blK_19 and 110 diamonds weighing 74.5 carats from 1,555m3 of the blK_18 commissioning sample. Directors’ report for the period ended 31 december 2013 the exceptional grades from blK_14 and blK_11 have encouraged the company to complete a detailed review of the e46 alluvial area which highlighted extensive old terraces of the cacuilo River at elevations similar to those recorded from the known diamond mineralisation at e46. the company considers those terraces could represent extensions and/or repetitions of the known diamond deposits, covering hundreds of hectares. in addition, the area covered by the terraces contains many magnetic targets that are likely to be kimberlites. more than 10 of these magnetic targets occur within the map area alone and many more occur within the headwaters of the creeks that drain into the cacuilo River. Subsequent to the december 31 balance date, lucapa announced it had received approval from its Joint Venture partners to apply for an alluvial mining lease over an area of 218km2 within the lulo concession. this area encompasses both lucapa’s main alluvial area and the e46 alluvial area. lucapa intends to continue the kimberlite evaluation program which aims to find the kimberlite source, or sources, of the valuable alluvial diamonds being recovered from within the lulo concession. magnetic surveys over the concession have identified more than 250 anomalies with magnetic signatures similar to known kimberlite pipes. to date, lucapa has classified ~70 of the anomalies as confirmed or probable kimberlite pipes. this work is ongoing. lucapa believes Se251 is a likely source for many of the alluvial diamonds the company has been recovering from gravels on, or adjacent to, the kimberlite pipe and a systematic drilling, pitting and bulk sampling program is continuing over the Se251 kimberlite to establish the internal geometry and locate all the eruptive phases within the pipe. lucapa plans to test one or two other sites on Se251 in 2014. the company will begin excavating and processing these pK kimberlite samples as soon as the ground conditions allow for the safe excavation of deeper pits. in addition, lucapa also plans to bulk sample the Se248 kimberlite as soon as ground conditions permit. Se248 sits strategically between the blK_6/19 pits - which produced the 95.45 carat and 32.2 carat diamonds - and blK_08, which produced the 131.4 carat gem. lucapa also plans to test several kimberlites in the broader e46 alluvial area. based on the indicator mineral results, lucapa has classified d30 as a probable kimberlite. the cluster of magnetic anomalies that include d30 is geographically distinct from the main kimberlite cluster and, as such, this could indicate a new kimberlite province at lulo. 8 | 10. direCtors’ interests the relevant interest of each director in the shares and options over such instruments issued by the company and other related bodies corporate, as notified by the directors to the aSX in accordance with S205G(1) of the corporations act 2001, at the date of this report is as follows. Director m Kennedy d Jones G Gilchrist Ordinary shares Options over ordinary shares Fully paid 38,550,000 3,312,500 6,462,500 Expiring 29 Aug 2015 2,050,000 - 587,500 Expiring 2 Dec 2014 - - 25,000,000 Directors’ report for the period ended 31 december 2013 11. share options uNISSuED ShARES uNDER OP tIONS at the date of this report unissued ordinary shares of the company under option are: Expiry date 2 december 2014 25 September 2014 29 august 2015 Exercise price $0.03 $0.019 $0.01 Number of options 25,000,000 125,000,000 795,436,657 Quoted - - 795,436,657 these options do not entitle the holder to participate in any share issue of the company or any other body corporate. OPtIONS GRAN tED tO DIREC tORS AND E xECutIvES OF th E COmPANy during or since the end of the financial period, the company has not granted options to directors of the company other than pursuant to their participation in the entitlements issue dated 27 September 2013. ShARE OP tIONS the following options over ordinary shares were issued by the company during or since the end of the financial period. Expiry date 29 august 2015 ExERCISE OF OP tIONS Exercise price $0.01 Number of options 795,436,657 Quoted 795,436,657 no options over ordinary shares were exercised during or since the end of the financial period. LAPSE OF OP tIONS the following options over ordinary shares lapsed during or since the end of the financial period. | 9 Expiry date 1 august 2013 2 december 2013 Exercise price $0.02 $0.02 Number of options 30,000,000 1,658,701,535 12. remuneration report – audited 12.1 PRINCIPLES OF COmPENSAtION Key management personnel (Kmp) have authority and responsibility for planning, directing and controlling the activities of the company, including directors of the company and other executives. currently, Kmp only comprises the directors of the company. compensation levels for Kmp are competitively set to attract and retain appropriately qualified and experienced directors and executives. the directors of the company obtain independent advice on the appropriateness of compensation packages of both Kmp given trends in comparative companies both locally and internationally, and the objectives of the company’s compensation strategy. the compensation structures are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. compensation packages include a mix of fixed compensation, equity-based compensation as well as employer contributions to superannuation funds. Shares and options may only be issued to directors subject to approval by shareholders at a general meeting. Directors’ report for the period ended 31 december 2013 Fixed compensation fixed compensation consists of base compensation, determined from a market review, to reflect core performance requirements and expectations of the relevant position and statutory employer contributions to superannuation funds. compensation levels are reviewed periodically by the remuneration committee through a process that considers individual, segment and overall performance of the company. Directors’ fees total compensation for directors and non-executive directors is set based on advice from external advisors with reference to fees paid to other directors of comparable companies. directors’ fees are presently limited to a total of a$950,000 per annum, excluding the fair value of any options granted. directors’ fees cover all main board activities and membership of any committee. the board has no established retirement or redundancy schemes in relation to directors. use of remuneration consultants the company did not employ the services of any remuneration consultants during the financial period ended 31 december 2013. Equity-based compensation (Long term incentive) none Short-term and long-term incentive structure and consequences of performance on shareholder wealth Given the company’s principal activity during the course of the financial period consisted of exploration and evaluation of mineral resources, the board has given more significance to service criteria instead of market related criteria in setting the company’s incentive schemes. accordingly, at this stage the board does not consider the company’s earnings or earning measures to be an appropriate key performance indicator. the issue of options as part of the remuneration package of directors is an established practice for listed exploration companies and has the benefit of conserving cash whilst appropriately rewarding the directors. in considering the relationship between the company’s remuneration policy and the consequences for the company’s shareholder wealth, changes in share price are analysed. Service contracts 10 | miles Kennedy mr Kennedy has been engaged to act as the company’s chief executive officer. mr Kennedy is entitled to receive director fees of $200,000 (gross) per annum which is subject to review by the board from time to time. the appointment may be terminated for various causes of a standard nature. upon termination, no benefits are due. david Jones mr Jones has been engaged to act as the company’s technical director. mr Jones is entitled to receive director fees of $48,000 (gross) per annum, which is subject to review by the board from time to time. the appointment may be terminated for various causes of a standard nature. upon termination, no benefits are due. Gordon Gilchrist mr Gilchirst was engaged on 22 march 2012 to act as the company’s non-executive chairman and has a fixed term contract for 3 years, expiring on 23 march 2015, subject to the provisions of the company’s constitution and corporations act. mr Gilchrist is entitled to a gross annual remuneration package of $120,000 (inclusive of all benefits and superannuation) and this is subject to annual cpi increases upon the anniversary of the commencement of his employment. to date, no cpi increases have been implemented. the appointment may be terminated by the company for various causes of a standard nature and mr Gilchrist may terminate the agreement by resigning as chairman and director of lom in accordance with corporations act and the company’s constitution. total payments to mr Gilchrist on retirement or termination may not exceed any limits imposed by the corporations act and aSX listing Rules. in addition, if a takeover announcement is made at any time prior to 23 march 2015, the total annual remuneration package that would have become payable to mr Gilchrist to the end of his full 3 year term (to 23 march 2015), will, to the fullest extent permitted by law, immediately become due and payable in full by the company to mr Gilchrist in advance. Directors’ report for the period ended 31 december 2013 12.2 KmP Remuneration details of the nature and amount of each major element of remuneration (in aud) of each key management person of the company are: Key management personnel Executive directors mr miles Kennedy, chief executive officer mr david Jones, technical director Non-executive director mr Gordon Gilchrist, non- executive chairman (appointed 27 march 2012) Former directors mr d lenigas, chairman (resigned 27 march 2012) mr G White (resigned 27 march 2012) total Short-term benefits Post employment benefits Equity-settled share based payments Period ended Salary & fees Superannuation benefits Options (A) total Proportion of remuneration performance related % value of options as portion of remuneration % dec 2013 165,800 feb 2013 dec 2013 182,532 40,000 feb 2013 48,000 dec 2013 91,617 feb 2013 103,877 dec 2013 feb 2013 dec 2013 feb 2013 dec 2013 - 69,703 - 50,693 297,417 feb 2013 454,805 - 16,428 - - 8,383 9,349 - - - - 8,383 25,777 - - - - - 165,800 198,960 40,000 48,000 100,000 172,991 286,217 - - - - - - 69,703 - 50,693 305,800 172,991 653,573 - - - - - - - - - - - - - - - - - 60.44% - - - - - - | 11 Notes in relation to the table of directors’ and executive officers’ remuneration (a) the fair value of the options are calculated at the date of grant using the black-Scholes option valuation model and allocated to each reporting period evenly over the period from grant date to vesting date. the values disclosed are the portion of the fair value of the options allocated to each reporting period. 12.3 Equity instruments all options refer to options over ordinary shares of lucapa diamond company limited, which are exercisable on a one-for-one basis. 12.3.1 Analysis of movements in options there was no movement of options over ordinary shares in the company held by each key management person relating to remuneration. End of audited section Directors’ report for the period ended 31 december 2013 13. indemniFiCation and insuranCe oF oFFiCers and auditors the company has entered into deeds of indemnity, insurance and access (“deeds”) with each of its directors. under these deeds, the company indemnifies each director or officer to the maximum extent permitted by the corporations act 2001 from liability to third parties (unless the liability arises out of conduct involving lack of good faith), and in successfully defending legal and administrative proceedings and applications for such proceedings. the company must use its best endeavours to insure a director or officer against any liability, which does not arise out of conduct constituting a wilful breach of duty or a contravention of the corporations act 2001. the company must also use its best endeavour to insure that a director or officer against liability for costs and expenses incurred in defending proceedings whether civil or criminal. the company has during and since the end of the period, in respect of any person who is an officer of the company or a related body corporate, paid a premium in respect of directors and officer liability insurance which indemnifies directors, officers and the company of any claims made against the directors, officers of the company and the company, except where the liability arises out of conduct involving a lack of good faith and subject to conditions contained in the insurance policy. the directors have not included details of the premium paid in respect of the directors’ and officers’ liability and legal expenses’ insurance contracts, as such disclosure is prohibited under the terms of the contract. the company has not entered into any agreement to indemnify the auditors against any claims by third parties arising from their reports on the financial Report for the period ended 31 december 2013 and 28 february 2013. 14. non-audit serviCes during the period Somes cooke, the company’s auditors, have not performed any other services for the company in addition to their statutory audit and as a result the directors are satisfied that auditors have not compromised the auditor independence requirements of the corporations act 2001. details of the amounts paid to the current auditor of the company, Somes cooke are set out below: in aud Audit services: 12 | audit and review of financial reports 31 Dec 2013 28 Feb 2013 38,000 38,000 33,250 33,250 15. auditor’s independenCe deCLaration the lead auditor’s independence declaration, as set out on the following page, forms part of the directors’ report for the financial period ended 31 december 2013. Signed in accordance with a resolution of the directors, on behalf of the directors. mileS a Kennedy chief eXecutiVe officeR dated at Subiaco this 31st day of march 2014 Directors’ report for the period ended 31 december 2013 | 13 StAtEmENt OF PROFIt OR L OSS AND OthER C OmPREhENSIvE INCOmE foR the peRiod ended 31 decembeR 2013 in aud finance income consulting expenses depreciation expense employee benefits expenses other expenses Loss before income tax income tax expense Loss after income tax for the period Other comprehensive income total other comprehensive income for the period total comprehensive income for the period attributable to owners of the company Loss per share basic (loss) per share (cents) diluted (loss) per share (cents) 7 5 6 9 10 10 Note 31 Dec 2013 (10 months) 28 Feb 2013 (12 months) (restated) 30,273 (15,515) (3,579) (1,587,811) (751,194) (2,327,826) - 2,223 (51,331) (2,347) (698,517) (423,057) (1,173,029) - (1,173,029) (2,327,826) - - - - (1,173,029) (2,327,826) (0.035) (0.035) (0.09) (0.09) the statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes. 14 | in aud Assets cash and cash equivalents trade and other receivables total current assets deferred exploration and evaluation costs property, plant and equipment total non-current assets total assets Liabilities trade and other payables total current liabilities total liabilities Net assets Equity Share capital Reserves accumulated losses total equity Note 31 Dec 2013 16a 11 12 13 14 15 15 28 Feb 2013 (restated) 2,356,247 65,018 2,421,265 23,634,079 12,948 23,647,027 26,068,292 294,114 294,114 294,114 305,960 78,819 384,779 28,344,568 10,601 28,355,169 28,739,948 1,463,304 1,463,304 1,463,304 27,276,644 25,774,178 64,130,565 1,896,623 (38,750,544) 27,276,644 61,836,670 1,815,963 (37,878,455) 25,774,178 the statement of financial position is to be read in conjunction with the accompanying notes. | 15 Statement of financial PoSition for the period ended 31 december 2013 in aud balance at 1 march 2012 (restated) total comprehensive income for the year loss for the year other comprehensive income total comprehensive income for the year transactions with owners, recorded directly in equity issue of share capital exercise of options expiry of options Share issue expenses Share based payments total transactions with owners Closing balance at 28 Feb 2013 (restated) balance at 1 march 2013 (restated) total comprehensive income for the period loss for the period other comprehensive income total comprehensive income for the period transactions with owners, recorded directly in equity issue of share capital expiry of options Share issue expenses Share based payments total transactions with owners Closing balance at 31 Dec 2013 16 | - - - 14,459,305 600 - (1,095,308) - 13,364,597 61,836,670 61,836,670 - - - 2,672,947 (379,052) - 2,293,895 64,130,565 Share capital 48,472,073 Reserves 3,075,189 Accumulated losses total (38,403,207) 13,144,055 (2,327,826) (2,327,826) - - (2,327,826) (2,327,826) - - - - - (2,852,578) 2,852,578 - 1,593,352 (1,259,226) 1,815,963 1,815,963 - - 2,852,578 (37,878,455) (37,878,455) 14,459,305 600 - (1,095,308) 1,593,352 14,957,949 25,774,178 25,774,178 - - - - (1,173,029) (1,173,029) - - (1,173,029) (1,173,029) - 2,672,947 - - - - - (300,940) 300,940 - 381,600 80,660 300,940 2,675,495 1,896,623 (38,750,544) 27,276,644 - (379,052) 381,600 the statement of changes in equity is to be read in conjunction with the accompanying notes. Statement of ChangeS in equity for the period ended 31 december 2013 in aud Cash flows from operating activities cash paid to suppliers and employees interest received Net cash used in operating activities 16b Cash flows from investing activities payments for exploration costs Net cash used in investing activities Cash flows from financing activities Note 31 Dec 2013 (1,109,507) 2,223 (1,107,284) 28 Feb 2013 (restated) (1,875,903) 30,273 (1,845,630) (3,618,498) (3,618,498) (12,363,036) (12,363,036) proceeds from investors for share capital 15,16c 2,672,947 proceeds from exercise of options proceeds from issue of options Share issue costs Net cash from financing activities 15,16c net decrease in cash and cash equivalents cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 16a - 63,600 (61,052) 2,675,495 (2,050,287) 2,356,247 305,960 10,761,805 600 30,000 (252,308) 10,540,097 (3,668,569) 6,024,816 2,356,247 the statement of cash flows is to be read in conjunction with the accompanying notes. | 17 Statement of CaSh flowS for the period ended 31 december 2013 1. reporting entity lucapa diamond company limited (the ‘company’) is a company domiciled and incorporated in australia. the address of the company’s registered office is 34 bagot Road, Subiaco Wa 6008. the company is primarily involved in the exploration of diamond projects in africa, specifically angola. 2. basis oF preparation (A) StAtEmENt OF CO mPLIANCE the financial report is a general purpose financial report which has been prepared in accordance with australian accounting Standards (aaSbs) (including australian interpretations) adopted by the australian accounting Standards board (aaSb) and the corporations act 2001. the financial report of the company complies with international financial Reporting Standards (ifRSs) and interpretations adopted by the international accounting Standards board (iaSb). the financial statements were authorised for issue by the board of directors on the date of the directors’ report. (b) bASIS OF m EASuREmENt the financial statements have been prepared on the historical cost basis, except for equity settled share-based payments. the methods used to determine fair values of equity settled share-based payments are discussed further in note 3. the financial statements have been prepared on the going concern basis. Going concern basis the financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. Whilst the company has achieved exploration success at the lulo project, the directors recognise that the company will have to seek additional funding in order to continue to exploit and develop the lulo project. during the period the company recorded a loss of $1,173,029 and had net assets of $27,276,644 (feb 2013: loss of $2,327,826 and net assets of $25,774,178). 18 | however, the ability of the company to continue to pay its debts as and when they fall due for a twelve month period from the date the financial report is signed is dependent upon: • • continued cash management according to exploration success; and the placement of securities under the ASX Listing Rule 7.1, or otherwise the directors believe that the above funding strategies can be achieved and the going concern basis is appropriate for the following reasons: • • The Company operates on a program of income and expenditure designed to ensure that there are at all times sufficient funds in hand to continue operations for the foreseeable future, whilst at the same time continuing the exploration at lulo in an effective manner; and The historical ability of the Company to raise capital via equity placements and capital raisings given the prospectivity of the lulo project. however, should the company be unable to obtain sufficient funding as advised above, there is a material uncertainty which may cast doubt as to whether or not the company will be able to continue as a going concern and whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements. the financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the company not continue as a going concern. (C) FuNCtIONAL AND PRESENtAtION CuRRENCy these financial statements are presented in australian dollars, which is the company’s functional currency. (D) uSE OF ES tImAtES AND J uDGEmENtS the preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. actual results may differ from those estimates. estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Judgements made by management in the application of australian accounting Standards that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 3. signiFiCant aCCounting poLiCies the accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by the company. certain comparative amounts have been reclassified to conform with the current period’s presentation. the company changed one of its accounting policies as a result of new or revised accounting standards that became effective for reporting periods commencing on 1 January 2013. previously the company accounted for the lulo Joint Venture (‘JV’) using proportional consolidation under aaSb 131 interests in Joint Ventures. proportional consolidation is no longer allowed for for-profit entities under australian accounting Standards. aaSb 131 has been superseded by aaSb 11 Joint arrangements. however, the JV does not fall within the scope of aaSb 11. therefore, the company now accounts for assets and liabilities relating to its interest in the JV in accordance with the standards applicable to the particular assets and liabilities. the aggregate effect of the change in accounting policy on the Statement of profit or loss and other comprehensive income for the period ended 28 february 2013 is as follows: finance income consulting expenses depreciation expense employee benefits expense other expenses Loss before income tax income tax expense Loss after income tax for the year Other comprehensive income items that may be re-classified to profit or loss exchange differences on translation of foreign jointly controlled entity total other comprehensive income for the year total comprehensive income for the year attributable to owners of the company Previous Policy $ Adjustment $ Revised Policy $ 30,273 (15,945) (3,579) (1,587,811) (750,764) (2,327,826) - (2,327,826) - - - - - - - - 30,273 (15,945) (3,579) (1,587,811) (750,764) (2,327,826) - (2,327,826) | 19 314,137 314,137 (314,137) (314,137) - - (2,013,689) (314,137) (2,327,826) Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 the aggregate effect of the change in accounting policy on the Statement of financial position as at 28 february 2013 is as follows: Assets cash and cash equivalents trade and other receivables other assets total current assets other receivables deferred exploration and evaluation costs property, plant and equipment total non-current assets Liabilities trade and other payables total current liabilities Equity Share capital Reserves accumulated losses total Equity 20 | Previous Policy $ Adjustment $ Revised Policy $ 2,623,512 65,018 702,918 3,391,448 13,517,632 7,248,046 2,606,044 23,371,722 (267,265) - (702,918) (970,183) (13,517,632) 2,356,247 65,018 - 2,421,265 - 16,386,033 23,634,079 (2,593,096) 12,948 275,305 23,647,027 988,992 988,992 (694,878) (694,878) 294,114 294,114 61,836,670 1,700,013 (37,762,505) 25,774,178 - 115,950 (115,950) 61,836,670 1,815,963 (37,878,455) - 25,774,178 the aggregate effect of the change in accounting policy on the Statement of cash flows for the period ended 28 february 2013 is as follows: Cash flows from operating activities cash paid to suppliers and employees interest received Net cash used in operating activities Cash flows from investing activities payments for exploration costs purchases of property, plant and equipment Net cash used in investing activities Cash flows from financing activities proceeds from investors for share capital proceeds from exercise of options proceeds from issue of options Share issue costs funds advanced to lulo JV Net cash from financing activities Previous Policy $ Adjustment $ Revised Policy $ (1,875,903) 30,273 (1,845,630) - - - (1,875,903) 30,273 (1,845,630) (2,370,021) (2,578,639) (9,993,015) (12,363,036) 2,578,639 - (4,948,660) (7,414,376) (12,363,036) 10,761,805 600 30,000 (252,308) (7,155,023) 3,385,074 - - - - 7,155,023 7,155,023 10,761,805 600 30,000 (252,308) - 10,540,097 net decrease in cash and cash equivalents (3,409,216) (259,353) (3,668,569) cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 6,032,728 2,623,512 (7,912) (267,265) 6,024,816 2,356,247 Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 the company adopted all new or revised accounting standards that became effective for reporting periods commencing on 1 January 2013. other than as outlined above, adoption of these standards has not resulted in any material changes to the company’s accounting policies. other standards that have been issued but are not yet effective are considered to have no significant effect on the financial statements. (A ) FOREIGN CuRRENCy Foreign currency transactions and balances transactions in foreign currencies are translated to the respective functional currencies of the company at exchange rates at the dates of the transactions. monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate at that date. foreign exchange differences arising on retranslation are recognised in the statement of profit or loss and other comprehensive income. the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to australian dollars at foreign exchange rates ruling at the reporting date. the income and expenses of foreign operations are translated to australian dollars at exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. foreign exchange differences arising on retranslation are recognised directly in a separate component of equity. When a foreign operation is disposed of in part or in full, the relevant amount in equity is transferred to the statement of profit or loss and other comprehensive income. foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of the net investment in a foreign operation and are recognised directly in equity. (b) FINANCIAL INS tRumENt S Non-derivative financial instruments non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. | 21 a financial instrument is recognised if the company becomes a party to the contractual provisions of the instrument. financial assets are derecognised if the company’s contractual rights to the cash flows from the financial assets expire or if the company transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the company commits itself to purchase or sell the asset. financial liabilities are derecognised if the company’s obligations specified in the contract expire or are discharged or cancelled. cash and cash equivalents comprise cash balances and call deposits. bank overdrafts that are repayable on demand and form an integral part of the company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. accounting for finance income and expense is discussed in note 3(k). other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. Share capital equity instruments, including preference shares, issued by the company are recorded at the proceeds received. incremental costs directly attributable to the issue of equity instruments are recognised as a deduction from equity, net of any tax effects. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 (C) PROPERty, PLANt AND EQ uIPmENt Recognition and measurement items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. cost includes expenditure that is directly attributable to the acquisition of the asset. the cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” in the Statement of profit or loss and other comprehensive income. Subsequent costs the cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of an item if it is probable that the future economic benefits embodied within the item will flow to the company and the cost of the item can be measured reliably. the carrying amount of the replaces part is derecognised. all other costs are recognised in the statement of profit or loss and other comprehensive income as an expense incurred. Depreciation depreciation is recognised in the statement of profit or loss and other comprehensive income on a reducing balance basis over the estimated useful lives of each part of an item of property, plant and equipment. the estimated useful lives in the current and comparative periods are as follows: computer equipment office equipment 3 years 5-10 years depreciation methods, useful lives and residual values are reviewed at each reporting date. 22 | (D) DEFERRED E xPLORAtION AND E vALuAtION COS tS exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. these costs are only carried forward to the extent that the right to tenure of each identifiable area of interest are current, and either the costs are expected to be recouped through successful development of the area, or activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. as the exploration assets are currently not available for use they are not amortised. exploration and evaluation assets are initially measured at cost and include acquisition of mining tenements, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation of assets used in exploration activities. General and administrative costs are only included in the measurement of exploration costs where they are related directly to operational activities in a particular area of interest. deferred exploration and evaluation costs in relation to an abandoned area are written off in full against profit or loss in the period in which the decision to abandon that area is made. 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. (E) IN vENtORIES inventories are measured at the lower of cost and net realisable value. the cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (F) ImPAIRmENt Financial assets a financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. a financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. an impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. individually significant financial assets are tested for impairment on an individual basis. the remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 all impairment losses are recognised in the statement of profit or loss and other comprehensive income. an impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. for financial assets measured at amortised cost the reversal is recognised in the statement of profit or loss and other comprehensive income. Non-financial assets the carrying amounts of the company’s non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. if any such indication exists, the asset’s recoverable amount is estimated. the recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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 the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). an impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. impairment losses are recognised in the statement of profit or loss and other comprehensive income. impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. an impairment loss is reversed only to the extent that the asset’s carrying amount dies not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (G) EmPLOyEE bENEFItS Defined contribution plans a defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. obligations for contributions to defined contribution superannuation funds are recognised as an expense in the statement of profit or loss and other comprehensive income as incurred. | 23 Short-term employee benefits liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the reporting date represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the company expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax. Long-term employee benefits the company’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs: that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. the discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the company’s obligations. termination benefits termination benefits are recognised as an expense when the company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Share-based payment transactions the fair value of options granted is recognised as an expense with a corresponding increase in equity. the fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. the fair value of the options granted is measured using the black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. the amount recognised is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to market conditions not being met. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. in addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. however, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 24 | (h) PROvISIONS a provision is recognised if, as a result of a past event, the company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. (I) REvENuE Provision of services Revenue from services rendered is recognised in the statement of profit or loss and other comprehensive income in proportion to the stage of completion of the transaction at the reporting date. Sale of non-current assets the net gain/(loss) on the sale of non-current assets is included as revenue or expense at the date control of the assets passes to the buyer. the gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal (including incidental costs). (J) LEASES leases in terms of which the company assumes substantially all the risks and rewards of ownership are classified as finance leases. upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to the initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. other leases are operating leases and the leased assets are not recognised in the company’s balance sheet. payments made under operating leases are recognised in the statement of profit or loss and other comprehensive income on a straight-line basis over the term of the lease. minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. the finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. (K) FINANCE INCOmE AND E xPENSES finance income and expenses comprises interest income on funds invested, interest expense on borrowings calculated using the effective interest method and unwinding of discounts on provisions. interest income is recognised in the statement of profit or loss and other comprehensive income as it accrues, using the effective interest method. all borrowing costs are recognised in the statement of profit or loss and other comprehensive income using the effective interest method. (L) INCOmE tAx income tax expense represents the sum of the tax currently payable and deferred tax. the tax currently payable is based on taxable profit (loss) for the period. taxable profit differs from net profit as reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. the company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. the carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. deferred tax is charged or credited in the statement of profit or loss and other comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 (m) GOODS AND SER vICES tAx Revenues, expenses and assets are recognised net of the amount of goods and services tax (GSt) or value added tax (Vat), except where the amount of GSt or Vat incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense. Receivables and payables are stated with the amount of GSt or Vat included. the net amount of GSt and Vat recoverable from, or payable to, the taxation authority is included as part of receivables or payables. cash flows are included in the statement of cash flows on a gross basis. the GSt and Vat component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (N) SEGm ENt REPORtING the company determines and presents operating segments based on the information that internally is provided to the board of directors, which is the company’s chief operating decision maker. an operating segment is a component of the company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the company’s other components. all operating segments’ operating results are regularly reviewed by the company’s ceo to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. the company engages in business activities within one segment, being the exploration of diamond projects in africa. the company maintains an administrative office in Western australia to support and promote the exploration activities in africa. (O) ADOPtION OF NE w AND RE vISED ACCOuNtING S tANDARDS the company has chosen not to early-adopt any accounting standards and interpretations that have been issued, but are not yet effective. the company has carefully considered each accounting standard that has been issued but is not yet effective and does not consider any of the pronouncements to have a material impact on the financial statements. furthermore, these changes in standards and interpretations are not expected to have a material impact on the accounting treatment in the current or future reporting periods and on foreseeable future transactions. (P) LOSS PER ShARE basic loss per share is calculated by dividing the net loss attributable to the ordinary shareholders of the company by the weighted average number of ordinary shares of the company during the period. diluted loss per share is determined by adjusting the net loss attributable to the ordinary shareholders and the number of shares outstanding for the effects of all dilutive potential shares, which comprise share options. | 25 (Q) ACCOuNtING ES tImAtES AND J uDGEmENtS management discusses with the board the development, selection and disclosure of the company’s critical accounting policies and estimates and the application of these policies and estimates. the estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Exploration and evaluation assets the company assesses the carried value of exploration and evaluation assets in accordance with the accounting policy noted above. as noted in that policy, the basis of carrying value involves numerous estimates and judgements resulting from the assessment of ongoing exploration activities. Share-based payment transactions the company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. the fair value of options granted is measured using the black-Scholes option pricing model, taking into account the terms and conditions as set out within note 15. the accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 (R) DEtERmINAtION OF FAIR v ALuES trade and other receivables the fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. Non derivative financial liabilities fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Share-based payment transactions the fair value of options issued is measured using the black-Scholes option pricing formula or direct method. measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. 4. segment reporting the company determines and presents operating segments based on the information that is internally provided to the board, which is the company’s “chief operating decision maker.” an operating segment is a component of the company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the company’s other components. all operating segments’ operating results are regularly reviewed by the company’s board to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. the company engages in business activities within one segment, being the exploration of diamonds in angola. the company maintains an administrative office in Western australia to support and promote the exploration activities in angola. 26 | all transactions disclosed in the statement of profit or loss and other comprehensive income during the period to 31 december 2013, and the year to 28 february 2013, relate to the administration and management of the company, in Western australia. assets and liabilities of the business are split as follows: As at 31 December 2013: in aud Assets cash and cash equivalents trade and other receivables total current assets deferred exploration costs property, plant & equipment total non-current assets Liabilities trade and other payables total liabilities Australia (Overhead) Angola (Exploration and Evaluation) total 305,960 78,819 384,779 - - - 28,344,568 - 28,344,968 28,344,568 10,601 28,355,169 1,091,997 1,091,997 1,463,304 1,463,304 305,960 78,819 384,779 - 10,601 10,601 371,313 371,313 Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 As at 28 February 2013: in aud Assets cash and cash equivalents trade and other receivables total current assets deferred exploration costs property, plant & equipment total non-current assets Liabilities trade and other payables total liabilities 5. empLoyee beneFits expenses in aud Wages, salaries and director remuneration Superannuation costs Australia (Overhead) Angola (Exploration and Evaluation) 2,356,247 65,018 2,421,265 - 12,948 12,948 294,114 294,114 total 2,356,247 65,018 2,421,265 23,634,079 12,948 23,647,027 - - - 23,634,079 - 23,634,079 - - 294,114 294,114 Note 31 Dec 2013 28 Feb 2013 equity settled share-based payment transactions 15 6. other expenses in aud administrative expenses operating lease rental expense 7. FinanCe inCome and expense in aud Finance income interest on bank deposits 8. auditors remuneration in aud Audit services: audit and review of financial reports (Somes cooke) 687,215 11,302 - 698,517 1,009,987 30,463 547,361 1,587,811 | 27 31 Dec 2013 28 Feb 2013 336,378 86,679 423,057 654,333 96,861 751,194 31 Dec 2013 28 Feb 2013 2,223 2,223 30,273 30,273 31 Dec 2013 28 Feb 2013 38,000 38,000 33,250 33,250 Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 9. inCome tax (beneFit) expense in aud Current tax expense domestic foreign Deferred tax expense domestic foreign total income tax expense Numerical reconciliation between income tax expense and loss before income tax in aud loss for the period total income tax (benefit) expense loss excluding income tax income tax benefit using the company’s domestic tax rate of 30% (feb 2013: 30%) non-deductible expenses Recognition of previously unrecognised prior year tax losses 28 | movement in unrecognised temporary differences deductible equity raising costs income tax (benefit) / expense Deferred tax assets not brought to account 31 Dec 2013 28 Feb 2013 - - - - - - - - - - - - - - 31 Dec 2013 28 Feb 2013 (1,173,029) (2,327,826) - - (1,173,029) (2,327,826) (351,909) 25,804 877,801 (524,159) (27,537) - (698,348) 386,428 435,358 (92,698) (30,740) - as at 31 december 2013, the company had estimated tax losses of approximately $9,421,713 (28 feb 2013: $10,186,950), which may be available to be offset against taxable income in future years. the availability of these losses is subject to satisfying australian taxation legislative requirements. the deferred tax asset attributable to tax losses has not been brought to account in these financial statements because the directors believe it is not presently appropriate to regard realisation of the future income tax benefits as probable. the deferred tax assets have not been brought to account in respect to the following: in aud deductible temporary differences tax revenue losses tax capital losses 31 Dec 2013 28 Feb 2013 80,963 2,727,168 6,613,582 9,421,713 644,384 2,928,983 6,613,582 10,186,950 Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 10. Loss per share in aud basic loss per share basic loss per share (cents) 31 Dec 2013 28 Feb 2013 (0.035) (0.09) the calculation of basic loss per share at 31 december 2013 was based on the loss attributable to ordinary shareholders of $1,173,029 (28 feb 2013: $2,327,826) and a weighted average number of ordinary shares outstanding of 3,381,961,721 (2012: 2,645,185,932), calculated as follows. weighted average number of shares issued ordinary shares at beginning of period effect of shares issued on weighted average Weighted average number of ordinary shares held during the period Diluted loss per share diluted loss per share (cents) 31 Dec 2013 28 Feb 2013 3,184,366,555 1,674,540,206 197,595,166 970,645,726 3,381,961,721 2,645,185,932 31 Dec 2013 28 Feb 2013 (0.035) (0.09) the company is in a loss making position and it is unlikely that the conversion to, calling of, or subscription for, ordinary share capital in respect of potential ordinary shares would lead to diluted earnings per share that shows an inferior view of the earnings per share. for this reason, the diluted loss per share is the same as the basic loss per share. 11. trade and other reCeivabLes in aud Current GSt receivable other current receivables 31 Dec 2013 28 Feb 2013 30,598 48,221 78,819 | 29 24,886 40,132 65,018 the company’s exposure to credit and currency risks related to trade and other receivables are disclosed in note 19. 12. deFerred expLoration and evaLuation Costs in aud Cost balance at beginning of period lulo project exploration costs incurred in the period balance at end of period (i) Note 31 Dec 2013 28 Feb 2013 23,634,079 - 4,710,489 10,080,786 13,553,293 - 28,344,568 23,634,079 (i) this balance represents the cumulative amount of costs incurred by the company in relation to the lulo project. all of the funds advanced to the lulo project have been spent on diamond exploration and evaluation and the purchase of plant and equipment required for these activities. the recoupment of funds advanced to the lulo project carried forward is dependent upon the successful development and commercialisation of the areas being explored and evaluated. Should a profitable diamond mining operation be established from the lulo project in the future, the angolan government has agreed that, prior to any profits being distributed between the joint venture parties, all of the funds the company has transferred to the lulo project will be reimbursed to the company. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 13. property, pLant and equipment in aud Cost balance at 1 march 2012 additions balance at 28 february 2013 balance at 1 march 2013 additions balance at 31 december 2013 Depreciation balance at 1 march 2012 depreciation for the year balance at 28 february 2013 balance at 1 march 2013 depreciation for the period balance at 31 december 2013 30 | Carrying amounts at 1 march 2012 at 28 february 2013 at 31 december 2013 14. trade and other payabLes in aud trade payables accruals and other payables (i) Note Computer Equipment Office Equipment 7,518 - 7,518 7,518 - 7,518 4,136 1,033 5,169 5,169 612 5,781 3,382 2,349 1,737 17,716 - 17,716 17,716 - 17,716 4,572 2,545 7,117 7,117 1,735 8,852 13,144 10,599 8,864 total 25,234 - 25,234 25,234 - 25,234 8,708 3,578 12,286 12,286 2,347 14,633 16,526 12,948 10,601 31 Dec 2013 28 Feb 2013 107,617 1,355,687 1,463,304 91,113 203,001 294,114 (i) included within other payables is an amount of $1,091,991, which represents the value of the company’s liability on behalf of the lulo project, of which it is operator. the majority of the payable amount relates to historical payroll tax on staff salaries at lulo, owed to the angolan government. the company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 19. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 15. issued CapitaL and reserves in aud issued and ordinary fully paid shares movement in ordinary shares in shares 31 Dec 2013 28 Feb 2013 64,130,565 61,836,670 Ordinary shares AuD Note 31 Dec 2013 28 Feb 2013 31 Dec 2013 28 Feb 2013 on issue at beginning of period 3,184,366,555 1,674,540,206 issue of shares for cash issue on exercise of options transaction expenses on issue at end of period (i) (ii) 668,236,657 1,509,796,349 - - 30,000 - 61,836,670 2,672,947 - 48,472,073 14,459,305 600 (379,052) (1,095,308) 3,852,603,212 3,184,366,555 64,130,565 61,836,670 (i) the company issued the following shares and options during the period to 31 december 2013. Number Issue/exercise price Funds raised transaction expiry of options issue of shares issue of options issue of shares issue of options issue of shares issue of options expiry of options issue of options 30,000,000 318,000,000 159,000,000 216,112,236 216,112,236 134,124,421 134,124,421 1,658,701,535 286,200,000 $0.02 $0.004 $0.01 $0.004 $0.01 $0.004 $0.01 $0.02 $0.01 - $1,272,000 Option expiry 1 august 2013 - 29 august 2015 $864,449 - 29 august 2015 $536,498 - - 63,600 | 31 29 august 2015 2 december 2013 29 august 2015 all options issued were free-attaching and hence had no value ascribed to them, except the final tranche of 286,200,000 options, of which 127,200,000 were issued in exchange for consideration of $0.0005 per option and settlement of costs for capital raising. these options were accounted for at their fair value, based on their publicly listed price at grant date. terms and conditions the holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. unissued ordinary shares of the company under option at 31 december 2013 were: Expiry date 29 august 2015 2 december 2014 25 September 2014 Lapse of options Exercise price Number of options $0.010 $0.030 $0.019 795,436,657 25,000,000 125,000,000 the following options over ordinary shares lapsed during the financial period: Expiry date 2 december 2013 1 august 2013 Exercise price Number of options $0.020 $0.020 1,658,701,535 30,000,000 Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 (ii) transaction expenses comprise: in aud fair value of listed options issued to cpS capital Group as consideration for their role in equity issues during the period other transaction costs Summaries of options granted 31 Dec 2013 318,000 61,052 379,052 the following table illustrates the number (no.) and weighted average exercise prices (Waep) of, and movements in, share options issued during the period: outstanding at 1 march 2013 Granted during the period exercised during the period expired during the period outstanding at 31 december 2013 Exercisable at 31 December 2013 31 Dec 2013 No. 1,838,701,535 795,436,657 - (1,688,701,535) 945,436,657 945,436,657 31 Dec 2013 wAEP $0.02 $0.01 - $0.02 $0.012 $0.012 Weighted average remaining contractual life the weighted average remaining contractual life for the share options outstanding as at 31 december 2013 is 1.53 years. 32 | Reserves in aud balance at 1 march 2012 expiry of options Share based payments balance at 28 february 2013 expiry of options Share based payments balance at 31 december 2013 Nature and purpose of reserves Share-based payments reserve 2,889,227 Option premium reserve 185,962 (2,666,616) 720,352 942,963 (300,940) - 642,023 (185,962) 873,000 873,000 - 381,600 1,254,600 total 3,075,189 (2,852,578) 1,593,352 1,815,963 (300,940) 381,600 1,896,623 Share-based payments reserve the share-based payments reserve represents the fair value of equity instruments issued to employees as compensation and issued to external parties for the receipt of goods and services. this reserve will be reversed against issued capital when the underlying shares are converted. option premium reserve the option premium reserve records amounts paid by shareholders in acquiring options over ordinary shares. the balance in the option premium reserve is transferred to issued capital on option conversion and transferred to accumulated losses on option expiry. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 16a. Cash and Cash equivaLents in aud bank balances the company’s exposure to interest rate risk is discussed in note 19. 16b. reConCiLiation oF C ash FLows From operating aCtivities in aud Loss for the period adjustments for: depreciation expense Share based payments Operating loss before changes in working capital and provisions (increase) in trade and other receivables increase/(decrease) in trade and other payables Net cash used in operating activities 16C. non Cash FinanCing aCtivities there were no non-cash financing activities during this period. 17. Contingent LiabiLities 31 Dec 2013 28 Feb 2013 305,960 2,356,247 31 Dec 2013 28 Feb 2013 (1,173,029) (2,327,826) 2,347 - 3,579 720,352 (1,170,682) (1,603,895) (13,801) 77,199 32,175 (273,910) (1,107,284) (1,845,630) the company did not have any contingent liabilities as at 31 december 2013 (28 feb 2013: nil). | 33 18. Commitments Capital commitments in aud approved, not yet contracted for: less than one year between one and five years 31 Dec 2013 28 Feb 2013 - - - - - - Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 19. FinanCiaL risk management the company has exposure to credit, liquidity and market risks from their use of financial instruments. this note presents information about the company’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. further quantitative disclosures are included throughout this financial report. the board of directors has overall responsibility for the establishment and oversight of the risk management framework. Risk management policies are established to identify and analyse the risks faced by the company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed to reflect changes in market conditions and the company’s activities. the company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. market risk commodity price risk the company is focused on its angolan diamond exploration interests in the lulo project. accordingly, the company is exposed to the global pricing structures of the diamond market. foreign exchange risk the company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the uS dollar and australian dollar. foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations that are not in the entity’s functional currency. the company does not use hedging, or any other active risk reduction strategy, in managing its foreign exchange risk. the functional and presentation currency of the company is australian dollars. the company’s exposure to foreign currency risk at balance date was a follows, based on notional amounts: 34 | in aud Financial liabilities trade and other payables other financial liabilities Net balance sheet exposure 31 Dec 2013 28 Feb 2013 (1,463,304) (294,114) - - (1,463,304) (294,114) the potential returns from exploration and evaluation activities (see note 12), should there be successful development of a profitable diamond mine in the future at the lulo project, are liable to foreign exchange fluctuations as the monies advanced are denominated in united States dollars, which continues to fluctuate against the australian dollar. Cash flow interest rate risk cash flow interest rate risk, is the risk that a financial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments. the company is not exposed to significant interest rate risk. any residual cash flow interest rate risk is in relation to the company’s cash and cash equivalent balances. the company does not currently use derivatives to mitigate these exposures. the following table details the company’s exposure to interest rate risk on its interest-bearing financial instruments at 31 december 2013. Fixed Interest Rate maturity Average Interest Rate % variable Interest Rate A$ Less than 1 year A$ 1 to 5 years A$ more than 5 years A$ Non-Interest bearing A$ total A$ 2.65 305,960 - - - 305,960 - - - - - - - - - - - - - - - - - - 305,960 78,819 78,819 78,819 384,779 1,463,304 1,463,304 1,463,304 1,463,304 Financial Assets cash trade and other receivables Financial Liabilities trade and other payables Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 the following table details the company’s exposure to interest rate risk on its interest-bearing financial instruments at 28 february 2013. Fixed Interest Rate maturity Average Interest Rate % variable Interest Rate A$ Less than 1 year A$ 1 to 5 years A$ more than 5 years A$ Non-Interest bearing A$ total A$ 3.15 2,356,247 - - - 2,356,247 - - - - - - - - - - - - - - - - - - 2,356,247 65,018 65,018 65,018 2,421,265 294,114 294,114 294,114 294,114 Financial Assets cash trade and other receivables Financial Liabilities trade and other payables cash flow sensitivity analysis for variable rate instruments the sensitivity analysis below has been prepared to demonstrate the sensitivity to a reasonably possible change in interest rates, with all other variables held constant through the impact on floating rate interest rates. a change of 100 basis points in interest rates at the reporting date would not have a material impact on the statement of profit of loss and other comprehensive income. there would be no effect on the equity reserves other than those directly related to statement of profit of loss and other comprehensive income. the analysis is performed on the same basis as for the year ended 28 february 2013. Credit risk | 35 credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the company. the company’s potential concentration of credit risk consists mainly of cash deposits with banks and other receivables. the company’s short term cash surpluses are placed with banks that have investment grade ratings. the maximum credit risk exposure relating to the financial assets is represented by their carrying values as at the balance sheet date. Liquidity risk liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. the company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation. ultimate responsibility for liquidity risk management rests with the board of directors. the company manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by continuously monitoring forecast and actual cash flows. the following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements. in aud trade and other payables - Within one year - one to five years - Greater than five years total Capital risk management 31 Dec 2013 28 Feb 2013 1,463,304 294,114 - - - - 1,463,304 294,114 the company’s objectives when managing capital are to safeguard the company’s ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration and development of its projects. in order to maintain or adjust the capital structure, the company may return capital to shareholders, issue new shares or sell assets to reduce debt. the company’s focus has been to raise sufficient funds through equity to fund exploration and evaluation activities. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 Fair value details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the financial statements. the financial assets and liabilities included in the assets and liabilities of the company approximate net fair value, determined in accordance with the accounting policies disclosed in note 3 to the financial statements. 20. reLated parties Key management personnel compensation the key management personnel compensation included in ‘employee benefits expense (see note 5) is as follows: in aud Short-term employee benefits post-employment benefits Share-based payments 31 Dec 2013 28 Feb 2013 297,417 8,383 - 305,800 454,805 25,777 172,991 653,573 Individual directors’ and executives’ compensation disclosures information regarding individual directors’ and executives’ compensation and some equity instruments disclosures as required by corporations Regulations 2m.3.03 is provided in the remuneration report section of the directors’ report. apart from the details disclosed in this note, no director has entered into a material contract with the company since the end of the previous financial year and there were no other material contracts involving directors interests at period-end. Key management personnel and director transactions 36 | a number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. a number of these entities transacted with the company in the reporting period. the terms and conditions of the transactions with management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length basis. Options over equity instruments the movement during the reporting period in the number of options over ordinary shares in the company held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows. held at 1 march 2013 or date of appointment Granted as compensation Rights Issue Expired without Exercise held at 31 December 2013 Released from escrow during the period vested during the period vested & Exercisable Directors mr m Kennedy 16,000,000 mr d Jones 10,000,000 mr G Gilchrist 50,000,000 - - - 2,050,000 (16,000,000) 2,050,000 - (10,000,000) - 587,500 (25,000,000) 25,587,500 - - - - - - 2,050,000 - 25,587,500 held at 1 march 2012 or date of appointment Granted as compensation Rights Issue held at resignation held at 28 February 2013 Released from escrow during the year vested during the year Directors mr m Kennedy 16,000,000 mr d Jones 10,000,000 - - mr G Gilchrist - 50,000,000 mr d lenigas 11,000,000 mr G White 11,000,000 - - - - - - - - - - 16,000,000 10,000,000 50,000,000 11,000,000 11,000,000 - - - - - - - - - - - - vested & Exercisable 16,000,000 10,000,000 50,000,000 - - Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 movements in shares the movement during the reporting period in the number of ordinary shares in the company held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows. held at 1 march 2013 or date of appointment 36,500,000 3,312,500 Purchases Rights Issue Sales held at resignation held at 31 December 2013 - - 2,050,000 - 875,000 5,000,000 587,500 - - - - - - 38,050,000 3,312,500 6,462,500 held at 1 march 2012 or date of appointment Received on exercise of options Purchases Sales held at resignation held at 28 February 2013 Directors mr m Kennedy mr d Jones mr G Gilchrist Directors mr m Kennedy 32,000,000 4,500,000 mr d Jones mr G Gilchrist 2,650,000 - 662,500 875,000 - - - - - - - - - 36,500,000 3,312,500 875,000 no shares were granted to key management personnel during the reporting period as compensation in 2013 or 2012. Other related party transactions an amount of $93,416 (28 feb 2013: $160,546) was paid to the bagot Road property partnership, associated with director miles Kennedy, relating to office rent and associated costs during the period. an amount of $495,573 (28 feb 2013: $699,477) was paid to the bagot Road Group pty ltd, associated with director miles Kennedy, relating to the provision of contract staff (including a director), payroll and baS services during the period. payments for the provision of director services, as disclosed within remuneration in the directors’ report, were paid to ascidian prospecting pty ltd and turnicate consulting, entities associated with director david Jones. | 37 21. subsequent events on 3 January 2014 the company announced the recovery of a 32.2 carat type 2a diamond from its lulo concession in angola. the diamond measured 32x10x8mm and is the largest recovered by lucapa through the new dense media Separation (dmS) plant which the company commissioned in november 2013 and is the fourth largest diamond recovered at lulo to date. on 10 January 2014 the company released an updated investor presentation highlighting progress at the lulo diamond project in angola. the presentation was given to brokers and fund managers in london on 14-16 January 2014. on 13 January 2014 the company announced that an additional 410 cubic metres of gravel from blK_18 had been processed and an additional 32 diamonds weighing 25.35 carats had been recovered. on 28 January 2014 the company announced the recovery of more large, valuable diamonds from its lulo diamond concession in angola, including a 95.45 carat type 2a gem. it is the second largest diamond recovered by lucapa from lulo behind the 131.4 carat type 2a stone discovered in 2012. on 31 January 2014 the company confirmed that the 95.45 carat type 2a stone was a d colour gem. on 25 february 2014 the company announced that the lulo project Joint Venture approved the sale of a second parcel of diamonds weighing 371.35 carats which were independently valued by Jaguar consultants limited at $uS3.164 million ($a3.52 million). this equates to an exceptional price of $uS8,521 ($a9,500) per carat. on 3 march 2014, the company announced that its diamond inventory totalled 533.1 carats (including the 371.35 carat parcel valued at $a3.52 million), taking total diamond recoveries at lulo to more than 1,000 carats. on 5 march 2014 the company announced that it had received the support of its Joint Venture partners to apply for an alluvial diamond mining lease over part of the lulo diamond concession in angola. the mining lease application (mla) will cover an area of ~218km2 and will include the recent alluvial and terrace deposits associated with cacuilo River. other than the above, there has not arisen in the interval between the end of the period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly the operations of the company, the results of those operations, or the state of affairs of the company, in future financial years. Notes to the FiNaNcial statemeNts for the period ended 31 december 2013 1. in the opinion of the directors of lucapa diamond company limited (“the company”): (a) the financial statements and notes, and the remuneration report in the directors’ Report, as set out on pages 9 to 11, are in accordance with the corporations act 2001, including: (i) giving a true and fair view of the company’s financial position as at 31 december 2013 and of its performance for the financial period ended on that date; and (ii) complying with australian accounting Standards (including the australian accounting interpretations) and the corporations Regulations 2001; (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1; and (c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. 2. the directors have been given the declarations required by section 295a of the corporations act 2001 from the chief executive officer and chief financial officer for the financial period ended 31 december 2013. Signed in accordance with a resolution of the directors mileS a Kennedy chief eXecutiVe officeR dated at Subiaco this 31st day of march 2014 38 | Directors’ Declaration for the period ended 31 december 2013 roLe oF management the board has delegated responsibilities and authorities to the executive staff and consultants to enable management to conduct the company’s day-to-day activities. matters which are not covered by these delegations, such as approvals which exceed certain limits or do not form part of the approved budget require board approval. an evaluation of the performance of senior management and consultants, including the chief executive officer is undertaken periodically at board level, with the chairman discussing this review separately with the chief executive officer. this is considered to be an appropriate process given the size of the company and its stage of development. ethiCaL standards as part of the board’s commitment to the highest standard of conduct, the company has adopted a code of conduct to guide executives, management, employees and contractors in carrying out their duties and responsibilities. the code of conduct is incorporated with the charter and encompasses: - responsibilities to shareholders; - compliance with laws and regulations; - relationships with clients and customers; - conflicts of interest; - employment practices; and - responsibilities to the community. diversity the board is committed to having an appropriate blend of diversity on the board and in all areas of the Group’s business. the board has established a policy regarding gender, age, ethnic and cultural diversity. the company and all its related bodies corporate are committed to workplace diversity. the company recognises the benefits arising from employee and board diversity, including a broader pool of high quality employees, improving employee retention, accessing different perspectives and ideas and benefiting from all available talent. | 39 diversity includes, but is not limited to, gender, age, ethnicity and cultural background. to the extent practicable, the company will address the recommendations and guidance provided in the aSX corporate Governance council’s principles and Recommendations. the diversity policy does not impose on the company, its directors, officers, agents or employee any obligation to engage in, or justification for engaging in, any conduct which is illegal or contrary to any anti-discrimination or equal employment opportunity legislation or laws in any State or territory of australia or of any foreign jurisdiction. the key objectives of the diversity policy are to achieve: (a) a diverse and skilled workforce, leading to continuous improvement in service delivery and achievement of corporate goals; (b) a workplace culture characterised by inclusive practices and behaviours for the benefit of all staff; (c) improved employment and career development opportunities for women; (d) a work environment that values and utilises the contributions of employees with diverse backgrounds, experiences and perspectives through improved awareness of the benefits of workforce diversity and successful management of diversity; and (e) awareness in all staff of their rights and responsibilities with regards to fairness, equity and respect for all aspects of diversity, (collectively, the objectives). DIvERSIty REPORtING the Group’s gender diversity as at the end of the reporting period is as follows: 31 December 2013 28 February 2013 Gender representation Female male Female male board representation Group representation No 0 9 % 0 26.5 No 3 25 % 100 73.5 No 0 6 % 0 12 No 3 44 % 100 88 the following senior positions with the Group are currently held by female employees: Chief Financial Officer • • Office Manager the company’s proposed diversity objectives for the 2014 financial year are to continue to assess and proactively monitor gender diversity at all levels of the business and report to the board. Corporate GovernanCe Statement for the period ended 31 december 2013 trading in the C ompany’s shares to safeguard against insider trading the company’s Securities trading policy prohibits directors, employees and consultants from trading the company’s securities if they are aware of any information that would be expected to have a material effect on the price of the company’s securities. directors must consult with the chairman of the board, or in his absence or conflict, the company Secretary, before dealing in shares or other securities of the company. dealings (whether purchases or sales) in the company’s shares or other securities by related personnel may not be carried out other than in the dealing “window”, being the period commencing 2 days prior to and ending 2 days following the date of announcement of the company annual or half yearly results or a major announcement leading to a fully informed market. “major” is defined as an announcement that may as a direct result, affect the share price, or an announcement affecting the operations of the company. if within that period any further announcement arises that may separately affect the share price, the chairman or in his absence the company Secretary may impose a lock-down period on the ability to trade. all related persons must give details of any acquisitions or disposal of shares or other securities in the company, within one business day to the company Secretary of the company. all related persons must ensure that they at all times observe the insider trading rules of the corporations act. the company discloses to aSX any transaction conducted by the directors in the company’s securities in accordance with the aSX listing Rules. the board has resolved that the relevant sections of the charter, particularly the code of conduct, corporate ethics policy, securities dealings restrictions and continuous disclosure obligations should also extend to cover all executives, employees and consultants of the company. Continuous disCLosure and sharehoL der CommuniCation 40 | the board is committed to the promotion of investor confidence by ensuring that trading in the company’s securities takes place in an efficient, competitive and informed market in accordance with continuous disclosure obligations under the aSX listing Rules, the company has procedures in place to ensure that all price sensitive information is identified, reviewed by management and disclosed to the aSX in a timely manner. these are also detailed in the charter. all information disclosure to the aSX is posed on the company’s website. Shareholders are forwarded the company’s annual Report if requested and documents relating to each general meeting, being the notice of meeting, any explanatory memorandum and a proxy form, and are invited to attend these meetings. the company’s external auditor is also required to be present at the annual General meetings to answer any queries shareholders may have with regard to the audit and preparation and content of the audit Report. managing business risk the board constantly monitors the operational and financial aspects of the company’s activities and is responsible for the implementation and ongoing review of the business risks that could affect the company. duties in relation to risk management that conducted by the board include, but are not limited to: - initiate action to prevent or reduce the adverse effects of risk; - control further treatment of risks until the level of risk becomes acceptable; - identify and record any problems relating to the management of risk; - initiate, recommend and provide solutions through designated channels; - verify the implementation of solutions; and - communicate and consult internally and externally as appropriate. in accordance with section 295a of the corporations act 2001, the persons performing the roles of chief executive officer and chief financial officer are required to provide a declaration to the board that the financial records of the company have been properly maintained, the financial statements comply with the accounting standards and give a true and fair view of the company’s financial position and performance. in addition, as required by the Recommendations, the declaration is founded on a found system of risk management and internal control which implements policies adopted by the board and the company’s risk management and internal compliance control system is operating efficiently and effectively in all material respects in relation to the financial reporting risks. Corporate GovernanCe Statement for the period ended 31 december 2013 prinCipL es & reComendations CompLianCe Principle 1 - Lay solid foundations for management and oversight 1.1 companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions. the board is responsible for the overall corporate governance of the company. the board has adopted a board charter that formalises its roles and responsibilities and defines the matters that are reserved for the board and specific matters that are delegated to management. on appointment of a director, the company issues a letter of appointment setting out the terms and conditions of appointment to the board CompLy complies. 1.2 1.3 companies should disclose the process for evaluating the performance of senior executives. the non-executive members of the board undertake annual assessment of the executives’ performance. companies should provide the information indicated in the Guide to reporting on principle 1. a summary of the board’s functions and responsibilities has been disclosed on the company’s website and is summarised in this corporate Governance Statement. Principle 2 - Structure the board to add value complies to the extent that non- executive members of the board undertake assessment of executives’ performance. complies. 2.1 a majority of the board should be independent directors. the majority of the board’s directors are not independent as a majority of the board are executive directors of the company. mr Gordon Gilchrist is a non-executive director. messrs miles Kennedy and david Jones are executive directors. does not comply however the skills and experience of both the independent and non-independent directors allow the board to act in the best interests of shareholders. 2.2 2.3 the chair should be an independent director. mr Gordon Gilchrist is a non-executive director of the board but is not independent. does not comply – refer explanation in 2.1. | 41 the roles of chair and chief executive officer should not be exercised by the same individual. mr Gordon Gilchrist is the chairman and mr miles Kennedy is the chief executive officer. complies. 2.4 the board should establish a nomination committee. 2.5 2.6 companies should disclose the process for evaluating the performance of the board, its committees and individual directors. companies should provide the information indicated in the Guide to reporting on principle 2. Given the size of the board, it was determined that the board will execute the functions of a nomination committee and that a separate nomination committee is unnecessary. the company did not conduct a performance evaluation of the board, and has no adopted a performance evaluation policy. does not comply for reasons given under 2.6 below. does not comply. Refer 1.2 above. this information has been disclosed (where applicable) in the directors’ Report in the company’s annual Report. a director is considered independent when he substantially satisfies the test for independence as set out in the aSX corporate Governance Recommendations. members of the board are able to take independent professional advice at the expense of the company. the board carries out the functions of a nomination committee. in accordance with the information suggested in Guide to Reporting on principle 2, the company has disclosed full details of its directors in the director’s Report. other disclosure material as suggested in Guide to Reporting on principle 2 has been made available on the company’s website. does not comply. Given the size of the board, the directors determined that it will execute the functions of a nomination committee and that a separate nomination committee is unnecessary. in addition, the board does not consist of a majority of independent directors however the skills and experience of both the independent and non-independent directors allows the board to act in the best interests of shareholders. Corporate GovernanCe Statement for the period ended 31 december 2013 prinCipL es & reComendations CompLianCe Principle 3 - Promote ethical and responsible decision making CompLy complies. the board has adopted a code of conduct that is contained within the board charter. the code establishes a clear set of values that emphasise a culture encompassing strong corporate governance, sound business practices and good ethical conduct. the code of conduct is encompassed within the board charter and is available on the company’s website. 3.1 companies should establish a code of conduct and disclose the code or a summary of the code as to: - the practices necessary to maintain confidence in the company’s integrity - the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders - the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. the policy should include requirements for the board to establish measureable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them. companies should disclose in each annual report the measureable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress in achieving them. 3.2 3.3 42 | the company has adopted a diversity policy. complies. the information is disclosed in the annual Report. complies. 3.4 companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. 3.5 companies should provide the information indicated in the Guide to reporting on principle 3. the information is disclosed in the annual Report. complies. the code of conduct and securities trading policy are available on the company’s website. the securities trading policy is summarised in this corporate Governance Statement. complies. Principle 4 - Safeguard integrity in financial reporting 4.1 the board should establish an audit committee. an audit committee has not been established by the board does not comply. Given the size of the board, the directors determined that it will execute the functions of an audit committee and that a separate audit committee is unnecessary. does not comply, for reasons given in 4.1 above. the full board is made up of three, two of which are executive directors, and a non-executive director who is not considered independent. 4.2 the audit committee should be structured so that it consists only of non- executive directors consists of a majority of independent directors is chaired by an independent chair, who is not chair of the board has at least three members. 4.3 the audit committee should have a formal charter. an audit committee has not been established by the board. the functions of an audit committee are reserved for the board and operate under the board charter does not comply, for reasons given in 4.1 above. Corporate GovernanCe Statement for the period ended 31 december 2013 prinCipL es & reComendations CompLianCe CompLy 4.4 companies should provide the information indicated in the Guide to reporting on principle 4. the functions associated with safeguarding the integrity in financial reporting are carried out by the Board; is encompassed within the Board charter which is available on the company’s website and summarised in this corporate Governance Statement does not comply, for reasons given in 4.1 above. Principle 5 - make timely and balanced disclosure 5.1 5.2 6.1 companies should establish written policies designed to ensure compliance with aSX listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. companies should provide the information indicated in Guide to Reporting on principle 5. the company has adopted a continuous disclosure policy, to ensure that it complies with the continuous disclosure regime under the aSX listing Rules and the corporations act 2001. this policy is available on the company’s website. complies. the company’s continuous disclosure policy is available on the company’s website complies. Principle 6 - Respect the rights of shareholders companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. the company has adopted a shareholder communications policy. the company uses its website www.lucapa.com.au, annual report, market announcements and media disclosures to communicate with its shareholders, as well as encourage participation at general meetings. this policy is available on the company’s website. complies. 6.2 companies should provide the information indicated in the Guide to reporting on principle 6. the company’s shareholder communications policy is available on the company’s website. complies. 7.1 7.2 7.3 Principle 7 - Recognise and manage risk companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. the board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. the board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. the board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295a of the corporations act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. the company has not adopted a risk management statement. the company has identified key risks within the business. in the ordinary course of business, management monitor and manage these risks. Key operational and financial risks are presented to and reviewed by the board at each board meeting. does not comply. however ultimate responsibility for risk oversight and risk management rests with the board and operates under the board charter. complies. complies. the board as a whole has made a declaration under section 295a of the corporations act 2001 that the financial accounting system is founded on a sound system of risk management and internal control and that the system is operating efficiently and effectively in all material respects in relation to the financial reporting risks. | 43 Corporate GovernanCe Statement for the period ended 31 december 2013 prinCipL es & reComendations CompLianCe 7.4 companies should provide the information indicated in Guide to Reporting on principle 7. the board has not adopted an audit and risk charter, however has identified key risks within the business. CompLy complies. Principle 8 - Renumerate fairly and responsibly 8.1 the board should establish a remuneration committee. the board has not established a remuneration committee and has not adopted a remuneration charter. 8.2 the remuneration committee should be structured so that it consists of a majority of independent directors is chaired by an independent director has at least three members 8.3 companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. the full board is made up of three, two of which are executive directors, and a non-executive director who is not considered independent. the company complies with the guidelines for executive remuneration packages and non- executive director remuneration. complies. does not comply. Given the size of the board, the directors have determined that it will execute the functions of a remuneration committee and that a separate remuneration committee is unnecessary. does not comply, for reasons given in 8.1 above. 8.4 companies should provide the information indicated in the Guide to reporting on principle 8. the board has not adopted a remuneration committee charter. the company does not have any schemes for retirement benefits other than superannuation for non-executive directors. 44 | does not comply. Given the size of the board, the board has determined that it will execute the functions of a remuneration committee and that a separate remuneration committee is unnecessary. With respect to this compliance issue, the board will review its position annually. Corporate GovernanCe Statement for the period ended 31 december 2013 | 45 Corporate GovernanCe Statement for the period ended 31 december 2013 46 | additional information current as at 27 march 2014 required by australia Securities exchange limited Rules and not disclosed elsewhere in this Report. 1. CapitaL s truCture ORDINARy ShARE CAPItAL 3,852,603,212 ordinary fully paid shares held by 3,503 shareholders. Spread 1 1,001 5,001 10,001 to to to to 100,001 - 1,000 5,000 10,000 100,000 Number of holders 39 44 42 914 Number of Shares 6,086 156,892 383,150 56,436,699 2,464 3,795,620,385 as at 27 march 2014 there were 773 fully paid ordinary shareholders holding less than a marketable parcel. OPtIONS - QuOtED 795,436,657 listed options expiring 29 august 2015 exercisable at $0.01 held by 1,180 option holders. Spread 1 1,001 5,001 10,001 to to to to 100,001 - 1,000 5,000 10,000 100,000 Number of holders 2 53 91 529 505 Number of 29/08/2015 Options 1,125 189,925 740,419 23,983,446 770,521,742 as at 27 march 2014 there were 724 $0.01 listed option holders holding less than a marketable parcel. OPtIONS – uNQuO tED As at 27 March 2014, the number of holders of unlisted options was as follows; 1 holder of 25,000,000 $0.03 unlisted options, expiring 2 December 2014; 8 holders of 125,000,000 $0.019 unlisted options, expiring 25 September 2014 2. voting rights ORDINARy ShARES on a show of hands, every member present in person or by proxy shall have one vote and upon a poll each share shall have one vote. OP tIONS options carry no voting rights. options convert to one ordinary share upon exercise. 3. on-market buy-baCk there is no current on-market buy back. 4. substantiaL sharehoL ders there are no substantial shareholders. | 47 additional shareholder information as at 27 march 2014 5. top 20 hoL ders oF quoted seCurities FuLLy PAID ORDINARy ShARES Name Slade technologies pty ltd Seah Kee Khoo peter daniel adams lujeta pty ltd benjamin dark tt nicholls pty ltd one dog one bone pty ltd Kapiri holdings pty ltd pershing australia nominees pty ltd pf Greene pty ltd citicorp nominees pty ltd fleubaix pty ltd Jp morgan nominees australia ltd Sinbad Jackson pty ltd maK Super Wa pty ltd balion pty ltd Robert nicholas arnold paul Spackman 48 | norvest projects pty ltd pershing australia nominees pty ltd Number held 68,750,000 58,024,700 55,000,000 50,989,997 50,000,000 41,269,261 40,000,000 38,484,102 37,650,000 37,125,000 33,146,114 30,000,000 29,573,812 29,372,779 28,550,000 28,125,007 27,525,300 27,500,000 23,650,000 22,698,765 757,434,837 LIStED OPtIONS E xPIRING 29 AuGuSt 2015 ExERCISAbLE At $0.01 Name one dog one bone pty ltd phillip John coulson christopher paul lawrence balion pty ltd Robert paul & Susan pamela martin benjamin dark Slade technologies pty ltd pershing australia nominees pty ltd philip edgar & helen Jane myers tt nicholls pty ltd Kylie-anne drummond Josephine Kathleen patoir Waterbeach investments pty ltd Jason & lisa peterson Sinbad Jackson pty ltd nutsville pty ltd Rachael louise mason Kapiri holdings pty ltd mark drummond overland corner West pty ltd Number held 80,000,000 37,950,000 25,000,000 23,875,007 22,000,000 20,000,000 18,750,000 18,699,888 18,200,000 12,751,751 12,500,000 12,000,000 11,913,955 11,000,000 10,942,279 10,767,763 10,000,000 9,328,022 9,167,513 9,134,181 383,980,359 % of Issued Capital 1.78 1.51 1.43 1.32 1.30 1.07 1.04 1.00 0.98 0.96 0.86 0.78 0.77 0.76 0.74 0.73 0.71 0.71 0.61 0.59 19.65 % of Issued Capital 10.06 4.77 3.14 3.00 2.77 2.51 2.36 2.35 2.29 1.60 1.57 1.51 1.50 1.38 1.38 1.35 1.26 1.17 1.15 1.15 48.27 additional shareholder information as at 27 march 2014 Corporate dire Ctory board oF direCtors austraLian business number GoRdon GilchRiSt non-executive chairman mileS Kennedy chief executive officer daVid JoneS executive technical director Company seC retary mark clements registered oFFiCe and prinCipaL pLaCe oF business 34 bagot Road Subiaco 6008 Western australia po box 298 West perth 6872 Western australia telephone +61-8 9489 9200 facsimile +61-8 9489 9201 email general@lucapa.com.au Website: www.lucapa.com.au 44 111 501 663 asx Codes lom lomo share registry Security transfer Registrars pty ltd 770 canning highway applecross 6153 Western australia | 49 auditors Somes cooke 35 outram Street West perth 6005 Western australia Lawyers drummond law 48 matheson Road applecross 6153 Western australia Firstnaturedesign.Com.au Corporate direCtory lucapa.com.au
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