2016 | Annual Report CONTENTS CORPORATE DIRECTORY .............................................................................................................................................. 2 CHAIRMAN’S REPORT .................................................................................................................................................. 3 OPERATIONS REPORT .................................................................................................................................................. 4 DIRECTORS’ REPORT .................................................................................................................................................. 34 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS ............................................................................... 45 CORPORATE GOVERNANCE STATEMENT ................................................................................................................... 46 DIRECTORS’ DECLARATION ........................................................................................................................................ 54 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ..................................... 55 CONSOLIDATED BALANCE SHEET ............................................................................................................................... 56 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................................................................. 57 CONSOLIDATED STATEMENT OF CASH FLOWS .......................................................................................................... 58 NOTES TO THE FINANCIAL STATEMENTS ................................................................................................................... 59 INDEPENDENT AUDIT REPORT ................................................................................................................................... 78 ADDITIONAL SHAREHOLDER INFORMATION ............................................................................................................. 80 TENEMENT SCHEDULE ............................................................................................................................................... 82 2016 Annual Report | Page 1 CORPORATE DIRECTORY Directors William Plyley (Non-Executive Chairman) Christopher Cairns (Managing Director) Jennifer Murphy (Technical Director) Peter Ironside (Non-Executive Director) Company Secretary Amanda Sparks Registered and Principal Office First Floor, 168 Stirling Highway Nedlands Western Australia 6009 Telephone: 08 9287 7630 08 9389 1750 Facsimile: Web Page: www.stavely.com.au Email: info@stavely.com.au ABN 33 119 826 907 Share Registry Computershare Investor Services Pty Ltd Level 11 172 St Georges Terrace Perth Western Australia 6000 Telephone: 1300 850 505 Facsimile: 08 9323 2033 Solicitors Steinepreis Paganin Level 4, Next Building 16 Milligan Street Perth Western Australia 6000 Bankers ANZ Bank 32 St Quentins Avenue Claremont Western Australia 6010 Stock Exchange Listing ASX Limited Level 40, Central Park, 152-158 St Georges Terrace Perth Western Australia 6000 ASX Code: SVY Auditors BDO Audit (WA) Pty Ltd Chartered Accountants 38 Station Street Subiaco Western Australia 6005 2016 Annual Report | Page 2 CHAIRMAN’S REPORT Welcome, It is my pleasure to present our 2016 Annual Report. While conducting a fiscally responsible business, looking after our people, looking after the environment and the needs of the community, the Stavely team has again added value in ways that we might not have expected a year ago. The team has continued to expand exploration targets at our Victorian Projects. And, at the same time the team has been able to gain significant Victorian government co-funding for exploration, has acquired excellent exploration ground in Queensland and has begun a review of the copper production potential at our mineral deposits in Victoria. As you know, one of our key exploration targets has been a Cadia-type gold-copper porphyry at our Stavely and Yarram Park Projects in Victoria. The targets, along with other high priority targets, formed the basis for seven joint funding proposals to the Victorian Government. During the proposal review, the Victorian Government utilised an independent panel of experts. The response was enthusiastic support for Stavely’s proposals, and resulted in grant of over $1 million of co-funding from the Victorian government. Key, high-priority targets that could add substantial value to Stavely will now proceed later this year with a much more cost-effective approach for shareholders. In February, Stavely acquired Ukalunda Pty Ltd, which held an application for the Ravenswood West gold and copper exploration project in north Queensland, near the historical Ravenswood mining centre (+4 million ounces of gold production). The exploration license has now been granted and exploration has begun targeting breccia pipe mineralisation that could be similar to nearby Mt. Wright (1 million ounces of gold Mineral Resources). Prompted by indications of additional copper resources at the Stavely project, improved copper price projections, and the drop in the Australian dollar relative to the US dollar, Stavely recently conducted a conceptual study of copper production potential from our two flagship projects, Stavely and Ararat. Stavely and Ararat have been a major attraction as they contain some 130kt of copper in Inferred Mineral Resources. Results from the study were quite encouraging, and, the results led to plans to conduct a Scoping Study to review mining and processing options to further improve the potential economics. Stavely now uses its excellent team to lever off multiple projects that can be run in parallel. The exciting Ravenswood Project in tropical north Queensland provides a field season during winter months when the western Victoria field is too wet for meaningful field programmes. So now, with these complimentary projects, exploration fieldwork on a substantial number of exciting targets can continue throughout the year. Scoping study of copper production potential will be conducted coincident with exploration. Our team has placed Stavely in an admirable position with fresh projects for gold and copper in historic mining areas that have demonstrated stable, supportive communities and governments. At the time of writing, we have $1.5m cash, no debt and substantial financial support from government co-funding and drilling contractor share subscription agreements. Additionally, a path to transition Stavely to copper producer may be indicated by our future Scoping Study of our flagship projects. While the market is slow to turn positive, our shareholders have been very supportive. We are not in a position to issue dividends, but we were able to show our thanks as we distributed credits of $748,000 to our shareholders via a new government EDI program. Thank you for your stellar support. Our highly qualified and highly capable team is enthusiastic about drilling our high priority projects in Victoria with potential for discovery of a Cadia-style copper-gold porphyry, drilling new gold and copper Mt. Wright- style gold mineralised breccia pipe projects in Queensland, and completing a Scoping Study for copper production from our flagship resources in Victoria. We look forward to reporting our successes in the future. Thank you BILL PLYLEY 2016 Annual Report | Page 3 OPERATIONS REPORT Drill testing at the Forgan’s Find and Carroll’s VMS prospects did return narrow intervals of massive to stringer sulphide zinc and copper mineralisation, including 0.2 metres at 1.77% zinc and 0.12% copper. Despite the drill core at the Cathcart Hill and prospects gold Remington no promising, appearing significant were intercepts returned. An IP survey over the Curtis Diorite in the Ararat Project, which hosts a number of historic gold the workings Honeysuckle Mine, has defined a number of chargeability features which are considered to be worthy of drill testing. including for potential At the the Stavely Project, Company’s conceptual study on the copper concentrate production from the chalcocite-enriched supergene ‘blanket’ at the Thursday’s Gossan copper deposit demonstrated sufficient positive outcomes with respect to net revenue and Net Present Value, as well as an attractive Internal Rate of Return, to proceed to a Scoping Study. northern evidence Additional IP data was collected at of the the end Gossan Thursday’s Porphyry prospect, where copper-gold strong on based structural kinematic indicators, 3D modelling, spatial analysis of alteration mineralogy, and sulphur isotopes from previous deep diamond drilling as well as indicates where the geophysics ‘core’ copper-gold targeted potassic zone should be located. Drill testing of the porphyry target beneath the low-angle structure where the better developed gold and is copper mineralisation expected will be conducted in the forthcoming year. Encouraging results were received from the soil sampling programme conducted at the Mount Stavely copper-gold pophyry target. The NitonTM XRF results produced an elevated molybdenum response which coincided with both an anomalous gold assay and an induced polarisation chargeability feature. The geochemical and geophysical the margin of the Mount Stavely gravity low is consistent with and possibly of mineralisation associated with a buried porphyry intrusion. signature on indicative Overview EXPLORATION The two The Company’s assets located in western Victoria and in northern Queensland are prospective for copper-gold mineralisation with existing VMS-style and porphyry deposits. flagship projects, Ararat and Stavely, host Inferred Mineral Resources that contain over 130Kt of copper and over 19,000 ounces of gold plus accessory zinc and silver. Stavely Minerals is targeting a Cadia-type gold-copper porphyry (Stavely and Yarram Park Projects), and a Degrussa-style VMS (volcanogenic massive sulphide) deposit (Ararat Project). Fairview The low-sulphidation mesothermal to epithermal gold prospect in the Stavely Project is potentially analogous to a Lake Cowal gold deposit. There are also indications of ‘Stawell-style’ and gold ‘intrusive-related’ mineralisation the Ararat Project. at VMS The Ararat Project hosts Besshi- style copper-gold-zinc mineralisation at Mt Ararat with a Total Mineral Resource of 1.3 Mt at 2.0% copper, 0.5 g/t gold and 0.4% zinc and 6 g/t silver including 0.25Mt in Indicated Mineral Resources with the remainder of the Total Mineral Resource classified as Inferred Resources. at 2.2% copper Ararat Goldfield The has significant historic alluvial and deep lead production of circa 640,000 ounces of gold but with no known substantial hard-rock source. geochemical Regional induced gravity, polarisation (IP) geophysics and soil sampling programmes conducted over the prospective stratigraphy in the Ararat Project have identified new base metal and gold targets. Drilling at Carroll’s VMS prospect. 2016 Annual Report | Page 4 the near licence exploration Queensland. Exploration has commenced on the recently granted Ravenswood in West The northern Ravenswood West Project is located historical Ravenswood mining centre, which has +4Moz of combined historical and modern gold production. Priority targets include ‘The Bank’ breccia pipe, which is being evaluated as a potential drill target similar to the nearby Mt Wright Gold Mine (~1Moz) and the Welcome pipe (210koz). breccia In addition, it will be a priority to determine if the high-grade gold mineralisation, including 6 metres at 16.7 g/t gold from 14 metres, at the Podosky’s prospect on an excised mining lease, extends into the Ravenswood West Project area. CORPORATE the Company has The share subscription agreement between Stavely Minerals and Titeline Drilling Pty Ltd, under which the option to settle monthly drilling charges by way of 50% cash payment and 50% by way of shares, is still in place. To date approximately $0.5 million of the total $2 million facility has been used as at the end of June. Pty In February 2016, Stavely Minerals acquired Ukalunda Ltd (‘Ukalunda’), being the applicant of EPM26041 in north Queensland for a purchase cost of $2. The purchase was a related party transaction as Ukalunda was established in 2007 by Stavely Minerals’ Director Mr Chris Cairns and Mr Peter Ironside with the of specific opportunistically for exploration permits in North Queensland. applying purpose Ukalunda was the vehicle used for the application as the potential for rare (REE’s) mineralisation is considered to be element earth of (30% $748,000 The Company distributed credits of the Company’s eligible 2014- 2015 exploration expenditure of $2.49 million) to Shareholders in June 2016. The exploration credits were distributed to Shareholders pro-rata relative to the number of shares held and the total shares on (95,490,593) on the Record date of 18 May 2016. The EDI enables eligible exploration companies to create exploration credits by giving up a portion of their carried forward losses from eligible exploration expenditure and distributing these exploration credits to equity shareholders. issue investment The EDI is intended to encourage in shareholder exploration companies undertaking greenfields mineral exploration in Australia. OPERATIONS REPORT outside of Stavely’s normal copper and gold focus, and having a wholly-owned subsidiary to hold represent a the asset could strategic advantage in the future should the REE’s potential be progressed towards any significant value and be considered for a possible future asset sale. In from Australia initiative. In June 2016, Stavely Minerals received offers of over $1 million of exploration co-funding for five projects the Victorian Government under the TARGET exploration an economic and geoscience boost to Victoria, Victorian the Government offered a total of almost $2 million in grants to five recipients for nine projects to explore for copper, other base metals and gold in the Stavely Region. A collaborative geological the research programme by Geological Survey of Victoria and Geoscience has identified the Stavely geological province in western Victoria as having potential for copper, other base gold mineralisation. The grant funding industry- is provided on an matched to mineral exploration companies to further enhance the understanding of in potential mineral deposits western Victoria, with the view that the investment will generate jobs, economic and other flow-on region. The the benefits TARGET grants will cover up to half the cost of eligible exploration including geophysical activities, sample and surveys, drilling analysis, with the companies funding the balance by their own means. metals basis and to Major porphyry/ intrusive-related and VMS copper-gold, as well as mesothermal to epithermal gold exploration targets identified by the Company at its Stavely, Ararat and Yarram Park Projects will be tested in the next twelve months following the receipt of the co- funding commitments. 2016 Annual Report | Page 5 OPERATIONS REPORT The Projects have excellent infrastructure and access with paved highways, port connection by railroad and a 62 MW wind farm located 8 kilometres from the Stavely Project. The primary land use is grazing and broad acre cropping. The Ravenswood Project is located 90km south of Townsville and 10km south west of Ravenswood The in North Queensland. Mingela- Ravenswood - Burdekin Dam the road passes down eastern boundary of the project (Figure 2). Review of Operations Background The Ararat and Stavely Projects are located approximately 200 kilometres west of Melbourne and are respectively just west of the regional centre of Ararat, Victoria and just east of the regional town of Glenthompson (Figure 1). The Victorian projects include exploration tenements with a total area of 392 square kilometres of 100% owned and 72 square kilometres of joint venture tenure. an exploration The Queensland Project includes a granted exploration licence with an area of 241 square kilometres licence and application covering 55 square kilometres. The is made up of rolling hills alternating with sandy flats. The Burdekin River parallels southern boundary of the project. Access within the tenements is by 4WD via station tracks. topography the Figure 1. Stavely, Yarram Park and Ararat Project Location Plan. Figure 2. Ravenswood Project Location Plan. 2016 Annual Report | Page 6 OPERATIONS REPORT Regional Victoria Geology Western The Ararat and Stavely Projects, while only 40 kilometres apart, are hosted within materially different geologic domains (Figure 3). The Ararat Project is hosted in the Stawell - Bendigo zone of the Lachlan Fold Belt and is comprised of Cambrian age mafic volcanic and pelitic sedimentary units of the Moornambool Metamorphics which were metamorphosed to greenschist to amphibolite facies during the Silurian period. of by the of The Stavely Project is hosted in Cambrian Delamerian age Orogeny submarine mafic and intermediate volcanics and tuffs which were overlain by quartz-rich turbidite the sequences Glenthompson Sandstone. These sequences were deformed in the seismic late-Cambrian. Recent Victorian traverses Economic Department Development, Jobs, Transport and Resources in western Victoria have supported the interpretation of an Andean-style convergent margin environment the development of the buried Stavely Arc beneath the Stavely Volcanic Complex and environs (Cayley, in prep, pers. comm., 2013). This regional architecture is considered conducive to the formation of fertile copper / gold mineralised porphyry systems (Crawford et al, 2003) as is the case with the Macquarie Arc in New South Wales, which hosts the Cadia Valley and North Parkes copper- gold porphyry complexes. mineralised for Lachlan Fold Belt and The Delamerian sequences are in fault contact large-scale thrusting along the east dipping Moyston Fault (Cayley and Taylor, 2001). through Largely unconformably overlying both these domains by low-angle Figure 3. Geology of south-eastern Australia. décollement is a structural outlier of the younger Silurian fluvial to to shallow marine mudstone the Grampians Group. sequences of sandstone Regional Geology North Queensland The dominant rock types within the Ravenswood Project are typically I-type calcic hornblende- biotite granodiorite to tonalite of the Ravenswood Batholith of Middle to Middle Devonian age (Figure 4). Silurian the cuts Zone, A major structure, the Mosgardies east-west Shear through Ravenswood Batholith adjacent to three gold centres. The shear zone is up to 2.5km wide. The main reef at Ravenswood, the ”Buck Reef”, is contained within the Mosgardies Shear Zone. The majority of faults in the area are transverse to the Morgardies Shear Zone and trend 30o to 40o either side of north. The bulk of the auriferous quartz reefs and leaders are hosted by shears with NW to NS orientation. Mineralisation is associated with shear hosted quartz veins and is dominated by pyrite-chalcopyrite- galena-gold. are The generally narrow and of limited strike style of mineralisation is widespread but of low tonnage. length. This veins chalcopyrite Copper as (and molybdenum-gold) mineralisation is also associated with quartz porphyry stocks. Mineralisation is contained both in sparse quartz veins and disseminated within the intrusive. More widespread phyllic (quartz- sericite) and potassic (biotite) alteration is reported suggestive of porphyry style alteration and style of mineralisation. deposit offers bulk tonnage potential. This in Cu-Au-Mo occurs intrusive breccias (“pipes”) at Three Sisters and Mt Wright outside the project area. Paleoplacer gold deposits occur in Quaternary sediments on the flanks of Tertiary laterites. 2016 Annual Report | Page 7 OPERATIONS REPORT Figure 4. Ravenswood West Project – Tenement over Geology, Gravity and Magnetics. Mineral Resources The Ararat and Stavely Projects host Mineral Resources reported in compliance with the 2012 JORC Code: (a) Ararat Project Mineral Resource In the Ararat Project, the Mount Ararat prospect hosts a Besshi- style VMS deposit with an estimated (using a 1% Cu lower cut-off) Total Mineral Resource of 1.3Mt at 2.0% copper, 0.5 g/t gold, 0.4% zinc and 6 g/t silver for a contained 26kt of copper, 21,000 ounces of gold, 5.3kt of zinc and 242,000 ounces of silver (Table 1). In accordance with the 2012 JORC Code, all criteria for sections 1, 2 and 3 of the JORC Code Table 1 and 2 are reported in Appendices 1 and 2. The Mt Ararat Copper Indicated and Inferred Resource Estimate, August 2016, remains unchanged from the Mt Ararat Copper Indicated and Inferred Resource Estimate, August 2015. There has been no additional drill data collected from the deposit and although economic circumstances affecting the mining industry have changed the underlying assumptions utilised in 2015 Mineral Resource estimate remain valid. 2015, since The Thursday Gossan Chalcocite Copper Inferred Mineral Resource Estimate remains unchanged from the Thursday Gossan Chalcocite Copper Resource Inferred Estimate, August 2013. There has been no additional drill data collected from the deposit and although economic circumstances affecting the mining industry have changed the underlying assumptions utilised in the 2013 Mineral Resource estimate remain valid. 2013, since (b) Stavely Project Mineral Resource In the Stavely Project, at the Thursday’s Gossan Prospect, a near surface secondary chalcocite enriched an estimated (using a 0.2% Cu grade lower cut-off) – 28Mt at 0.4% copper for 110kt of contained copper (Table 2). blanket with 2016 Annual Report | Page 8 OPERATIONS REPORT Table 1. The Mount Ararat Resource Estimate Reporting Threshold Classification Domain Tonnes: Cu Resource (KT) Cu Grade (%) Tonnes: Au,Ag,Zn Resource (KT) Au Grade (ppm) Ag Grade (ppm) Zn Grade (%) 1.0% Cu 2.0% Cu Indicated Inferred Total 1% Cu Indicated Inferred Total 2% Cu Supergene Fresh Total Weathered Supergene Fresh Total Supergene Fresh Total Weathered Supergene Fresh Total 50 200 250 170 30 870 1070 1320 30 80 110 30 20 230 280 390 2.4 2.2 2.2 1.7 2.2 1.9 1.9 2.0 2.9 2.9 2.9 2.9 3.0 3.0 3.0 2.9 170 80 1070 1320 1320 30 50 310 390 390 0.5 0.4 0.5 0.5 0.5 1.3 0.3 0.6 0.6 0.6 3.1 4.4 6.2 5.7 5.7 7.9 4.2 7.7 7.3 7.3 0.1 0.4 0.4 0.4 0.4 0.2 0.4 0.6 0.5 0.5 Table shows rounded estimates. This rounding may cause apparent computational discrepancies. Significant figures do not imply precision. Nominal copper grade reporting cuts applied. Three material types reported as varied economic factors will be applicable to the deposit base on reported material types. Table 2. The Thursday Gossan Chalcocite Copper Inferred Resource Estimate (reviewed in 2016) Table shows rounded estimates. This rounding may cause apparent computational discrepancies. Significant figures do not imply precision. Nominal copper grade reporting cuts applied. Three mineralised thicknesses reported as varied economic factors are likely to be applicable to each. 2016 Annual Report | Page 9 OPERATIONS REPORT Ararat Project The Ararat Project is prospective for VMS copper-gold-zinc-silver mineralisation as well as ‘Stawell- style’ and intrusion-related gold mineralisation. an Collection of regional gravity data, together with induced polarisation (IP) survey and a soil geochemical sampling programme over the prospective stratigraphy in the Ararat Project successfully identified new base metal and gold targets (Figure 5). 28 architecture approximately A gravity survey covering an area of square important kilometres provided information with respect to the regional and distribution of rock types in the area. IP data collected over the prospective horizons highlighted chargeability some anomalies key prospects. Diamond drilling was conducted at the Mt Ararat Footwall, Carroll’s and Forgan’s Find base metal prospects and RC drilling with diamond tails at the Cathcart Hill gold prospect to ascertain if the chargeability anomalies are related to sulphide mineralisation. significant at Exploration was also conducted at two historic hard rock gold in the Ararat Project, workings namely and Remington the Honeysuckle Mines. An IP survey was conducted at the Honeysuckle prospect and an RC/ diamond drilling the programme Remington Mine. at The regional soil and rock-chipping geochemical programme has been successful in identifying a number of new targets with the potential to host both VMS-style copper- gold-zinc mineralisation and ‘Stawell-style’ or intrusive related gold mineralisation. A strong arsenic anomaly has been defined in the northern portion of Figure 5. Ararat Project - Copper and Gold Targets. the Ararat Project. The +20 ppm arsenic anomaly extends in excess is of kilometres 2.8 predominantly the Minotaur Joint Venture tenement EL5450 (Figure 6). and located on Several of the soil samples in this area returned gold values in excess of 50 ppb, with peak values of 103 ppb (0.10 g/t) and 238 ppb (0.24 g/t). The gold-arsenic anomaly is coincident with three primary historic gold workings, namely the Plantagenet, New Hope and Goldburra Mines. Anomalous gold values of 1.25 g/t and 1.41 g/t were returned from rock samples previously collected by Stavely Minerals in this area. An application has been chip made for an exploration licence (EL6271) immediately to the north of the Ararat Project to cover the extension of the anomalous soil geochemistry the Stawell Granite (Figure 6). The current anomaly is a southern mirror image to the Stawell Gold Mine located on the northern margin of the Stawell Granite. trend into The regional sampling over the Curtis Diorite in the vicinity of the is historic Honeysuckle Mine incomplete but the limited results received to date have returned anomalous arsenic values up to 123 ppm. 2016 Annual Report | Page 10 OPERATIONS REPORT Figure 6. Ararat Project - Regional Soil Sampling over simplified geology. i. Mt Ararat VMS Deposit in smaller A diamond hole was drilled to a depth of 375m to test a large and strong IP (120mV/V) chargeability Line 156300mN, anomaly identified in the footwall to the Mt Ararat VMS deposit (Figure 7). The known deposit is associated with a IP chargeability much anomaly the footwall anomaly, which was modelled to extend from 150m below the surface to more that 400m below surface. Previous drilling has not tested this position. The drill hole was disappointing with no indication of the source of the IP chargeability anomaly and was not sampled. compared with ii. Carroll’s and Forgan’s Find Base Metal Prospects to strong A diamond hole was drilled at the Carroll’s prospect to a depth of IP test a 321m chargeability anomaly (Figure 7), which coincided with a 1.5km long x 500m wide zinc-copper soil geochemistry anomaly and a surface sample which returned a value of up to 24% copper, 1.1% zinc and 0.52 g/t gold. float At Forgan’s Find a diamond hole was drilled to a depth of 359.9m in November 2015 to test gossanous mineralisation identified at surface which fell within the 1.5km long x 500m wide zinc-copper anomaly (Figure 7). At Forgan’s Find an rock gossanous in-situ chip returned assays of 10% copper, 0.4% zinc and 1.5 g/t gold. The geochemical anomaly is supported by the strong IP chargeability feature which has been modelled from approximately 100m depth to 250m depth. intervals of massive to Narrow stringer sulphides were intersected in the two drill holes. Drill sections are presented in Figures in 8 and 9. Results include: o 0.2 metres at 1.77% zinc and 0.12% copper o 0.25 metres at 0.57% zinc and 0.13% copper o 0.25 metres at 0.41% zinc 2016 Annual Report | Page 11 OPERATIONS REPORT v. Honeysuckle Mine Gold Prospect There are a number of historic mines, including the Honeysuckle Mine, hosted within a late-phase in the Ararat intrusive granite Project Field (Figure identified investigations alteration which may indicate the presence of a reasonably sized gold mineralised system, although focussed upon historic mining narrow, high-grade reefs. have 6). Gold in the Honeysuckle area was discovered in 1897 and grades of 7.5 g/t gold were reported. With the gold being hosted within an intrusive, Induced Polarisation (IP) in is identifying sulphides potentially associated gold mineralisation. to be effective likely with Figure 7. Ararat Project - IP Chargeability Profiles Line Locations. iii. Cathcart Hill Gold Prospect to test prospect chargeability One RC hole drilled to a depth of 200m and two RC holes with diamond tails, drilled to depths of 305.7m and 302.6m respectively, were completed at the Cathcart Hill IP chargeability features (Figure 7). These anomalies have a tabular geometry and dip against the stratigraphy and hence were considered to be significant with respect to potential gold mineralisation. The Cathcart Hill gold prospect was identified by the soil 2015 reconnaissance geochemistry and float rock-chip sampling. An 800m long arsenic-chrome geochemical anomaly associated with iron-rich pseudo gossan with laboratory assay results of up to 0.45% arsenic and 0.8 g/t gold was identified at Cathcart Hill. programme Despite the abundant sulphide mineralisation intercepted, selective sampling of the drilling did not return any significant gold intercepts or interesting any pathfinder elements. iv. Remington Prospect Mine Gold The hard rock Remington Mine was discovered in 1895 and was reported as producing very high- grade material of up to 23 ounces per tonne (Figure 5). Six RC holes were drilled for a total of 686m to target the down dip extensions of the Remington Mine reef. Due to excess water, which would not have been able to be contained by the sumps, three of the RC holes had to have diamond tails to reach the target depth. The drill holes targeted did Remington Reef and Whitten Reef however results were disappointing with no significant assay results received. intercept the the IP data was collected on four lines in the over the Curtis Diorite Mine Honeysuckle area. Processing of the data and integration with magnetic and gravity data has the identification of a number of chargeability features which are considered worthy of follow-up. led to Previous rock chip sampling by the Company in the vicinity of the Honeysuckle Mine returned a gold value of 5.33 g/t. Additional IP data will be collected prior to the selection of drill targets. 2016 Annual Report | Page 12 OPERATIONS REPORT Figure 8. Ararat Project - Carroll’s Prospect Oblique Drill Section SADD005. Figure 9. Ararat Project - Forgan’s Find Prospect Oblique Drill Section SADD007. 2016 Annual Report | Page 13 Stavely Project opportunities The Stavely Project hosts several significant for discovery of porphyry copper-gold and VMS base-metals +/- gold deposits. During the year the Company IP at the conducted additional Thursday’s Porphyry Gossan prospect, soil sampling at the Mount Stavely Porphyry prospect and a conceptual study on the potential for copper concentrate production from the chalcocite- enriched supergene ‘blanket’ at the Thursday’s Gossan copper deposit (Figure 10). The study conceptual demonstrated sufficient positive outcomes with respect to net revenue and Net Present Value, as well as an attractive Internal Rate of Return, for Stavely Minerals to proceed to a scoping study. There are as not yet reasonable grounds to support the discussion of the OPERATIONS REPORT projected economic outcomes in detail. The key elements of the conceptual study including: o An average feed grade of 0.5% copper; o A sulphide flotation recovery on of metallurgical testwork); and (based 87% o A sulphide concentrate grade of 27% copper (based on testwork) metallurgical ‘clean’ producing a very concentrate low with deleterious elements. Financial assumptions included: o World Bank forecast copper prices (Figure 11); o A range of A$/ US$ exchange rates of A$1 = US$0.60 to US$0.75 The conceptual study identified a to number enhance economics including: opportunities project of o Increasing the size of the resource – recent drilling has identified chalcocite copper the mineralisation outside current Mineral Resource. Stavely Minerals’ drill hole SMD004 intersected 52m at from 39m 0.23% copper This depth. downhole intercept located is approximately 400m to the west of the existing Mineral Resource and illustrates the potential material for increases; it costs equipment. o Reducing the assumed mining and milling by investigating the suitability of surface using continuous The mining the mining attraction of method is well is that suited to long and wide, flat- the lying mineralisation; oxidized the of nature mineralisation is well suited to this mining method; the is already partially product comminuted and reduces the need for primary crushing; and this mining method can the be very selective vertical dimension. in o Reducing the processing costs through reagent lowering usage and by streamlining the processing flowsheet – the Scoping Study will investigate the potential to beneficiate from un- the mineralised mineralised clays prior to flotation of sulphide concentrate amongst other processing enhancements. the Figure 10. Stavely Project – Thursday’s Gossan Long section of the chalcocite- enriched copper mineralisation ‘blanket’. Figure 11. World Bank Copper Price, US$/t (June 2016). 2016 Annual Report | Page 14 i. Thursday’s Gossan Porphyry Prospect Additional IP data was collected at the northern end of the prospect in order to better resolve targets beneath the low-angle structural offset, in drilling by identified The Stavely Minerals in 2014. areas to the north and east of previous Stavely Minerals are considered to have the greatest potential for discovery copper-gold mineralisation of associated resurgent with porphyry intrusion. drilling by system. porphyry Deep drilling conducted by Stavely Minerals and previous explorers has provided a geological vector to the metal-rich potassic ‘core’ of the Three diamond drill holes have been planned at the Thursday’s Gossan Porphyry prospect to target the ‘core’ where the best developed copper and gold grades could be expected and have yet to be discovered 12). information gained Geophysical from the IP surveys and geological and evidence obtained from the diamond core including structural investigation, 3D modelling, spatial analysis of alteration and mineralogy, as well as sulphur isotopes has been used to design the drilling programme. geochemical (Figure ii. Mount Stavely Prospect a is The Mount Stavely porphyry copper-gold target is reflected as a ‘low’ in the gravity data and as a ‘low’ in the airborne magnetic data interpreted to reflect which porphyry as respectively intrusive at depth and magnetic fluid destructive hydrothermal alteration. gold Proximal mineralisation at the Fairview gold prospect to be mesothermal to epithermal style gold mineralisation. An IP survey, conducted in 2014 in the Mount a Stavely chargeability is slightly offset to the north-east from the gravity low. feature which interpreted returned area is OPERATIONS REPORT Stavely prospect Soil samples were collected at the Mount for primary analysis using a NitonTM portable XRF analysis with gold analysis through ALS. The NitonTM results show an arsenic anomaly in the immediate vicinity of the topographic high at Mount Stavely (Figure 13) possibly indicating a higher-level within the system. The NitonTM results show an elevated molybdenum response which is coincident with an IP chargeability anomaly (Figure 14). A coincident anomalous gold value of 49 ppb was also returned in this area. As the chargeability feature with Mo-Au geochemical support overlies the Williamson Road Serpentinite (not expected to have a background signature), they are interpreted to be associated with a buried porphyry. A diamond drill hole has been planned to test for intrusion- related gold mineralisation. high Mo-Au copper and Yarram Park Project an area the The Yarram Park Project is located within where regional interpretation of aeromagnetic data has identified the presence of an offset portion of either the Mount Stavely Belt, or the Bunnagul Belt, beneath the Quaternary cover (Figure 15). Both the Mount Stavely Belt and the Bunnagul Belt are considered to be intrusive- highly prospective for copper-gold related and gold mineralisation. diatreme-hosted porphyry IP data was collected at the Toora West prospect in the Yarram Park Project. Figure 12. Stavely Project – Thursday’s Gossan Planned Drilling and IP Survey. 2016 Annual Report | Page 15 OPERATIONS REPORT Figur e 13 Figure 14 Figure 13 & 14. Stavely Project – Mount Stavely Copper Gold Prospect soil geochemistry over gravity draped on magnetics. Top image arsenic geochemistry, bottom image molybdenum. 2016 Annual Report | Page 16 OPERATIONS REPORT Figure 15. Yarram Park Project - Aeromagnetic Image. i. Toora West Prospect A coincident gravity low with peripheral and central magnetic highs was identified within the Cambrian aged volcanics at the Toora West prospect. Mineralisation in porphyry copper- gold and diatreme-hosted deposits is commonly associated with magnetite that can produce strong discrete peripheral and central anomalies. Porphyry magnetic intrusions and diatremes are commonly less dense than the surrounding country rocks and produce a gravity low. IP completed over low the The coincident and gravity magnetic high identified a pair of chargeability features on both survey lines. The IP chargeability features correlate with the margins of the small magnetic high at the core of the gravity low which itself is enclosed within a magnetic high annulus and makes this prospect a very attractive conceptual geologic target and a priority for drill testing (Figure 16). 2016 Annual Report | Page 17 OPERATIONS REPORT Figure 16. Yarram Park Project - Aeromagnetic Image. Ravenswood Project The Ravenswood Project is highly gold-copper for prospective excellent exploration, with and for potential intrusive-related gold mineralisation, as well as having copper- four prospects molybdenum-gold identified (Figure 17). porphyry orogenic The presence of high-grade gold mineralisation at the Podosky’s prospect (located on a small excised Mining Lease held by Kitchener Mining NL) highlights the area. gold potential Significant drill intercepts include: the in high-grade o 6 metres at 16.7 g/t gold from 14m depth in drill hole PDR-2 o 6 metres at 13.38 g/t gold from 26m depth in drill hole PDR-9 o 5 metres at 12.06 g/t gold from 29 depth in drill hole PDR-23. The Ravenswood West Project has four identified porphyry copper- molybdenum-gold prospects – The Bank, Keane’s, Barrabas and Turkey Gulley , none of which have been drilled since the early 1970’s. Surface rock chip results of up to 19% copper, 0.24 g/t gold, 0.2% molybdenum and 1,793 g/t silver have been returned from these prospects. Historical drill results from the prospect Keane’s molybdenite include: o 45 feet 3 inches (13.8m) at 0.26% molybdenum o 1 foot 7 inches (0.38m) at 2.26 ounces (70.3 g/t) silver per tonne o 9 feet at 9.6 (2.74m) pennyweight of gold plus silver (15 g/t) of which 0.58 g/t was gold. gravity to low which reflect a The Project area is underlain by a large is interpreted large intrusive body at depth, and is likely to be the source intrusion for the multiple phases of higher-level porphyry intrusions (Figure 4). West trends, In conjunction with very strong the regional structural Project Ravenswood is have excellent potential for porphyry, diatreme intrusive-related and mineralisation. considered to Early stage rare earths potential identified with very anomalous stream sediment sample results up to 0.25% cerium, 0.14% lanthanum and other rare earth elements are yet to be followed up. 2016 Annual Report | Page 18 OPERATIONS REPORT Figure 17. Ravenswood West Project – Prospect Location Plan. JORC Compliance Statement The information in this report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Chris Cairns, a Competent Person who is a Member of the Australian Institute of Geoscientists. Mr Cairns is a full-time employee of the Company. Mr Cairns is the Managing Director of Stavely Minerals Limited, is a substantial shareholder of the Company and is an option holder of the Company. Mr Cairns has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Cairns consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. With respect to reporting of the Mineral Resources at the Mt Ararat VMS copper-gold-zinc deposit and Thursday’s Gossan chalcocite copper deposit, the information is extracted from the report entitled “Mount Ararat 2015 Resource Estimate Report” dated 24 August 2015 and “Appendix 1, Reporting of Thursday Gossan Chalcocite Copper Resource against criteria in Table 1 JORC Code 2012” authored by Mr Duncan Hackman of Hackman and Associates Pty Ltd. Mr Hackman is a Member of the Australian Institute of Geoscientists and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code, 2012 Edition). Mr Hackman consented to the inclusion in the Stavely Minerals’ 2015 Annual Report of the matters based on his information in the form and context in which it appears. As there has been no new information generated from the Mineral Resource areas, Mr Cairns has reviewed the underlying assumptions in the 2015 Mineral Resources reports and finds that there have been no material changes and that the underlying assumptions and technical parameters remain valid. There are therefore no changes to the Mineral Resources estimates from this annual review. Stavely Minerals’ policy for Mineral Resources estimates is to have the estimates done by suitably qualified and experienced external consultants and have these estimates reviewed internally by suitably qualified and experienced Stavely Minerals’ personnel. 2016 Annual Report | Page 19 OPERATIONS REPORT Bibliography Australian Stratigraphic Names Database, 2012, Geoscience Australia. Bastrakov, E. 2014. Stavely Regional Drilling Project, western Victoria: sulfur isotopic fingerprinting of Cambrian copper systems. http://www.ga.gov.au/about-us/news-media/minerals-alert.html#e Cayley, R.A., 1988, The structure and metamorphism of the Mount Ararat region Victoria. B.Sc. (Hons) thesis, University of Melbourne, Melbourne (unpubl.). Cayley, R.A and Taylor, D.H., 2001, Ararat: 1:100 000 map area geological report. Geological Survey of Victoria Report 115. Crawford, A.J., 1988, Cambrian. in J.G. Douglas & J.A. Ferguson (eds.) Geology of Victoria. Geological Society of Australia, Victorian Division, Melbourne, page 37- 62. Corbett, G., 2012, Corbett, G. J., 2012 Comments on the potential for the Mount Stavely Volcanics to host porphyry Cu-Au mineralisation. Unpublished report to the Geological Survey of Victoria, June 2012. Corbett, G. & Menzies, D., 2013, Review of the Thursdays Gossan Project, Victoria for Northern Platinum Pty Ltd. Internal company report. Crawford, A.J., Cayley, R.A., Taylor, D.H., Morand, V.J., Gray, C.M., Kemp. A.I.S., Wohlt, K.E., Vandenberg, A.H.M., Moore, D.H., Maher, S., Direen, N.G., Edwards, J., Donaghy, A.G., Anderson, J.A., and Black, L.P., 2003, Neoproterozoic and Cambrian continental rifting, continent-arc collision and post-collisional magmatism. in Evolution of the Palaeozoic Basement. Geological Society of Australia, Sydney, Australia, pages 73 -93. Halley, S., 2013, Interpretation of HyLogger Spectral Data from the Stavely Volcanic Belt, Western Victoria for Northern Platinum Pty Ltd. Internal company report. Hackman and Associates Pty Ltd., 2013a, Thursday Gossan Chalcocite Copper Deposit, Victoria, Australia 2013 Resource Estimate Report. Hackman and Associates Pty Ltd., 2013b, Mount Ararat Copper Deposit, Victoria, Australia 2013 Resource Estimate Report. Hackman and Associates Pty Ltd., 2015, Mount Ararat, Victoria, Australia 2015 Resource Estimate Report. Holliday, J.R., and Cooke, D.R., 2007, Advances in Geological Models and Exploration Methods for Copper ± Gold Porphyry Deposits. in Proceedings of Exploration 07: Fifth Decennial International Conference on Mineral Exploration, B Milkereit (ed), pages 791-809. Spencer, A.A.S., 1996, Geology and Hydrothermal Alteration of Thursdays Gossan Porphyry System, Stavely, Victoria BSc (Hons) Thesis La Trobe University (Unpublished). Stuart-Smith, P.G. & Black, L.P., 1999. Willaura, sheet 7422, Victoria, 1:100 000 map geological report. Australian Geological Survey Organisation Record 1999/38. 2016 Annual Report | Page 20 OPERATIONS REPORT Appendix 1: Mt Ararat Mineral Resource Estimate Summary: The Mount Ararat August 2015 Inferred Resource Estimate is an inverse distance squared Cu, Au, Ag and Zn estimate of the planar, steeply dipping VMS style mineralisation of the deposit and is tabulated below. The estimate was undertaken, classified and reported according to the guidelines set out in The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012 Edition). The Mount Ararat Resource Estimate: Table shows rounded estimates. This rounding may cause apparent computational discrepancies. Significant figures do not imply precision. Nominal copper grade reporting cuts applied. Three material types reported as varied economic factors will be applicable to the deposit base on reported material types. The estimate: was based on recent 2014-15 Stavely Minerals drilling and historic drilling data which is of unknown reliability and quality that tests a discrete steeply dipping body of base metal mineralisation. Extends for a strike length of 830m (towards 335deg), vertically for 350m and ranges mostly between 1m and 3m thick (total massive + sub-massive + stringer mineralisation). The mineralisation is modelled between 4m and 14m thick in the upper 50m (this may be real, due to supergene actions or introduced due to the suspected wet/difficult RC drilling conditions). Is underpinned by 309 Cu assays from 64 holes (271 nominal 1m composites). High grade restrictions are applied to the Cu, Au, Ag and Zn grade interpolations (55m radius of influence). A tonnage factor of 3.17g/cc was applied to all mineralised blocks. Reconciles well both statistically and spatially with the source assay data. Was undertaken by Duncan Hackman who is a member of the Australian Institute of Geoscientists and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code, 2012 Edition). 2016 Annual Report | Page 21 OPERATIONS REPORT JORC 2012 Table 1, Sections 1, 2 and 3 criteria. Section 1: Sampling Techniques and Data Criteria Explanation Sampling techniques Resource estimate underpinned by diamond drilling (DD) and reverse circulation drilling (RC) drilling samples. Drilling techniques Drilling details for the Mount Ararat resource drillhole dataset Drill sample recovery Logging Sub-sampling sample preparation techniques and Quality of assay data and laboratory tests No detailed information or data: Historic reports state that diamond holes had relatively low core recoveries, and RC drilling encountered water in the weathered and oxidized mineralized zone. Limited data indicates that samples from this material will be significantly compromised by drilling and sampling conditions encountered. lithological drill logs generated by workers but not utilised in generating resource estimate. Pennzoil: Half-core samples were taken from core showing visible mineralisation. Centaur Mining: o MA24 to MA38: Half-core samples were taken from core showing visible mineralisation. Sample reduction process unknown. o MA39A to MA58: 130mm RC chips from drilling configuration utilising back-end cross-over sub to return sample. Sample collection by splitting (details unknown) and sample reduction process unknown. o M94_1 to M94_4: Half-core samples were taken from core showing visible mineralisation. Sample reduction process unknown. Beaconsfield Gold: o ARD001 to ARD004: diamond drilling – sampling method and reduction unknown. o ARC001 to ARC006: 84mm RC chips. Sample collected by passing through 3 tiered riffle splitter. Sample reduction process unknown. Stavely Minerals: o SADD001 to SADD003: diamond drilling – ½ HQ core sampled by core saw. Crush-split and pulverise to 85% passing -75micon o SARC00[1,2,4 - 9]: RC drilling – cone splitter. Crush-split and pulverise to 85% passing -75micon Pennzoil: A base metal suite was assayed via AAS (digestion not specified) and Au was assayed via fire assay. Centaur Mining: o MA24 to MA38: A base metal suite was assayed via AAS (digestion not specified) and Au was assayed via fire assay. 2016 Annual Report | Page 22 OPERATIONS REPORT Criteria Explanation o MA39A to MA58: A base metal suite was assayed via AAS (digestion not specified) and Au was assayed via fire assay. o M94_1 to M94_4: A base metal suite was assayed 4 acid digest with AAS finish and Au was assayed via fire assay. Beaconsfield Gold: o ARD001 to ARD004: Assay Lab – Onsite Lab Services. Cu initially by method B101 - AR digest ICP finish. If higher than 5000ppm then A101 - Ore grade digest (details unknown) with AA finish. Au by PE01S - 25g Fire Assay. o ARC001 to ARC006: Assay Lab – Onsite Lab Services. Cu initially by method B101 - AR digest ICP finish. If higher than 5000ppm then A101 - Ore grade digest (details unknown) with AA finish. Au by PE01S - 25g Fire Assay. No quality control samples submitted with any historic routine samples Stavely Minerals: o SADD00[1 – 3], SARC00[1,2,4 - 9]: Australian Laboratory Services, Orange. Cu, Ag and Zn by four acid digest (including HF), ICP-AES determination (ALS code ME-ICP61). Samples >1% Cu re-assayed by ore grade four acid digest, ICP-AES determination (ALS code ME-OG62). Au by 30g fire assay, AAS determination (ALS codes Au-AA23 and Au-AA25). Client and Laboratory QC data inserted with routine samples and establish acceptable reliability of assays. sampling and No available data available for analysis Verification of assaying Location of data Data spacing and distribution Orientation of data in relation to geological structure Sample security Audits or reviews Historic drillholes originally located according to two local grids (details unknown). Collar coordinates were converted to GDA94 zone 54S (MGA94 54S) by historic workers. Conversion details are unknown. Stavely Minerals holes located in MGA94 54S. The estimate is undertaken using the supplied MGA94 54S grid references. GPS checking of 2 Pennzoil, 3 Centaur Mining and 4 Beaconsfield Gold hole collar locations show holes located with acceptable accuracy for reporting of Inferred and Indicated Resources. Within the central 500m of mineralisation (strike length): o Oxide mineralisation – drill tested on 50m centred section lines o Fresh Indicated Resources –tested at nominal 50m centres. Other areas and mineralisation extent tested by 8 holes Holes drilled at 9degrees (Azimuth) to planar mineralisation. Holes angled mostly between 50 and 70 degrees easterly. Mineralised plane dips westerly ~60degrees No available data to assess security GPS checking of 9 hole collar locations Basic checking of data integrity Section 2: Reporting of Exploration Results Criteria Explanation Mineral tenure status tenement and land Mineralisation straddles boundary between exploration licences EL4758 (expired 28/01/2014) and EL3019 (expired 21/12/2014) and is within Retention Licence application RL2020. SVY’s tenure over the area covered by expired licences EL4758 and EL3019 remains current pending the grant of the retention licence. Tenements currently held by Stavely Minerals Limited Stavely Minerals have informed HA that the licences are in good standing. 2016 Annual Report | Page 23 OPERATIONS REPORT Criteria Explanation Exploration done by other parties Geology Drill hole Information Pennzoil: 12 holes drilled into mineralisation. Centaur Mining: 38 holes drilled into mineralisation. Beaconsfield Gold: 10 holes drilled into mineralisation Stavely Minerals: 9 holes drilled into mineralisation Steeply westerly dipping, single planar massive sulphide horizon (historically described as VMS) 82 holes drilled in the prospect area, 64 holes intercepted mineralisation, 5 holes define the strike extent of mineralisation. Collar locations verified as acceptable through field checking of 9 holes Downhole surveys for describing hole trace and sample locations available for 32 holes: Assaying of those samples logged with visible sulphide mineralisation Lithology logs available for all holes Oxidation state available for 34 Centaur Mining holes. Summary moisture data available for 18 Centaur Mining RC holes. 39 SG measurements taken from 4 Beaconsfield Gold holes ARD[001- 004] Assay sample intervals: Data aggregation methods Relationship mineralisation intercept lengths between and widths Composited to 1m intervals for resource estimate. No apparent association when data assessed by drill type and mineralisation style breakdown. Significant relationship differences when assessing DD vs RC holes: o Smearing and/or preferential loss and/or cross-contamination of samples may be present in RC drill sample assay dataset. o Preferential loss of friable non-mineralised material may have biased the DD drill sample assay dataset o Both the RC and DD datasets may be preferentially weighted by material with significantly different tenor of in situ grade Diagrammes Historic cross sections and plans were reviewed Long section thickness and drillhole intercept figure: 2016 Annual Report | Page 24 OPERATIONS REPORT Criteria Explanation Balanced reporting substantive exploration Other data Selective sampling of holes where mineralisation observed considered acceptable for estimating sulphide resources. Any gold or silver mineralisation intercepted by drilling with no associated sulphides will not be identifiable in the current dataset. Stavely Minerals identified younger gold only mineralisation proximal to but not genetically related to the VMS mineralisation. A further 53 holes have been drilled within the exploration tenements. Further work Mineralisation thins but is open at depth and opportunities for defining drilling targets (thick shoots). Additional resources may be identified by better definition of the thick mineralisation directly below the Indicated Resources. Section 3: Estimation and Reporting of Mineral Resources Criteria Explanation Database integrity Site visits Geological interpretation Dimensions Estimation techniques and modelling Data management protocols and provenance unknown Limited cross checks with paper records of drill hole and assay data Field verification of 9 hole collar locations. Relational and spatial integrity assessed and considered acceptable. Not undertaken by CP Stavely Minerals’ personnel verify existence of core. CP has viewed photos of chip trays with mineralisation taken by Stavely Minerals’ Personnel. Single planar mineralised massive sulphide body interpreted and modelled for grade interpolation. Oxide state modelled and utilised for reporting of resource estimate. Mineralisation extends for a strike length of 830m (towards 335deg), vertically for 350m and ranges mostly between 1m and 3m thick (total massive + sub-massive + stringer mineralisation). The mineralisation is modelled between 4m and 14m thick in the upper 50m (this may be real, due to supergene actions or introduced due to the suspected wet/difficult RC drilling conditions) The block model and grade estimate encompasses the extent of the mineralisation. Copper, gold, silver and zinc grades were interpolated into a VulcanTM non- regular block model with 10x10x10 metre parent blocks – subblocked to 1x1x1 metre minimum block dimensions. 1m composite intervals utilised. Grades greater than: 6%Cu, 2.50ppmAu, 15ppmAg, 1%Zn, 2016 Annual Report | Page 25 OPERATIONS REPORT Criteria Explanation were restricted to inform blocks within a 55m radius of their location. Single pass ID2 interpolation run employed utilising 400m sample search within the plane of mineralisation. Minimum of 20 and maximum of 40 composites utilised to estimate grade. The Mt Ararat resource is classified as Inferred under the guidelines set out in the 2012 JORC Code. 15 of 18 RC holes drilled by Centaur Mining encountered wet drilling through the mineralisation. Grade profiles suggest down hole smearing of grade (cross-contamination) in the oxide/supergene mineralisation. Core recovery averages 85% through the oxide/weathered mineralisation, down from >97% recorded for the supergene and primary mineralisation. There is no information or data to assess the affect core loss has on grade. The resource is reported by mineralisation thickness and oxidation state. Cuts of 0.5%, 1.0% and 2.0% copper were applied. These breakdowns and grade tonnage plots are reported to allow differing economic assessment on the project. Not applied, however resource is reported at 1m and 2m thicknesses and by oxidation state to allow for assessment of both underground and open cut mining methods. Not evaluated as risks associated with historic data over-riding feature affecting the confidence of the estimate. Not evaluated as risks associated with historic data over-riding feature affecting the confidence of the estimate. A single tonnage factor of 3.17 tonnes/m3 was applied to all mineralisation. The estimate is classified as Inferred under the JORC Code (2012 Edition). Absence of QA/QC and important data for evaluating risk to the estimate (such as recover and moisture versus grade) are key factors in assigning an Inferred Classification. No Audit or Review of estimate undertaken. Not undertaken other than that stated under the classification section. Moisture and recovery Cut-off parameters Mining factors or assumptions factors or factors or Metallurgical assumptions Environmental assumptions Bulk Density Classification Audits or reviews. Discussion of relative accuracy/ confidence 2016 Annual Report | Page 26 OPERATIONS REPORT Appendix 2: Thursday’s Gossan Mineral Resource Estimate Summary: The Thursday Gossan Chalcocite Copper Inferred Resource Estimate, remains unchanged from the Thursday Gossan Chalcocite Copper Inferred Resource Estimate, August 2013. There has been no additional data collected from the deposit and although economic circumstances affecting the mining industry have changed since 2013 the assumptions utilised in 2013 remain valid, if not for the current situation but for future situations. Stavely Minerals have advised that tenure over the Thursday Gossan Chalcocite deposit is in good standing and that there are no impediments to undertaking further evaluation of the deposit. Details of the 2013 resource estimate have been reported in “Thursday Gossan Copper, Victoria, Australia, 2013 Resource Estimate Report” prepared for Northern Platinum Pty Ltd, a forerunner for Stavely Minerals Limited who now hold tenure over the project area. The following summary of the 2013 Inferred Resource Estimate applies to the 2015 resources publically stated by Stavely and is repeated here unchanged to support their statement. The reader can substitute 2015 for 2013 and Stavely Minerals for Northern Platinum in the text on the following pages. The Thursday Gossan Chalcocite Copper August 2013 Inferred Resource estimate is an inverse distance squared Cu estimate of the tabular sub-horizontal supergene style mineralisation of the deposit and is tabulated below. The estimate was undertaken, classified and reported according to the guidelines set out in The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserve (the JORC Code, 2012 Edition). The Thursday Gossan Chalcocite Copper Inferred Resource Estimate: Table shows rounded estimates. This rounding may cause apparent computational discrepancies. Significant figures do not imply precision. Nominal copper grade reporting cuts applied. Three mineralised thicknesses reported as varied economic factors are likely to be applicable to each. The estimate: Is based on historic drilling data of unknown reliability and quality however there are no obvious reasons to question that the holes were drilled to test a flat lying supergene copper deposit. Extends intermittently for a strike length of 4000m (NS) a breadth of 1500m and vertically up to 60m thick. The model includes prospects known as Thursday Gossan Chalcocite Copper, Junction and Drysdale. Is underpinned by 2355 Cu assays from 225 holes (1493 nominal 3m composites). Cu grades were interpolated without any cuts or restrictions. A tonnage factor of 2.10g/cc was applied to all mineralised blocks. Reconciles well both statistically and spatially with the source assay data. 2016 Annual Report | Page 27 OPERATIONS REPORT Was undertaken by Duncan Hackman who is a member of the Australian Institute of Geoscientists and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code, 2012 Edition). JORC 2012 Table 1, Sections 1,2 and 3 criteria. Section 1: Sampling Techniques and Data Criteria Explanation Sampling techniques Drilling techniques Resource estimate underpinned by diamond drilling (DD), aircore drilling (AC), reverse air blast drilling (RAB) and reverse circulation drilling (RC) samples: Pennzoil (1 RC, 14 RAB holes): 2m Samples selected where mineralisation observed. 13 RAB holes sampled every alternate 2m intervals. No details on sampling methods. North (4 DD, 1 AC, 85 RAB) and Newcrest (3 DD): Diamond holes ½ core sampled. No details on sampling of RC, RAB and Aircore holes. Beaconsfield Gold (2 DD, 78 AC): Diamond holes ½ core sampled. Aircore holes were sampled by spearing of material on 2m or 3m intervals where no mineralisation was observed and on 1m intervals where mineralisation was observed. TGM Group (26 AC): No details. Drilling details for the TGC resource drillhole dataset Drill sample recovery Recovery data available for 2 DD holes. Logging Sub-sampling sample preparation techniques and Quality of assay data and laboratory tests Lithology logs through mineralisation available for all holes. Incomplete oxidation-state and interval colour logging (utilised to determine base of supergene zone). Pennzoil (1 RC, 14 RAB holes): No details on sampling and sample preparation methodology. North (4 DD, 1 AC, 85 RAB) and Newcrest (3 DD): No details sample preparation methodology. Beaconsfield Gold (2 DD, 78 AC): No information on sample preparation methodology. TGM Group (26 AC): No details Pennzoil (1 RC, 14 RAB holes): A base metal suite was assayed via AAS (digestion not specified) and Au was assayed via fire assay. North (4 DD, 1 AC, 85 RAB) and Newcrest (3 DD): A base metal suite was assayed via Mixed Acid digest, AAS detection and Au was assayed via fire assay. Beaconsfield Gold (2 DD, 78 AC): OnSite Laboratory Services (Bendigo) 2016 Annual Report | Page 28 OPERATIONS REPORT Criteria Explanation analysed all samples for Cu by aqua regia digest ICP-OES detection and repeated assays for samples returning greater than 5000ppm Cu by Mixed Acid Digest ICP-OES detection. Au was assayed via fire assay. TGM Group (26 AC): No details. “Cherry-picking” of best assays from reassayed samples (85 of 160 substituted) has introduced a +10% relative bias for 9 holes used in the resource estimate. No QC samples were inserted into any of the sample batches from the Thursday Gossan drilling. No laboratory QC data was made available for assessment as part of this resource estimate. Beaconsfield Gold undertook a limited (selective) umpire laboratory programme (29 samples), entire residual material assaying (94 intervals) and 66 sub-sample assays of residual material (66 intervals). These projects provide limited insight into sampling and assay reliability. This data indicates that: Both significant bias and precision issues are suspected in the Beaconsfield Gold dataset (OnSite Laboratory) and that there appears to be a period of instrument malfunction or systems/procedural breakdown at grades greater than 3000ppm Cu at the laboratory. The spear vs total sample dataset shows a significant relative bias in favour of the spear sample, manifesting greatest within samples containing higher copper grades. Beaconsfield Gold undertook a limited (selective) umpire laboratory programme (29 samples), entire residual material assaying (94 intervals) and 66 sub-sample assays of residual material (66 intervals). These projects provide limited insight into sampling and assay reliability. Holes within the Thursday Gossan area are recorded as being surveyed under three systems: AMG66 zone 54S, MGA zone 54 and GDA94 zone 54S. All coordinates were converted to GDA94 zone 54S by previous workers. These conversions have not been checked by NPT or HA. The August 2013 estimate is undertaken using the supplied GDA94 54S grid references. Beaconsfield Gold holes were located by hand held GPS. No information on survey methods for other workers. Area showing the thickest and highest tenor of mineralisation tested at nominal 50m centres by predominantly vertical holes. Areas less well mineralised tested mostly at 100m centres by vertical drillholes Drill orientation appropriate for testing of flat-lying mineralisation Underlying geology indicates that primary mineralisation may be sub vertical. Supergene mineralisation is controlled by pre-existing geology, groundwater movement and surface/weathering events. It is unknown from the current dataset if there is any sub-vertical fabric within the supergene mineralisation and if so then vertical holes will not adequately sample this feature of the mineralisation. No available data to assess security Basic checking of data integrity Verification of assaying sampling and Location of data Data spacing and distribution Orientation of data in relation to geological structure Sample security Audits or reviews 2016 Annual Report | Page 29 OPERATIONS REPORT Section 2: Reporting of Exploration Results Criteria Explanation Mineral tenure status tenement and land Exploration done by other parties Geology Drill hole Information The mineralisation is situated within exploration licence EL4556 (expires 05/04/2014) which is currently held by Northern Platinum Pty Ltd. Northern Platinum advises that the tenement is considered in good standing by the Victorian Department of Environment and Primary Industries and that they cannot foresee any reasons that would inhibit the tenement being renewed for a further term in 2014. Pennzoil: 1 RC, 14 RAB holes North: 4 DD, 1 AC, 85 RAB holes TGM Group: 26 AC holes Beaconsfield Gold: 2 DD, 78 AC holes Beaconsfield Gold: Resource Estimate undertaken by Coffey Mining Pty Ltd (2008) Supergene enrichment of hydrothermally altered host rocks, where fine grained chalcocite and covellite have partially replaced pyrite and chalcopyrite grains. 225 holes drilled in the prospect. Collar locations not verified however plot within acceptable levels from SRTM derived topographic surface. Downhole surveys for describing hole trace and sample locations available for 4 of 40 angled holes. 185 vertical holes drilled. Pennzoil assayed intervals logged with visible sulphide mineralisation. Sampling interval breakdown: Lithology logs through mineralisation available for all holes. Incomplete oxidation-state and interval colour logging (utilised to determine base of supergene zone). Summary moisture data available for 28 AC/RC holes show that all bar one hole encountered water through the mineralised interval. Recovery data available for 2 DD holes. SG measurements taken from Beaconsfield Gold hole TGDD46. No mention of drying samples. May be more akin to bulk density measurements than dry bulk density measurements. Assays composited to 3m for resource estimation. No obvious association other than, as expected with supergene mineralisation, globally thicker mineralisation has higher tenor of copper. Data aggregation methods Relationship between mineralisation widths and intercept lengths Diagrammes No historic or client produced diagrammes available for review. 2016 Annual Report | Page 30 OPERATIONS REPORT Criteria Explanation Thickness plan: Copper grade plan: Drillhole plan: 2016 Annual Report | Page 31 OPERATIONS REPORT Criteria Explanation Balanced reporting substantive exploration Other data Further work Selective sampling of holes where mineralisation observed considered acceptable for estimating sulphide resources. Alternative sampling and “cherry picking” practices assessed as having negligible effect on global estimate but will be a limiting factor in lifting local resources to higher than Inferred classification under the JORC Code (2012 Edition) 66 of the 225 holes terminate within mineralisation; however surrounding holes adequately define the base of mineralisation. A further 683 holes within and surrounding the prospect area were utilised for defining the resource mineralisation. Evaluation of area for discovery of styles of mineralisation other than the defined supergene mineralisation. Section 3: Estimation and Reporting of Mineral Resources Criteria Explanation Database integrity Site visits Geological interpretation Dimensions Data management protocols and provenance unknown. Limited cross checks with paper records of drill hole and assay data. Relational and spatial integrity assessed and considered acceptable. Not undertaken by CP CP has viewed photos of chip trays with mineralisation taken by Northern Platinum Personnel. Single planar flat-lying horizon of supergene mineralisation containing areas where mineralisation thickens and copper grade tenor increases. A 0.2%Cu cut was utilised to domain the extents of the better mineralisation and this domain used as a hard boundary for grade interpolation. Extends intermittently for a strike length of 4000m (NS) a breadth of 1500m and vertically up to 60m thick. The model includes prospects known as 2016 Annual Report | Page 32 OPERATIONS REPORT Criteria Explanation Estimation techniques and modelling Moisture and Recovery Cut-off parameters Mining factors or assumptions factors or factors or Metallurgical assumptions Environmental assumptions Bulk Density Classification Audits or reviews. Discussion of relative accuracy/ confidence Thursday Gossan Chalcocite Copper, Junction and Drysdale. The block model and grade estimate encompasses the extent of the mineralisation. Copper grades were interpolated into a VulcanTM non-regular block model with 20x20x10 metre parent blocks – subblocked to 2.5x2.5x2.5 metre minimum block dimensions. 3m composite intervals utilised. No high grade sample treatment applied. Single pass ID2 interpolation run employed utilising 200m sample search within the plane of mineralisation (97.8% of blocks within the TIN domain estimated). Minimum of 10 and maximum of 20 composites utilised to estimate grade. The Mt Ararat resource is classified as Inferred under the guidelines set out in the 2012 JORC Code. 27 of 28 AC/RC holes with moisture information recorded wet drilling conditions through the mineralisation. It is unknown if the wet conditions has introduced bias or contamination into the dataset as relevant/detailed information is not available. Available core recovery data suggests that biases caused by both loss and enrichment may be affecting the resource dataset. The resource estimate is reported at 0.2%, 0.3% and 0.5% Cu cuts and by three mineralised thicknesses domains - <10m, 10-20m and >20m thick. These breakdowns and grade tonnage plots are reported to allow differing economic assessment on the project. Not applied, however resource is reported at three thicknesses for input into this discipline. Not evaluated as risks associated with historic data over-riding feature affecting the confidence of the estimate. Not evaluated as risks associated with historic data over-riding feature affecting the confidence of the estimate. A single tonnage factor of 2.10 tonnes/m3 was applied to all mineralisation. The estimate is classified as Inferred under the JORC Code (2012 Edition). Absence of QA/QC, the indicated sampling and assaying issues and absence of important data for evaluating other risks to the estimate (such as recover and moisture versus grade) are key factors in assigning an Inferred Classification. No Audit or Review of estimate undertaken Not undertaken other than that stated under the classification section. 2016 Annual Report | Page 33 DIRECTORS’ REPORT Your Directors present their report for the year ended 30 June 2016. DIRECTORS The names and particulars of the Directors of the Company in office during the financial year and up to the date of this report were as follows. Directors were in office for the entire year unless otherwise stated. William Plyley B.Sc (Metallurgical Engineering) Non Executive Chairman (appointed 6 December 2013) Mr William Plyley is a mining executive with over 35 years operational experience in exploration, mining, processing, and management with substantial resources companies such as Placer Dome Inc, Normandy Mining Limited and Red Back Mining Inc. He has been responsible for major mine developments in Ghana, West Africa and Australia. He has also had significant roles in development and expansion of mines in Papua New Guinea and Australia. Mr Plyley retired, in late 2010, from a role as Chief Operating Officer of La Mancha Resources where he was responsible for the development of the Frog’s Leg and White Foil mines near Kalgoorlie, Western Australia and the operation of mines in Sudan and Cote d’Ivoire, Africa. Recently, Mr Plyley was a Director of Integra Mining Limited from November 2011 until the take over of Integra by Silver Lake Resources Limited in January 2013. Mr Plyley has a B.Sc. in Metallurgical Engineering from Mackay School of Mines, University of Nevada. He is a member of Australian Institute of Mining and Metallurgy (MAusIMM) and Graduate of Australian Institute of Company Directors (GAICD). Mr Plyley is a member of the Company’s Audit and Risk Committee. Other directorships of listed companies in the last three years: None. Christopher Cairns B.Sc (Hons) Executive Managing Director (Appointed 23 May 2006) Mr Christopher Cairns completed a First Class Honours degree in Economic Geology from the University of Canberra in 1992. Mr Cairns has extensive experience having worked for: BHP Minerals as Exploration Geologist / Supervising Geologist in Queensland and the Philippines Aurora Gold as Exploration Manager at the Mt Muro Gold Mine in Borneo LionOre as Supervising Geologist for the Thunderbox Gold Mine and Emily Anne Nickel Mine drill outs Sino Gold as Geology Manager responsible for the Jinfeng Gold Deposit feasibility drillout and was responsible for the discovery of the stratabound gold mineralisation taking the deposit from 1.5Moz to 3.5Moz in 14 months. Mr Cairns joined Integra Mining Limited in March 2004 and as Managing Director oversaw the discovery of three gold deposits, the funding and construction of a new processing facility east of Kalgoorlie transforming the company from explorer to gold producer with first gold poured in September 2010. In 2008 Integra was awarded the Australian Explorer of the Year by Resources Stocks Magazine and in 2011 was awarded Gold Miner of the Year by Paydirt Magazine and the Gold Mining Journal. In January 2013, Integra was taken over by Silver Lake Resources Limited for $426 million (at time of bid) at which time Mr Cairns resigned along with the whole Integra Board after having successfully recommended shareholders accept the Silver Lake offer. Mr Cairns is a member of the Australian Institute of Geoscientists, a member of the JORC Committee and a Board member of the Australian Prospectors and Miners Hall of Fame. Other directorships of listed companies in the last three years: None. 2016 Annual Report | Page 34 DIRECTORS’ REPORT Jennifer Murphy B.Sc(Hons), M.Sc Executive Technical Director (Appointed 8 March 2013) Ms Jennifer Murphy completed a First Class Honours Degree in Geology in 1989, and subsequently a Master of Science Degree in 1993 at the University of Witwatersrand in South Africa. Ms Murphy joined Anglo American Corporation in 1993 as an exploration geologist working in Tanzania and Mali. In 1996, she immigrated to Australia and joined Normandy Mining Limited, working initially as a project geologist in the Eastern Goldfields and Murchison Greenstone Provinces and afterwards was responsible for the development and management of the GIS and administration of the exploration database. Between 2004 and 2007, Ms Murphy provided contract geological services to a range of junior exploration companies. Ms Murphy joined Integra Mining Limited in 2007, initially as an administration geologist, and in 2010 the role was expanded to that of corporate geologist. In 2013 Ms Murphy joined Stavely Minerals as part of the management team to provide technical and geological expertise. Ms Murphy is a member of the Australian Institute of Geoscientists and has a broad range of geological experience ranging from exploration program planning and implementation, GIS and database management, business development, technical and statutory, and ASX reporting, as well as corporate research and analysis and investor liaison. Ms Murphy is a member of the Company’s Audit and Risk Committee. Other directorships of listed companies in the last three years: Nil. Peter Ironside B.Com, CA Non Executive Director (appointed 23 May 2006) Mr Peter Ironside has a Bachelor of Commerce Degree and is a Chartered Accountant and business consultant with over 30 years’ experience in the exploration and mining industry. Mr Ironside has a significant level of accounting, financial compliance and corporate governance experience including corporate initiatives and capital raisings. Mr Ironside has been a Director and/or Company Secretary of several ASX listed companies including Integra Mining Limited and Extract Resources Limited (before $2.18Bn takeover) and is currently a non-executive director of Zamanco Minerals Limited. Mr Ironside is Chair of the Company’s Audit and Risk Committee. Other directorships of listed companies in the last three years: Zamanco Minerals Limited (current). COMPANY SECRETARY Amanda Sparks B.Bus, CA, F.Fin Appointed 7 November 2013 Ms Amanda Sparks is a Chartered Accountant with over 28 years of resources related financial experience, both with explorers and producers. Ms Sparks has extensive experience in financial management, corporate governance and compliance for listed companies. 2016 Annual Report | Page 35 DIRECTORS’ REPORT MEETINGS OF DIRECTORS During the financial year, five meetings of directors were held. The number of meetings attended by each director during the year is as follows: W Plyley C Cairns J Murphy P Ironside Board of Directors Audit and Risk Committee Meetings Held 5 5 5 5 Meetings Attended 5 5 5 5 Meetings Held 2 * 2 2 Meetings Attended 2 * 2 2 * Not a member of the Audit and Risk Committee DIRECTORS’ INTERESTS IN SHARES AND OPTIONS The following table sets out each director’s relevant interest in shares and options in shares of the Company as at the date of this report. Name of Director Number of Shares (direct and indirect) W Plyley C Cairns J Murphy P Ironside DIVIDENDS 22,000 15,007,419 3,467,097 30,157,419 Number of Unlisted Options at 27 cents, expiry 31/12/2017 1,000,000 5,032,258 1,561,290 5,032,258 Number of Unlisted Options at 23 cents, expiry 1/12/2016 2,500,000 4,500,000 2,000,000 1,000,000 No dividends were paid or declared during the year. The Directors do not recommend payment of a dividend. ENVIRONMENTAL ISSUES The Group’s environmental obligations are regulated by the laws of Australia. The Group has a policy to either meet or where possible, exceed its environmental obligations. No environmental breaches have been notified by any governmental agency as at the date of this report. The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. The Directors have assessed that there are no current reporting requirements, but may be required to do so in the future. CORPORATE INFORMATION Corporate Structure Stavely Minerals Limited is a limited liability company that is incorporated and domiciled in Australia. Stavely Minerals Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year as follows: Stavely Minerals Limited Ukalunda Pty Ltd - - parent entity 100% owned controlled entity Principal Activity The Group’s principal activity was mineral exploration for the year ended 30 June 2016. There were no significant changes in the nature of the principal activities during the year. Operations review Refer to the Operations Review on pages 4 to 33. 2016 Annual Report | Page 36 DIRECTORS’ REPORT Summary of Financial Position, Asset Transactions and Corporate Activities A summary of key financial indicators for the Group, with prior period comparison, is set out in the following table: Cash and cash equivalents held at year end Net loss for the year after tax Included in loss for the year: Exploration costs Equity-based payments Basic loss per share (cents) from continuing operations Net cash (used in) operating activities Net cash (used in) investing activities Net cash from financing activities During the year: Year Year 30 June 2016 30 June 2015 $ $ 1,520,166 1,941,148 (3,002,027) (3,497,173) (1,534,337) (2,815,163) (884,473) (3.19) - (4.33) (1,700,195) (3,490,417) (48,958) (116,189) 1,328,171 1,331,037 - On 6 July 2015, Stavely issued 85,700 new shares at an issue price of $0.35 as consideration for the extension of the Stavely Royalty Option with New Challenge Resources Pty Ltd. - On 20 July 2015, Stavely issued 6,332,726 new shares at an issue price of $0.25 per share together with 3,166,373 free attaching options pursuant to a Non-Renounceable Entitlement Issue. The options have an exercise price of $0.30 each and expire 30 June 2016. Gross proceeds raised totalled $1,583,181. - In October 2014, Stavely Minerals entered into a $2 million Share Subscription Agreement with its existing drilling contractor, Titeline Drilling Pty Ltd. Pursuant to this agreement, the drilling contractor has agreed to subscribe for up to $2 million of shares, with Stavely Minerals having the option to settle monthly drilling charges by way of cash payment and by way of offset of the price of subscription application for shares. During the year ended 30 June 2016, 1,961,886 ordinary shares ($266,379) were issued pursuant to this agreement. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Group during the financial year are detailed on pages 4 to 33 of this report. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Group anticipates to continue its exploration activities and consider corporate transactions to ensure further development of its tenements. 2016 Annual Report | Page 37 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) A. INTRODUCTION This report details the nature and amount of remuneration for each Director and Executive of Stavely Minerals Limited. The information provided in the remuneration report includes remuneration disclosures that are audited as required by section 308(3C) of the Corporations Act 2001. For the purposes of this report key management personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether Executive or otherwise). For the purposes of this report the term “Executive” includes those key management personnel who are not directors. Details of Key Management Personnel During the Year Non-Executive Directors William Plyley Peter Ironside – – Non-executive Chairman (from 6 December 2013) Director (from 23 May 2006) Executive Directors Christopher Cairns Jennifer Murphy – – Managing Director (from 23 May 2006) Technical Director (from 8 March 2013) B. REMUNERATION GOVERNANCE The Board is responsible for ensuring that the Company’s remuneration structures are aligned with the long-term interests of Stavely and its shareholders Once the Board is of a sufficient size and structure, and the Company’s operations are of a sufficient magnitude, to assist the Board in fulfilling its duties, the Board will establish a Remuneration Committee. Until that time, the Board has taken a view that the full Board will hold special meetings or sessions as required. The Board are confident that this process is stringent and full details of remuneration policies and payments are provided to shareholders in the annual report and on the web. The Board has adopted the following policies for Directors’ and executives’ remuneration. C. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION Remuneration Philosophy The performance of the Group depends upon the quality of its Directors and Executives. To prosper, the Group must attract, motivate and retain highly skilled Directors and Executives. To this end, the Group embodies the following principles in its remuneration framework: provide competitive rewards to attract high calibre Executives; link Executive rewards to shareholder value; and in the future, will establish appropriate, demanding performance hurdles in relation to variable Executive remuneration. In accordance with best practice corporate governance, the structure of non-executive director and executive compensation is separate and distinct. 2016 Annual Report | Page 38 DIRECTORS’ REPORT Non-Executive directors’ remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the Group with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure Non-executive Directors’ fees are paid within an aggregate limit which is approved by the shareholders from time to time. Retirement payments, if any, are agreed to be determined in accordance with the rules set out in the Corporations Act as at the time of the Director’s retirement or termination. Non-executive Directors’ remuneration may include an incentive portion consisting of options, as considered appropriate by the Board, which may be subject to shareholder approval in accordance with ASX listing rules. The option incentive portion is targeted to add to shareholder value by having a strike price considerably greater than the market price at the time of granting. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers the amount of Director fees being paid by comparable companies with similar responsibilities and the experience of the Non-executive Directors when undertaking the annual review process. Executive Director Remuneration Objective The Group aims to reward Executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group and so as to: reward Executives for company, and individual performance; ensure continued availability of experienced and effective management; and ensure total remuneration is competitive by market standards. Structure In determining the level and make-up of Executive remuneration, the Board negotiates a remuneration to reflect the market salary for a position and individual of comparable responsibility and experience. Remuneration is regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. If required, the Board may engage an external consultant to provide independent advice in the form of a written report detailing market levels of remuneration for comparable Executive roles. Remuneration consists of a fixed remuneration and a long term incentive portion as considered appropriate. Fixed Remuneration - Objective The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Board and the process consists of a review of Group and individual performance, and relevant comparative remuneration in the market. As noted above, the Board may engage an external consultant to provide independent advice. Fixed Remuneration - Structure The fixed remuneration is a base salary or monthly consulting fee. Variable Pay — Long Term Incentives - Objective The objective of long term incentives is to reward Executives in a manner which aligns this element of remuneration with the creation of shareholder wealth. The incentive portion is payable based upon attainment of objectives related to the Executive’s job responsibilities. The objectives vary, but all are targeted to relate directly to the Group’s business and financial performance and thus to shareholder value. Variable Pay — Long Term Incentives – Structure Long term incentives granted to Executives are delivered in the form of options. The option incentives granted are aimed to motivate Executives to pursue the long term growth and success of the Group within an appropriate control framework and demonstrate a clear relationship between key Executive performance and remuneration. Director options are granted at the discretion of the Board and approved by shareholders. Other key management employees 2016 Annual Report | Page 39 DIRECTORS’ REPORT may be granted options. Performance hurdles are not attached to vesting periods; however the Board determines appropriate vesting periods to provide rewards over a period of time to key management personnel. During the year, no performance related cash payments were made. D. SERVICE AGREEMENTS On appointment to the board, all non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the board policies and terms, including compensation, relevant to the office of director. Remuneration and other terms of employment for the executive directors and the other key management personnel are also formalised in service agreements. The major provisions of the agreements relating to remuneration are set out below. Name Directors William Plyley Term of agreement Commenced 22/1/2014. Ongoing, subject to re- elections Christopher Cairns Commenced 22/1/2014. No end date, subject to termination clauses Jennifer Murphy Commenced 22/1/2014. No end date, subject to termination clauses Peter Ironside Ongoing, subject to re-elections * Salary adjustments were effective from 1 March 2015 and are ongoing. Base annual salary exclusive of superannuation at 30/6/2016 Termination benefit Waived to Nil* (was $75,000) $150,000* (Was $250,000, reduced by 40%) $90,000* (Was $150,000, reduced by 40%) Waived to Nil* (Was $30,000) None 12 months 12 months None 2016 Annual Report | Page 40 DIRECTORS’ REPORT E. REMUNERATION OF KEY MANAGEMENT PERSONNEL Details of the remuneration of each key management personnel of the Group, including their personally-related entities, during the year were as follows: Post Employment Share Based Cash salary, directors fees, consulting fees, insurances and movement in leave provisions $ Superannuation $ Total Cash and Provisions $ Options (1) $ Total including share based payments $ - 50,000 169,293 239,818 94,832 141,883 - 20,000 - 13,350 264,125 465,051 - 4,750 14,250 20,583 8,550 12,350 - 2,330 - - 22,800 40,013 - 54,750 183,543 260,401 103,382 154,233 - 22,330 - 13,350 286,925 505,064 170,953 - 307,715 - 136,762 - 68,381 - - - 683,811 - 170,953 54,750 491,258 260,401 240,144 154,233 68,381 22,330 - 13,350 970,736 505,064 Directors W Plyley C Cairns J Murphy P Ironside Other KMP A Sparks(2) TOTAL Year 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 (1) Equity based payments – options. These represent the amount expensed for options granted and vested in the 2016 year. (2) Amanda Sparks is an external provider of company secretarial services and is no longer regarded as a KMP from 1 July 2015. There were no performance related payments made during the year. Performance hurdles are not attached to remuneration options; however the Board determines appropriate vesting periods to provide rewards over a period of time to key management personnel. 2016 Annual Report | Page 41 DIRECTORS’ REPORT F. SHARE-BASED COMPENSATION During the year the following options were granted as equity compensation benefits to Directors and other Key Management Personnel (2015: none). These options vested at grant date. Directors W Plyley C Cairns J Murphy P Ironside Number of Options at 23 cents, expiry 1/12/2016 Value* per option at grant date $ 2,500,000 4,500,000 2,000,000 1,000,000 0.0684 0.0684 0.0684 0.0684 These options were granted to recognise the efforts of Stavely’s directors and consultants and provide a retention incentive. It is important to note that in March 2015, all directors and staff agreed to reduce their salaries / fees in order to maximise cash for exploration expenditure. Issue of these Director options were approved by Shareholders at the Company’s Annual General Meeting held on 18 November 2015. * Value at grant date has been calculated in accordance with AASB 2 Share-based Payment. Stavely used a Black Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and the expected volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Further details are in note 13 of the financial statements. Shares issued to Key Management Personnel on exercise of compensation options During the year to 30 June 2016, there were no compensation options exercised by Directors or other Key Management Personnel. G. EQUITY HOLDINGS AND MOVEMENTS DURING THE YEAR (a) Shareholdings of Key Management Personnel 30 June 2016 Balance at beginning of the year Net change during the year Balance at end of the year Directors W Plyley C Cairns J Murphy P Ironside 20,000 14,687,419 3,407,097 29,677,419 47,791,935 2,000 320,000 60,000 480,000 862,000 22,000 15,007,419 3,467,097 30,157,419 48,653,935 All equity transactions with Key Management Personnel have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arms-length. 2016 Annual Report | Page 42 DIRECTORS’ REPORT (b) Option holdings of Key Management Personnel 30 June 2016 Directors W Plyley C Cairns J Murphy P Ironside Balance at beginning of the year Granted as remuneration Granted as shareholder options Expired during the year Balance at end of the year Exercisable 1,000,000 2,500,000 1,000 (1,000) 3,500,000 3,500,000 5,032,258 4,500,000 160,000 (160,000) 9,532,258 9,532,258 1,561,290 2,000,000 30,000 (30,000) 3,561,290 3,561,290 5,032,258 1,000,000 240,000 (240,000) 6,032,258 6,032,258 12,625,806 10,000,000 431,000 (431,000) 22,625,806 22,625,806 H. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Mr Peter Ironside, Director, is a shareholder and director of Ironside Pty Ltd. Ironside Pty Ltd is a shareholder of the 168 Stirling Highway Syndicate, the entity which owns the premises the Company occupies in Western Australia. During the year an amount of $141,375 (net of GST) was paid/payable for office rental and variable outgoings (2015: $123,164 (net of GST)). Mr Peter Ironside, Director, is also a shareholder and non-executive director of Zamanco Minerals Limited (“Zamanco”). Zamanco sub-leases office space in the premises the Company occupies. During the year an amount of $39,416 (net of GST) was paid/payable by Zamanco to the Company for reimbursement of office rental and associated expenses (2015: $39,048 (net of GST)). Mr Chris Cairns and Mr Peter Ironside are directors of Ukalunda Pty Ltd. In February 2016, Stavely Minerals acquired Ukalunda Pty Ltd (‘Ukalunda’) for a purchase cost of $2. During the year, Ukalunda made loan repayments of $10,000 to Mr Chris Cairns and $19,040 to related parties of Mr Peter Ironside. I. USE OF REMUNERATION CONSULTANTS No remuneration consultants were engaged by the Company during the year. J. VOTING OF SHAREHOLDERS AT LAST YEAR’S ANNUAL GENERAL MEETING The Company received 99.69% of ‘yes’ votes for its remuneration report for the 2015 financial year and did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. End of Audited Remuneration Report. INDEMNIFICATION AND INSURANCE OF OFFICERS The Company has paid a premium to insure the Directors and Officers of the Company and its controlled entities. Details of the premium are subject to a confidentiality clause under the contract of insurance. The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Company. 2016 Annual Report | Page 43 DIRECTORS’ REPORT SHARES UNDER OPTION Unissued ordinary shares of the Company under option at the date of this report are as follows: Unlisted Options Unlisted Options Unlisted Options Number 14,400,000 3,000,000 10,000,000 Exercise Price 27 cents 27 cents 23 cents Expiry Date 31/12/2017 01/12/2016 01/12/2016 No option holder has any right under the options to participate in any other share issue of the Company or any other related entity. No share options were exercised by employees or Key Management Personnel during the year. SUBSEQUENT EVENTS There are no matters or circumstances that have arisen since 30 June 2016 that have or may significantly affect the operations, results, or state of affairs of the Group in future financial years. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Stavely Minerals Limited support and adhere to the principles of corporate governance. The Company’s Corporate Governance Statement is contained in this annual report. AUDIT INDEPENDENCE AND NON-AUDIT SERVICES Auditors' independence - section 307C The Auditor’s Independence Declaration is included on page 45 of this report. Non-Audit Services The following non-audit services were provided by the entity’s auditor, BDO. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. BDO received, or are due to receive, the following amounts for the provision of non-audit services: Taxation and Corporate advice services Signed in accordance with a resolution of the Directors. 2016 $5,700 2015 $4,915 Christopher Cairns Managing Director Dated this 2nd day of September 2016 2016 Annual Report | Page 44 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS 2016 Annual Report | Page 45 CORPORATE GOVERNANCE STATEMENT This statement outlines the main corporate governance practices. These corporate governance practices comply with the ASX Corporate Governance Council recommendations unless otherwise stated. BOARD OF DIRECTORS The Board operates in accordance with the broad principles set out in its charter, which is available from the corporate governance information section of the Company website at www.stavely.com.au. ROLE AND RESPONSIBILITIES OF THE BOARD The Board is responsible for ensuring that the Group is managed in a manner which protects and enhances the interests of its shareholders and takes into account the interests of all stakeholders. This includes setting the strategic directions for the Group, establishing goals for management and monitoring the achievement of these goals. A summary of the key responsibilities of the Board include: 1. 2. 3. 4. 5. 6. 7. Strategy - Providing strategic guidance to the Company, including contributing to the development of and approving the corporate strategy; Financial performance - Approving budgets, monitoring management and financial performance; Financial reporting and audits - Monitoring financial performance including approval of the annual and half-year financial reports and liaison with the external auditors; Leadership selection and performance - Appointment, performance assessment and removal of the Managing Director. Ratifying the appointment and/or removal of other senior management, including the Company Secretary and other Board members; Remuneration - Management of the remuneration and reward systems and structures for Executive management and staff; Risk management - Ensuring that appropriate risk management systems and internal controls are in place; and Relationships with the exchanges, regulators and continuous disclosure - Ensuring that the capital markets are kept informed of all relevant and material matters and ensuring effective communications with shareholders. The Board has delegated to management responsibility for: Strategies - Assisting in developing and implementing corporate strategies and making recommendations where necessary; Leadership selection and performance - Appointing management where applicable and setting terms of appointment and evaluating performance; Budgets - Developing the annual budget and managing day-to-day operations within budget; Risk Management - Maintaining risk management frameworks; and Communication - Keeping the Board and market informed of material events. The Company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board. All directors have direct access to the Company Secretary. 2016 Annual Report | Page 46 CORPORATE GOVERNANCE STATEMENT COMPOSITION OF THE BOARD The names, skills, experiences and period of office of the Directors of the Company in office at the date of this Statement are set out in the Director’s Report. A summary of these skills and experiences are provided in graph 1. The composition of the Board is determined using the following principles: Persons nominated as Non-executive Directors shall be expected to have qualifications, experience and expertise of benefit to the Company and to bring an independent view to the Board’s deliberations. Persons nominated as Executive Directors must be of sufficient stature and security of employment to express independent views on any matter. The Chairperson should ideally be independent, but in any case be Non-executive and be elected by the Board based on his/her suitability for the position. The roles of Chairperson and Managing Director should not be held by the same individual. All Non-executive Directors are expected voluntarily to review their membership of the Board from time-to-time taking into account length of service, age, qualifications and expertise relevant to the Company’s then current policy and programme, together with the other criteria considered desirable for composition of a balanced board and the overall interests of the Company. The Company considers that the Board should have at least three Directors (minimum required under the Company's Constitution) and to have a majority of independent Directors but acknowledges that this may not be possible at all times due to the size of the Company. Currently the Board has four Directors, with only Mr William Plyley as independent. The number of Directors is maintained at a level which will enable effective spreading of workload and efficient decision making. The Board has accepted the following definition of an independent Director: An independent Director is a Director who is not a member of management (a Non-executive Director) and who: (a) holds less than 5% of the voting shares of the Company and is not an officer of, or otherwise associated directly or indirectly with, a shareholder of more than 5% of the voting shares of the Company; (b) within the last three years has not been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment; (c) within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provided; (d) is not a material supplier or customer of the Company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; (e) has no material contractual relationship with the Company or another group member other than as a Director of the Company; (f) has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company; and (g) is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company. The materiality thresholds are assessed on a case-by-case basis, taking into account the relevant Director’s specific circumstances, rather than referring to a general materiality threshold. 2016 Annual Report | Page 47 CORPORATE GOVERNANCE STATEMENT Graph 1: Skills and Experience Matrix of Stavely Directors Director 4 Director 3 Director 2 Director 1 e c n e i r e p x E s r a e Y 120 100 80 60 40 20 0 i p h s r e d a e L y g e t a r t S t n e m e g a n a M k s i R y n a p m o C d e t s i L c i l b u P e c n a n r e v o G e t a r o p r o C y t i l i b i s a e F n o i t a r o p x E l l a n o i t a r e p O g n i r e e n g n E i t n e m p o e v e D l y t e f a S d n a h t l a e H s l a t e M d n a s l a r e n M i a i s A a c i r f A e p o r u E a i l a r t s u A a c i r e m A h t r o N a c i r e m A h t u o S s e c r u o s e R n a m u H l s n o i t a e R y t i n u m m o C e c n a n i F g n i t n u o c c A s n o i t s i u q c A d n a s r e g r e M s t e k r a M l a t i p a C d n a y t i u q E l y g o o n h c e T g n i s s e c o r P d n a n o i t a r o p x E l INDEPENDENT PROFESSIONAL ADVICE AND ACCESS TO COMPANY INFORMATION Each Director has the right of access to all relevant Company information and to the Company’s Executives and, subject to prior consultation with the Chairperson, may seek independent professional advice at the Company’s expense. A copy of advice received by the Director is made available to all other members of the Board. 2016 Annual Report | Page 48 CORPORATE GOVERNANCE STATEMENT NOMINATION COMMITTEE / APPOINTMENT OF NEW DIRECTORS Because of the size of the Company and the size of the Board, the Directors do not believe it is appropriate to establish a separate Nomination Committee. The Board has taken a view that the full Board will hold special meetings or sessions as required. The Board are confident that this process for selection and review is stringent and full details of all Directors are provided to shareholders in the annual report and on the web. The composition of the Board is reviewed on an annual basis to ensure the Board has the appropriate mix of expertise and experience. Where a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the services of a new Director with particular skills, the Board determines the selection criteria for the position based on the skills deemed necessary for the Board to best carry out its responsibilities and then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders. All new non-executive directors are required to sign a letter of appointment which sets out the key terms and conditions of their appointment, including roles and responsibilities, time commitments and remuneration. Executive directors and other senior executives enter into an employment agreement which governs the terms of their appointment. The Board undertakes appropriate checks prior to nominating a director for election by shareholders. These checks include a police and reference checks. Shareholders are provided with all material information in its possession concerning a director standing for election or re-election in the relevant notice of meeting. An informal induction is provided to all new directors, which includes meeting with technical and financial personnel to understand Stavely’s business, including strategies, risks, company policies and health and safety. All directors are required to maintain professional development necessary to maintain their skills and knowledge needed to perform their duties. In additional to training provided by relevant professional affiliations of the directors, additional development is provided through attendance at seminars and provision of technical papers on industry related matters and developments offered by various professional organisations, such as accounting firms and legal advisors. TERM OF OFFICE Under the Company's Constitution, the minimum number of Directors is three. At each Annual General Meeting, one third of the Directors (excluding the Managing Director) must resign, with Directors resigning by rotation based on the date of their appointment. Directors resigning by rotation may offer themselves for re-election. PERFORMANCE OF DIRECTORS AND MANAGING DIRECTOR The performance of all Directors, the Board as a whole and the Managing Director is reviewed annually. The Board meets once a year with the specific purpose of conducting a review of its composition and performance. This review includes: Determining the appropriate balance of skills and experience required to suit the Company’s current and future strategies; Comparing the requirements above against the skills and experience of current Directors and Executives; Assessing the independence of each Director; Measuring the contribution and performance of each Director; Assessing any education requirements or opportunities; and Recommending any changes to Board procedures, Committees or the Board composition. A review was undertaken in June 2016. 2016 Annual Report | Page 49 CORPORATE GOVERNANCE STATEMENT PERFORMANCE OF SENIOR EXECUTIVES The Board meets at least annually to review the performance of senior Executives, considerations include the following: The performance of the senior Executive in supplying the Board with information in a form, timeframe and quality that enables the Board to effectively discharge its duties; Feedback from other senior Executives; and Any particular concerns regarding the senior Executive. A review of senior executives was undertaken in June 2016. CONFLICT OF INTEREST In accordance with the Corporations Act 2001 and the Company’s constitution, Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the Board believes a significant conflict exists, the Director concerned does not receive the relevant Board papers and is not present at the Board meeting whilst the item is considered. Details of Directors related entity transactions with the Company are set out in the related parties note in the financial statements. DIVERSITY Stavely recognises the benefits arising from employee and Board diversity, including a broader pool of high quality employees, improving employee retention, accessing different perspectives and ideas and benefiting from all available talent. Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. Stavely’s Diversity Policy defines the initiatives which assist Stavely with maintaining and improving the diversity of its workforce. A copy of Stavely’s Diversity Policy can be found on Stavely’s website at http://www.stavely.com.au/wp- content/uploads/2014/03/Corporate-Governance-Plan.pdf. In accordance with this policy and ASX Corporate Governance Principles, the Board has established the following objectives in relation to gender diversity. Proportion of Women Organisation as a whole Executive Management Team Board and Company Secretary REMUNERATION Actual 44% 67% 40% Objective 40% 40% 40% The performance of the Company depends upon the quality of its Directors and Executives. To prosper, the Company must attract, motivate and retain highly skilled Directors and Executives. To this end, the Company embodies the following principles in its remuneration framework: Provide competitive rewards to attract high calibre Executives; Link Executive rewards to shareholder value; and Establish appropriate performance hurdles in relation to variable Executive remuneration. A full discussion of the Company’s remuneration philosophy and framework and the remuneration received by Directors and Executives in the current year is included in the remuneration report, which is contained within the Report of the Directors. There are no schemes for retirement benefits for Non-executive Directors, other than superannuation. 2016 Annual Report | Page 50 CORPORATE GOVERNANCE STATEMENT BOARD REMUNERATION COMMITTEE Once the Board is of a sufficient size and structure, and the Company’s operations are of a sufficient magnitude, to assist the Board in fulfilling its duties, the Board will establish a Remuneration Committee. Until that time, the Board has taken a view that the full Board will hold special meetings or sessions as required. The Board are confident that this process is stringent and full details of remuneration policies and payments are provided to shareholders in the annual report and on the web. AUDIT AND RISK COMMITTEE The Audit and Risk Committee consists of the following directors: Mr Peter Ironside (non-executive director). Chairman of the Committee. Appointed 16 January 2014. Ms Jennifer Murphy (technical executive director). Appointed 16 January 2014. Mr William Plyley (non-executive director). Appointed 16 January 2014. Full details of the qualifications of the Committee members can be found in the Report of the Directors. A copy of Stavely’s Audit and Risk Committee Charter can be http://www.stavely.com.au/wp-content/uploads/2014/03/Corporate-Governance-Plan.pdf. found on Stavely’s website at The Committee held two meetings during the year ended June 2016. Details of attendance are disclosed in the Directors’ Report. The Board reviewed the performance of this committee in June 2016. RISK OVERSIGHT AND MANAGEMENT The Board determines the Company’s ‘risk profile’ and is responsible overseeing and approving risk management strategy and policies, internal compliance and internal control systems. In summary, the Company policies are designed to ensure strategic, operational, legal, reputation and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Company’s business objectives. The Company’s Risk Register identifies the material risks for the Company. These risks include loss of a significant tenement, failure to raise future capital, insufficient new reserves converted from resources and the occurrence of a fatality or permanent disabling injury to persons whom Stavely has a duty of care. The Risk Register records all current controls in place to minimise the risks, and identifies the overall control effectiveness. The Board and Audit and Risk Committee review the Risk Register on a regular basis. The Board reviewed the Risk Management Framework, including the policies, procedures and the Company’s Risk Register on 21 June 2016. A summary of Stavely’s Risk Management review procedures can be found in the corporate governance information section of the Company website at www.stavely.com.au. Considerable importance is placed on maintaining a strong control environment. The Board actively promotes a culture of quality and integrity. Control procedures cover management accounting, financial reporting, compliance and other risk management issues. No internal audit function is currently in place due to the size of the Company, however the Audit and Risk Committee regularly assess the need for an internal audit function. The Board encourages management accountability for the Company’s financial reports by ensuring ongoing financial reporting during the year to the Board. Quarterly, the Financial Controller (or equivalent) and the Managing Director are required to state in writing to the Board that in all material respects: Declaration required under s295A of the Corporations Act 2001 - the financial records of the Company for the financial period have been properly maintained; the financial statements and notes comply with the accounting standards; 2016 Annual Report | Page 51 CORPORATE GOVERNANCE STATEMENT the financial statements and notes for the financial year give a true and fair view; and any other matters that are prescribed by the Corporations Act regulations as they relate to the financial statements and notes for the financial year are satisfied. Additional declaration required as part of corporate governance - the risk management and internal compliance and control systems in relation to financial risks are sound, appropriate and operating efficiently and effectively. These declarations were received for the June 2016 financial year. CODE OF CONDUCT The Company has developed a Code of Conduct (the Code) which has been fully endorsed by the Board and applies to all directors and employees. The Code is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Company’s integrity. The Code of Conduct embraces the values of: Integrity Excellence Commercial Discipline The Board encourages all stakeholders to report unlawful/unethical behaviour and actively promotes ethical behaviour and protection for those who report potential violations in good faith. TRADING IN STAVELY SECURITIES BY DIRECTORS, OFFICERS AND EMPLOYEES The Board has adopted a specific policy in relation to Directors and officers, employees and other potential insiders buying and selling shares. Directors, officers, consultants, management and other employees are prohibited from trading in the Company’s shares, options and other securities if they are in possession of price-sensitive information. The Company's Security Trading Policy is provided to each new employee as part of their induction training. Stavely personnel must receive written approval prior to any dealing in Stavely securities. The Directors are satisfied that the Company has complied with its policies on ethical standards, including trading in securities. CONTINUOUS DISCLOSURE The Board has a Market Disclosure Policy to ensure the compliance of the Company with the various laws and ASX Listing Rule obligations in relation to disclosure of information to the market. The Managing Director is responsible for ensuring that all employees are familiar with and comply with the policy. Stavely is committed to: (a) (b) (c) ensuring that shareholders and the market are provided with timely and balanced information about its activities; complying with the general and continuous disclosure principles contained in the ASX Limited (“ASX”) Listing Rules and the Corporations Act 2001; and ensuring that all market participants have equal opportunities to receive externally available information issued by Stavely. 2016 Annual Report | Page 52 CORPORATE GOVERNANCE STATEMENT SHAREHOLDER COMMUNICATIONS STRATEGY The Company places significant importance on effective communication with shareholders. The Company has adopted a Shareholder Communications Strategy which can be accessed from Stavely’s website at http://www.stavely.com.au/wp- content/uploads/2014/03/Corporate-Governance-Plan.pdf. Information is communicated to shareholders through the annual and half yearly financial reports, quarterly reports on activities, announcements through the Australian Stock Exchange and the media, on the Company’s web site and through the Chairman’s address at the annual general meeting. After the Annual General Meeting, the Managing Director provides shareholders with a presentation. Afterwards all directors are available to meet with any shareholders and answer questions. Shareholders are encouraged to contact Stavely through the Contact Us section on Stavely’s website to submit any questions via email, or call. Stavely’s website provides communication details for its Share Registry, including an email address for shareholder enquiries direct to the Share Registry. In addition, news announcements and other information are sent by email to all persons who have requested their name to be added to the email list. If requested, the Company will provide general information by email. The Company will, wherever practicable, take advantage of new technologies that provide greater opportunities for more effective communications with shareholders. Stavely ensures that its external auditor is present at all Annual General Meetings to enable shareholders to ask questions relevant to the audit directly to the auditor. COMPANY WEBSITE Stavely has made available details of all its corporate governance principles, which can be found in the corporate governance information section of the Company website at www.stavely.com.au. 2016 Annual Report | Page 53 DIRECTORS’ DECLARATION 1. In the opinion of the directors: a) The financial statements and notes are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the year then ended; and ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations 2001 and other mandatory professional reporting requirements; and iii) complying with International Financial Reporting Standards (IFRS) as stated in note 1 of the financial statements; and b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2016. This declaration is signed in accordance with a resolution of the Board of Directors. Christopher Cairns Managing Director Dated this 2nd day of September 2016 2016 Annual Report | Page 54 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016 Revenue and Income Interest revenue Rental sub-lease revenue Expenses Administration and corporate expenses Administration – equity based expenses Exploration expensed Total expenses Consolidated Year ended 30 June 2016 Year ended 30 June 2015 Note $ $ 51,596 39,416 36,499 42,048 91,012 78,547 2(a) 13 2(b) (674,229) (884,473) (1,534,337) (760,557) - (2,815,163) (3,093,039) (3,575,720) Loss before income tax (3,002,027) (3,497,173) Income tax expense Loss after income tax attributable to members of Stavely Minerals Limited 3 - - (3,002,027) (3,497,173) Other comprehensive income/(loss) Items that may be reclassified subsequently to profit or loss: Other Other comprehensive income/(loss) for the year, net of tax - - - - Total comprehensive loss for the year (3,002,027) (3,497,173) Loss per share for the year attributable to the members of Stavely Minerals Limited Basic loss per share 4 Cents Per Share (3.19) Cents Per Share (4.33) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 2016 Annual Report | Page 55 CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2016 ASSETS Current Assets Cash and cash equivalents Other receivables Total Current Assets Non-Current Assets Receivables Property, plant and equipment Deferred exploration expenditure Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Provisions Total Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Consolidated 30 June 2016 $ Note 30 June 2015 $ 5 6 6 7 8 9 10 1,520,166 87,281 1,607,447 42,500 85,231 3,006,057 3,133,788 1,941,148 101,948 2,043,096 40,000 101,814 2,982,126 3,123,940 4,741,235 5,167,036 173,730 44,913 218,643 218,643 265,097 31,303 296,400 296,400 4,522,592 4,870,636 11 12 12,325,646 1,168,877 (8,971,931) 10,556,136 284,404 (5,969,904) 4,522,592 4,870,636 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 2016 Annual Report | Page 56 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016 At 1 July 2014 Loss for the year Other comprehensive income/(loss) Total comprehensive loss for the year, net of tax Transactions with owners in their capacity as owners: Issue of share capital Cost of issue of share capital Share based payments Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ 9,101,363 284,404 (2,472,731) 6,913,036 - - - 1,639,658 (184,885) - 1,454,773 - - - - - - - (3,497,173) (3,497,173) - - (3,497,173) (3,497,173) - - - - 1,639,658 (184,885) - 1,454,773 As at 30 June 2015 10,556,136 284,404 (5,969,904) 4,870,636 At 1 July 2015 Loss for the year Other comprehensive income/(loss) Total comprehensive loss for the year, net of tax Transactions with owners in their capacity as owners: Issue of share capital Cost of issue of share capital Share based payments 10,556,136 284,404 (5,969,904) 4,870,636 - - - 1,879,583 (110,073) - 1,769,510 - - - - - 884,473 884,473 (3,002,027) (3,002,027) (3,002,027) (3,002,027) - - - - 1,879,583 (110,073) 884,473 2,653,983 As at 30 June 2016 12,325,646 1,168,877 (8,971,931) 4,522,592 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 2016 Annual Report | Page 57 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016 Consolidated Year ended Year ended 30 June 2016 30 June 2015 Note $ $ Cash flows from operating activities Receipts in the ordinary course of activities (mostly GST) Payments to suppliers and employees Interest received 211,099 (1,962,890) 51,596 402,250 (3,929,166) 36,499 Net cash flows used in operating activities 5(i) (1,700,195) (3,490,417) Cash flows from investing activities Payments for plant and equipment Payments for exploration expenditure capitalised Refunds for exploration expenditure capitalised Payments for bonds Investment in subsidiary Cash acquired upon acquisition of subsidiary Net cash flows used in investing activities Cash flows from financing activities Proceeds from issue of shares Payment of share issue costs Repayment of advances / loans from related parties Net cash flows from financing activities (51,793) - - (2,500) (2) 5,337 (64,815) (5,000) 3,626 (50,000) - - (48,958) (116,189) 1,583,204 (225,993) (29,040) 1,328,171 1,400,000 (68,963) - 1,331,037 Net decrease in cash and cash equivalents held Add opening cash and cash equivalents brought forward (420,982) 1,941,148 (2,275,569) 4,216,717 Closing cash and cash equivalents carried forward 5 1,520,166 1,941,148 The above consolidated statement of cashflows should be read in conjunction with the accompanying notes. 2016 Annual Report | Page 58 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation These financial statements are general purpose financial statements, which 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. The financial report has also been prepared on a historical cost basis. The financial report is presented in Australian dollars, which is the Group’s functional and presentation currency. Stavely Minerals Limited is a for-profit entity for the purpose of preparing the financial statements. The annual report of Stavely Minerals Limited for the year ended 30 June 2016 was authorised for issue in accordance with a resolution of the Directors on 2 September 2016. (b) Statement of Compliance These financial statements comply with Australian Accounting Standards and International Financial Reporting Standards (IFRS). (c) Adoption of new and revised standards and Change in Accounting Standards Early adoption of accounting standards The Group has not elected to apply any pronouncements before their operative date in the annual reporting year beginning 1 July 2015. New and amended standards adopted by the Group None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2015 affected any of the amounts recognised in the current year or any prior period and are not likely to affect future periods. Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2016 reporting year. The Group’s assessment of the impact of these new standards and interpretations that may have an impact on the Group is set out below: AASB 9 Financial Instruments AASB 9 includes requirements for the classification and measurement of financial assets. There is no material impact for Stavely. This standard is not applicable until the financial year commencing 1 July 2018. AASB 16 Leases AASB 16 requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months. Stavely has not yet determined the impact on the group accounts. This standard is not applicable until the financial year commencing 1 July 2019. (d) Significant accounting estimates and judgments Significant accounting judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements. 2016 Annual Report | Page 59 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Exploration assets The Company’s accounting policy for exploration expenditure is set out at Note 1(i). The application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised acquisition expenditure under the policy, it is concluded that the expenditures are unlikely to be recovered by future exploitation or sale, then the relevant capitalised amount will be written off to profit or loss. Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting year are: Impairment of assets In determining the recoverable amount of assets, in the absence of quoted market prices, estimations are made regarding the present value of future cash flows using asset-specific discount rates and the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Share-based payment transactions The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes model. Commitments - Exploration The Group has certain minimum exploration commitments to maintain its right of tenure to exploration permits. These commitments require estimates of the cost to perform exploration work required under these permits. (e) Basis of consolidation and Business Combinations The consolidated financial statements comprise the financial statements of Stavely Minerals limited (“Company” or “Parent Entity”) and its subsidiaries as at 30 June each year (the Group). Subsidiaries are all entities over which the group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: - - - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee), Exposure, or rights, to variable returns from its involvement with the investee, and The ability to use its power over the investee to affect its returns The financial statements of the subsidiaries are prepared for the same period as the parent entity, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The acquisition of subsidiaries has been accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Accordingly, the consolidated financial statements include the results of subsidiaries for the period from their acquisition. 2016 Annual Report | Page 60 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market price as at the date of exchange, adjusted for any conditions imposed on those shares. Transaction costs arising on the issue of equity instruments are recognised directly in equity. All identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of the business combination over the net fair value of the Group's share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the Group's share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the statement of profit or loss and other comprehensive income, but only after a reassessment of the identification and measurement of the net assets acquired. (f) Cash and cash equivalents Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as described above, net of outstanding bank overdrafts. (g) Trade and other receivables Receivables are initially recognised at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Current receivables for GST are due for settlement within 30 days and other current receivables within 12 months. Cash on deposit is not due for settlement until rights of tenure are forfeited or performance obligations are met. (h) Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Plant and equipment - 2 to 5 years - 2 to 5 years Motor vehicles The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. Disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. 2016 Annual Report | Page 61 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued (i) Exploration and evaluation expenditure Exploration expenditure is expensed to the statement of profit or loss and other comprehensive income as and when it is incurred and included as part of cash flows from operating activities. Exploration costs are only capitalised to the balance sheet if they result from an acquisition. Evaluation expenditure is capitalised to the balance sheet. Evaluation is deemed to be activities undertaken from the beginning of the pre-feasibility study conducted to assess the technical and commercial viability of extracting a mineral resource before moving into the Development phase. The criteria for carrying forward the costs are: - - Such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or evaluation activities in the area of interest which has not yet reached a state which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area are continuing. Costs carried forward in respect of an area of interest which is abandoned are written off in the year in which the abandonment decision is made. (j) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. 2016 Annual Report | Page 62 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued (k) Other financial assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transactions costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace. (i) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in profit or loss. The fair values of quoted investments are based on last trade prices. If the market for financial assets is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. Loans and receivables (ii) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Wages, salaries and, annual leave Employee leave benefits (i) Liabilities for wages and salaries, including non-monetary benefits and annual leave and expected to be settled wholly within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. (ii) Other long-term employee benefit obligations The liability for long service leave and annual leave not expected to be settled wholly within 12 months of the reporting date are recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and period of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities if the Group does not have an unconditional right to defer settlement for at least 12 months of the reporting date, regardless of when actual settlement is expected to occur. (l) (m) (n) 2016 Annual Report | Page 63 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued (o) (p) (q) (r) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Leases Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset. Share-based payment transactions Equity settled transactions: The Group provides benefits to executive directors, employees and consultants of the Group in the form of share- based payments, whereby those individuals render services in exchange for shares or rights over shares (equity- settled transactions). When provided, the cost of these equity-settled transactions with these individuals is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of options is determined using a Black-Scholes model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Stavely Minerals Limited (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant individuals become fully entitled to the award (the vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects: (i) (ii) (iii) the grant date fair value of the award; the extent to which the vesting period has expired; and the number of awards that, in the opinion of the Directors of the Company, will ultimately vest taking into account such factors as the likelihood of non-market performance conditions being met. This opinion is formed based on the best available information at balance date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. If an equity-settled award is forfeited, any expense previously recognised for the award is reversed. However, if a new award is substituted for a cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. 2016 Annual Report | Page 64 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued (s) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint operations, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint operations, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. 2016 Annual Report | Page 65 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued (t) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Borrowing Costs Borrowing costs are expensed in the period in which they are incurred except borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset that necessarily takes a substantial period to get ready for its intended use or sale. In this case, borrowing costs are capitalised as part of the cost of such a qualifying asset. Earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. (u) (v) Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: costs of servicing equity (other than dividends); the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (w) Segment reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the board of Directors. Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive management team. The Group aggregates two or more operating segments when they have similar economic characteristics, and the segments are similar in each of the following respects: - Nature of the products and services, - Type or class of customer for the products and services, - Methods used to distribute the products or provide the services, and if applicable - Nature of the regulatory environment. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the Financial Statements. 2016 Annual Report | Page 66 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 2 - EXPENSES (a) Administration and Corporate Expenses Administration and corporate expenses include: Depreciation - administration Operating lease rental expense Equity based expense – refer note 13 Other administration and corporate expenses (b) Exploration Costs Expensed Exploration costs expensed include: Depreciation - exploration Exploration drilling – non-cash - refer note 11 Exploration other – non-cash – refer note 5(ii) Other exploration costs expensed NOTE 3 - INCOME TAX EXPENSE (a) Income Tax Expense The reconciliation between tax expense and the product of accounting loss before income tax multiplied by the Group’s applicable income tax rate is as follows: Loss for year Prima facie income tax (benefit) @ 30% Tax effect of non-deductible items Net deferred tax assets not brought to account Income tax attributable to operating loss (b) Net deferred tax assets not recognised relate to the following: DTA - Tax losses DTL - Other Timing Differences, net Year ended 30 June 2016 Year ended 30 June 2015 $ $ 1,926 146,224 884,473 526,079 1,558,702 66,450 266,379 30,000 1,171,508 1,534,337 1,396 123,848 - 635,313 760,557 43,925 239,658 - 2,531,580 2,815,163 (3,002,027) (3,497,173) (900,608) (1,049,152) 276,142 624,466 - - 1,049,152 - 2,635,978 (132,665) 2,629,834 (879,960) 2,503,313 1,749,874 These deferred tax assets have not been brought to account as it is not probable that tax profits will be available against which deductible temporary differences can be utilised. (c) Franking Credits The franking account balance at year end was $nil (2015: $nil). 2016 Annual Report | Page 67 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 4 - EARNINGS PER SHARE Basic loss per share Year ended 30 June 2016 Year ended 30 June 2015 Cents (3.19) Cents (4.33) $ $ Loss attributable to ordinary equity holders of the Company used in calculating: - basic loss per share (3,002,027) (3,497,173) Weighted average number of ordinary shares outstanding during the year used in the calculation of basic earnings per share Number of shares Number of shares 94,135,661 80,761,349 For the year ended 30 June 2016, diluted earnings per share was not disclosed because potential ordinary shares, being options granted, are not dilutive and their conversion to ordinary shares would not demonstrate an inferior view of the earnings performance of the Company. $ $ NOTE 5 - CASH AND CASH EQUIVALENTS Cash at bank and on hand 1,520,166 1,941,148 (i) Reconciliation of loss for the period to net cash flows used in operating activities Loss after income tax Non-Cash Items: Depreciation Share-based payments expensed - options Exploration drilling – non-cash* Exploration other – non-cash – refer note 5(ii) Change in assets and liabilities: (Increase)/decrease in receivables Increase/(decrease) in payables Increase/(decrease) in provisions (3,002,027) (3,497,173) 68,376 884,473 266,379 30,000 14,688 24,307 13,609 45,321 - 239,658 - 88,910 (393,794) 26,661 Net cash flows used in operating activities (1,700,195) (3,490,417) * 1,961,886 ordinary shares ($266,379) were issued pursuant to the Share Subscription Agreement with Titeline Drilling Pty Ltd and Greenstone Property Pty Ltd. Refer to note 11. (ii) Non-Cash Financing and Investing Activities The following non-cash financing and investing activities were undertaken: 2016 - In Jul 2015, the Company issued 85,700 ordinary shares ($30,000) to New Challenge Resources Pty Ltd as consideration for extension of the Stavely Royalty Agreement. 2016 Annual Report | Page 68 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 6 – TRADE AND OTHER RECEIVABLES Current GST refundable Bonds – credit card Other Total current receivables Non-Current Cash on deposit - security bonds Fair Value and Risk Exposures: 30 June 2016 $ 30 June 2015 $ 45,961 40,000 1,320 87,281 59,690 40,000 2,258 101,948 42,500 40,000 (i) Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. (ii) The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security. (iii) Details regarding interest rate risk exposure are disclosed in note 18. (iv) Other current receivables generally have repayments between 30 and 90 days. Receivables do not contain past due or impaired assets as at 30 June 2016 (2015: none). NOTE 7 - PROPERTY, PLANT AND EQUIPMENT Motor vehicles- at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation 28,273 (21,204) 7,069 182,977 (104,815) 78,162 28,273 (12,723) 15,550 134,294 (48,030) 86,264 Total property, plant and equipment 85,231 101,814 Reconciliation of property, plant and equipment: Motor Vehicles Carrying amount at beginning of year Depreciation Carrying amount at end of year Plant and Equipment Carrying amount at beginning of year Additions Depreciation Carrying amount at end of year 15,550 (8,481) 7,069 86,264 51,793 (59,895) 78,162 24,032 (8,482) 15,550 63,409 59,694 (36,839) 86,264 2016 Annual Report | Page 69 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 30 June 2016 $ 30 June 2015 $ NOTE 8 - DEFERRED EXPLORATION EXPENDITURE Deferred exploration acquisition costs brought forward Capitalised acquisition expenditure incurred during the year, net Deferred exploration costs carried forward 2,982,126 2,980,752 23,931 1,374 3,006,057 2,982,126 Ultimate recoupment of exploration and evaluation expenditure carried forward is dependent on successful development and commercial exploitation or, alternatively, sale of the respective areas. NOTE 9 - TRADE AND OTHER PAYABLES Current Trade creditors Accruals Fair Value and Risk Exposures 141,997 31,733 173,730 232,779 32,318 265,097 (i) Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. (ii) Trade and other payables are unsecured and usually paid within 60 days of recognition. NOTE 10 – PROVISIONS Current Employee entitlements 44,913 31,303 2016 Annual Report | Page 70 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 11 – ISSUED CAPITAL (a) Issued Capital 95,490,593 (2015: 87,110,206) ordinary shares fully paid 12,325,646 10,556,136 30 June 2016 $ 30 June 2015 $ (b) Movements in Ordinary Share Capital 80,432,000 Opening balance at 1 July 2014 169,194 Issue of shares – Share Subscription Agreement 5 Dec 2014 176,528 Issue of shares – Share Subscription Agreement 18 Dec 2014 472,891 Issue of shares – Share Subscription Agreement 21 April 2015 259,593 Issue of shares – Share Subscription Agreement 18 May 2015 5,600,000 Issue of shares – Placement 30 June 2015 Costs of equity issues 87,110,206 Closing Balance at 30 June 2015 87,110,206 Opening balance at 1 July 2015 85,700 6,332,726 75 232,811 1,378,672 350,403 Issue of shares – New Challenge Royalty 6 July 2015 Issue of shares – Rights Issue 20 July 2015 Issue of shares – Exercise of Options 6 August 2015 Issue of shares – Share Subscription Agreement 13 November 2015 Issue of shares – Share Subscription Agreement 17 December 2015 Issue of shares – Share Subscription Agreement 12 May 2016 Costs of equity issues 95,490,593 Closing Balance at 30 June 2016 9,101,363 56,172 42,190 89,377 51,919 1,400,000 (184,885) 10,556,136 10,556,136 30,000 1,583,181 23 42,605 176,470 47,304 (110,073) 12,325,646 Rights Issue On 20 July 2015, Stavely issued 6,332,726 fully-paid ordinary shares at 25c a share and 3,166,373 free attaching options (on a one-for-two basis) with an exercise price of 30 cents and expiry date of 30 June 2016 under a non-renounceable rights issue to shareholders. Gross proceeds were $1,583,181. Share Subscription Agreement In October 2014, Stavely Minerals entered into a $2 million Share Subscription Agreement with its existing drilling contractor, Titeline Drilling Pty Ltd. Pursuant to this agreement, the drilling contractor has agreed to subscribe for up to $2 million of shares, with Stavely Minerals having the option to settle monthly drilling charges by way of cash payment and by way of offset of the price of subscription application for shares. During the year ended 30 June 2016, 1,961,886 ordinary shares ($266,379) were issued pursuant to the Share Subscription Agreement with Titeline Drilling Pty Ltd and Greenstone Property Pty Ltd as trustee for the Titeline Property Trust. As at 30 June 2016, cumulative subscriptions totalled $506,036 (2015: $239,658). 2016 Annual Report | Page 71 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 11 – ISSUED CAPITAL - continued (c) Options on issue at 30 June 2016 Unlisted Options Unlisted Options Unlisted Options During the year: Number 14,400,000 3,000,000 10,000,000 27,400,000 Exercise Price 27 cents 27 cents 23 cents Expiry Date 31 December 2017 1 December 2016 1 December 2016 (i) (ii) (iii) (iv) (v) (vi) (vii) 3,166,373 listed options were granted pursuant to the non-renounceable rights on 20 July 2015; 75 listed options were exercised (2015: nil) 5,966,298 listed options expired (2015: nil) No unlisted options were granted to shareholders (2015: nil); 13,000,000 unlisted options were granted as share-based payments (2015: nil); No unlisted options expired (2015: nil); and No unlisted options were exercised (2015: nil). (d) Terms and conditions of issued capital Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors are fully entitled to any proceeds of liquidations. (e) Capital management When managing capital, management's objective is to ensure the entity continues as a going concern as well as maintains optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Management may in the future adjust the capital structure to take advantage of favourable costs of capital and issue further shares in the market. Management has no current plans to adjust the capital structure. There are no plans to distribute dividends in the next year. NOTE 12 - RESERVES Equity-based payments reserve 1,168,877 284,404 30 June 2016 $ 30 June 2015 $ Equity-based payments reserve Balance at the beginning of the year Equity-based payments expense Balance at the end of the year Nature and purpose of the reserve: The Equity-based payments reserve is used to recognise the fair value of options issued but not exercised. 284,404 884,473 1,168,877 284,404 - 284,404 2016 Annual Report | Page 72 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 13 – EQUITY-BASED PAYMENTS (Recognised as Remuneration Expenses) (a) Value of equity based payments in the financial statements Expensed in the profit or loss: Equity-based payments- options 30 June 2016 30 June 2015 $ 884,473 $ - (b) Summary of equity-based payments granted during the year: Year ended 30 June 2016: Granted to key management personnel and consultants as equity compensation: 3,000,000 options expiring 31 December 2016, exercisable at 27 cents each; and 10,000,000 options expiring 1 December 2016, exercisable at 23 cents. Year ended 30 June 2015: None. The assessed fair values of the options were determined using a Black-Scholes option pricing model, taking into account the exercise price, term of option, the share price at grant date and expected price volatility of the underlying share, expected dividend yield and the risk-free interest rate for the term of the option. The inputs to the model used were: Grant date Option exercise price ($) Expected life of options (years) Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Underlying share price ($) Value of Option ($) 25/08/2015 30/11/2015 0.27 1.27 - 111.95 1.73 0.18 0.0669 0.23 1.01 - 112.09 1.98 0.185 0.0684 The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value. (c) Weighted average fair value The weighted average fair value of equity-based payment options granted during the year was $0.06804 (2015: nil). (d) Range of exercise price The range of exercise price for options granted as share based payments outstanding at the end of the year was $0.23 to $0.27 (2015: $0.27). (e) Weighted average remaining contractual life The weighted average remaining contractual life of share based payment options that were outstanding as at the end of the year was 0.59 years (2015: 2.5 years). 2016 Annual Report | Page 73 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 13 – EQUITY-BASED PAYMENTS - continued (f) Weighted average exercise price The following table shows the number and weighted average exercise price (“WAEP”) of share options granted as share based payments. 12 Months to 30 June 2016 Number 12 Months to 30 June 2016 WAEP $ 12 Months to 30 June 2015 Number 12 Months to 30 June 2015 WAEP $ Outstanding at the beginning of year Granted during the year Outstanding at the end of the year 2,400,000 3,000,000 10,000,000 15,400,000 0.27 0.27 0.23 0.24 2,400,000 - - 2,400,000 Exercisable at year end 15,400,000 0.24 1,000,000 The weighted average share price for options exercised during the year was nil (2015: nil). 0.27 - - 0.27 0.27 NOTE 14 – COMMITMENTS AND CONTINGENCIES Operating leases (non-cancellable): (a) Within one year More than one year but not later than five years 30 June 2016 $ 30 June 2015 $ 140,198 7,140 147,338 125,376 103,820 229,196 These non-cancellable operating leases are primarily for office premises, residential premises at site and a ground lease. (b) Exploration Commitments Tenement Expenditure Commitments: The Group is required to maintain current rights of tenure to tenements, which require outlays of expenditure in 2016/2017. Under certain circumstances these commitments are subject to the possibility of adjustment to the amount and/or timing of such obligations, however, they are expected to be fulfilled in the normal course of operations. 442,900 375,400 Contingencies (c) The Company is party to a Deed of Option and Royalty relating to the Stavely tenement EL 4556. The Group had no other contingent liabilities at year end (2015: same). 2016 Annual Report | Page 74 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 15 – RELATED PARTIES (a) Compensation of Key Management Personnel Short-term employment benefits Post-employment benefits Equity-based payment 30 June 2016 $ 30 June 2015 $ 264,125 22,800 683,811 970,736 465,051 40,013 - 505,064 (b) Other transactions and balances with Key Management Personnel Other Transactions with Key Management Personnel Mr Peter Ironside, Director, is a shareholder and director of Ironside Pty Ltd. Ironside Pty Ltd is a shareholder of the 168 Stirling Highway Syndicate, the entity which owns the premises the Company occupies in Western Australia. During the year an amount of $141,375 (net of GST) was paid/payable for office rental and variable outgoings (2015: $123,164 (net of GST)). Mr Peter Ironside, Director, is also a shareholder and non-executive director of Zamanco Minerals Limited (“Zamanco”). Zamanco sub-leases office space in the premises the Company occupies. During the year an amount of $39,416 (net of GST) was paid/payable by Zamanco to the Company for reimbursement of office rental and associated expenses (2015: $39,048 (net of GST)). Mr Chris Cairns and Mr Peter Ironside are directors of Ukalunda Pty Ltd. In February 2016, Stavely Minerals acquired Ukalunda Pty Ltd (‘Ukalunda’) for a purchase cost of $2. During the year, Ukalunda made loan repayments of $10,000 to Mr Chris Cairns and $19,040 to related parties of Mr Peter Ironside. Refer to note 20. (c) Transactions with Other Related Parties There were no transactions with other related parties (2015: none). NOTE 16 - AUDITORS' REMUNERATION Amount received or due and receivable by the auditor for: Auditing the financial statements, including audit review - current year audits Other services – taxation and corporate advisory Total remuneration of auditors NOTE 17 – SEGMENT INFORMATION 30 June 2016 $ 30 June 2015 $ 36,565 5,700 42,265 45,969 4,915 50,884 Management has determined the operating segments based on the reports reviewed by the board of directors that are used to make strategic decisions. The Group does not have any material operating segments with discrete financial information. The Group does not have any customers and all its’ assets and liabilities are primarily related to the mining industry and are located within Australia. The Board of Directors review internal management reports on a regular basis that is consistent with the information provided in the statement of profit or loss and other comprehensive income, balance sheet and statement of cash flows. As a result no reconciliation is required because the information as presented is what is used by the Board to make strategic decisions. 2016 Annual Report | Page 75 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 18 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s principal financial instrument comprises cash. The main purpose of this financial instrument is to provide working capital for the Group’s operations. The Group has various other financial instruments such as sundry debtors, security bonds and trade creditors, which arise directly from its operations. It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risk arising from the Group’s financial instruments is interest rate risk. The Board reviews and agrees on policies for managing each of these risks and they are summarised below. Interest rate risk At balance date the Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s cash and bonds. The Group constantly analyses its exposure to interest rates, with consideration given to potential renewal of existing positions, the mix of fixed and variable interest rates and the period to which deposits may be fixed. At balance date, the Group had the following financial assets exposed to variable interest rates that are not designated in cash flow hedges: Financial Assets: Cash and cash equivalents - interest bearing Trade and other receivables - bonds Net exposure 30 June 2016 $ 30 June 2015 $ 1,372,318 80,000 1,452,318 478,927 80,000 558,927 Sensitivity At 30 June 2016, if interest rates had increased by 0.5% from the year end variable rates with all other variables held constant, post tax profit and equity for the Group would have been $7,261 higher (2015: changes of 0.5% $2,795 higher). The 0.5% (2015: 0.5%) sensitivity is based on reasonably possible changes, over a financial year, using an observed range of historical RBA movements over the last year. Liquidity risk The Group has no significant exposure to liquidity risk as there is effectively no debt. The Group manages liquidity risk by monitoring immediate and forecast cash requirements and ensuring adequate cash reserves are maintained. Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted the policy of dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group measures credit risk on a fair value basis. Significant cash deposits are with institutions with a minimum credit rating of AA (or equivalent) as determined by a reputable credit rating agency e.g. Standard & Poor. The Group does not have any other significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics. 2016 Annual Report | Page 76 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 19 – PARENT ENTITY INFORMATION Balance sheet information Current assets Non-current assets Current liabilities Non-current liabilities Net Assets Issued capital Reserves Accumulated losses Profit or loss information Loss for the year Comprehensive loss for the year Commitments and contingencies Company 30 June 2016 $ 30 June 2015 $ 1,602,611 3,131,197 (212,453) - 2,043,096 3,123,940 (296,400) - 4,521,355 4,870,636 12,325,646 10,556,136 1,168,877 284,404 (8,973,168) (5,969,904) 4,521,355 4,870,636 (3,003,264) (3,497,173) (3,003,264) (3,497,173) There are no commitments or contingencies, including any guarantees entered into by Stavely Minerals Limited on behalf of its subsidiaries. Subsidiaries 30 June 2016 30 June 2015 Name of Controlled Entity Class of Share Place of Incorporation % Held by Parent Entity Ukalunda Pty Ltd Ordinary Australia 100% - NOTE 20 – ACQUISITION OF SUBSIDIARY On 15 February 2016, Stavely Minerals Limited acquired Ukalunda Pty Ltd (‘Ukalunda’). Ukalunda was established in 2007 by Stavely Minerals’ Directors Mr Chris Cairns and Mr Peter Ironside with the specific purpose of opportunistically applying for exploration permits in north Queensland. Cash consideration for the acquisition was $2. At the date of acquisition, Ukalunda had loans totalling $29,040 outstanding to Mr Cairns and Mr Ironside for company establishment fees, tenement application fees and compliance costs etc. but does not include any costs for Mr Cairns’ or Mr Ironside’s time and efforts. The loans were discharged by Stavely Minerals after acquisition. The following table summarises the assets and liabilities acquired: Cash and cash equivalents Receivables Exploration asset Trade payables Loans payable Net Assets $ 5,337 22 23,931 (248) (29,040) 2 NOTE 21 – SUBSEQUENT EVENTS There are no matters or circumstances that have arisen since 30 June 2016 that have or may significantly affect the operations, results, or state of affairs of the Group in future financial years. 2016 Annual Report | Page 77 INDEPENDENT AUDIT REPORT . 2016 Annual Report | Page 78 INDEPENDENT AUDIT REPORT 2016 Annual Report | Page 79 ADDITIONAL SHAREHOLDER INFORMATION Information as at 1 September 2016 a) Substantial Shareholders (who have lodged notices with Stavely Minerals Limited) Number of Ordinary Shares 30,157,419 15,007,419 Name Peter Reynold Ironside Christopher John Cairns b) Shareholder Distribution Schedule Size of Holding 1 - 1,001 - 5,001 - 10,001 - 1,000 5,000 10,000 100,000 100,001 and over Total Number of shareholders holding less than a marketable parcel c) Voting Rights Number of Shareholders 24 95 146 295 86 646 70 (i) at meetings of members entitled to vote each member may vote in person or by proxy or attorney, or in the case of a member which is a body corporate, by representative duly appointed under section 250D; (ii) on a show of hands every member entitled to vote and present in person or by proxy or attorney or representative duly authorised shall have one (1) vote; (iii) on a poll every member entitled to vote and present in person or by proxy or attorney or representative duly authorised shall have one (1) vote for each fully paid share of which he is the holder and in the case of contributing shares until fully paid shall have voting rights pro rata to the amount paid up or credited as paid up on each such share; and (iv) a member shall not be entitled to vote at general meeting or be reckoned in a quorum in respect of any shares upon which any call or other sum presently payable by him is unpaid. d) Restricted Securities The following restricted securities were released from escrow on 7 May 2016: 31,499,903 Fully Paid ordinary shares; and 13,400,000 Unlisted options. 2016 Annual Report | Page 80 Number of Ordinary Shares 14,677,419 10,480,000 9,759,032 5,238,387 5,000,000 3,891,762 3,427,097 3,040,092 2,600,000 2,258,065 1,250,000 1,250,000 1,250,000 1,250,000 1,233,000 1,225,000 940,000 870,000 610,000 586,674 70,836,528 95,760,863 % of Issued Capital 15.33 10.94 10.19 5.47 5.22 4.06 3.58 3.17 2.72 2.36 1.31 1.31 1.31 1.31 1.29 1.28 0.98 0.91 0.64 0.61 73.99 ADDITIONAL SHAREHOLDER INFORMATION e) Twenty largest shareholders: Name 1 2 3 4 5 6 7 8 9 Ironside Pty LtdChaka Investments Pty Ltd Goldwork Asset Pty Ltd Goldwork Asset Pty Ltd Ironside Pty Ltd Citicorp Nominees Pty Limited Jennifer Elaine Murphy Greenstone Property Pty Ltd Dr Anthony Cairns 10 Michelle Maria Skinner 11 DK & SJ Pty Ltd 12 13 Trading Pursuits Group JC Holdings Pty Ltd 14 Mick Ashton Nominees Pty Ltd 15 Sanluri Pty Ltd 16 Mr Harle John Mossman 17 18 19 Contango Nominees Pty Limited Elphick Superannuation Pty Ltd Chertor Pty Ltd 20 ABN AMRO Clearing Sydney Nominees Pty Ltd Shares on issue at 1 September 2016 f) Unlisted Options 01/12/2016 27 cents 01/12/2016 23 cents 31/12/2017 27 cents - - - - 2,500,000 4,500,000 2,000,000 1,000,000 1,000,000 500,000 1,000,000 500,000 3,000,000 10,000,000 1,000,000 5,032,258 1,561,290 5,032,258 - 774,194 750,000 250,000 14,400,000 Name Directors: W Plyley C Cairns J Murphy P Ironside Others: H Forgan M Skinner A Sparks Q Te Tai g) Use of Funds The Company confirms that the use of cash from date of ASX admission has been used in a way consistent with the business objectives as stated in its Initial Public Offering Prospectus dated 17 March 2014. 2016 Annual Report | Page 81 TENEMENT SCHEDULE Tenement Portfolio - Victoria Area Name Tenement Mt Ararat Ararat Stavely Yarram Park Mortlake Ararat Ararat Ararat Ararat Stavely Ararat Ararat EL 3019 EL 4758 EL 4556 EL 5478 EL 5470 EL 5486 ELA 5487 EL 6271 RLA 2020 RLA 2017 EL 5403 EL 5450 Grant Date/ (Application Date) 21 December 1989 29 January 2004 5 April 2001 26 July 2013 17 June 2013 10 July 2014 (21 June 2013) 21 July 2016 (12 June 2014) (20 May 2014) 25 January 2012 21 February 2013 Tenement Portfolio - Queensland Area Name Tenement Grant Date/ (Application Date) Ravenswood West EPM26041 24 May 2016 Ravenswood North Application EPM26152 (15 February 2016) Dreghorn Kirk North EPM26303 EPM26304 (1 August 2016) (1 August 2016) Size (Km2) 42 12 139 99 110 1 5 6 28 139 68 4 Size (Km2) 241 48 137 81 2016 Annual Report | Page 82 2016 | Annual Report