MRG Metals Ltd
Annual Report 2012

Plain-text annual report

Annual Report MRG Metals Ltd ABN: 83 148 938 532 For the Year ended 30 June 2012 For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Contents Review of Operations Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to the Consolidated Financial Statements 1. Nature of Operations 2. General Information and Statement of Compliance 3. Changes in Accounting Policies 4. Summary of Accounting Policies 5. Revenue 6. Segment Reporting 7. Other Receivables 8. Cash and Cash Equivalents 9. Equity 10. Employee Remuneration 11. Trade and Other Payables 12. Plant and Equipment 13. Exploration and Evaluation 14. Income Tax Expense 15. Auditor Remuneration 16. Earnings per Share and Dividends 17. Reconciliation of Cash Flows from Operating Activities 18. Related Party Transactions 19. Contingent Assets and Contingent Liabilities 20. Commitments 21. Financial Instrument Risk 22. Capital Risk Management 23. Post-Reporting Date Events 24. Parent Entity Information 25. Authorisation of Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information Corporate Directory 2 Page 3 12 19 20 25 26 27 28 29 29 29 31 35 35 35 35 36 37 37 38 38 39 39 40 40 40 43 43 43 44 45 45 45 46 47 50 53 For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Review of Operations Highlights: 3 • Acquisition of prospective Kalgoorlie East Gold project, WA o Surface geophysics and soil sampling identifying high Gold and Nickel anomalies o Subsequent RAB/RC drilling confirmed 3 target zones for Gold, Silver and Base Minerals o Follow up work commenced on Silver targets • Acquisition of prospective Collie South Coal project, WA o Land owner and DMP approvals acquired. Drilling to start in Oct 2012 • Acquisition of Gold and Base metals project at Fraser Range, WA • Completion of 1:2 non renounceable option rights entitlement, raising $426,042 net of costs The year ended 30 June 2012 represented the first full year of MRG as a listed entity and is the period in which MRG commenced its first drilling program at Kalgoorlie East, developed a program of works for Collie South and acquired tenements in the prospective Fraser Range area (potential of the area highlighted by Sirius Resources discovery). The year positions the Group for an exiciting 12 month exploration program focussed on further targetting of the Silver anomoly identifed adjacent to the Nimbus Silver mine in Kalgoorlie, and Coal exploration drilling on extensions of the known Coal fields. Add to this the recent Gold exploration finds by Northern Star Resources next to our Xanadu tenement; the exciting Ni/Cu find by Sirius Resources near our Mt Fraser tenement, which lies along the Tropicana extension; MRG offers some of the best exploration opportunities in the Junior Exploration space. Kalgoorlie East Project (Gold and Silver) 3 Targets identified. The Kalgoorlie East Project is located approximately 7 kilometres due east of the Kalgoorlie Super Pit in the eastern Goldfields of Western Australia and is considered prospective for both Gold and Nickel mineralisation, as the project lies along strike and in the same sequence or rocks as the Golden Ridge Gold Mine and Blair Nickel Mine. The project contains widespread evidence of mineralisation as shown by numerous historic workings. After a review of previous exploration and structural analysis, the Company embarked upon widespread soil sampling. This first pass sampling was followed be more detailed grid sampling, which highlighted some eleven areas warranting further exploration. Also, in conjunction with the soil sampling, an Electro-Magnetic (EM) geophysical survey was commissioned, over areas where elevated Nickel in soil was coincident with ultramafic rocks. After completing further soil sampling analysis at its Kalgoorlie East Project during the March 2012 Quarter and the results of the ground electromagnetic survey (EM), the Company completed its first pass RAB and RC drilling program on the key targets at Kalgoorlie East. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 4 • A total of 5,183 metres of RAB drilling was completed across a number of Gold and Silver targets. In addition two RC holes were drilled in areas identified through the ground EM program targeting base metals. (Figure 1) • Of the eight soil anomalies drill tested for Gold, two have returned elevated precious metal values. The first of these is located within the tenement P26/3604 (Figure 1) and comprises a narrow auriferous shear structure with a strike length in excess of 400 metres (across broadly spaced drill lines). The southernmost anomaly has returned numerous elevated Silver (Ag) (Figure 1) values in 5 metre composite samples. The elevated silver occurs in a pyritic felsic volcanics and black shale sequence, part of the Black Flag Beds. The mineralisation appears analogous to that seen in the Nimbus deposit, which lies 2.5 kilometres to the North East. Most significantly, many holes terminated in mineralisation as the Air Core drill was unable to penetrate further into harder rock encountered at depth. • The two RC holes, which drill tested strong EM anomalies, intersected strongly pyritised black shales. Geochemical analysis of composite samples from these shales showed elevated levels of Copper and Zinc. Subsequent testing and analysis has identified the potential for a significant source resource to be located in the vicinity of the initial test areas. It is now planned to further test the area with an addition surface geophysics (Surface EM) and deeper RC drilling. The preliminary drill results validate the earlier soil sampling analysis and resultant target zones. Of particular interest is the potential for significant Silver mineralisation in the area adjacent to the Nimbus mine, where recent exploration has identified substantial Silver intersects in previously unexplored zones below the old mine operations. These discoveries and our preliminary exploration encourage MRG to further explore the area for a significant Silver resource. Therefore, our near term focus on Kalgoorlie East will be to further test the area for Silver mineralisation. In summary the Aircore drilling discovered three distinct styles of mineralisation; shear hosted Gold mineralisation, lateritic Nickel mineralisation, with up to 1% nickel and Silver mineralisation within meta - volcaniclastics. Several of the holes intersected elevated Silver values, with hole KE047 terminating in a hard quartz vein returning values up to 88.7 g/t Silver. The EM conductors tested by RC drilling were revealed to be black shales containing up to 1.5% Zinc and 0.2% Copper. Of the mineralisation styles found in the first phase of drilling the Silver mineralisation was afforded the highest priority for further work, as it is in a similar geological setting to the Nimbus Ag - Zn deposit, which lies 2.5 kilometres to the east. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 5 Figure 1 Kalgoorlie East Gold Project For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Collie South Project (Coal and Bauxite) 6 The Collie tenement covers 33kms of strike directly south of the main Collie Coal bearing basin & ground surrounding the western sub-basin of the lesser Wilga Coal bearing basin. (Figures 2, 3) An exhaustive compilation of has been made of all available data for the area of the Collie tenements & environs. This has included data from previous drilling, gravity & airborne magnetic surveys and mapping. This compilation has identified seven targets considered worthy of follow up. In the June Quarter of 2012 the Company has sought the required approvals and negotiated with Private Landholders for access in order to complete first pass drilling on four main targets, numbers 1, 3 & 6 on the following plan. Drilling is planned to commence during October 2012. Fig 2 Collie South identified target zones For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 7 Figure 3 Collie South Coal Project For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Xanadu Project (Gold) 8 Work completed at the Xanadu Project during the year consisted of database compilation and verification. All historical data relevant to the project dating back to the mid-1980’s was acquired in both digital and hard copy format. Once finalised, the Xanadu database will be reviewed and priority targets identified for further exploration. In addition an analysis of ALOS & LandSat imagery along with radiometric/DEM imaging has been completed to identify the geological characteristics associated with the known mineral anomalies and to facilitate new target identification. A new target has been identified close to the known resource near the Amphitheatre area close to the eastern boundary near to Northern Star Resources’ recent Sparta discovery. The work of Northern Star Resources indicates that this region is developing into a significant Gold province. Our project is 7km west of their Mt Olympus Gold Project where recently completed RC drilling has targeted the sulphide resource beneath the Mt Olympus, Waugh and Peak open pits and adjacent to their new discovery at Sparta. Figure 4 Xanadu Gold Project For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Braemore Battery (Gold) 9 A soil program was completed at Braemore Battery to cover the northern portion of the project which overlay the historical Au-As anomalies. Work completed to date has not identified any significant results. Braemore is to be retained given that minimum expenditure is low and mostly met for the next year; pending review of drilling on nearby tenements. We have written off the costs of Braemore at 30 June 2012. If further work is carried out that changes our view, costs will be reinstated and capitalised. Tenement Acquisitions/Sales During the year the Board of MRG finalised its review of all the current Tenements. In light of recent developments and acquisitions, MRG decided there was a need to reduce the number of Tenements in the portfolio. Key elements to this decision being: - Need to prioritise exploration expenditure across the most prospective projects. - The preliminary exploration results across the retained Tenements warrant focus of management time and Company resources. Interest of 3rd parties created opportunities. - - Potential to look at other opportunities and acquisitions. - Timing of Tenement anniversary dates and near term expenditure requirements. MRG decided to sell its exploration licences at Bell Chambers, Diorite and Mulgul. Terms of the sale included the retention of future interest via a royalty agreement which varies during the exploration phase through to a full net smelter royalty once in the production phase. Acquisitions: The Board of MRG is pleased to advise its successful application for prospective tenements along the Tropicana geological feature extension, known as Fraser Range. Tropicana Gold has identified over 5 million oz resource. o The project is consistent with MRG’s strategy to develop world class Gold assets. o The tenements sit within MRG’s WA tenement focus. o The project is in an area currently being evaluated by Thor Mining Ltd, Ausquest Ltd and AngloGold Ashanti Ltd. o The Company expects that these new tenements will be granted late in 2012. o Recent Ni/Cu discovery by Sirius Resources in the Fraser Range tenement to the North further enhances the potential of this relatively under explored region Overview The project lies in an area that has seen intense tectonic activity within the same province which hosts the Tropicana Gold deposits. It has demonstrated Gold potential, with Gold anomalies already identified in the adjacent tenements owned by Thor Mining Ltd and Ausquest Ltd ( Figure 5) and Nickel as indicated by the recent announcement of Sirius Resources. Location: 100km ESE of Norseman, WA Tenements: Exploration Licences:- E63/1552 and E63/1553 for a total of 100 blocks. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 10 Figure 5 – Fraser Range Project Location and Soil Geochemistry For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Corporate Activities 11 Non-Renounceable Rights Options Issue During the year, the Group offered Shareholders the opportunity to participate in a 1 for 2 non-renounceable entitlements issue of Options. The last trading day for Shareholders to become eligible for the entitlement was Tuesday 23 August 2011. All Shareholders registered as at 7.00pm AEST on 30 August 2011 were entitled to participate in a pro-rata non-renounceable entitlements issue of Options on the basis of 1 Option for every 2 Shares held. The Options were issued at 1 cent per Option and at an exercise price of 25 cents, valid for a period of 5 years. Other key aspects of the Rights Issue were as follows: • The maximum number of MRG options able to be issued were 44,058,000 and 44,057,993 were issued; • The issue price for the Offer Securities was 1 cent each; • Options exercisable at 25 cents for a period open until 21 September 2016; • The amount of money raised by the Rights Issue was $440,580; • The Board of MRG took up 100% of their own rights; and • Money raised through the Rights Issue will be used to: o provide working capital for the Company; and o meet the costs of the Rights Issue, which were $14,538. MRG is continuing to review a number of additional opportunities that avail themselves in the current market conditions. ACTIVITIES AND HIGHLIGHTS SINCE 30 JUNE 2012 MRG has submitted its program of works for Collie South and is awaiting approval from the Department of Minerals &Petroleum WA and WA Water Authority before it commences the initial drill program. Drilling is expected to start in October 2012. Further drilling at Kalgoorlie East commenced in August 2012 and finished in early September 2012. Follow up RC drilling of the Silver target did not return results with as high a tenor as the original air core drilling. However, subsequent detailed geological mapping and soil sampling indicates that this mineralisation likely extends further to the south. Currently, a review of the exploration results generated to date is underway and the results of this review will be used to focus future work on the Project. This work shows two areas to the south of the previous drilling, within the felsic volcaniclastics. The stronger anomaly (anomaly 1) is within the Volcaniclastic unit but close to the boundary with the Dolerite volcanics. The mapping suggests some local folding in the area and the mineralisation could be present in the hinge zone of the fold. Additional drilling is planned to confirm this hypothesis and drilling will continue in October. Xanadu is currently undergoing further data consolidation and further field work is planned in the next quarter, to develop a comprehensive exploration plan. A priority of the plan will be how to quickly monetise the known Gold resource sitting within the old Leach pit, which was abandoned during previous operations under significantly different gold valuations. It is anticipated (but requires validation) that in excess of 5,000 oz of contained Gold sits within the old pit. The Board of MRG has met to review the proposed exploration expenditure for the 2013 financial year and has approved a range of exploration expenditure between $500,000 and $600,000 pending progressive outcomes. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 12 Directors’ Report The Directors of MRG Metals Ltd present their Report together with the financial statements of the consolidated entity, being MRG Metals Ltd (‘MRG’ or ‘the Company’) and its controlled entity, MRG Metals (Australia) Pty Ltd (‘the Group’) for the year ended 30 June 2012 and the Independent Audit Report thereon. The Company was incorporated on 24 January 2011 and the comparatives in this Report are for the period from 24 January 2011 to 30 June 2011. Director details The following persons were directors of MRG Metals Ltd during or since the end of the financial year. Mr Andrew Van Der Zwan BA Chemical Engineering Managing Director Director since 14/02/2011 Andrew has 26 years engineering and commercial experience, both local and international. He was a Non Executive Director of Gulfx Ltd for 11 years and was employed in various senior positions within the worldwide operations of Exxon Mobil for 17 years. Other current directorships: None Previous directorships (last 3 years): None Interests in shares: 2,160,000 shares Interest in options: 1,080,000 options Mr Albert Pietrzak BA Mechanical Engineering Independent Non-Executive Director Independent Chairman Director since incorporation 24/01/2011 Albert has 41 years engineering and commercial experience. He was Managing Director of an engineering company for 33 years. He is a fully qualified IFR pilot, an engineering consultant and an investor. Other current directorships: None Previous directorships (last 3 years): None Interests in shares: 2,130,000 shares Interest in options: 1,065,000 options For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Mr Shane Turner CA, Bachelor of Business Independent Non-Executive Director Director since incorporation 24/01/2011 13 Shane is a Chartered Accountant and has 24 years financial and accounting experience. He has been employed with KPMG, a large regional public accounting practice, operated his own public accounting practice and now is employed with RSM Bird Cameron. He was a Non Executive Director and Company Secretary for Metminco Ltd for 2 years. Other current directorships: None Previous directorships (last 3 years): Metminco Ltd Interests in shares: 1,470,000 shares Interest in options: 735,000 options Company secretary Shane Turner is a Chartered Accountant and the Group Chief Financial Officer. Shane has held senior positions with a number of professional accounting firms and has a degree in Business. Shane has previously held the role of company secretary for Metminco Ltd for 2 years. He has been the company secretary of MRG Metals Ltd since incorporation on 24/01/2011. Principal activities During the period, the principal activities of entities within the Group were exploration and development of gold, base metals and other commodities within Australia. There have been no significant changes in the nature of these activities during the period. Review of operations and financial results The operating result of the Group for the year ended was a loss of $764,056 (part year 2011 loss $316,660). Refer detailed Review of Operations that follows this report. Earnings per share (0.87) cents (2011 (1.33) cents). Since listing, monies raised have been used consistent with that described in the IPO Prospectus, including: augment the Company’s exploration of mining tenements, assist the Company to identify and assess new mining opportunities, finance the acquisition of interests in mineral properties, - - - - meet the Company’s ongoing administration and corporate overhead expenses, and - meet the one-off expenses of the offer. Further information on the detailed operations of the Group during the year are included in the Review of Operations Report. For personal use only 14 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Significant changes in the state of affairs During the year, the following changes occurred within the Group: • Options issue On 25 November 2011, the Company completed a 1 for 2 non renounceable options issue, raising $440,580, before costs of $14,538. These options are exercisable at $0.25 by September 2016. • Tenement Acquisitions On 4 July 2011, the Group completed the acquisition of tenements prospective for Gold at Kalgoorlie East, WA. This resulted in 1,000,000 shares being issued and payment of $20,000. On 26 July 2011, the Group completed an option for the 30% acquisition of tenements prospective for Coal and Bauxite at Collie South, WA. This resulted in 1,000,000 shares being issued and payment of $50,000. On 12 April 2012, the Company announced application for tenement acquisitions prospective for Gold along the Tropicana extension at Fraser Range near Norseman, WA. • Tenement Sales On 5 March 2012, the Company announced sale of tenements known as Bell Chambers, Diorite and Mulgul for a Royalty interest after a review of tenements. Dividends There were no dividends declared or paid during the financial period. Events arising since the end of the reporting period Since the end of the year the following significant events have occurred: • There are no other events occurring since the end of the year that have, or may, significantly affect the Group’s operations, results of those operations or the state of affairs of the Group. Likely developments Information on likely developments in the Group’s operations and the expected results have not been included in this report because the directors believe it would likely result in unreasonable prejudice to the Group. Directors’ meetings The number of meetings of directors held during the period and the number of meetings attended by each director were as follows: Name Board meetings Mr A Van Der Zwan Mr A Pietrzak Mr S Turner A 13 13 13 B 13 13 13 Where: A is the number of meetings the Director was entitled to attend B is the number of meetings the Director attended For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 15 Remuneration Report (audited) The Directors of MRG Metals Ltd (‘the Group’) present the Remuneration Report prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001. The remuneration report is set out under the following main headings: a. Principles used to determine the nature and amount of remuneration b. Details of remuneration c. Service agreements d. Share-based remuneration (a) Principles used to determine the nature and amount of remuneration The principles of the Group’s executive strategy and supporting incentive programs and frameworks are: • To align rewards to business outcomes that deliver value to shareholders; • To drive a high performance culture by setting challenging objectives and rewarding high performing individuals; and • To ensure remuneration is competitive in the relevant employment market place to support the attraction, motivation and retention of executive talent. MRG Metals Ltd has structured a remuneration framework that is market competitive and complementary to the reward strategy of the Group. The Board, in accordance with its charter as approved by the Board, is responsible for determining and reviewing compensation arrangements for the directors and the executive team. The remuneration structure that has been adopted by the Group consists of the following components: • Fixed remuneration being annual salary; and • Superannuation to meet statutory obligations. The Board assesses the appropriateness of the nature and amount of remuneration on a periodic basis by reference to recent employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. The payment of bonuses, share options and other incentive payments are reviewed by the Board annually as part of the review of executive. All bonuses, options and incentives must be linked to pre-determined performance criteria. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 16 (b) Details of remuneration Details of the nature and amount of each element of the remuneration of each key management personnel (‘KMP’) of MRG Metals Ltd are shown in the table below. The $5,000 paid to Mr A Pietrzak in 2011 was in recognition of outstanding contribution to the successful capital raising in connection with the IPO. The $1,000 paid to Mr N Fammartino was in recognition of him serving as a Director for the period 24/1/11 to 14/2/11. Director and other Key Management Personnel Remuneration Short term employee benefits Name Executive director Mr A Van Der Zwan Non-executive directors Mr A Pietrzak Mr S Turner Mr N Fammartino Cash salary and fees ($) Cash bonus ($) Non- monetary benefits ($) 56,250 - 20,833 35,833 - 5,000 - - 2011 Total 112,916 5,000 Executive director Mr A Van Der Zwan 150,000 - Non-executive directors Mr A Pietrzak Mr S Turner Mr N Fammartino 50,000 86,000 - - - 1,000 2012 Total 286,000 1,000 Post- employment benefits Long-term benefits Termination benefits Share-based payments Superannuation ($) Long-term bonus ($) Termination payments ($) Options ($) Total ($) % of remuneration that is performance based - - - - - - - - - - 5,063 1,875 3,225 10,163 13,500 4,500 7,740 25,740 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 61,313 27,708 39,058 - 128,079 163,500 54,500 93,740 1,000 312,740 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 17 (c) Service agreements Remuneration and other terms of employment for the Executive Directors and other Key Management Personnel are formalised in a service agreement. The major provisions of the agreements relating to remuneration are set out below: Name Mr A Van Der Zwan Mr A Pietrzak Mr S Turner - Director Mr S Turner - Secretary Base salary 150,000 50,000 50,000 36,000 Term of agreement Three Years Rotation per Corporations Act 2001 Nil Rotation per Corporations Act 2001 Nil Nil No fixed term Notice period Six Months (d) Share based remuneration During the year, there was no share based remuneration paid or outstanding. End of audited remuneration report. Environmental legislation The Group’s projects are subject to environmental regulation under laws of the Commonwealth and States and Territories in Australia, specifically the Group is required to comply with terms of the grant of the tenement and all directions given to it under those terms of the tenement which it holds. There have been no known breaches of the tenement conditions, and no such breaches have been notified by any government agency during the period ended 30 June 2012. Indemnities given and insurance premiums paid to auditors and officers During the year, MRG Metals Ltd negotiated a premium to insure officers of the Group. The officers of the Group covered by the insurance policy include all directors. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the Group. Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract. The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnity any current or former officer or auditor of the Group against a liability incurred as such by an officer or auditor. Non-audit services During the previous period, Grant Thornton Audit Pty Ltd, the Group’s auditors, performed certain other services in addition to their statutory audit duties. The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non-audit services during the year is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 18 • All non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the Board to ensure they do not impact upon the impartiality and objectivity of the auditor; and • The non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards. Details of the amounts paid to the auditors of the Group, Grant Thornton Audit Pty Ltd, and its related practices for audit and non-audit services provided during the year are set out in note 15 to the Financial Statements. A copy of the auditor’s independence declaration as required under s307C of the Corporations Act 2001 is included on page 19 of this financial report and forms part of this Directors’ Report. Proceedings of behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Signed in accordance with a resolution of the directors. Albert Pietrzak Chairman 27 September 2012 For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 19 Grant Thornton Audit Pty Ltd ACN 130 913 594 Level 2 215 Spring Street Melbourne Victoria 3000 GPO Box 4984 Melbourne Victoria 3001 T +61 3 8663 6000 F +61 3 8663 6333 E info.vic@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of MRG Metals Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of MRG Metals Limited for the period ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been: a. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b. no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants B Taylor Partner – Audit & Assurance Melbourne, 27 September 2012 Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards Legislation For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Corporate Governance Statement 20 This Corporate Governance Statement sets out the extent to which the Company's practices comply with the ASX Corporate Governance Council's Principles of Good Corporate Governance and Recommendations (Recommendations). The Recommendations are not mandatory. ASX Corporate Governance Council Recommendation Principle 1: Lay solid foundations for management and oversight Recommendation 1.1: Companies should establish functions reserved to the board and those delegated to senior executives and disclose those functions MRG policy Compliance Complies Group's responsibilities of The Corporate Governance framework includes a Board Charter, which details the specific the Board and identifies those areas of authority delegated senior executives. The Board will set performance criteria to review the performance of senior management. to the The Board Charter is available on the Group's website. Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives Recommendation 1.3: Companies should provide information indicated in the Guide to reporting on Principle 1 Principle 2: Structure the board to add value Recommendation 2.1: A majority Two of three directors, being Albert Pietrzak of the board should be independent and are Shane directors independent directors. Albert Pietrzak is the Chairman and is an independent director. Albert Pietrzak is the Chairman. Andrew Van Der Zwan is the Chief Executive Officer. Recommendation 2.2: The chair should be an independent director Recommendation 2.3: The roles of chair and chief executive officer should not be exercise by the same individual Recommendation 2.4: The board should a nomination committee the Group's establish Turner, Recommendation 2.5: Companies should disclose the process for evaluating the performance of the board, its committees and individual directors into consideration The Group does not currently have a nomination committee. appointments will be Board decided by the Board as a whole, taking the needs of the Group at the relevant time. The Company Secretary plays an integral role in monitoring the conduct and activities of Board, an ensuring appropriate mix of skills and experience reviewing and individual director's performance. The Chief Executive Officer is reviewing responsible the for performance of the Company Secretary. the Board has Complies Complies Complies Complies Complies The Board does not consider it necessary given the size of the Group's current operations. Complies For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 21 the MRG policy ASX Corporate Governance Council Recommendation Recommendation 2.6: Companies should provide information indicated in the Guide to reporting on Principle 2 Principle 3: Promote ethical and responsible decision making Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of the code as to: This information, where relevant, has been disclosed the Directors’ Report. in Compliance Complies Complies The Board has established a Code of Conduct as to the practices necessary to maintain confidence in the Group's integrity; practices necessary to take into account the Group's legal obligations and the reasonable of shareholders and the responsibility and accountability of individuals investigating for reporting and reports of unethical practices. The Code of Conduct is available on the Group's website. expectations - - - - 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 trading in securities of the Company Recommendation 3.2: Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the establish measurable board to objectives for achieving gender diversity for the board and to assess annually both the objectives and progress in achieving them Recommendation 3.3: Companies in each annual should disclose report the measurable objectives for achieving gender diversity set by the the board progress and diversity towards achieving them Recommendation 3.4: Companies should disclose in each annual report the proportion of women whole employees organisation, women senior executive positions and women on the board Recommendation 3.5: Companies should provide information indicated in the Guide to reporting in accordance with policy the the in in The Group does not currently have a diversity policy. Once the Group has established its operations, it will develop a policy that complements its needs. The Group does not currently have a diversity policy. Once the Group has established its operations, it will develop a policy that complements its needs. is committed to prepare Diversity and Board review appropriate policy. is committed to prepare Diversity and Board review appropriate policy. None at present. None at present due to the size of Group. The Code of Conduct and the diversity policy (once established) will be available on the Group's Board review appropriate is committed to prepare Diversity and For personal use only 22 Compliance policy. The Board does not consider it necessary given the size of the Group's current operations. MRG Metals Ltd Consolidated Financial Statements 30 June 2012 MRG policy ASX Corporate Governance Council Recommendation on Principle 3 Principle 4: Safeguard integrity in financial reporting Recommendation 4.1: The board should establish an audit committee website. The Group does not currently have an audit committee. The functions of this committee will be carried out by the whole Board. The Company Secretary has significant experience in financial and accounting matters and will be for primarily the monitoring and preparing financial External reports. resources will be commissioned where necessary. responsible Refer to comments in 4.1 above. Refer to comments in 4.1 above. Recommendation 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 3 members Refer to comments in 4.1 above. Refer to comments in 4.1 above. The Group has established a Continuous Disclosure Policy which applies to all directors and senior management. the Recommendation 4.3: The audit committee should have a formal charter Recommendation 4.4: Companies should provide information indicated in the Guide to reporting on Principle 4 Principle 5: Make timely and balanced disclosure Recommendation 5.1: Companies should establish written policies designed to ensure compliance with disclosure ASX Listing Rule requirements ensure and accountability at a senior executive level that compliance and disclose those policies or a summary of those policies Recommendation 5.2: Companies information should provide indicated in the Guide to reporting on Principle 5 Principle 6: Respect the rights of shareholders Recommendation 6.1: Companies should design a communications for promoting effective policy the for to Group's The Continuous Disclosure Policy will be available on the Group's website. The Group is committed to all shareholders stakeholders and having equal and timely access to Refer to comments in 4.1 above. Refer to comments in 4.1 above. Complies Complies Complies For personal use only 23 MRG policy Compliance MRG Metals Ltd Consolidated Financial Statements 30 June 2012 ASX Corporate Governance Council Recommendation communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy Recommendation 6.2: Companies should provide information indicated in the Guide to reporting on Principle 6 the Principle 7: Recognise and manage risk Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies to require management implement Recommendation 7.2: The board to should design and 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 the to it as the company's effectiveness of management of its material business risks Recommendation 7.3: The board it has should disclose whether received assurance from the CEO and CFO 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 Recommendation 7.4: Companies information should provide that the material information regarding the operations and results of the Group. Where required, this information will be provided via the ASX. Otherwise, information will be made available on the Group's website. The Group will provide an explanation of any departures (if the best practice any) recommendations in Principle 6 in its future annual reports. from considers Given the size of the Group's current operations, the Board has formed the view that a separate risk committee is not necessary. The Board itself monitors all areas of operational and financial risk strategies and for appropriate risk management arrangements on an ongoing basis. If considered necessary, external input will be sought to assess and counteract identified risks. The Board will that require Andrew Van Der Zwan, as Managing Director and Chief Executive Officer, design and implement an appropriate risk management and internal control system and provide a report to the Board at the relevant time. Complies Complies Complies The Board will seek this assurance from Andrew Van Der Zwan as Chief Executive Officer. Complies The Group will provide an explanation of any departures (if Complies For personal use only 24 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 ASX Corporate Governance Council Recommendation indicated in the Guide to reporting on Principle 7 MRG policy Compliance from any) the best practice recommendations in Principle 7 in its future annual reports. Principle 8: Remunerate fairly and responsibly Recommendation 8.1: The board should establish a remuneration committee The Group does not currently have a remuneration committee. . is responsible for The Board recommendations making regarding and director remuneration management packages. The Board does not consider it necessary given the size of the Group's current operations Recommendation The remuneration committee should be structured so that it: 8.2: - - consists of a majority of independent directors is chaired by an independent chair - has at least three members clearly distinguish Recommendation 8.3: Companies the should structure of non-executive directors' remuneration from that of executive directors and senior executives Recommendation 8.4: Companies should provide information indicated in the Guide to reporting on Principle 8 the Refer to comments in 8.1 above. Refer to comments in 8.1 above. and reflects the scope of The Board is aware of the need to remains remuneration ensure competitive and consistent with competitor companies and that remuneration the performance of the Group over time. The directors performing an executive role are remunerated their based on the responsibilities performance of the Group. Non-executive directors are paid fees by shareholders. the The Group will provide requisite regarding disclosure executive remuneration policies in its annual report. The Group will provide an explanation of any departures (if any) the best practice recommendations in Principle 8 in its future annual reports. determined from as Complies Complies The Board actively monitors the Group's governance framework, related practices and overall culture. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 25 Statement of Financial Position As of 30 June 2012 Notes Consolidated Consolidated 2011 $ 2012 $ Assets Current Cash and cash equivalents Other receivables Total current assets Non-current Plant & Equipment Exploration & Evaluation Total non-current assets Total assets Liabilities Current Employee benefits Trade and other payables Total current liabilities Total liabilities Net assets Equity Share capital Retained earnings Total equity 8 7 12 13 10 11 9 4,362,737 44,436 4,407,173 5,145,091 92,370 5,237,461 736 2,089,540 2,090,276 6,497,449 - 1,146,623 1,146,623 6,384,084 10,062 183,567 193,629 193,629 6,303,820 4,716 150,034 154,750 154,750 6,229,334 7,384,536 (1,080,716) 6,303,820 6,545,994 (316,660) 6,229,334 This statement should be read in conjunction with the notes to the financial statements. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 26 Statement of Comprehensive Income for the year ended 30 June 2012 Revenue Employee benefits expense Administrative expenses Exploration expenses Loss before tax Tax expense Loss after tax Other comprehensive income, net of tax Total comprehensive losses Earnings per share Basic earnings per share Earnings from continuing operations Diluted earnings per share Earnings from continuing operations Notes Consolidated 2012 $ Consolidated 24/1/11 - 30/6/11 $ 5 10 14 16 298,117 (317,086) (376,708) (368,379) (764,056) - (764,056) - (764,056) 28,840 (127,795) (217,705) - (316,660) - (316,660) - (316,660) Cents Cents (0.87) (0.87) (1.33) (1.33) This statement should be read in conjunction with the notes to the financial statements. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 27 Statement of Changes in Equity for the year ended 30 June 2012 Balance at 24 January 2011 Other Comprehensive Income Loss after income tax expense for the period Transactions with owners Issue of share capital Less capital raising costs Total transactions with owners Share Capital $ Retained earnings $ Total equity $ - - - - (316,660) (316,660) 6,967,200 (421,206) 6,545,994 - - - 6,967,200 (421,206) 6,545,994 Balance at 30 June 2011 6,545,994 (316,660) 6,229,334 Balance at 30 June 2011 6,545,994 (316,660) 6,229,334 Other Comprehensive Income Loss after income tax expense for the period - (764,056) (764,056) Transactions with owners Issue of share capital Less capital raising costs Total transactions with owners 853,080 (14,538) 838,542 - - - 853,080 (14,538) 838,542 Balance at 30 June 2012 7,384,536 (1,080,716) 6,303,820 This statement should be read in conjunction with the notes to the financial statements. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Statement of Cash Flows for the year ended 30 June 2012 28 Notes 17 Operating activities Interest received Payments to suppliers and employees Net cash from continuing operations Net cash used in operating activities Investing activities Payment for plant & equipment Payment for exploration & evaluation Net cash used in investing activities Financing activities Proceeds from issue of share capital Capital raising costs Net cash from (used in) financing activities Net change in cash and cash equivalents Consolidated Consolidated 24/1/11 to 30/6/11 $ 2012 $ 298,117 (643,069) (344,952) (344,952) (1,104) (874,840) (875,944) 28,840 (329,944) (301,104) (301,104) - (72,924) (72,924) 453,080 (14,538) 438,542 5,695,800 (176,681) 5,519,119 (782,354) 5,145,091 Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 8 5,145,091 4,362,737 - 5,145,091 This statement should be read in conjunction with the notes to the financial statements. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 29 Notes to the consolidated financial statements Nature of operations 1 The activities of MRG Metals Ltd and its subsidiary, MRG Metals (Australia) Pty Ltd are exploration and development of gold, base metals and other commodities within Australia. General information and statement of compliance 2 The consolidated general purpose financial statements of the Group have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. Compliance with Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). MRG Metals Ltd is the Group's ultimate parent company. MRG Metals Ltd is a public company incorporated and domiciled in Australia. The consolidated financial statements for the year ended 30 June 2012 were approved and authorised for issue by the board of directors on 26 September 2012 (see note 25). 3 Changes in accounting policies Overall considerations 3.1 The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any impact on the financial performance or position of the Group. 3.2 New Accounting Standards and Interpretations not yet mandatory or early adopted At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. Standard/Interpretation Effective for annual Expected to be initially reporting periods applied in the financial beginning on or after year ending AASB 9 ‘Financial Instruments’, AASB 200911 ‘Amendments to Australian Accounting Standards arising from AASB 9’ and AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)’ 1 January 2013 30 June 2014 AASB 10 ‘Consolidated Financial Statements’ 1 January 2013 30 June 2014 AASB 11 ‘Joint Arrangements’ 1 January 2013 30 June 2014 AASB 12 ‘Disclosure of Interests in Other 1 January 2013 30 June 2014 For personal use only 30 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Entities’ AASB 127 ‘Separate Financial Statements’ (2011) 1 January 2013 30 June 2014 AASB 128 ‘Investments in Associates and Joint Ventures’ (2011) 1 January 2013 30 June 2014 AASB 13 ‘Fair Value Measurement’ and AASB 2011-8 ‘Amendments to Australian Accounting Standards arising from AASB 13’ AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10 ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011)’ AASB 2010-8 ‘Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets’ AASB 2011-4 ‘Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements’ AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements standards’ AASB 2011-9 ‘Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income’ Interpretation 20 ‘Stripping Costs in the Production Phase of a Surface Mine’ and AASB 2011-12 ‘Amendments to Australian Accounting Standards arising from Interpretation 20’ 1 January 2013 30 June 2014 1 January 2013 30 June 2014 1 January 2012 30 June 2013 1 July 2013 30 June 2014 1 January 2013 30 June 2014 1 July 2012 30 June 2013 1 January 2013 30 June 2014 At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations were also in issue but not yet effective, although Australian equivalent Standards and Interpretations have not yet been issued. Standard/Interpretation Mandatory Effective Date of IFRS 9 and Transition Disclosures (Amendments to IFRS 9 and IFRS 7) Effective for annual Expected to be initially reporting periods applied in the financial beginning on or after year ending 30 June 2016 1 January 2015 For personal use only 31 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 4 Summary of accounting policies Overall considerations 4.1 The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarised below. The consolidated financial statements have been prepared using the measurement bases specified by Australian Accounting Standards for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below. Presentation of financial statements 4.2 AASB 101 requires two comparative periods to be presented for the statement of financial position in certain circumstances. The comparatives are for the reporting period since incorporation on 24 January 2011 to 30 June 2011. Basis of consolidation 4.3 The Group financial statements consolidate those of the parent company and its subsidiary undertakings drawn up to 30 June 2012. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of 30 June. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Segment reporting 4.4 Operating segments are presented using the ‘management approach’, where information is presented on the same basis as the internal reports provided to chief operating decision makers, being the Board of Directors. The Board of Directors are responsible for the allocation of resource to operating segments and assessing their performance. Revenue 4.5 Interest income is recognised when received. Operating expenses 4.6 Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin. Exploration and evaluation 4.7 Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 32 Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made. A regular review for impairment is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Income taxes 4.8 Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity. Current income tax assets and/or liabilities comprise those obligations to, or claims from, the Australian Taxation Office (ATO) and other fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income. Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively. Cash and cash equivalents 4.9 Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. For personal use only 33 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Other Receivables 4.10 Other receivables are recognised at amortised cost, less any impairment. Trade Payables 4.11 These amounts represent liabilities for goods and services provided the Group prior to the end of the financial period and which are unpaid. Due to their short term nature they are measured at amortised cost and not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Earnings per share 4.12 Basic earnings per share is calculated by dividing the profit attributable to the owners of MRG Metals Ltd, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the financial period. Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Equity 4.13 Share capital represents the nominal value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share capital, net of any related income tax benefits. Retained earnings include all current and prior period retained profits. 4.14 Post employment benefits and short-term employee benefits The Group provides post employment benefits through various defined contribution plans. A defined contribution plan is a superannuation plan under which the Group pays fixed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. The Group contributes to several plans and insurances for individual employees that are considered defined contribution plans. Contributions to the plans are recognised as an expense in the period that relevant employee services are received. Short-term employee benefits, including annual leave entitlement, are current liabilities included in ‘employee benefits’, measured at the undiscounted amount that the Group expects to pay as a result of the unused entitlement. Provisions, contingent liabilities and contingent assets 4.15 Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 34 All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Possible inflows of economic benefits to the Group that do not yet meet the recognition criteria of an asset are considered contingent assets. Goods and Services Tax (GST) 4.16 Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST components of investing and financing activities, which are disclosed as operating cash flows. Significant management judgement in applying accounting policies 4.17 The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements. Deferred tax assets The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group's latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances. Estimation uncertainty When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results. Information about significant judgements, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Exploration and evaluation assets At each reporting date, the directors review the carrying amount of each area of interest, with reference to the indicators of impairment outlined in AASB 6 Exploration for and Evaluation of Mineral Resources. No indicators of impairment were noted in the current period. Tax Losses The Group has not recognised a deferred tax asset with regard to unused tax losses and other temporary differences, as it has not been determined whether the Company will generate sufficient taxable income against which the unused tax losses and other temporary differences can be utilised in the foreseeable future. Share based payments The Group measures the cost of share based payments at fair value at the issue date. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 5 Revenue Interest received 6 Segment reporting 35 Consolidated 2012 $ 298,117 298,117 Consolidated 24/1/11 - 30/6/11 $ 28,840 28,840 The Group is organised into one operating segment, which is the exploration and development of Gold, base metals and other commodities within Australia. This operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers) in assessing performance and in determining the allocation of resources. 7 Other receivables GST receivables Prepayments Other receivables The receivables noted above are not impaired nor past due. 8 Cash and cash equivalents Cash and cash equivalents include the following components: Cash at bank and in hand: AUD Short term deposits (AUD) Cash and cash equivalents Consolidated 2012 $ 44,436 - 44,436 Consolidated 2011 $ 49,704 42,666 92,370 Consolidated 2012 $ Consolidated 2011 $ 3,552,737 810,000 4,362,737 1,085,091 4,060,000 5,145,091 The effective interest rate on short-term bank deposits is 5.55%; these deposits have an average maturity of 90 days but can be redeemed prior to maturity without penalty on interest earned. For personal use only 36 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 9 9.1 Equity Share capital The share capital of MRG Metals Ltd consists of fully paid ordinary shares and options, the shares do not have a par value. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders' meeting of MRG Metals Ltd. Date Issued Details 24 Jan 2011 24 Jan 2011 8 March 2011 11 March 2011 8 June 2011 8 June 2011 Shares issued and fully paid: Issued to Directors at $0.005 Issued to Consultants at $0.005 Issued to Seed Capitalists at $0.0625 Issued to Promoters at $0.06251 Issued to Tenement Vendors at $0.20 Issued to Public on IPO at $0.20 Total issued shares at 30 June 2011 Less costs of capital raising for above items2 Total share capital at 30 June 2011 Quantity 2,800,000 12,000,000 50,000,000 3,600,000 5,250,000 12,466,000 86,116,000 Consolidated 24/1/11 - 30/6/11 $ 14,000 60,000 3,125,000 225,000 1,050,000 2,493,200 6,967,200 (421,206) 6,545,994 1These shares were awarded to promoters, whom assisted with the seed capital raising, at an issue price of $0.001 per share (totalling $3,600). These shares have been recognised at the fair value of the shares as denoted by the issue price of the seed capital raising. 2 Included in the costs of capital raising is $221,400 of share based payments to promoters. Date Issued Details 4 July 2011 26 July 2011 9 November 2011 SHARES Total at 30 June 2011 Shares issued and fully paid: Issued to Tenement Vendors at $0.20 Issued to Tenement Vendors at $0.20 Issued from options conversion at $0.25 Total issued shares at 30 June 2012 OPTIONS Total at 30 June 2011 Options issued: 28 September 2011 Issued to public at $0.01 9 November 2011 Options conversion Total issued options at 30 June 2012 Less costs of capital raising for above items Total issued options at 30 June 2012 SHARE CAPITAL Total share capital at 30 June 2012 Consolidated 2012 $ Quantity 86,116,000 6,545,994 1,000,000 1,000,000 50,000 88,166,000 200,000 200,000 12,500 6,958,494 - - 44,057,993 (50,000) 44,007,993 44,007,993 440,580 - 440,580 (14,538) 426,042 7,384,536 For personal use only 37 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 9.2 Dividends No dividends were declared or paid during the year. There are no franking credits outstanding at period end. 10 10.1 Employee remuneration Employee benefits expense Expenses recognised for employee benefits are analysed below: Salaries and fees Defined Contribution Superannuation Employee benefits expense 10.2 Employee benefits Consolidated 2012 $ 291,346 25,740 317,086 Consolidated 24/1/11 - 30/6/11 $ 117,632 10,163 127,795 The liabilities recognised for employee benefits in the statement of financial position consist of the following amounts: Current: - Other short term employee obligations Consolidated 2012 $ Consolidated 2011 $ 10,062 10,062 4,716 4,716 The current portion of these liabilities represents the Group’s obligations to its current employees that are expected to be settled during 2012. Other short-term employee obligations arise from accrued annual leave entitlement at the reporting date. 11 Trade and other payables Trade and other payables recognised in the statement of financial position can be analysed as follows: Current - Trade payables - Other payables and accrued expenses Consolidated 2012 $ Consolidated 2011 $ 139,941 43,626 183,567 96,782 53,252 150,034 For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 12 Plant and equipment Plant & Equipment Accumulated Depreciation 13 Exploration and evaluation assets Cost as at 24 Jan 2011 Additions: Xanadu - tenement acquisition costs Mulgul - tenement acquisition costs Braemore Battery - tenement acquisition costs Diorite/Bellchambers - tenement acquisition costs Other acquisition and exploration costs Cost as at 30 June 2011 Cost as at 30 June 2011 Additions: Kalgoorlie East - tenement acquisition costs Collie South - tenement acquisition costs Fraser Range - tenement acquisition costs Other acquisition and exploration costs Disposals: Mulgul Diorite/Bellchambers Braemore Battery Cost as at 30 June 2012 38 Consolidated 2012 $ 1,104 (368) 736 Consolidated 2011 $ - - - Consolidated 2011 $ 825,100 12,254 220,000 55,000 34,269 1,146,623 Consolidated 2012 $ 1,146,623 220,000 250,000 13,700 791,140 (22,435) (65,513) (243,975) 2,089,540 The shares issued as consideration for tenement purchases are equivalent to the fair value of those tenements at the issue price of the Initial Public Offering. The recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 14 Income tax expense The relationship between the expected tax expense based on the tax rate of MRG Metals Ltd and the reported tax expense in profit or loss can be reconciled as follows, also showing major components of tax expenses: 39 Profit/(loss) before tax Expected tax expense/(benefit) @ 30% Adjustment for non-deductible expenses: - Movement in accruals - Movement in provisions - Incorporation expenses - Exploration and evaluation expenses Current period tax loss not recognised Current tax expense Deferred tax expense: - Temporary differences - Unused tax losses Deferred tax assets not recognised Consolidated 2012 $ (764,056) (229,217) Consolidated 24/1/11 - 30/6/11 $ (316,660) (94,998) - 1,603 (338) (210,473) (438,425) 438,425 - (209,208) 438,425 229,217 10,800 1,415 457 (7,497) (89,823) 89,823 - 5,175 89,823 94,998 The above potential tax benefit has not be recognised as the recovery is uncertain. The taxation benefit of tax losses and temporary differences not brought to account will only be obtained if: - the Group derives future assessable income of a nature and an amount sufficient to enable the benefit from the deductions for the losses to be realised; the Group continues to comply with the conditions for deductibility imposed by law; and no change in tax legislation adversely affects the Group in realising the benefits from deducting the tax losses. - - 15 Auditor remuneration Audit services Auditors of MRG Metals Ltd – Grant Thornton - Audit of the financial report Audit services remuneration Other services Auditors of MRG Metals Ltd – Grant Thornton - Preparation of an Investigating Accountants Report Total other service remuneration Total Auditor’s remuneration Consolidated 2012 $ Consolidated 24/1/11 - 30/6/11 $ 34,000 34,000 - - 34,000 20,000 20,000 9,800 9,800 29,800 For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Earnings per share 16 The weighted average number of shares for the purposes of diluted earnings per share can be reconciled to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: 40 Loss after income tax Weighted average number of shares used in basic earnings per share Weighted average number of shares used in diluted earnings per share Earnings Per Share Diluted Earnings Per Share Consolidated 2012 $ (764,056) 88,071,601 88,071,601 Consolidated 2011 $ (316,660) 23,807,858 23,807,858 (0.87) cents (0.87) cents (1.33) cents (1.33) cents The rights to options held by option holders have not been included in the weighted average number of ordinary shares for the purposes of calculating diluted EPS as they do not meet the requirements for the inclusion in AASB 133 “Earnings per Share”. The rights to options are non-dilutive as the Group is loss generating. 17 Reconciliation of cash flows from operating activities Cash flows from operating activities Loss after income tax expense for the year Cash flows excluded from loss attributable to operating activities Non cash flows in loss: Depreciation Write off deferred exploration and evaluation expenditure Change in other employee obligations Change in other assets and liabilities: (Increase)/decrease in trade and other receivables (Increase)/decrease in other assets and prepayments (Increase)/decrease trade and other payables Net cash from operating activities Non cash investing and financing activities Consolidated 2012 $ Consolidated 24/1/11 - 30/6/11 $ (764,056) (316,660) 368 331,923 5,345 5,268 42,666 33,534 (344,952) - - 4,716 (49,704) (42,666) 103,210 (301,104) The Group purchased tenements via share based payments (refer to Note 13) and also awarded shares to promoters of seed capital (refer to Note 9.1). For personal use only 41 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 18 Related party transactions The Parent entity is MRG Metals Ltd. MRG Metals Ltd owns 100% of the shares of MRG Metals (Australia) Pty Ltd. MRG Metals (Australia) Pty Ltd owns the mining tenements and has no other Assets or Liabilities. The Group's related parties include its key management and others as described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. 18.1 Transactions with related parties The following transactions occurred with related parties: Payment for goods and services: The Company has entered into an agreement with Calatos Pty Ltd in relation to consulting fees for services relating to marketing, dealing with shareholders and capital raising. The fees payable are $120,000 per annum. At the time of entering into the agreement, Mr Bruce McFarlane, a shareholder of Calatos Pty Ltd, held a controlling interest in MRG Metals Ltd. The Group used the accounting services of RSM Bird Cameron, an entity associated with Mr. Turner. The amounts billed were based on normal market rates and amounted to $31,500 (2011 $68,000). Receivable from and payable to related parties There were no trade receivable from or trade payables to related parties. Loans to/from related parties There were no loans to or from related parties at the reporting date. Terms and conditions All transactions are made on normal commercial terms and conditions and at market rates. 18.2 Transactions with key management personnel Key management of the Group are the Board of Directors. Key management personnel remuneration is set out in the Remuneration Report in the Director’s Report. 18.3 Equity instruments held by KMP The number of shares in the Company by each of the key management personnel of the Group, including their related parties are set out below: For personal use only 42 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Year ended 30 June 2011 Van Der Zwan Pietrzak Turner Fammartino Year ended 30 June 2012 Van Der Zwan Pietrzak Turner Balance at start of year - - - - - Balance at start of year 2,160,000 2,130,000 1,470,000 5,760,000 Received on exercise Other changes Held at the end of the reporting period - - - - - - - - (1,860,000) 2,160,000 2,130,000 1,470,000 - (1,860,000) 5,760,000 Additions 2,160,000 2,130,000 1,470,000 1,860,000 7,620,000 Received on exercise Other changes Additions Held at the end of the reporting period - - - - - - - - - - - - 2,160,000 2,130,000 1,470,000 5,760,000 These shares were acquired in initial capital raising of Company, via issue to Seed Capitalists and via Initial Public Offering. Mr. Fammartino resigned on 14 February 2011. The number of options in the Company by each of the key management personnel of the Group, including their related parties are set out below: Year ended 30 June 2012 Van Der Zwan Pietrzak Turner Balance at start of year - - - - Deleted on exercise Other changes Held at the end of the reporting period - - - - - - - - 1,080,000 1,065,000 735,000 2,880,000 Additions 1,080,000 1,065,000 735,000 2,880,000 For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 19 Contingent assets and contingent liabilities The Group has no contingent assets as 30 June 2012. The Group has no contingent liabilities at 30 June 2012. 20 Commitments for expenditure Exploration and evaluation: Within 12 months 43 2012 $ 344,000 344,000 2011 $ 310,760 310,760 Exploration and evaluation: In order to maintain current rights of tenure to exploration tenements, the Group is required to outlay rentals and to meet the minimum expenditure requirements of the State Mine Departments. Minimum expenditure commitments may be subject to renegotiation and with approval may otherwise be avoided by sale, farm out or relinquishment. These obligations are not provided in the accounts and are payable. 21 Financial instrument risk Risk management objectives and policies The Group is exposed to various risks in relation to financial instruments. The main types of risks are market risk (including interest rate risk), credit risk and liquidity risk. The Group's risk management is carried out by the board of directors, and focuses on actively securing the Group's short to medium-term cash flows by minimising the exposure to financial markets. The Group does not engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed are described below. 21.1 Foreign currency sensitivity To date, all of the Group's transactions have been carried out in Australian Dollars. 21.2 Interest rate sensitivity The Group's only exposure to interest rate risk is in relation to deposits held. Deposits are held with reputable banking financial institutions. At 30 June 2012, there was $750,000 on deposit at 5.55% and $60,000 on deposit at 5.80% (Note 8). On 2 July 2012, $3,000,000.00 was invested for six months at 5.50%. An increase/decrease by 30% or 1.65 basis points would have a favourable/adverse effect on profit for the year of $62,865. The percentage change is based on the expected volatility of interest rates using market data and analysts’ forecasts. For personal use only 44 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 21.3 Credit risk analysis Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to minimal credit risk as its only exposure is to interest receivable and GST refunds. 21.4 Liquidity risk analysis Liquidity risk is that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring actual and forecast cash inflows and outflows due in day-to-day business. The Group's working capital, being current assets less current liabilities, at 30 June 2012 was $4,213,544. Based on this, the directors are satisfied the Group will have sufficient funds to pay its debts as and when they fall due. As at 30 June, the Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: 30 June 2011 Trade and other payables Total 30 June 2012 Trade and other payables Total Current Non current Within 6 months $ 150,034 150,034 6 to 12 months $ - - 1 to 5 years $ - - Later than 5 years $ - - Current Non current Within 6 months $ 183,567 183,567 6 to 12 months $ - - 1 to 5 years $ - - Later than 5 years $ - - The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date. Unless otherwise stated, the carrying amounts of financial instruments reflect their fair values due to their short term nature. 22 Capital risk management The Group’s objectives when managing capital is to ensure the Group's ability to continue as a going concern so that it can provide an adequate return to shareholders. The Group would look to raise capital when an opportunity to invest in a business, company or tenement is seen as value adding. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 45 23 Post-reporting date events Since the end of the year the following significant events have occurred: • There are no other events occurring since the end of the year that have, or may, significantly affect the Group’s operations, results of those operations or the state of affairs of the Group. 24 Parent entity information Information relating to MRG Metals Ltd (‘the parent entity’) Statement of financial position Current assets Total assets Current liabilities Total liabilities Issued capital Retained earnings Statement of comprehensive income Profit/(loss) for the period Total comprehensive income 2012 $ 2011 $ 4,407,173 6,497,449 193,629 193,629 7,384,536 (1,080,716) 6,303,820 5,237,461 6,384,084 154,750 154,750 6,545,994 (316,660) 6,229,334 (764,056) (764,056) (316,660) (316,660) 25 Authorisation of financial statements The consolidated financial statements for the year ended 30 June 2012 were approved by the board of directors on 27 September 2012. Albert Pietrzak Chairman Shane Turner Director/Secretary) For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Directors’ declaration 46 1. In the opinion of the directors of MRG Metals Ltd: a the consolidated financial statements and notes of MRG Metals Ltd are in accordance with the Corporations Act 2001, including i. giving a true and fair view of its financial position as at 30 June 2012 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; and b there are reasonable grounds to believe that MRG Metals Ltd 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 30 June 2012. 3. The consolidated financial statements comply with International Financial Reporting Standards. Signed in accordance with a resolution of the directors: Dated at Melbourne, the 27th day of September 2012 _______________________Albert Pietrzak Director For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 47 Grant Thornton Audit Pty Ltd ACN 130 913 594 Level 2 215 Spring Street Melbourne Victoria 3000 GPO Box 4984 Melbourne Victoria 3001 T +61 3 8663 6000 F +61 3 8663 6333 E info.vic@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of MRG Metals Ltd Report on the financial report We have audited the accompanying financial report of MRG Metals Ltd (the “Company”), which comprises the statement of financial position as at 30 June 2012, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the company . Directors responsibility for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determines is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards Legislation For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 48 In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Electronic presentation of audited financial report This auditor’s report relates to the financial report of MRG Metals Ltd and controlled entities for the year ended 30 June 2012 included on MRG Metals Ltd’s web site. The Company’s Directors are responsible for the integrity of MRG Metals Ltd’s web site. We have not been engaged to report on the integrity of MRG Metals Ltd’s web site. The auditor’s report refers only to the statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of this report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report to confirm the information included in the audited financial report presented on this web site. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: a the financial report of MRG Metals Ltd is in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of the Company’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 49 Report on the remuneration report We have audited the remuneration report included in pages 15 to 17 of the directors’ report for the year ended 30 June 2012. The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion on the remuneration report In our opinion, the remuneration report of MRG Metals Ltd for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001. GRANT THORNTON AUDIT PTY LTD Chartered Accountants B.L. Taylor Partner - Audit & Assurance Melbourne, 27 September 2012 For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 50 ASX Additional Information Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. The information is effective as at 19 September 2012. Substantial Shareholders The number of substantial shareholders and their associates are set out below: Shareholder Ottawa Resources P/L Voting Rights Ordinary shares Number of Shares 11,524,000 On show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote Options Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 1,000,000 and over No voting rights Shareholders 4 29 122 166 112 433 There were no holders of less than a marketable parcel of ordinary shares. Twenty largest quoted shareholders G & C Hedt P/L Bigson P/L J Powell Gulf Country Investments P/L L Knight Tigerland Investments P/L TRR Investments P/L Aznanob P/L RL Staggard & DL Berry A & J Turner P/L 33rd Infinity P/L S Popovic Notemarl P/L UBS Wealth Management Australia Nominees P/L Malanti P/L Bruce McFarlane & J Charlwood Marloss Fifteen P/L PW Askins & HM Ansell Stage Constructions P/L Brian McFarlane Ordinary Shares Number Held %of quoted shares 4.02 4.02 4.02 3.77 3.01 2.20 2.17 2.17 2.01 2.01 2.01 2.01 2.01 1.96 1.57 1.38 1.38 1.27 1.26 1.21 45.46 2,560,000 2,560,000 2,560,000 2,400,000 1,920,000 1,400,000 1,380,000 1,380,000 1,280,000 1,280,000 1,280,000 1,280,000 1,280,000 1,250,892 1,000,000 882,500 880,000 810,000 800,000 768,000 28,951,392 For personal use only 51 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Restricted equity securities The following securities are subject to escrow: - 24,439,000 Escrowed until 8 June 2013 Securities exchange The Company is listed on the Australian Securities Exchange and shares are quoted under the code MRQ. Options Twenty largest quoted optionholders Number Held Ottawa Resources P/L G & C Hedt P/L J Powell Gulf Country Investments P/L HSBC Custody Nominees (Australia) Ltd Life-Style Connections P/L Minico P/L Kathryn Van Der Zwan L Knight Rylet P/L N Fammartino Bigson P/L Tigerland Investments P/L Sage Administration P/L TRR Investments P/L RL Staggard & DL Berry A & J Turner P/L 33rd Infinity P/L S Popovic Notemarl P/L Securities exchange 5,942,000 1,280,000 1,280,000 1,200,000 1,154,750 1,050,000 1,000,000 965,000 960,000 890,000 880,000 880,000 700,000 695,000 690,000 687,500 640,000 640,000 640,000 640,000 22,814,250 %of quoted options 13.50 2.91 2.91 2.73 2.62 2.39 2.27 2.19 2.18 2.02 2.00 2.00 1.59 1.58 1.57 1.56 1.45 1.45 1.45 1.45 51.82 The Company is listed on the Australian Securities Exchange and options are quoted under the code MRQO. For personal use only MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Tenements The Tenements held by the Company at reporting date are as follows: Project Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Xanadu Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Kalgoorlie East Collie South Braemore Battery Braemore Battery Braemore Battery Braemore Battery Braemore Battery Braemore Battery Braemore Battery Braemore Battery Braemore Battery Fraser Range Fraser Range Tenement P52/1366 P52/1367 P52/1368 P52/1369 P52/1372 P52/1373 P52/1374 P52/1375 P52/1376 P52/1377 P52/1378 P52/1379 P52/1380 P52/1381 P26/3693 P26/3694 P26/3596 P26/3597 P26/3598 P26/3599 P26/3600 P26/3601 P26/3602 P26/3603 P26/3604 P26/3605 P26/3606 P25/1984 P25/1985 E70/3331 P37/7008 P37/7009 P37/7765 P37/7766 P37/7767 P37/7768 P37/7769 P37/7070 P37/7771 EL63/1552 EL63/1553 52 % Owned 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 30 100 100 100 100 100 100 100 100 100 100 100 For personal use only 53 MRG Metals Ltd Consolidated Financial Statements 30 June 2012 Corporate Directory Directors & Secretary Albert Pietrzak Non Executive Chairman Andrew Van Der Zwan Managing Director and Chief Executive Officer Shane Turner Non Executive Director and Company Secretary Principal place of business Level 8, 350 Collins Street, Melbourne VIC 3000 Telephone: +61 3 9642 8575 Email: info@mrgmetals.com.au www.mrgmetals.com.au Fax: +61 3 96425662 Registered office Level 1, 1-3 Bath Lane, Ballarat Victoria 3350 PO Box 237, Ballarat VIC 3353 Telephone: +61 3 5330 5800 Fax: +61 3 5333 1667 Corporate accountant and Registered ASIC Agent RSM Bird Cameron Level 1, 1-3 Bath Lane, Ballarat VIC 3350 PO Box 685, Ballarat VIC 3353 Telephone: +61 3 5330 5800 Fax: +61 3 5333 1667 www.rsmi.com.au Solicitors Middletons Level 25, 525 Collins Street, Melbourne VIC 3000 Telephone: +61 3 9205 2000 Fax: +61 3 9205 2055 www.middletons.com Share Registry Link Market Services Limited Ground Floor, 178 St Georges Terrace, Perth WA 6000 Telephone: 1300 554 474 Auditor Grant Thornton Audit Pty Ltd Level 2, 215 Spring Street, Melbourne Vic 3000 Telephone (office): +61 3 8663 6000 Fax: +61 3 8663 6333 Email: brad.taylor@au.gt.com Website: www.grantthornton.com.au Stock Exchange Listing ASX Codes: MRQ , MRQO For personal use only 

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