Strike Resources Annual Report 2011

Plain-text annual report

2011 ANNUAL REPORT STRIKE RESOURCES ANNUAL REPORT 2011 CORPORATE DIRECTORY Strike Resources Limited ACN 088 488 724 BOARD Malcolm Richmond Ken Hellsten William Johnson Matthew Hammond Chairman Managing Director Non-Executive Director Non-Executive Director COMPANY SECRETARY Stephen Gethin HEAD OFFICE Level 8, The Forrest Centre, 221 St George’s Terrace, Perth, Western Australia 6000 +61 8 9324 7100 +61 8 9324 7199 Telephone: Facsimile: Local telephone: 1300 974 700 Email: Internet: info@strikeresources.com.au www.strikeresources.com.au SHARE REGISTRY Advanced Share Registry Services, Suite 2, 150 Stirling Highway, Nedlands, Western Australia 6009 Telephone: Facsimile: Email: Internet: AUDITOR +61 8 9389 8033 +61 8 9389 7871 admin@advancedshare.com.au www.advancedshare.com.au BDO Audit (WA) Pty Ltd, 38 Station Street, Subiaco, Western Australia 6008 Telephone: Facsimile: Website: +61 8 9382 4600 +61 8 9382 4601 www.bdo.com.au STOCK EXCHANGE Australian Securities Exchange (ASX) Perth, Western Australia ASX Code: SRK ii CONTENTS Chairman’s Letter Review of Operations Directors’ Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 2 4 30 49 50 51 52 Notes to the Financial Statements 53 Independent Audit Report Corporate Governance Mineral Tenements Securities Information 87 89 102 106 www.strikeresources.com.au Visit our website for: (cid:139)(cid:3) (cid:83)(cid:72)(cid:91)(cid:76)(cid:90)(cid:91)(cid:3)(cid:85)(cid:76)(cid:94)(cid:90) (cid:139)(cid:3) (cid:84)(cid:72)(cid:89)(cid:82)(cid:76)(cid:91)(cid:3)(cid:72)(cid:85)(cid:85)(cid:86)(cid:92)(cid:85)(cid:74)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)(cid:90) (cid:139)(cid:3) (cid:196)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:89)(cid:76)(cid:87)(cid:86)(cid:89)(cid:91)(cid:90) (cid:57)(cid:76)(cid:78)(cid:80)(cid:90)(cid:91)(cid:76)(cid:89)(cid:3)(cid:96)(cid:86)(cid:92)(cid:89)(cid:3)(cid:76)(cid:84)(cid:72)(cid:80)(cid:83)(cid:3)(cid:94)(cid:80)(cid:91)(cid:79)(cid:3)(cid:92)(cid:90)(cid:3)(cid:91)(cid:86) (cid:89)(cid:76)(cid:74)(cid:76)(cid:80)(cid:93)(cid:76)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)(cid:83)(cid:72)(cid:91)(cid:76)(cid:90)(cid:91)(cid:3)(cid:42)(cid:86)(cid:84)(cid:87)(cid:72)(cid:85)(cid:96) (cid:72)(cid:85)(cid:85)(cid:86)(cid:92)(cid:85)(cid:74)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)(cid:90)(cid:3)(cid:72)(cid:85)(cid:75)(cid:3)(cid:89)(cid:76)(cid:83)(cid:76)(cid:72)(cid:90)(cid:76)(cid:90) (cid:44)(cid:84)(cid:72)(cid:80)(cid:83)(cid:3)(cid:92)(cid:90)(cid:3)(cid:72)(cid:91)(cid:33) (cid:80)(cid:85)(cid:77)(cid:86)(cid:39)(cid:90)(cid:91)(cid:89)(cid:80)(cid:82)(cid:76)(cid:89)(cid:76)(cid:90)(cid:86)(cid:92)(cid:89)(cid:74)(cid:76)(cid:90)(cid:21)(cid:74)(cid:86)(cid:84)(cid:21)(cid:72)(cid:92) 1 STRIKE RESOURCES ANNUAL REPORT 2011 CHAIRMAN’S LETTER Dear Shareholder, The last year has primarily been one of consolidation for the Company with the restructure of the Board and Management, along with strengthening our position in our key iron-ore assets in Peru. The Board restructure in early 2011 saw the number of directors reduced to four in order to facilitate the appointment of additional independent directors, in accordance with sound corporate governance practice. We are well advanced in the recruitment process and anticipate the new Board member(s) will be in place by late this year. I wish to thank Messrs Madan, Khan, Moshiri and Horn for their valuable contributions and high level of commitment during their time on the Board. The appointment of an experienced and extremely capable CEO for Apurimac Ferrum (AF) in Tom Kelly has allowed day-to-day responsibilities to move primarily to Lima, with a resultant improvement in operational efﬁciency and effectiveness. In addition, the strengthening of the management team in Peru with the appointments of Luis Orihuela (Community Relations Manager) and Ian Cullen (Exploration Manager) has enhanced the ability of both AF and Strike to identify and respond to opportunities. This is most notably demonstrated by the recent transactions with Cuervo Resources and IAC where Strike secured the option to acquire up to 49.2% of Cuervo and moved from 44% to a 50% shareholding in AF. During our strategic review in April this year the Board recognised the opportunity to leverage off AF’s strong resource and concession holdings to strengthen its position and consolidate iron-ore projects within the Apurimac and Cusco regions of southern Peru. Through AF’s ownership of the largest and best quality iron-ore resources in the region and Strike’s strong cash position, we are uniquely positioned to play a leading role in this consolidation and I am very heartened by the excellent progress made by the management team in recent months. The move to at least 50% of AF simpliﬁes the structure and operation of our key operating company in Peru and we look forward to making further signiﬁcant steps with our valued Peruvian partner, the D&C Group. Optimisation studies completed by AF during 2010 and early 2011 outlined several opportunities to add further value to the Apurimac and Cusco Iron-Ore Projects and these will be pursued during the next study phase. The high-quality resources at Opaban provide a number of competitive advantages over most magnetite deposits and an ideal basis for a low-cost iron-ore operation. The current focus for the AF team is the delineation of sufﬁcient resources to support an operation of at least 15Mtpa for a minimum of 15 years and they are gearing up for an aggressive exploration program over the next year to achieve this outcome. While the regional and presidential elections over the past 12 months have signiﬁcantly impacted on the timing of approvals, it is most pleasing to see the recent ﬂow of approvals for both the Apurimac and Cusco Projects. These have enabled AF to commence exploration activities at several of the priority concession areas. We anticipate the ﬂow of approvals to continue during the coming year, allowing the further acceleration of exploration programs including drilling at both project areas, including the Opaban prospect. I believe the Company is now well positioned to realise the latent value in our Peruvian iron-ore assets and we will see signiﬁcant progress over the next 12 months. Cuervo also anticipates drilling commencing at their exciting Bob 1 prospect later this year and we look forward with some anticipation to those results. 2 I am also most encouraged by the opportunities for further consolidation of iron-ore projects within the region along with the prospectivity of our concessions for copper and gold deposits. The AF and Cuervo properties lie within the world’s premier copper-producing belt and the AF geological team has identiﬁed several exciting target areas with strong indications of mineralisation within their concessions. Drilling of the high-priority targets is planned for the ﬁrst half of 2012. Despite signiﬁcant efforts by the management team we have been unable reach agreement with our Indonesian partner in the Berau Coal Project on the restructure of our Cooperation Agreement or the appropriate development structure. Accordingly we have been forced to consider other options including legal action and we will continue to work to extract the best possible outcome for shareholders from this project. Strike’s stake in the Apurimac Iron-Ore Project represents an excellent opportunity to develop a major, low-cost iron-ore project in a favourable jurisdiction. With a strong and committed team, A$27 million in cash and CAN$5.25 million in loans to Cuervo, Strike is well positioned to deliver value to shareholders and I am looking forward to working with my team in taking substantial steps towards this goal over the next 12 months. Yours sincerely Prof. Malcolm R. Richmond Chairman 3 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS COMPANY OVERVIEW Strike Resources is an Australian-listed resources company with two principal projects in the attractive bulk commodities market. The Apurimac and Cusco Projects are large-scale iron-ore projects in southern Perú, with Apurimac the most advanced with a high-quality Concept-level Study completed in 2008. The Company is seeking to establish a 15 – 20 million tonne per annum (Mtpa) operation based on current JORC Indicated and Inferred Resources of 270Mt1 at its Opaban concessions located at Apurimac. The Company has strengthened its resource and exploration position in Perú through the acquisition of an additional 6% of Apurimac Ferrum S.A. (AF) - taking Strike to 50% of AF2 - and entering into a strategic option to acquire a major stake in Cuervo Resources Inc. (Cuervo) which holds high-quality exploration concessions in the Cusco district of southern Perú, and which are complimentary to Strike’s own concession interests in the same area. Strike holds 100% of the rights to mine coal at the Berau Thermal Coal Project in Indonesia, subject to a royalty to the concession owner, through a Co-operation Agreement. The Company is in dispute with the owner over the terms of the agreement and dispute resolution proceedings are likely. Table 1 - Strike Resources’ projects summary Project Location Apurimac Iron Ore Apurimac District, Perú Cusco Iron Ore Cusco District, Perú Cuervo Resources Cusco District, Perú Strike’s Interest 50%3 50%3 Option to acquire 49.2%4 Berau Thermal Coal Berau Regency, East Kalimantan, Indonesia (subject to payment of a royalty to the concession owner) Paulsens East Iron Ore West Pilbara, Western Australia (Strike has farmed out iron-ore rights in this project and will receive a royalty on any iron ore produced) 100% Royalty AF geologist mapping Cusco 4 OPERATIONAL HIGHLIGHTS Operational Highlights of the 2010-2011 ﬁnancial year, and to the date of this Report, include: (cid:115) Strong cash position with $34 million in cash reserves as at 30 June. (cid:115) Increased position in Apurimac Ferrum S.A. from 44% to 50%2. (cid:115) Strategic option secured to acquire up to 49.2% of Cuervo Resources Inc4. (cid:115) Strong, Perú-based management team established in AF. (cid:115) Constructive relationships established with communities with approvals ﬂowing. (cid:115) Board restructure involving the retirement of the former chairman and two non-executive directors, with the appointment of one or more additional independent non-executive directors pending. PERÚVIAN PROJECTS Apurimac and Cusco Iron-Ore Project (SRK 50%)2 The Company holds a direct interest of 50%2 in Apurimac Ferrum S.A. (AF), the owner of the Apurimac and Cusco project concessions located in Perú. Strike is currently funding AF through a loan agreement with AF and Mr Hellsten, Strike’s Managing Director, is President of AF. These loans will be capitalised in mid-2012 under the 2009 Settlement Agreement between the AF shareholders (Capitalisation Date), unless Strike exercises the “shoot-out” provision of the agreement. Assuming Strike does not exercise the “shoot-out”, at the Capitalisation Date the other AF shareholder, D&C Group, has the right to make a top-up capital contribution to AF. Depending on the amount contributed, this will result in D&C holding between 25% and 50% of AF. 1 Comprised of an Indicated Resource of 142.5Mt at 57.84% Fe and an Inferred Resource of 127.5Mt at 56.7% Fe. 2 At the date of this Report Strike in fact holds 56% of AF, having acquired the 12% stake formerly held by Iron Associates Corporation in July 2011, increasing Strike’s holding from 44% to 56%. This acquisition was subject to an option for D&C to acquire 6% of AF from Strike. D&C has since given notice of exercise of that option, but the option shares have not yet been transferred to D&C. After the transfer D&C and Strike will each hold 50% of AF. 3 The percentage of Strike’s shareholding in Apurimac Ferrum S.A., the company which holds these concessions, and see footnote 2. 4 On an undiluted basis. On a fully-diluted basis, which assumes the exercise of all Strike warrants in Cuervo and all Cuervo options and warrants held by third parties, Strike would hold approximately 46% of Cuervo. 5 Under the “Shootout” provisions of the AF Settlement Agreement Strike may, but is not obliged to, make an offer to buy D&C’s AF. If Strike makes an offer D&C must either accept the offer or buy Strike’s shares for a higher price per share. Opaban 1 concession: outcropping massive haematite and magnetite mineralisation 5 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS Strike has continued to progress the Apurimac and Cusco Projects in the Southern Andes region of Perú. The Apurimac Project comprises 72 concessions totalling approximately 59,000 hectares6 and the Cusco Project covers 17,500 hectares, approximately 150 kilometres to the south-east of Apurimac. Following a detailed review of the projects’ resource inventory and study programs in late 2010, the focus of activities has moved from detailed project studies to exploration and resource expansion. The current mineral resources at Opaban are high quality and form a sound basis for a potential iron-ore operation, however, additional resources are required to justify the signiﬁcant infrastructure costs and deliver a robust iron-ore business. The Company’s geological team believe that the existing AF concessions hold strong potential for additional iron ore, and has identiﬁed opportunities to acquire additional prospective ground within the region. The principal activities undertaken during the year have been: (cid:115) Establishment of a strong Perú-based management team within AF. (cid:115) Development of constructive, sustainable relationships and programs with communities affected by the project to facilitate approvals in line with exploration plans. (cid:115) Identify and pursue opportunities to consolidate the Company’s strong strategic position in iron ore and to expand resources and exploration potential, with a view to outlining sufﬁcient iron-ore mineralisation to support a 15 – 20Mtpa iron-ore business through: o Review and appraisal of the iron-ore potential within AF’s existing concessions and identiﬁcation of priority target areas. o Acquiring additional shares in AF from minority shareholder Iron Associates Corporation. o Development of alliances, partnerships and/or acquisitions with other concession holders in the region. (cid:115) Completion of alternate production rate and project conﬁguration studies to determine the preferred parameters. These studies included: o Production rates of 10Mtpa and 15Mtpa to complement the original 20Mtpa study. o Additional metallurgical studies to determine product and processing options. o Transport alternatives of rail and rope conveyor to supplement the original slurry pipeline option. o Water supply and management studies. o Scenario and ﬁnancial modelling. Initial Mineral Resource estimate for the Santo Tomas concessions at Cusco. Initial appraisal of the base-metal and gold potential of the AF concessions, given their position within a major copper, gold and silver province which extends into Chile, the world’s largest copper producer. (cid:115) (cid:115) Locals and contractors – Apurimac Project 6 Strengthened AF Management Team A key step in strengthening the AF team was completed in March 2011 with the appointment of Mr Thomas Kelly as AF Chief Executive Ofﬁcer. Mr Kelly reports to Mr Hellsten who is President of AF and Managing Director of Strike. Mr Kelly is based in AF’s Lima ofﬁce in Perú and has overall responsibility for the preparation and delivery of the business plans for AF. Mr Kelly holds a Masters degree in Mining Engineering from the Colorado School of Mines and has 35 years’ experience in mineral exploration, mine production, mineral industry consulting and corporate management. He has worked in CEO and senior management positions with both large multi-national and smaller resource companies in various countries. In these roles he has managed several large exploration projects and feasibility studies and has held senior management positions in operating mines. His experience includes 12 years in senior roles in Latin America, with the three years prior to joining AF based in Perú. Mr Kelly is experienced in managing government and community relations for mining project development in Perú, which makes him ideally suited to lead AF through the current resource expansion phase and into the feasibility study and operational stages. AF also added Australian geologist, Ian Cullen, to its Lima-based team. Mr Cullen has over 30 years’ experience as a geologist, specialising in iron ore and gold. He has worked in leading roles with some of the world’s largest producers of these minerals. Mr Cullen’s achievements include heading up exploration programs which resulted in producing mines. His principal focus will be to advise on the regional iron-ore exploration potential and priorities for AF’s Apurimac concessions and manage the exploration programs. These appointments substantially complete the process of transferring day-to-day control of AF’s operations to Lima and strengthening its Perúvian team, which is resulting in signiﬁcant operational efﬁciencies for the Company. Since joining AF Mr Kelly and Mr Cullen have undertaken management and operational changes which include the further strengthening the local AF team. These changes are delivering signiﬁcant beneﬁts for AF and Strike, including the identiﬁcation and appraisal of the Cuervo Resources opportunity. In addition, their expertise, along with that of AF’s other senior managers, has seen the advancement of the community and government relations programs and a material improvement in the outlook for timely approvals for AF’s exploration programs. 6 Strike’s Apurimac Project comprises concessions held by AF and Strike Resources Perú S.A.C (SRP). AF holds an option to acquire the SRP concessions for close to nominal value. Opaban 1 concession: looking west 7 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS Perúvian Presidential Elections Perú’s presidential elections were concluded in June 2011, resulting in the election of Mr Olanta Humala as Perú’s President. Mr Humala formally took ofﬁce on 28 July and has been providing progressive up-dates on his planned programs and key cabinet appointments. While Mr Huamala’s election had initially caused concerns about Perú’s ability to continue on its path of successful economic growth, to date these concerns have largely been dispelled by Mr. Huamala’s actions subsequent to his election. This has been borne out to date through his open support for the current macro-economic settings which have led to Perú being the best performing economy in Central and South America over the past decade. He has recently re-appointed the head of the Central Bank for a further 5 year term and established an experienced and respected team of senior cabinet ministers. Mr Humula has announced his main social programs will focus on the reduction of poverty and he intends to fund much of this through the implementation of a mining tax. Accordingly, the Board maintains the view that the medium- and long-term outlook for Perú is strong and it represents an attractive jurisdiction for both exploration and operations in the resources industry. Community Relations and Approvals The approval processes for exploration and drilling programs in Perú are extensive and highly structured. These processes are mandated by law and include both environmental and community approvals. While most government approvals have a mandated time frame, community approvals are largely in the hands of the community authorities and the General Assembly process which involves a formal meeting of the entire community. The political climate in Perú associated with the lead up to the Presidential elections added complexity to AF’s activities in the local communities. This impacted AF’s ability to engage with communities during the entire year, initially during the lead up to the local and regional elections in late 2010 and then through the period of the Presidential elections from April to June 2011. Since the election of Mr Humala as President the communities have tended to refocus on local issues and the level of engagement has increased, with the AF community relations team holding discussions with numerous communities regarding access to land for reconnaissance exploration and drilling. Approvals have been received from a number of communities in both Apurimac and Cusco regions since June 2011 and further approvals are expected going forward. During the year AF played a lead role in the establishment of the Apurimac Working Group, a cooperative organisation for resources companies to share learning points and experiences in their community programs. This group is proving most valuable in assisting companies to ensure consistency of approach across the region and developing Government Palace, Lima. 8 improved relationships with regional government. Founding members along with AF include Xstrata, Hothschild, Buenaventura (Perú’s largest gold producer) and various other juniors. AF established a comprehensive series of community programs at the Colcabamba Community during the drilling programs from late 2010. These programs were designed as a template for all community programs and act as a reference for other communities, to display AF’s professionalism and commitment to developing and implementing community enhancement programs and becoming a valued partner of the communities. The programs are all jointly agreed and developed with each community to ensure that they provide maximum value and the best practical outcomes for the community. One key element of these programs is working with the communities to develop and enhance the community’s ability to access existing government and other programs and to establish their own community development plan. Programs implemented at Colcabamba during the year included: (cid:115) Knitting workshops for women to assist them to develop this into an economic activity. (cid:115) Establishment of a facility for the elderly women of the community. (cid:115) A visual health campaign with the support of the “Monseñor Enrique Pelach” Eyecare Centre, a part of the Abancay Bishopric. Over a hundred people from the Colcabamba community attended the visual health campaign, with several being sent on to Abancay for more specialised treatment. (cid:115) Assistance with the development of the Colcabamba Community Development Plan. AF anticipates that it will be granted access for initial reconnaissance geological and geophysical programs at the majority of its Apurimac and Cusco concessions during the coming year. Geological teams and contractors have been established to enable the commencement of these exploration programs shortly after approvals are received and results are expected to ﬂow progressively from the September 2011 quarter. Formal discussions have commenced regarding exploration and drilling approvals for the Opaban deposits with three communities. One of these communities, Antapata, has approved access for exploration, and work in this area is expected to commence shortly. The discussions with the Huinchos and Huancabamba communities are expected to proceed over the coming months. Following community access approvals AF will undertake environmental studies required for the formal environmental approval from the central government and the local community, which is expected to take in the order of 6 months, with drilling planned to commence during the ﬁrst half of 2012. In the interim period AF anticipates drilling commencing at the Santo Tomas project in Cusco and at a number of satellite concessions in Apurimac following completion of initial geological and geophysical targeting programs. Apurimac Ferrum community initiative 9 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS Consolidation and Acquisition Programs Consistent with its objective to expand its iron-ore resources, the Company has actively pursued a number of opportunities to consolidate and expand its equity in prospective concessions within both the Apurimac and Cusco regions. Successful transactions were competed with IAC, a shareholder in AF and Cuervo Resources Inc., a Perúvian-focused Canadian mineral explorer, with several further opportunities actively being appraised. This process is expected to continue over the coming year. Purchase of AF shares from IAC Strike executed an agreement with Iron Associates Corporation (IAC) to purchase IAC’s 12% interest in AF, the Perúvian company through which Strike holds its interest in the Apurimac and Cusco projects in Perú. As a result of this strategic transaction SRK’s shareholding in AF increased temporarily from 44% to 56% but will move back to 50% in the short term, as detailed below. Strike has been in discussions with the other AF shareholders over the past year to explore opportunities to increase its shareholding in AF. This transaction forms part of the Company’s strategy to simplify the AF shareholding structure and increase and consolidate its presence in the prospective Apurimac and Cusco regions of Perú. The key terms of the IAC agreement are: (cid:115) Strike has acquired IAC’s 12% shareholding in AF. (cid:115) IAC assigned to Strike a loan of US$5.245 million, including interest (AF-IAC Debt) owed by AF to IAC. This loan is convertible to shares in AF in 2012 under the terms of the Settlement Agreement between the AF shareholders. (cid:115) IAC held a right, in certain circumstances, to convert its AF shareholding to a royalty from AF’s future production. This royalty right has now been extinguished. (cid:115) Strike paid IAC US$1.2m in cash on the execution of the agreement and issued IAC 9 million Strike shares as consideration under the agreement. These shares represent 6.3% of Strike’s issued capital. The Company believes that this provides signiﬁcant beneﬁts for shareholders in both the short and longer term. Initially, the simpliﬁcation of the AF shareholding structure will improve operational efﬁciency and reduce risks during the exploration and project execution phases. In addition, over the longer term it enhances Strike’s ability to attract strategic partners to develop the Apurimac and Cusco Iron-Ore Projects. IAC buy-out option and exclusivity agreement Strike also signed an agreement with the other major AF shareholder, the D&C Group, giving Strike negotiating exclusivity for 90 days (Exclusivity Period). Under this agreement the parties agreed to negotiate in good faith AF prize donations to agricultural fair 10 the potential acquisition by Strike of D&C’s share in AF on pro-rata terms to the IAC acquisition. This agreement provided that if D&C and Strike did not agree on the sale of D&C’s AF shares within the Exclusivity Period, D&C had the option, exercisable within a further 10 days, to buy half of the AF shares which Strike acquired from IAC (i.e. 6% of AF) plus half the AF-IAC debt. Negotiations for Strike to acquire D&C’s AF shares were unsuccessful and D&C exercised the option, however, the option shares have not yet been transferred. Once that transfer is complete, Strike and D&C will each own 50% of AF. D&C will pay Strike US$1.9 million for exercising the option. Cuervo transaction Strike entered into an agreement with Cuervo Resources Inc. (Cuervo) in July 2011 which gives Strike the option to purchase up to 49.2% of Cuervo7 in return for Strike providing Cuervo with up to C$15m in debt funding. Cuervo Resources Inc. (CNSX code: FE) is a mineral explorer listed on the Canadian National Stock Exchange (CNSX) and also trades on the Frankfurt Stock Exchange. Cuervo is active in exploration for iron ore in Perú, most particularly at its wholly-owned Cerro Ccopane project, located 65 km south of Cusco in southern Perú (see Figure 1 below) where it has delineated four zones of magnetite mineralisation. These zones host the prospects of Aurora, Orcopura, Huillque and Bob 1 (see Figure 2, below). The Cerro Ccopane property covers 14,000 ha (140 square kilometres) of largely contiguous mineral concessions. At Cerro Ccopane (Figure 2) drilling in 167 holes in three zones has identiﬁed high-grade magnetite mineralisation. No drilling has been undertaken at Bob 1 to date. Figure 1 - Regional plan showing Cuervo (blue) and AF (red) concessions and major Cu/Au deposits. 11 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS The Orcopura Zone has a reported JORC-Code-compliant mineral resource estimate of 106.4 million tonnes at 45.3% Fe, details of which can be found in Table 2 below. Table 2 – Cerro Ccopane Iron-Ore Project – resource inventory as at April 2009 Prospect Orcopura Orcopura Orcopura Orcopura Orcopura Classiﬁcation Measured Indicated Sub-total (Measured + Indicated) Inferred Total Mt 19.7 35.9 55.6 50.8 106.4 Fe% 48.3 45.9 46.8 43.7 45.3 S% 2.4 2.6 2.5 3.1 2.8 The mineral resource estimate has used a database consisting of the assay results of sampled intervals from 121 diamond-drill holes totalling 15,725 metres. The Orcopura mineralisation has been tested over a strike length of approximately 800 metres and remains open along strike and down dip in several areas. The Orcopura resources exhibit a clear geophysical expression with strong magnetic and gravity anomalies coincident with the iron-ore mineralisation. Figure 2 - Magnetic image of Cerro Ccopane Project showing existing drilling, prospects and targets 7 On an undiluted basis. On a fully-diluted basis, which assumes the exercise of all Strike warrants in Cuervo and all Cuervo options and warrants held by third parties, Strike would hold approximately 46% of Cuervo. 12 In addition, limited initial drill testing of the magnetic anomalies at the Huillque and Aurora prospects has intersected broad zones of iron-ore mineralisation, however insufﬁcient drilling has been undertaken to deliver a resource estimate at this time. Better results from drilling at these zones include: Table 3 – Selected intercepts from Huillque and Aurora prospects Hole ID Interval (m) Width (m) HDH – 01 62.7 – 138.5 HDH – 03 129.80 – 228.50 HDH – 12 130.25 – 181.10 78.85 98.70 50.85 HDH – 17 21.20 – 132.30 110.60 ADH – 01 8.70 – 87.20 ADH – 01 17.70 – 59.70 ADH – 06 35.50 – 114.00 78.50 42.00 78.50 True Width 53 69 35 55 29 68 Fe% S% P% Prospect 62.09 54.55 53.66 49.92 50.77 58.73 51.05 0.80 4.14 1.51 2.27 3.64 3.71 3.46 0.03 0.04 0.05 0.05 0.03 0.02 0.03 Huillque Huillque Huillque Huillque Aurora Aurora Aurora Ground geophysical surveys (magnetic and gravity) have also identiﬁed two additional target zones on the property. These are known as Bob 1 and Huillque Norte (see Figure 2) both of which are considered high-priority drilling targets, with the following signiﬁcant features: (cid:115) At Bob 1 coincident magnetic and gravity anomalies have been identiﬁed over 6 kilometres (km) of strike with strong indications of at least 10 km of strike potential. This compares with the Orcopura magnetic anomaly (1.5km) and the approximately 600 metre strike length of the current resource. The strength and extent of the geophysical anomalies are very impressive and the presence of outcropping massive magnetite ironstones above the anomaly means this represents an exciting drilling target. Bob 1 will be the initial focus for Cuervo’s Stage 1 drilling program. (cid:115) Huillque Norte has a strong gravity anomaly with sporadic magnetic highs which lies immediately north of the Huillque mineralised zone. Further detailed surveying and mapping is required prior to drill testing. At this time Cuervo believes this area has potential for copper and gold mineralisation as well as iron ore but further work is required to deﬁne speciﬁc drilling targets. Cuervo has also completed high-quality studies on the Cerro Ccopane Project including metallurgical testwork, transport studies and concept-level project assessment. The results are consistent with the outcomes from similar work by AF on its Apurimac and Cusco concessions and indicate the potential to establish a robust 15 – 20 million tonnes per year operation if sufﬁcient resources can be outlined. Aurora prospect magnetite outcrop, Cerro Ccopane Project (Cuervo) 13 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS Mineral processing studies have shown that standard grinding and magnetic separation will produce a high-grade (i.e. 67% to 71% Fe) magnetite ore concentrate containing acceptable levels of impurities in the majority of samples. Iron recoveries to the concentrate are very high, with average mass recoveries of 75%, which is similar to that seen for AF’s high-quality Opaban deposit. Similarly to AF’s projects, there is evidence the coarse-grained nature of the mineralisation will enable good-quality concentrates to be delivered with grind sizes up to <1mm. Further work is planned to determine the best way to capitalise on this characteristic. Coarse grinding provides potential for signiﬁcant operating and capital cost savings relative to iron-ore projects that require energy-intensive, ﬁne grinding prior to beneﬁciation. As the Orcopura iron ore contains sulphur and copper, typically present at concentrations of 2.5% S and 0.10% Cu, these must be removed to deliver an attractive product for the steel industry. In some concentrate samples the copper and sulphur levels were higher than the target range, therefore sighter tests were undertaken to determine the best way to reduce these elements to acceptable levels. Initial tests indicate this can be achieved by further grinding and either magnetic or ﬂoatation separation. Additional studies carried out by Cuervo have also shown the resulting concentrates are amenable to the production of commercial-grade pellets. Two transportation studies to date have shown that there are no unique logistical challenges that would prevent the conceptual development of a mining project. The construction of a direct slurry pipeline to tidewater was identiﬁed as the most cost-effective alternative for bulk transport. Preliminary concept-level studies for a 20Mtpa operation have produced capital and operating cost estimates similar to those from AF’s studies for Apurimac and indicate a robust business can be established based on 15 – 20 years’ operational life. The Cerro Ccopane Iron-Ore Project overlies the contact zone between the Tertiary-age Apurimac Pluton and an older outlier of limestones belonging to the Arcurquina Formation of Cretaceous age. This geological setting is highly prospective for the discovery of additional iron skarn mineralisation along the geological contact as well as hydrothermal iron mineralisation within host intrusives. Ground geophysical surveys (magnetic and gravity) have been successful in the targeting of the magnetite mineralisation. The three mineralised zones delineated by drilling to date at the Cerro Ccopane property all exhibit the same geophysical expression with strong magnetic and gravity highs. While caution must be used in interpreting gravity data in steep terrain such as seen in the Perúvian Andes, the mineralisation identiﬁed to date also has a strong magnetic signature (see Figure 2, above). Cuervo intends to continue to use both magnetic and gravity data to screen their concessions and identify drilling targets. To date exploration and diamond drilling has been undertaken at the Aurora, Orcopura and Huillque prospects; however resource estimates have only been completed at the Orcopura Prospect. Successful drilling campaigns targeting the geophysical anomalies have been completed at the Aurora and Huillque prospects, where signiﬁcant Diamond drilling at Orcopura, Cerro Ccopane Project (Cuervo) 14 intervals of magnetite mineralisation have been intersected. The Aurora prospect is deﬁned by a geophysical anomaly similar in size to the Orcopura Prospect. The magnetite mineralisation at Aurora and Huillque prospects remains open along strike and down dip. At both prospects there is good potential to extend the mineralisation targeting the untested portions of the geophysical anomalies. Further drilling is scheduled to improve the geological understanding of these prospects. Of particular interest is the signiﬁcant geophysical magnetic and gravity anomaly located in the northern portion of the property, which delineates the Bob 1 target zone. This geophysical anomaly is over 6 km long and remains open to the south (see Figure 2, above) with strong indications of at least 10 km of strike potential. Recent ﬁeld work has mapped extensive magnetite outcrops at Bob 1 typical of the known zones of mineralisation at Orcopura, Huillque and Aurora. In addition, regional appraisals based on satellite imagery and regional geology have highlighted several areas in the western half of the Cuervo concessions which warrant detailed exploration including geological mapping and ground geophysics. In addition to the Cerro Ccopane property Cuervo holds several concessions within Northern and Southern Perú. The Northern group of concessions have access to excellent infrastructure, being located close to the Paciﬁc coast and the Pan-American Highway. They are also located at relatively low altitudes in arid areas, which allows for year-round access. Small-scale mining operations have occurred on some of these concessions in the past. Iron mineralisation consists of massive magnetite, hematite or goethite. The most advanced of the Cuervo properties in northern Perú is the Chimbote concession group. These concessions are located approximately 40 km from the steel foundry of Siderperú located at Chimbote, Ancash. Cuervo continues to carry out reconnaissance ﬁeld activities to evaluate these concessions. Further information on Cuervo can be found on its website at www.cuervoresources.com. Project Optimisation Studies As part of its exploration and project assessment programs, AF completed a number of project optimisation studies during 2010 and early 2011 to determine the optimum conﬁguration for a potential iron-ore business in southern Perú. These programs assisted in the establishment of the exploration target and key drivers for success. Alternative mine production study Building on the initial Pre-feasibility Study into a 20Mtpa iron-ore operation completed in 2008, AF undertook studies to determine if lower production options would provide beneﬁts for the Apurimac project. Ausenco Engineers were appointed to undertake the studies on the alternatives of producing 10 and 15Mtpa as a concentrate or combined lump and ﬁnes products. Looking east to Opaban 1 15 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS The key outcomes were: (cid:115) Strip ratios at Opaban of between 1.2 and 1.8 when a practical mine design is applied. (cid:115) A high conversion ratio (>80%) of resources to economically-recoverable material (design pit) is likely based on current operating costs8. (cid:115) Mine sensitivity analysis indicates a robust project, relatively insensitive to mining costs, pit design parameters and operating costs. (cid:115) A potential mine life based on an optimised pit on current Indicated and Inferred Resources of 18 yrs for 10Mtpa, 12yrs for 15Mtpa and 9 yrs for 20Mtpa production rates. (cid:115) The process plant and port facility for the 10 and 15Mtpa options study offer advantages in reduced sizing of equipment and, for the lump and ﬁnes option, a considerably simpliﬁed process circuit resulting in reduced capital and operating costs. (cid:115) A rope conveyor (Rope-Con by Doppelmayr) was identiﬁed as a potentially superior ore and product transport option to rail or a slurry pipeline. A rope conveyor requires lower capital expenditure than rail. Rope conveyors also offer the ability to transport multiple product types which, like rail, would facilitate the more conventional, lower-cost lump and ﬁnes iron-ore product options. Rope conveyors offer large distances between supports and are currently used in similar downhill material transport applications over large distances in rugged terrains, speciﬁcally bauxite ore transport in the Caribbean. Opportunities have also been identiﬁed for more favourable locations for some of the process plant. Rail option study AF commissioned Ausenco Sandwell to conduct a pre-feasibility level study to determine whether transporting an alternative product mix of lump and sinter feed by rail is preferable to transporting slurry via a pipeline. The rail study considered the options of transporting 20Mtpa, 15Mtpa and 10Mtpa – the same options being considered by the alternative mine production study. Key outcomes are: (cid:115) A ﬁnal aligned track distance of 574km. (cid:115) The rail option requires 120 tunnels with a total distance of approximately 77km. (cid:115) 18 major bridges are required with spans ranging from 45m to 980m. (cid:115) The estimated time required to design and construct the rail line is 4 years. (cid:115) The total capital cost for a rail line with 20Mtpa capacity is US$3 billion +20%. (cid:115) The operating cost is $5.90 per tonne +/- 20% for 20Mtpa of product. 8 The mining study by SRK Consulting includes both Inferred and Indicated Resources. Although the pit optimisations and preliminary design pits are indicative of the potential economically-recoverable material, they do not represent Ore Reserves and further drilling is required to conﬁrm the results. Panoramic view of Cusco project 16 This option is unlikely to be attractive due to the high capital cost and project execution risk and could not be supported by the AF project alone. Rope conveyor (Ropecon) concept study AF commissioned a study on a Doppelmayr rope conveyor with Ausenco and Doppelmayr. This program was completed in late 2010 with the key outcomes being: (cid:115) A Ropecon option is suitable for the transport of 10 to 20Mtpa of crushed ore, lump and ﬁnes or concentrate products from the mine site to the port. (cid:115) The route length of the conveyor is approximately 288km, requiring 31 Ropecon sections. (cid:115) The total installed cost estimate for the Ropecon transport system is US$2.1B +/-35%. (cid:115) The operating cost estimate for the Ropecon transport system is $1.1/t +/-35%. This includes a credit associated with the impact of power generation on the downhill sections. Importantly, the capital and operating costs for the Ropecon option are signiﬁcantly lower than for the rail transport system. Accordingly, it is expected to deliver a material improvement in the project economics compared to the rail transport option. The Ropecon is capable of transporting both crushed ore and all of the product alternatives (lump, ﬁnes and coarse concentrate) to the port. This potentially provides operational ﬂexibility as well as allowing alternative project conﬁgurations such as locating all of the processing facilities, or simply the more complex concentrator portion of the project, at the coast. In addition, this may enable the deferral of the capital costs for the concentrator until after the high-grade material is mined and processed. These options are expected to deliver capital and operating cost savings for the project. This alternative also has the potential to signiﬁcantly reduce the water requirements of the project when compared to the slurry pipeline option. As water is a key factor in community sentiments in Perú, the Ropecon has the potential to simplify the community approvals process for the project. The Ropecon is expected to provide the preferred ore transport option from satellite deposits to a processing facility at Opaban due to its suitability for traversing rugged terrain and its low operating cost. The Ropecon study is only at concept level at present and a large volume of additional work is necessary to conﬁrm that it is feasible from both the construction and operational perspectives. One key risk area for the Ropecon option is the fact that multiple-unit Ropecon facilities are not yet operational on a commercial scale. While this risk is expected to be addressed during the remaining exploration and study phase of the project, AF believes it is prudent to retain the slurry option as the project base case at this point in time. Example of a rope conveyor in use in hilly terrain in Papua New Guinea 17 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS Transport option analysis AF completed preliminary analysis of the potential transport options available for Apurimac Project late in 2010. This process compared project conﬁgurations available with each of the transport options, speciﬁcally the slurry pipeline, rope conveyor and railway, at a range of production rates. The following points summarise the outcomes from this review: (cid:115) Slurry pipeline remains the preferred base case, with the best ﬁnancial and risk proﬁle. (cid:115) A Ropecon system offers attractive project conﬁgurations if a lump and ﬁnes product is feasible for AF ores. This option carries an elevated risk proﬁle due to the length of the rope conveyor and the high number of transfer points required. (cid:115) The high capital costs of the railway project conﬁgurations lead to these offering the poorest ﬁnancial returns. A railway alternative cannot be supported by the AF project alone. (cid:115)(cid:0) A production rate of 15 to 20Mtpa is required to provide robust ﬁnancial returns using current long-term iron-ore price forecasts. To achieve a mine life of 15 - 20 years at least 500Mt of iron-ore feed is required. The option analysis provided the basis for the strategic review undertaken during the ﬁrst half of 2011 which led to the focus on resource expansion and exploration and deferral of further major studies until AF has outlined sufﬁcient iron ore to support a 15 – 20Mtpa operation. Detailed water study Given the sensitivity in Perú to the use for mining of large quantities of water, AF commissioned Golder Associates, Perú to complete a review of the water supply options and options for managing ﬁltrate from the Apurimac Project’s slurry pipeline (base case) alternative. Phase 1 of the Water Study involved a desktop review of the existing supply and discharge options, development of potential alternatives and the recommendation of preferred options. Key outcomes from the Phase 1 Water Study are: (cid:115) Multiple options exist for the collection and storage of surface water to meet the Project’s water supply requirements. The capture and storage of surface water is the lowest capital and operating cost option for water supply to the Project. (cid:115) Re-use of waste water from the city of Andahualyas has the potential to supplement or offset a small amount of the Project’s water requirements. (cid:115) Recycling of ﬁltrate from the port to the mine site is technically feasible, although this is clearly the highest capital and operating cost option available. 18 (cid:115) Irrigation of trees planted for this purpose is the best option to manage the discharge of ﬁltrate at the port site, from both a capital and operating cost perspective, based on an assumed mine life of 20 years. (cid:115) Further investigation of evaporation basins near the port site, as either support or replacement for irrigation, is recommended once more information on the likely ﬁltrate quality becomes available. If no additional treatment of ﬁltrate is necessary this would be the best option. Phase 2 of the study, which involves a detailed assessment and preliminary engineering for the most attractive options, would be undertaken as part of a detailed Pre-feasibility Study work program. Preliminary metallurgical testwork program In the December 2010 quarter AF commenced a preliminary metallurgical testwork program to explore the potential to generate suitable direct-shipping ore or DSO (lump and ﬁnes) products from high-grade ores at the Opaban concessions. This testwork program was completed by Transmin Metallurgical Consultants in Lima, using historical core samples from previous drilling campaigns at Opaban. The preliminary program also included a number of Davis Tube (DTR) tests on magnetite ores of varying iron and sulphur grades and coarse grind sizes of P80 at 250 and 500μm to explore the performance of lower-grade ores. In summary, the results are: (cid:115) DSO products from high-grade ores: o High-grade samples (predominately Fe> 61%) performed very well and, on average, generated a lump (+6.3mm) split of approximately 88% by mass after a -30mm crush. The performance of the high-grade lump and ﬁnes samples is shown in Figure 3 below. o Segregation of SiO2 and Al2O3 to the ﬁner fractions was also observed and this trend generally increased with the level of these impurities in each sample. This trend is shown in Figure 3 below and supports previous testwork completed on Opaban ores. o While no lump degradation work is planned as a part of the preliminary campaign the initial results from the high-grade DSO product testwork are positive. Further work will be completed as a part of the Pre-feasibility Study, to explore potential value creation options associated with the initial production of lump and ﬁnes products. Further DSO product test work will also be carried out when new samples can be generated from the proposed Opaban drilling program. Figure 3 – High-grade samples: Potential DSO product results 19 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS (cid:0)(cid:0)(cid:115) DTR testwork on magnetite ores: o Samples were divided into high- and low-sulphur groupings, with 10 low-sulphur and 6 high-sulphur samples tested at 2 grind sizes: P80 of 250 and 500μm. Table 4 – High-level summary of DTR results Characteristics Head Grade (Calc) % Concentrate Grade Fe% Mass Recovery % Low-sulphur magnetite - 250μm 40.6 to 65.9% Low-sulphur magnetite - 500μm 41.5 to 64.6% High-sulphur magnetite - 250μm 48.1 to 65% High-sulphur magnetite - 500μm 49.8 to 66.4% 60 to 68% 60 to 68% 62 to 68% 62 to 68% 62 to 93.7% 61 to 92.8% 70 to 92.6% 72.5 to 95.4% o Overall, the DTR performance across the range of samples tested was very good, with average mass recovery for the low- and high-sulphur magnetite samples of 79% and 72% respectively. Iron recoveries were also very good, with an average of 90% and 81% respectively for the low- and high-sulphur samples. o DTR mass and iron recoveries were similar for the low- and high-sulphur samples at the two grind sizes tested. o DTR results support previous testing completed on Opaban ores for the 2008 Study. Initial indications suggest there may be potential to increase the grind size to a P80 of 500μm to generate an initial concentrate and potentially reduce the grinding power requirements for Opaban ores. Resource Estimate, Cusco (SRK 50%) During the June quarter Strike released the initial resource estimate for the Santo Tomas concessions located in the Cusco Project area. This resource estimation was undertaken by SRK Consulting in conjunction with AF geologists and resulted in a JORC-Code-compliant Inferred Resource of 104.4 million tonnes of iron-ore (refer Table 5 below). The database used to calculate the iron mineral resources at Santa Tomas comprised of 168 diamond core and reverse circulation drill holes totalling 16,935 metres. Table 5 – Santo Tomas Project – Inferred Resource estimate – 0% Fe cut-off Tonnes (MT) 104.4 Fe % 32.62 S (%) 0.53 Al2O3 (%) 3.19 LOI (%) 0.21 P (%) 0.035 SiO2 (%) 21.66 AF geologists mapping in the ﬁeld 20 The style of the mineralisation is similar to that seen at Opaban, being coarse grained and dominated by magnetite. Preliminary metallurgical tests indicate a concentrate grade of >65%Fe can be produced using conventional grinding and magnetic separation processes. Higher-grade, haematite-rich zones have been identiﬁed in the logging in the upper portions of the deposits and further work is planned to fully delineate this material. Most of the resource zones remain open along strike and at depth and further drilling is planned in these areas during the 2011/12 ﬁnancial year. In addition to the above resource, the drilling campaign at Santo Tomas identiﬁed iron mineralisation which is not sufﬁciently well deﬁned to be included in the initial Inferred Resource estimate due to the relatively broad spacing of some of drill holes. This potential is estimated at 23 – 26Mt at 30 – 35%Fe. Further to this, a review undertaken on the Santo Tomas geophysical and geological data has also identiﬁed several areas with potential to increase the current iron resource through additional drilling. These target areas are shown in Figure 4 (below) and represent untested magnetic and gravity anomalies as well as extensions to the known mineralisation. (The potential quantity of the target iron-ore mineralisation is conceptual in nature. There has been insufﬁcient exploration to deﬁne an additional Mineral Resource in relation to that target iron ore. It is uncertain whether further exploration will result in the determination of an additional Mineral Resource in relation to that target iron ore.) Figure 4 – Total magnetic ﬁeld image showing mineralisation envelopes (inferred and potential) and target areas (circled) to be drilled. Colcabamba Project (SRK 50%) A diamond drilling program comprising eight (8) diamond drill holes for a total of 2,336 metres was undertaken at the Colcabamba Project approximately 30 kilometres south of Opaban to test several zones of outcropping magnetite ironstone associated with a large magnetic anomaly. The objective was to outline additional iron-ore mineralisation which could supplement the resources deﬁned at the Opaban Project. All drill holes intersected several zones of magnetite ironstones at depth with the best results of a composite iron- ore interval of 57m at 49%Fe in two zones in COL 010. These zones were separated by an interval of less than 5 metres thickness containing lower-grade iron which was not assayed. Taking a conservative approach of assigning 20%Fe to the lower-grade zones the combined interval is 61.4metres at an average grade of 47.8%Fe. Likewise a composite interval of 36 metres at an average grade of 56%Fe was intersected within 3 separate zones in COL 007. Using 20%Fe for the lower-grade zones results in a combined interval of 46.9 metres at an average grade of 48%Fe. Better results from the drilling program are provided in Table 5. 21 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS The mineralisation style is similar to that seen at Opaban, being coarse grained and dominated by magnetite. While no metallurgical testwork has been undertaken to date it is expected this material would have similar characteristics to Opaban and produce high-grade iron concentrates at coarse grind sizes (0.5 – 1 mm). Similar to the Santo Tomas mineralisation the iron ore at Colcabamba contains elevated sulphur levels which would require additional processing to produce a high-quality concentrate. Overall the results at Colcabamba indicate that, while good-quality iron ore is present, the width of these zones at depth is narrower than seen in the surface outcrops and the likelihood of outlining signiﬁcant tonnages of iron ore is low. Further work on this prospect is likely to focus on the assessment of the base metal potential. Table 5 – Colcabamba drilling results (extract) Drill hole From (m) To (m) Interval (m) Fe% COL-001 COL-002 COL-003 COL-003 COL-007 COL-007 COL-007 COL-010 COL-010 124.6 150.3 45.8 2.60 56.0 8.60 12.60 19.50 125.60 134.60 139.60 152.30 158.20 172.45 81.00 106.20 110.30 142.40 25.7 10.2 6.0 6.9 9.00 12.70 14.25 25.20 32.10 47.8 56.9 59.7 46.9 48.7 59.7 58.5 50.9 49.0 Al2O3 (%) SiO2 (%) 7.24 1.54 1.35 1.70 3.40 1.90 0.82 0.86 2.03 1.45 8.55 7.89 17.6 10.48 4.99 6.27 12.64 8.33 S (%) P (%) 3.7 2.6 0.04 0.06 5.49 6.18 4.98 6.22 6.36 0.017 0.003 0.02 0.03 0.035 0.024 0.012 0.022 0.021 Regional Assessment for Iron and Copper-Gold Potential A regional assessment of the potential for iron ore, base metals and precious metals across the Apurimac and Cusco Project areas was completed during the June quarter. This program was aimed at establishing the key controls for iron-ore and base-metal mineralisation within the region as well as the review of previous exploration data by AF and others. This work was designed to enable priorities to be established for exploration as well as speciﬁc target areas where more detailed work and drill testing is warranted. Key ﬁndings include: (cid:115) The region contains several high-grade magnetite deposits, with Opaban being the largest and highest quality resource identiﬁed to date. Exploration potential for additional “satellite” iron-ore deposits within 50 kilometres of Opaban is considered very high. Environmental remediation works 22 (cid:115) The AF concessions lie within the Andahuaylas-Yauri copper-iron belt which hosts major copper deposits including Las Bambas and Tintaya as well as several major base- and precious-metal projects. (cid:115) The broad geological, alteration and geochemical signatures recognised within the AF concession areas are typical of Andean porphyry copper systems and iron skarn systems. The review also highlighted several areas representing high-priority exploration targets for both iron ore and base metals which warrant further detailed exploration and drill testing. The key target areas identiﬁed to date are outlined below. The Santo Tomas prospect (SRK 50%) The prospectivity of these concessions for iron ore has been well established for some time and a preliminary resource estimate has been undertaken as reported above. The drilling programs to date have tested 30 – 40% of the target area for iron ore and further drilling is planned over the next 6 – 12 months to test the remaining high- priority target areas. In addition, the database review highlighted signiﬁcant intervals of elevated copper and silver from previous drilling completed during 2008 testing iron-ore targets. These intersections include: (cid:115) CQ 0027; 77.45 – 112 metres (34.55m) at 0.22%Cu and 102.6 – 106.6 metres (4m) at 60g/t Ag (cid:115) CQ 0031; 61.8 – 96 metres (34.2m) at 0.31%Cu (cid:115) CQ 0048; 32.7 – 42.7 metres (10m) at 72g/t Ag (cid:115) PIS 0150; 28 – 46 metres (18m) at 1.0%Cu. Accordingly, the results from a reconnaissance ground IP survey completed on the Santo Tomas concession group in August 2006 were reassessed. Three regional lines were surveyed at 1km line spacing and station spacing of 500 metres. While the data is broadly spaced it identiﬁed a strong north-south trending chargeability high coincident with the western ironstone outcrops. This anomaly remains open to the south and north. IP is commonly used as the key exploration tool for copper mineralisation in South America as it can locate disseminated sulphide occurrences which typically occur as part of large porphyry copper systems. Figure 5 – Santo Tomas summary plan with drill holes, magnetic (purple) and IP (yellow) anomalies 23 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS The initial drilling of this zone was targeted at testing the iron-ore potential and hence the holes were relatively shallow (generally less than 100 metres’ total depth) therefore the source of the anomaly is unlikely to have been intersected by this drilling. Nevertheless PIS 0150, which lies on the southernmost line of the original survey, intersected 18m at 1.0%Cu from 28 metres and was completed at only 50 metres depth. No deep drilling has been undertaken south of this hole. Figure 5 shows the locations of the IP anomaly and the elevated copper results. Signiﬁcantly there is a cluster of high copper and silver values and old gold workings to the south of the existing IP survey. AF is planning ﬁeld checking of the target area and additional IP surveying of the concessions prior to drill testing of the best targets. While the results are early stage and signiﬁcant follow-up is required, the combination of location within a world- class copper province, attractive geophysical signatures, prospective geology and widespread, strongly anomalous copper results with some potential economic-grade copper and/or silver is considered most encouraging. Coriminas prospect (SRK 50%) At the Coriminas concession group located approximately 50 km south of the Company’s Opaban Project, a similar review of previous AF drilling results identiﬁed signiﬁcant iron intersections in the northern portion of the concessions over a strike length of 500m. Signiﬁcant intersections include: (cid:115) COR 0001; 0 – 65.4 metres (65.4m) at 52.2%Fe (cid:115) COR 0004; 0 – 33.5 metres (33.5m) at 56.5%Fe (cid:115) COR 0012; 0 – 38.3 metres (38.3m) at 61.2%Fe (cid:115) COR 0013; 0 – 28.8 metres (28.8m) at 60.9%Fe and 33.0 – 74.50 metres (41.5m) at 51.4%Fe. The iron mineralisation consists of massive magnetite interpreted as an iron skarn and remains open at depth and along strike. Further ﬁeld work is planned to determine if the potential of this area is at least 50 million tonnes of iron mineralisation with an average grade of at least 45%Fe, which is the minimum considered attractive as a satellite mine for a potential operation at either Apurimac or Cusco. If this potential is conﬁrmed, further drilling will be undertaken to outline the extent of the mineralised system. Signiﬁcant intersections and geophysical targets are shown in Figure 6 below. Figure 6 – Coriminas Project summary plan The review also identiﬁed a large area in the southern portion of the concession containing anomalous copper and silver results in scout drilling. These results are complimented by elevated gold results (up to 4 g/t Au) from costean sampling in the same area and are coincident with a strong IP chargeability anomaly which remains open and is strengthening to the south east. Better results from the scout drilling include: (cid:115) COR 0023: 0 – 8.1metres (8.1m) at 0.16% Cu and 3.7g/t Ag. (cid:115) COR 0023:14.1 – 32.4 metres (18.3m) at 0.19%Cu and 7.6g/t Ag. AF plans to extend the IP survey to the south and east and conduct ﬁeld checking prior to drill testing of the IP anomaly and extension drilling at the iron-ore target, if warranted following the assessment of the potential. Regional satellite imagery To assist with the regional analysis a broad regional study was completed using medium resolution LANDSAT and ASTER satellite imagery. This approach used interpreted structural and alteration mapping to outline a number of target areas of interest and has been successful in outlining zones of hydrothermal alteration and iron-oxide abundance associated with skarns, epithermal-style mineralization and/or volcanic centres. Future work planned to commence during the September quarter includes: 24 (cid:115) Ground checking of target areas by geological mapping and surface sampling. (cid:115) Acquiring geochemical and geophysical data over interpreted alteration anomalies. (cid:115) Acquiring high-resolution topographic data to assist in the interpretation of geomorphological features. (cid:115) Examine the suitability and acquisition of hyper-spectral airborne data over target areas to assist in deﬁning in detail the alteration and mineralogy of target areas. A review of the current AF geophysical database was also undertaken in support of the regional appraisal. The work consisted of a re-interpretation of the GPR helicopter magnetic survey which was completed in 2008 over a portion of the Apurimac concessions and an evaluation of the ground magnetic and IP surveys on prospects in both the Apurimac and Cusco regions. The review made a number of recommendations which include: (cid:115) Completing additional high-resolution ground magnetic surveys at Santo Tomas and Coriminas to assist in deﬁning extensions of existing mineralisation and to deﬁne drill targets. (cid:115) Ground magnetics over target areas deﬁned by the remote sensing work. (cid:115) IP surveys at the Coriminas, Santo Tomas and Colcabamba prospects to close off the existing IP anomalies and to generate drill targets for porphyry copper mineralisation. These activities have been included in the work program and budget for the 2011/12 ﬁnancial year. AF Dispute with Millenium On 8 October 2010 AF commenced arbitration proceedings against Perúvian company Millenium Trading SAC (Millenium) to settle the terms on which Millenium may conduct a small-scale mining operation on an AF concession. Under a 2006 agreement under which AF acquired certain mineral concessions (Option Termination Agreement) AF agreed to permit Millenium to mine up to 400,000 tonnes of iron ore per annum for 5 years on an unspeciﬁed AF concession, on terms to be agreed by subsequent negotiations (Mining Agreement). In return Millenium agreed with a third party, Minera los Andes y el Paciﬁco (MAPSA), to relinquish options over certain mineral concessions to enable MAPSA to sell them to AF. AF and a Millenium-appointed party subsequently commenced negotiations for a Mining Agreement. The Millenium party ceased negotiating in 2007 with no agreement having been reached. In late 2010 Millenium re-asserted its right to enter into the Mining Agreement with AF but also rejected AF’s approaches to enter into good-faith negotiations for that purpose. Opaban Project outcropping massive magnetite mineralisation 25 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS The Option Termination Agreement provides that either party may appoint arbitrators to resolve the terms of the Mining Agreement if the parties have not resolved the matter by negotiation. AF considered that it was appropriate to refer the matter to arbitration given that the terms of the Mining Agreement were not resolved by negotiation in 2007 and given Millenium’s refusal to re-open good-faith negotiations in 2010. After AF commenced arbitration Millenium commenced court proceedings claiming that the Option Termination Agreement should be set aside. AF has had legal advice that it has good prospects of defeating Millenium’s claim. AF has asked the court to decline jurisdiction over Millenium’s claim on the basis that arbitration is the proper forum for that dispute according to the Option Termination Agreement. A decision on that question is pending. A mining operation of the type contemplated by the any Mining Agreement will not materially affect AF’s own proposed mine. JORC Code Competent Person Statements The information in this document which relates to Mineral Resources at the Apurimac, Cusco and Cerro Ccopane projects has been reviewed and conﬁrmed by Mr Ian Cullen, B.Sc. (Geology), who is an employee of Strike Resources Ltd and is a member of the Australasian Institute of Mining and Metallurgy. Mr Cullen has sufﬁcient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as Competent Persons as deﬁned in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves (the JORC Code).” Mr Cullen consents to the inclusion in this document of the matters based on this information in the form and context in which it appears. The information in this document which relates to exploration results at Colcabamba, Santo Tomas and other AF concessions has been compiled by Mr Ian Cullen, B.Sc. (Geology), who is a member of the Australasian Institute of Mining and Metallurgy and is an employee of Strike Resources Limited. Mr Cullen has sufﬁcient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as deﬁned in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves (the JORC Code).” Mr Cullen consents to the inclusion in this document of the matters based on this information in the form and context in which it appears. BERAU THERMAL COAL PROJECT (EAST KALIMANTAN, INDONESIA) Overview of previous studies (2009 – 2010) The Berau Project is located 40 kilometres south-west of Tanjungredeb (Berau) and 350 kilometres north of Balikpapan, East Kalimantan, Indonesia. Strike has a 100% interest in the rights to mine a mineral concession (IUP) and sell the product, subject to payment of a royalty to the IUP owner. The project straddles the Kelai River with the focus for both exploration and studies being initially the Nyapa West area on the western side of the river which hosts over 50% of the resources and has simpler access (see Figure 7 below). Berau 26 Figure 7 – Berau drilling and geology map A series of feasibility level studies were completed by Strike in 2009 based on mining and transporting run-of- mine coal by truck approximately 30 km along a proposed haul road to a barge port to be constructed on the Segah River, where it will be crushed and stockpiled prior to loading on barges. Barges will then transport the coal approximately 90km to the coast and then on to a trans-shipment point 30km offshore, where it will be off-loaded to ships for delivery to customers. The target production was 1.5 Mt of coal in the ﬁrst year, expanding to produce at a rate of up to 3 Mtpa in subsequent years. The run-of-mine coal product is expected to have a medium caloriﬁc value of approximately 5,550 kcal/kg (gar) with low sulphur (0.66%S as received), ash of 7.3% and total moisture of 16.6%. The development timetable is assessed at approximately 8 months from receipt of development approvals to production with ﬁrst shipment of product 2 months after completion of construction. The study results indicated the project is relatively simple technically and delivers robust ﬁnancial returns with an estimated capital cost of approximately US$20 million and operating costs estimated at US$40 – 45 per tonne based on a production rate of 3 Mtpa. Project approvals The Project’s Environmental Impact Analysis (Analisis Mengenai Dampak Lingkungan or AMDAL) was approved by the Regent of Berau in January 2010. In February 2010 the Berau project coal concession was converted to a Mining Production Operations Licence (Izin Usaha Pertambangan Operasi Produksi or IUP Production Operations) under Indonesia’s new Mining Law. Obtaining the IUP Production Operations is a key pre-requisite for the conduct of mining activities. This licence allows the mining and sale of coal, subject to ﬁnal approval of the ﬁrst year’s annual budget and work plan by the Regent of Berau. Other granted approvals include the Special Area Port License. Central Forestry approval for the alignment of the proposed mine-site to barge-port haul road and Regional Forestry approval of logging of trees in the area that will be disturbed by the mining operation have been granted, subject to completion of cataloguing tree species and quantities in the area of disturbance. 27 STRIKE RESOURCES ANNUAL REPORT 2011 REVIEW OF OPERATIONS Analysis of tenders was undertaken in 2010 along with a second round of mining contract proposals. This work conﬁrmed the key capital and operating cost components of the project determined during the 2009 feasibility study. Current status During the year management held extensive discussions with Strike’s Indonesian partner with a view to reaching agreement on the restructure of the existing Cooperation Agreement to ensure it complies with the new Indonesian Mining Laws. Despite these efforts the partner has refused to negotiate in good faith and dispute resolution proceedings are under consideration. Given the uncertainties regarding the timing and outcomes of the dispute resolution processes the Company has taken a conservative view with regard to the carrying value of the Berau asset. PAULSENS EAST IRON ORE PROJECT (WEST PILBARA, WESTERN AUSTRALIA) The Paulsens East Project tenements are located approximately 140 kilometres west of Tom Price (close to transport infrastructure) and eight kilometres east-northeast of the Paulsens Gold mine in the northwest of Western Australia. Under a farm-out agreement between Strike and Process Minerals International Pty Ltd (PMI) - a subsidiary of ASX- listed Mineral Resources Limited - PMI has exclusive rights to explore for and mine iron ore from Paulsens East. Strike retains the rights to other minerals. If PMI mines iron ore at this project it will pay Strike a royalty of A$ 3.20 per tonne, subject to variations in line with movements in an iron ore benchmark price. In the September Quarter 2010 PMI completed ﬁeld validation of Strike’s previous drilling. PMI has developed a 35-hole, strategic resource expansion drilling program with a view to extending the projected life of its proposed open-pit mine by extending and better deﬁning the current assessment of iron ore on the tenements and provide geotechnical data for mining studies. PMI’s current exploration target is for an additional 9 - 11 million tonnes of iron ore at a grade of 54 – 56% Fe and above. (The potential quantity and grade of the target iron ore is conceptual in nature. There has been insufﬁcient exploration to deﬁne a Mineral Resource in relation to the target iron ore. It is also uncertain whether further exploration will result in the determination of a Mineral Resource in relation to the target iron ore.) PMI is well advanced in discussions with the Traditional Owners regarding approvals for the planned drilling program. PMI is also awaiting feedback from the Commonwealth Department of Sustainability, Environment, Water, Population and Communities (SEWPaC) on the northern quolls present in the area prior to commencing drilling. Drilling commencement is accordingly not expected before the December 2012 quarter. SEWPaC and the WA Departments of the Environment and Conservation (DEC) and Minerals and Petroleum (DMP) are developing a new set of guidelines for exploration and mine development in areas containing northern quolls. PMI will be required to conduct a quoll survey under the new guidelines before conducting further work on Paulsens East 28 site. A quoll trapping program required for the survey will commence in October, 2011 subject to obtaining the necessary trapping licence and weather conditions. PMI has carried out an initial internal analysis of potential mine plans, mine cost models and export options for the iron ore with a view to determining the optimum conﬁguration for the project. Further work is required, including the strategic drilling program, to complete this activity. Discussions with service providers and infrastructure owners are continuing in parallel with the exploration program. CORPORATE MATTERS Board Restructure As part of a strategic review of its structure and operations, Strike Resources determined in February 2011 to restructure the composition of its Board of Directors in a move to bring it into line with current leading practice in corporate governance. Speciﬁcally, the representation of major shareholders was reduced and the Board will move to a majority of independent Directors. To facilitate the restructure Non-Executive Directors Messrs Farooq Khan and Farhad Moshiri (together with his alternate Director Mr Mark Horn) retired from the Strike Board, effective 3 February. In addition, Strike’s Chairman, Mr Shanker Madan, announced his retirement effective 3 February 2011 in order to concentrate on his role as Managing Director of ASX-listed resource company, Alara Resources Ltd. Professor Malcolm Richmond, independent Non-Executive Director, was appointed Acting Chairman on 3 February 2011. After considering alternatives, the Board appointed Prof. Richmond Chairman on 27 July. The Company has commenced an international search for at least one additional independent, Non-Executive Director. Strategic Review of Operations The Strike Board conducted a strategic review of operations in two rounds, held in April and July 2011. Key outcomes from the review were: (cid:115) conﬁrming the aim of becoming the most signiﬁcant iron-ore producer in Perú through establishment of a 15 – 20Mtpa iron-ore business based on the Apurimac and Cusco assets and the assets of Cuervo Resources. (cid:115) utilising the ﬁrm’s strong cash position, strategic strengths and AF’s experienced team in Perú to consolidate its landholding and strong iron-ore resource position. (cid:115) undertaking vigorous exploration programs through AF and Cuervo Resources to materially increase iron-ore resources over the next 2 years. (cid:115) leveraging from our location in the world’s largest copper producing belt to establish a strong base metals project portfolio. Examining drill core at Santo Tomas, Cusco 29 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT The Directors present their report on Strike Resources Limited (Company or Strike) and its controlled entities (Consolidated Entity) for the ﬁnancial year ended 30 June 2011. This report is current to 23 September 2011. Strike is a company limited by shares which is incorporated in Western Australia and has been listed on the Australian Securities Exchange (ASX) since 7 March 2000 (ASX Code: SRK). Strike has prepared a consolidated ﬁnancial report incorporating the entities which it controlled during the ﬁnancial year. Details of Strike’s controlled entities during the ﬁnancial year can be found at Note 12 to the Financial Statements. No entities became controlled entities after the end of the ﬁnancial year. OVERVIEW The 2011 ﬁnancial year has seen the Company continue with the implementation of the ﬁndings from its strategic review. During the year the Board of Directors underwent further restructuring with the aim of moving towards best practice corporate governance, while also meeting the Company’s requirements at the present phase of the its operations. The Board restructure saw the departure of Messrs Farooq Khan, Shanker Madan and Farhad Moshiri and the appointment of Professor Malcolm Richmond as Acting Chairman in February 2011. In July 2011, Prof. Malcolm Richmond’s appointment as Chairman was made permanent. During the year Apurimac Ferrum appointed Mr. Thomas Kelly as its Chief Executive Ofﬁcer following a decision by the AF shareholders to enhance the Perúvian-based management team. Mr. Kelly holds a degree in Mining Engineering from the Colorado School of Mines and has over 35 years’ experience in mineral exploration, mine production, mineral industry consulting and corporate management. This process also involved the appointment of Mr Luis Orihuela as the Community Relations Manager and Mr Ian Cullen as Exploration Manager. The extensive experience and knowledge of Mr Orihuela and Mr Cullen are seen as a major beneﬁt to the Company in accelerating AF’s exploration activities at its Opaban and Cusco projects. In December 2011 AF recommenced drilling in Perú after ceasing major exploration activities in 2009 due to a dispute between AF’s shareholders. Since settling the dispute in July 2009, Strike and AF’s other shareholder, D&C Group, have been working to re-establish relations with the communities located on AF’s concession holdings. This process resulted in the ﬁrst exploration drilling program since the dispute was settled, at the Colcabamba concessions, and is seen as a major step forward for the progress of the Company’s exploration activities. Details of Strike’s operations over the past year can be found in the “Review of Operations” section above. The optimisation studies conducted during 2010 identiﬁed a number of opportunities to enhance the Apurimac Iron-Ore Project including the production of lump and ﬁnes products as an alternative to a slurry concentrate, and the use of a rope conveyor for both ore and product transport. While these are positive steps the key conclusion from the studies was that a production rate of at least 15Mtpa for more than 15 years is required to deliver robust economic returns based on long-term projected iron-ore prices. Accordingly AF is re-focussing on exploration to outline sufﬁcient iron ore to support such an operation. This will remain the focus in 2011/12. During the year Strike commenced negotiations with Cuervo Resources Incorporated (Cuervo), a Perú-focused Canadian iron-ore explorer, with the aim of building its interest in quality iron ore exploration concessions within Perú. Subsequent to the reporting period Strike and Cuervo entered into a ﬁnancing arrangement giving Strike the option to purchase up to 49% of Cuervo’s shares through the exercise of share warrants. More details of this agreement can be found in the “Events Subsequent to Reporting Date” section below. Unfortunately for both management and shareholders, despite signiﬁcant efforts by management, during the year little progress was made on the resolution of disputes with Strike’s partner in the Berau Thermal Coal Project. Due to the position adopted by the Company’s partner, there is some uncertainty about whether negotiations will succeed and dispute resolution proceedings are now likely. On 30 June 2011, Strike entered into an agreement with Iron Associates Corporation (IAC) to purchase IAC’s 12% shareholding in AF for US$1.2m and 9,000,000 shares in Strike. As a result of this agreement Strike’s shareholding in AF increased from 44% to 56% on the reporting date. Management see this transaction as a positive step as it reduces the risks associated with the execution of AF’s exploration activities. Details of this transaction can be found in the “Signiﬁcant Changes in the State of Affairs” section of this report below. With a strong cash balance and with exploration and evaluation work recommenced in Perú on AF’s iron ore projects, the Company is poised to make signiﬁcant progress on its Perúvian iron-ore concession interests over the coming year. 30 Principal Activities The principal activities of the Consolidated Entity during the ﬁnancial year consisted of the ongoing exploration and evaluation of the Consolidated Entity’s interest in the Apurimac and Cusco Iron-Ore Projects located in Perú, South America and its Berau Thermal Coal Project in Indonesia. Signiﬁcant Changes in the State of Affairs During the year the Consolidated Entity continued to implement changes which were the result of a strategic review of the Company’s operations. In February 2011, several long-serving members of Strike’s Board of Directors retired from their position with the Company to facilitate the restructuring of the Board’s composition to bring it in line with industry best practice. The Company announced that it had begun a search for a new Chairman and an additional independent Non-Executive Director. In July 2011, the Board of Directors appointed Professor Malcolm Richmond to the position of Chairman. Prof. Richmond had held the position of Acting Chairman since the Board restructuring which commenced in February 2011. On 30 June 2011 Strike entered into an agreement with Iron Associates Corporation (IAC) to purchase IAC’s 12% share holding in Apurimac Ferrum S.A. (AF). Key terms of the agreement are as follows: (cid:115) Strike acquired IAC’s 12% shareholding in AF. (cid:115) (cid:115) IAC assigned to Strike a loan of US$ 5.245 million owed by AF to IAC. This loan is convertible to AF shares in July 2012 under the terms of the Settlement Agreement between the AF shareholders. IAC held a right, in certain circumstances, to convert its AF shareholding to a royalty from AF’s future production. This royalty right was extinguished as a result of the IAC share purchase transaction. (cid:115) Strike paid IAC US$1.2m in cash on the execution of the agreement and issued IAC 9 million Strike shares as consideration under the agreement. These shares represent 6.3% of Strike’s issued capital. The Company believes this transaction will provide signiﬁcant beneﬁts for shareholders in both the short and longer term. Initially, the simpliﬁcation of the AF shareholding structure will improve operational efﬁciency and reduce risks during the exploration and project execution phases. Strike also believes that over the longer term the simpliﬁed ownership structure enhances the ability to attract strategic partners to develop the Apurimac and Cusco Iron-Ore Projects if required. Strike also signed an exclusivity agreement with AF’s remaining shareholder, the D&C Group, giving Strike 90 days to negotiate in good faith the potential acquisition by Strike of D&C’s 44% shareholding in AF on pro rata terms to the IAC transaction described above. If Strike and D&C Group are successful in negotiating a deal Strike will move to 100% ownership and control of AF. If however the parties are unable to agree on the terms of the proposed share sale, then D&C Group has 10 business days to exercise an option to purchase from Strike, 50% of the AF shares Strike acquired from IAC on equivalent terms to the IAC deal. Under this transaction both Strike and D&C Group would hold 50% of the Shares in AF. In June 2011 Strike announced the initial JORC mineral resource for the Cusco Iron Ore Project in Perú (details of which can be found in the Review of Operations section above). The Cusco mineral resource, which is located on AF’s Santo Tomas concessions, is the second of the Company’s two JORC iron-ore Mineral Resources located in Perú. The Cusco Iron-Ore Project is located in the southern highlands of Perú within the highly prospective Andahuaylas-Yauri copper/iron belt. A review of historical drill samples has identiﬁed broad zones of anomalous copper, silver and molybdenum values which the Company plans to incorporate in a further review of the polymetallic potential for the region. Towards the end of the ﬁnancial year Strike entered into negotiations with Canadian iron-ore explorer, Cuervo Resources Inc. (Cuervo) for Strike to provide ﬁnancing to Cuervo in return for the option for Strike to purchase up to 49% of Cuervo through the exercise of Cuervo Share Warrants. Cuervo is a Perú-focused iron ore explorer which has concession within the Cusco geological region which are complementary to Strike’s own concession interests. This transaction forms part of Strike’s strategy of consolidating its position of as a major holder of high-quality iron ore concessions in the Apurimac and Cusco regions of Perú. These negotiations were successfully concluded in July 2011 and the key terms of the ﬁnancing agreement can be found in the “Events Subsequent to the Reporting Date” section below and Note 25 to the Financial Statements. 31 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT During the year, Strike, through its interest in AF, continued to progress development studies in relation to the Apurimac Iron-Ore Project, including product optimisation studies and transport trade-off analysis. As a part of the geological review a decision was made to continue the Company’s focus on increasing the resource inventory at both the Apurimac and Cusco Projects. This will principally comprise a major drilling campaign with the objectives of: (cid:115) Increasing the current iron-ore resources at Apurimac from the current 269 Mt at 57.3% Fe Resource to at least 500Mt, at a similar grade; and (cid:115) Increasing the Measured and Indicated Resource within the total Resource, at a similar grade. In June, Perú’s Presidential election resulted in the election of Ollanta Humala, a former army ofﬁcer. Mr. Humala’s election cast doubt over Perú’s ability to continue its strong growth seen over the past years, due to his perceived left-wing political views. However, subsequent to the election and appointment of key government ministers the economic outlook for Perú is viewed favourably. Other Matters Other than those mentioned above, there were no other material changes in the state of affairs of the Consolidated Entity during the ﬁnancial year. Events Subsequent to the Reporting Date Subsequent to the Reporting Date Strike entered into a ﬁnancing arrangement with Canadian iron-ore exploration company, Cuervo Resources Incorporated (Cuervo). Under this agreement Strike Resources Ltd has agreed to lend Cuervo up to 15m Canadian dollars, for the consideration of potentially earning up to 49.2% in Cuervo through the issue of share warrants to Strike. The funds loaned by Strike are to be used by Cuervo to advance exploration work on Cuervo’s Perúvian iron-ore concessions which are located in the same geological region as Strike’s concession interests in the Cusco region of Perú. Details about the ﬁnancing arrangement can be found in Note 25 to the Consolidated Financial Statements. Operations Review A detailed review of the operations of the Consolidated Entity can be found on pages 4 to 29 of this Annual Report. Other Matters The Directors are not aware of any other matters or circumstances at the date of this Directors’ Report, other than those referred to elsewhere in this Directors’ Report or the Financial Statements, that have signiﬁcantly affected or may signiﬁcantly affect the operations, the results of operations or the state of affairs of the Consolidated Entity in subsequent ﬁnancial years. Operating Results The Consolidated Entity made an operating loss for the ﬁnancial year of $24,891,619 (2010: proﬁt $19,961,626). Gain/Loss per Share Consolidated Basic earnings/(loss) per share (cents) Diluted earnings/(loss) per share (cents) 2011 2010 (18.95) (18.95) 15.35 14.95 Weighted-average number of ordinary shares outstanding during the year used in the calculation of basic earnings/(loss) per share 131,367,145 130,034,268 Dividends No dividends have been paid or declared during the ﬁnancial year. At the date of this Report no dividend has been recommended for payment in respect of the reporting period. Capital Raisings No capital raisings were undertaken during the current reporting period. 32 Summary of share capital changes during the reporting period Date Description 30/06/2009 Opening balance Issue price No. shares Value of issue Running balance of issued share capital (No.) 130,034,268 Movement in current period N/A - - - 30/06/2010 Closing balance 130,034,268 Movement in current period N/A 3,500,000 789,667 133,534,268 30/06/2011 Closing balance 133,534,268 Options Unlisted Directors’ and Employees options During the ﬁnancial year no unlisted Directors’ or Employees’ Options were exercised. The following unlisted employee’s options were issued during the ﬁnancial year: Date of issue Description of unlisted options 6 May 2011 Employee options Exercise price Expiry Date 23 March 2013 $1.30 $1.50 $1.75 No. of options 1,200,000 Vesting criteria All options vested at grant date Future Developments During the reporting year, the Australian government proposed legislating a new tax that was to place an additional tax burden on certain resource mining companies with producing resource projects within Australia. At the date of this Report it is unclear if the proposed tax or a variant of the tax will be imposed on Australian resource projects. As the ﬁnal structure of the proposed resource tax is unknown, the Company is unable to quantify how the tax will affect the Consolidated Entity’s Australian project including its future ﬁnancial performance. The Australian Government has proposed the introduction of a “Carbon Tax” which places a price on “carbon” emissions. At the date of this report the proposed legislation has not been enacted, therefore the Company is unable to quantify how the proposed emissions pricing scheme will affect the Consolidated Entity’s future ﬁnancial performance. Environmental Regulation and Performance The Consolidated Entity notes the reporting requirements of both the Energy Efﬁciency Opportunities Act 2006 (EEOA) and the National Greenhouse and Energy Reporting Act 2007 (NGERA). The Energy Efﬁciency Opportunities Act 2006 requires an affected company to assess its energy usage, including the identiﬁcation, investigation and evaluation of energy saving opportunities and to report publicly on the assessments undertaken, including what action the company intends to take as a result. The National Greenhouse and Energy Reporting Act 2007 requires affected companies to report their annual greenhouse gas emissions and energy use. The Consolidated Entity has determined that it does not operate a recognised facility requiring registration and reporting under the NGERA and, in any event, it would fall under the threshold of greenhouse gas emissions required for registration and reporting. Similarly, the Consolidated Entity’s energy consumption would fall under the threshold required for registration and reporting under the EEOA. The Consolidated Entity is not otherwise subject to any particular or signiﬁcant environmental regulation under either Commonwealth or State legislation. To the extent that any environmental regulations may have an incidental impact on the Consolidated Entity’s operations, the Directors are not aware of any breach by the Consolidated Entity of those regulations. 33 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT Directors and Company Secretary On 3 February 2011, Strike’s then Chairman, Mr Shanker Madan retired from his position as a Director of the Company to focus on his other business interest. Mr Farooq Khan and Mr Farhad Moshiri (along with his alternate Director, Mr Mark Horn) also resigned from their positions on Strike’s Board with the aim of moving the Board’s composition into line with current leading practice in corporate governance. Information concerning Directors who held ofﬁce at the reporting date or during the reporting period can be found below. Current members of the Board of Directors and Company Secretary Malcolm Richmond Chairman Appointed 13 July 2011 Previous positions held Acting Chairman (3 February 2011 to 13 July 2011) Non-Executive Director (25 October 2006 to 3 February 2011) Qualiﬁcations B. Science Hons (Metallurgy) and B. Commerce Merit (Econs) (New South Wales) Experience Professor Richmond has 30 years experience with the Rio Tinto and CRA Groups in a number of positions including: Vice President, Strategy and Acquisitions; Managing Director, Research and Technology; Managing Director Development (Hamersley Iron Pty Limited) and Director of Hismelt Corporation Pty Ltd. He was formerly Deputy Chairman of the Australian Mineral Industries Research Association and Vice President of the WA Chamber of Minerals and Energy. Professor Richmond also served as a Member on the Boards of a number of public and governmental bodies and other public listed companies. He is a qualiﬁed metallurgist and economist with extensive senior executive and board experience in the resource and technology industries both in Australia and internationally. His special interests include corporate strategy and the development of markets for internationally traded minerals and metals - particularly in Asia. Professor Richmond is a nominee director on the Board of Cuervo Resources Inc. for Strike Resources Ltd. Professor Richmond is currently a Visiting Professor at the Graduate School of Management and School of Engineering, University of Western Australia, a Fellow of the Australian Academy of Technological Sciences & Engineering, a Fellow of Australian Institute of Mining and Metallurgy and a Member of Strategic Planning Institute (US). Special responsibilities Chairman of the Remuneration and Nomination Committee and member of the Audit Committee Relevant interest in securities Shares Unlisted director options 100,000 (indirectly) 1,700,000 Other current directorships in listed entities Former directorships in other listed entities in past 3 years Non-Executive Director of: MIL Resources Limited (MGK) (appointed August 2001) Advanced Braking Technology Ltd (ABV) (appointed August 2006) Cuervo Resources Incorporated (appointed 29 July 2011) Structural Monitoring Systems Plc (SMN) (17 October 2006 to 10 November 2010) 34 Ken Hellsten Managing Director Appointed 24 March 2010 Qualiﬁcations B. Sc Geology Hons (Monash University) Experience Relevant interest in securities Other current directorships in listed entities Former directorships in other listed entities in past 3 years Mr. Hellsten is a geologist with over 30 years experience in the resources industry. He has been employed in senior executive roles ranging from exploration to development and operations with both large multi-national and smaller resources companies, including BHP Billiton, Centaur Mining, Ironclad Mining and Polaris Metals. During the past 20 years Mr. Hellsten has lead teams responsible for the deﬁnition and development of signiﬁcant gold and nickel projects. Prior to his appointment to Strike, he served as Managing Director of Polaris Metals NL, where he added signiﬁcant value for shareholders by progressing that company’s iron-ore assets towards development and leading a strategic partner search, which ultimately resulted in the acquisition of Polaris by Mineral Resources Limited in January 2010. Mr. Hellsten is a nominee director on the Board of Cuervo Resources Inc. for Strike Resources Ltd. Mr. Hellsten is a fellow of the Australasian Institute of Mining and Metallurgy and a member of the Australian Institute of Company Directors. He has previously served on the Executive Councils of the Association of Mining and Exploration Companies and the Northern Territory Chamber of Mines. Shares 217,083 Non-Executive Director of: Heron Resources Ltd (HRR) (appointed December 2006) Brierty Limited (BYL) (appointed February 2010) Cuervo Resources Incorporated (appointed July 2011) Polaris Metals NL (18 March 2009 to 7 January 2010) Matthew Hammond Non-Executive Director Appointed 25 September 2009 Qualiﬁcations BA (Hons) (Bristol) Experience Mr. Hammond is the Group Managing Director of Mail.ru, one of the largest European internet businesses. Prior to that he was Group Strategist at Metalloinvest Holdings, where he had responsibility for part of the non-core asset portfolio. Prior to joining Metalloinvest, Mr. Hammond was a director at Credit Suisse, where he worked for 12 years as an investment analyst. During his time with Credit Suisse Mr. Hammond was ranked number one 8 times in the Extell, Institutional Investor and Reuters surveys. Special responsibilities Member of the Audit and Remuneration and Nomination Committees Relevant interest in securities Nil Other current directorships in listed entities Mail.ru. (appointed April 2011) Nautilus Minerals (appointed Oct 2009) Puricore Inc. (appointed May 2010) Former directorships in other listed entities in past 3 years Nil 35 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT William Johnson Non-Executive Director Appointed 30 April 2010 Previous position held Executive Director (14 July 2006 to 30 April 2010) Qualiﬁcations MA (Oxon), MBA Experience Mr. Johnson commenced his career in resource exploration and has held senior management and executive roles in a number of public companies in Australia, New Zealand and Asia. Most recently, Mr. Johnson has acted as an executive and non- executive director of a number of ASX listed resource exploration and development companies and brings a considerable depth of experience in business strategy, investment analysis, ﬁnance and execution. Special responsibilities Chairman of the Audit Committee and member of the Remuneration and Nomination Relevant interest in securities Other current directorships in listed entities Former directorships in other listed entities in past 3 years Committee Unlisted Directors’ Options 1,240,000 Executive Director of: Orion Equities Limited (appointed February 2003) Bentley Capital Limited (appointed March 2009) Alara Resources Limited (appointed October 2009) Drillsearch Energy Limited (24 October 2006 to 11 August 2008) Scarborough Equities Limited (29 November 2004 to 13 March 2009) Company Secretary Stephen Gethin Company Secretary Appointed 30 April 2010 Qualiﬁcations Barrister and Solicitor of the Supreme Court of Western Australia, GradCert Tax (Curtin) Experience Mr. Gethin previously served as Company Secretary and General Counsel for ERG Limited from 2006 to 2008, when he joined Strike Resources as General Counsel. Mr. Gethin worked in the Corporate and Finance practice group in a national law ﬁrm from 2001 to 2004. He has extensive experience in capital raisings, corporate transactions and project agreements in Australia and overseas. Directors ceasing to hold ofﬁce during the year Farooq Khan Past Non-Executive Director (ceased as a Director on 3 February 2011) Appointed 30 April 2010 Previous position held Executive Director (3 September 1999 to 30 April 2010) Qualiﬁcations BJuris, LLB. (Western Australia) Experience Mr. Khan is a qualiﬁed lawyer having previously practised principally in the ﬁeld of corporate law. Mr. Khan has extensive experience in the securities industry, capital markets and the executive management of ASX-listed companies. In particular, Mr. Khan has guided the establishment and growth of a number of public listed companies in the investment, mining and ﬁnancial services sectors. He has considerable experience in the ﬁelds of capital raisings, mergers and acquisitions and investments. Special responsibilities Member of the Audit Committee Member of the Remuneration and Nomination Committee Relevant interest in securities at the date ceased being a director Unlisted director options Shares Shares 530,010 (directly) 16,890,800 (indirectly) 3,050,000 (directly) 36 Other current directorships in listed entities Chairman and Managing Director of: Queste Communications Ltd (QUE) (since 10 March 1998) Chairman of: Orion Equities Limited (appointed October 2006) Bentley Capital Limited (appointed December 2003) Executive Director of: Alara Resources Limited (AUQ) (appointed May 2007) Former directorships in other listed entities in past 3 years Interstaff Recruitment Limited (27 April 2006 to 18 March 2011) Scarborough Equities Limited (29 November 2004 to 13 March 2009) H. Shanker Madan Former Chairman (ceased as Chairman and Director on 3 February 2011) Appointed 24 March 2010 Previous position held Managing Director (26 September 2005 to 24 March 2010) Qualiﬁcations Honours and Masters Science degrees in Applied Geology Experience Mr. Madan has had world-wide experience in the exploration and evaluation of mineral deposits for various commodities. Mr. Madan has been a Manager with Hamersley Iron, Group Leader with BHP Minerals, Chief Geologist with Hancock and Wright Prospecting and a Senior Geological Consultant to the Rio Tinto Group. Mr. Madan has managed a range of mineral evaluation studies in Iran, Brazil and Western Australia for BHP, Rio Tinto and Hamersley Iron. He has also acted as a consultant to Rio Tinto, Ashton Mining and others on mineral projects in Brazil, South Africa, India, the Philippines, Fiji and the United States, working on a range of iron ore, diamond, gold, copper and chromate deposits. Mr. Madan has been involved in the discovery of 3 world-class iron deposits in Western Australia for Texas Gulf and BHP Minerals. From 1997 to 2001, Mr. Madan managed the evaluation of resource projects for Hamersley Iron and completed a resource due diligence study of the billion-dollar West Angelas project in the Pilbara region of Western Australia. Mr. Madan is a member of The Australian Institute of Mining and Metallurgy. Special responsibilities Chair of the Board Member of the Audit Committee Shares Unlisted director options 496,343 6,130,000 Managing Director of: Alara Resources Limited (appointed May 2007) Nil Relevant interest in securities at the date ceased being a director Other current directorships in listed entities Former directorships in other listed entities in past 3 years 37 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT A. Farhad Moshiri Past Non-Executive Director (ceased as a Director on 3 February 2011) Appointed 29 July 2008 Qualiﬁcations B.Econ (Hons), FCCA Experience Farhad Moshiri graduated from the University of London with an honours degree in Economics and Statistics and subsequently qualiﬁed as a Chartered Certiﬁed Accountant (FCCA). He worked for a number of the major accounting ﬁrms, latterly focusing on ﬁnancial services. He joined Global Natural Energy, a London-listed company with energy and commodity interests, where he was the Chief Executive for eight years. He helped set up Gallagher Holdings Limited, where he has been instrumental in developing and acquiring its various interests in mining and metals, including its holding in Metalloinvest, a leading Russian mining and metals group where he is Executive Chairman. Farhad Moshiri sits on a number of other boards. Relevant interest in securities Other current directorships in listed entities Former directorships in other listed entities in past 3 years Nil Nil Nil Mark P. M. Horn Past Alternate Director for A. Farhad Moshiri (ceased as a Director on 3 February 2011) Appointed Qualiﬁcations Experience 29 July 2008 B.A. (Hons) (First Class), M.A. (Rhodes), LLB (Hons) (London), Dip.B.Admin (Manchester), and an FSI (Dip) Mark Horn holds a B.A. (Hons) (First Class), M.A. (Rhodes), LLB (Hons) (London), Dip.B.Admin (Manchester), FSI (Dip). He is also qualiﬁed as a Barrister of the Honourable Society of Lincoln’s Inn. He is the CEO of M. Horn & Co., an FSA authorised corporate ﬁnance boutique based in the UK specialising in international mining and energy. He has worked in the City of London since 1987 as a fund manager, analyst and corporate ﬁnancier, and a mining and oil analyst. Relevant interest in securities Nil Special responsibilities Chairman of the Audit Committee Other current directorships in listed entities Nil Former directorships in Nil other listed entities in past 3 years 38 Directors’ Meetings The following table sets out the number of meetings of the Company’s Directors and Board Committees held during the ﬁnancial year (excluding Directors’ circulating resolutions) and the number of meetings attended by each Director of the Company: Name of Director Board Meetings Committee Meetings (Audit) Committee Meetings (Remuneration/ Nomination) Attended Meetings held1 Attended Meetings held1 Attended Meetings held1 7 7 7 4 4 4 7 Hammond, M. Hellsten, K. Johnson, W. Khan, F.2 Madan, H.S.3 Moshiri, A. F. 4 (represented by Mark Horn as his Alternate Director) Richmond, M. 5 7 7 4 4 4 6 1 Meetings held while the Director was a member. 2 Mr Khan ceased as a Director on 3 February 2011. 3 Mr Madan ceased as a Director on 3 February 2011. 4 Mr Moshiri ceased as a Director on 3 February 2011. * Not a member of the relevant committee Board Committees 1 * 1 1 1 1 2 1 * 1 1 1 1 2 1 * - 1 * * 1 1 * - 1 * * 1 In addition to the Board of Directors the Company has an Audit Committee and a Remuneration and Nomination Committee. Each Committee consisted of three Non-Executive Directors. The Audit Committee was established to assist the Board in overseeing the Consolidated Entity’s ﬁnancial reporting and risk management systems. In addition to these matters, the Audit Committee Charter states that the Audit Committee assists the Board in overseeing the Consolidated Entity’s external audit function. The Audit Committee reports to the Board on these matters at least twice a year and more frequently if required. The Remuneration and Nomination Committee was established to assist the Board in the selection and retention of suitably-qualiﬁed directors and senior executives. Amongst its duties, the Remuneration and Nomination Committee is responsible for reviewing the performance and remuneration of the Board members and senior management of the Company. As part of the process of selecting and retaining suitable senior executives, the Remuneration and Nomination Committee is charged with the setting of goals for senior executives and the establishment of incentive schemes. Remuneration Report (Audited) This report details the nature and amount of remuneration for each Director and executive, being a company secretary or senior manager with authority and responsibility for planning, directing and controlling the major activities of the Consolidated Entity, directly or indirectly (Key Management Personnel or KMP). The information provided under headings (1) to (5) below has been audited as required under section 308(3C) of the Corporations Act 2001. (1) Remuneration Policy The Board, with guidance from the Remuneration and Nomination Committee, determines the remuneration structure of all Key Management Personnel having regard to the Consolidated Entity’s strategic goals, scale and scope of operations and other relevant factors, including experience and qualiﬁcations, length of service, market practice (including available data concerning remuneration paid by other listed companies, in particular companies of comparable size and nature) and the duties and responsibilities of the Key Management Personnel. 39 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT Fixed cash short-term employment beneﬁts: The Key Management Personnel of the Company are paid a ﬁxed amount per annum plus applicable employer superannuation contributions, where applicable. The Non-Executive Directors of the Company are paid a maximum aggregate base remuneration of $500,000 per annum inclusive of employer superannuation contributions where applicable, to be divided as the Board determines appropriate. During the year the aggregate fees paid to Non-Executive Directors of the Company were as follows: Director Ofﬁce held Gross salary/fees and superannuation for the period Special exertions Super- annuation Hammond, M. Non-Executive Director Horn, M.3 Alternate Director for Farhad Moshiri Johnson, W. Executive/Non-Executive Director Khan, F.1 Executive/Non-Executive Director Madan, H.S.2 Non-Executive Chairman Moshiri, F.3 Non-Executive Director Fees 40,635 - 45,000 61,602 35,821 22,404 Richmond, M. Non-Executive Director/ Chairman - 5,600 33,600 14,000 32,000 14,000 - - Total 205,462 99,200 1. Mr. Khan ceased as a Director on 3 February 2011. 2. Mr. Madan ceased as a Director on 3 February 2011. 3. Mr. Moshiri ceased as a Director on 3 February 2011. - - 5,310 8,424 4,483 - 55,436 73,653 Total fees 46,235 33,600 64,310 102,026 54,304 22,404 55,436 378,315 Special exertions and reimbursements: Pursuant to the Company’s Constitution, each Director is also entitled to receive: (cid:115) Payment for the performance of extra services and the undertaking of any executive or other work for the Company beyond his or her general duties; and (cid:115) Payment for travelling and other expenses properly incurred by a Director in attending meetings of the Company or the Board or in connection with the Company’s business. Long-term beneﬁts: Other than termination beneﬁts disclosed in the section titled “Service Agreements” below, Key Management Personnel have no right to termination payments save for payment of accrued unused leave. Post-employment beneﬁts: Other than the legislated contributions to nominated complying superannuation funds of employees, the Company does not presently provide retirement beneﬁts to Key Management Personnel. Performance-related beneﬁts: Details of performance-related beneﬁts provided to Key Management Personnel can be found in the section below titled “Service Agreements”. Financial performance of the Company: There is no relationship between the Company’s current remuneration policy and the Company’s ﬁnancial performance other than the exercise price of options issued to Key Management Personnel being priced at values higher than the trading price of the underlying shares at the time the options are granted. The exercise price of these options are structured to incentivise KMP to generate value for shareholders through the increase in the value of the Company. Equity-based beneﬁts: Eligible Key Management Personnel are offered equity-based remuneration where the Board decides that it is appropriate to do so. (2) Details of Remuneration of Key Management Personnel Amounts of remuneration Details of the remuneration of the Directors, the Key Management Personnel of the Group (as deﬁned in AASB 124 Related Party Disclosures) and the ﬁve highest-paid executives of Strike Resources Limited and the Consolidated Entity are set out in the following tables. 40 The Key Management Personnel of the Group are the Directors of Strike Resources Limited (see pages 34 to 38 above) and those executives that report directly to the Managing Director during the year being: (cid:115) Stephen Gethin Company Secretary & General Counsel (cid:115) David Lim Chief Financial Ofﬁcer (cid:115) Michael Lowry General Manager – Berau (cid:115) Andrew Napier Principal Process Engineer The above-listed Key Management Personnel are also among the 5 highest remunerated Group and/or Company executives as must be disclosed by the Corporations Act 2001. Key Management Personnel of the Group and other executives of the Company and the Group Key Management Personnel Short-term beneﬁts Post- employ- ment beneﬁts Other long- term beneﬁts Termi- nation beneﬁts Equity- based beneﬁts Total Options as a % of total remun- eration Cash salary and fees $ Cash bonus $ Non- cash beneﬁt $ Super- annuation $ Long service leave $ Options $ $ $ % 2011 Non- Executive Directors: Hammond, M. 46,235 33,600 59,000 93,602 49,821 22,404 - Horn, M.3 Johnson, W. Khan, F.1 Madan, H.S.2 Moshiri, F.3 Richmond, R. Executive Director: - - - - - - - - - - - - - - - - 5,310 8,424 4,483 - 55,436 Hellsten, K. 325,000 25,000 41,230 29,250 Other key management personnel: Gethin, S. Lim, D. Lowry, M.4 Napier, A. 131,738 193,211 295,973 3,431 3,600 7,016 - - 13,324 160,655 2,050 1,456 67,550 17,713 21,181 14,481 Total 1,411,239 34,081 63,026 223,828 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 46,235 33,600 64,310 102,026 54,304 22,404 55,436 420,480 12,197 221,932 12,197 226,721 - - 330,478 178,642 24,394 1,756,568 - - - - - - - - 5% 5% - - 41 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT Key Management Personnel Short-term beneﬁts Post- employ- ment beneﬁts Other long- term beneﬁts Termi- nation beneﬁts Equity- based beneﬁts Total Options as a % of total remun- eration Cash salary and fees $ Cash bonus $ Non- cash beneﬁt $ Super- annuation $ Long service leave $ Options $ $ $ % 2010 Non- Executive Directors: Hammond, M. 22,962 Ho, V. Horn, M. Khan, F. 99,629 36,400 244,580 Johnson, W. 95,725 Madan, H.S. 312,435 Moshiri, F. 30,000 Richmond, M. 53,200 Stephenson, J. 42,054 Executive Director: Hellsten, K. 85,000 Other key management personnel: Gethin, S. Hobson, M. Lim, D. Lowry, M. Total 121,965 231,651 101,077 230,942 1,707,620 - - - - - - - - - - - - - - - - - - - - 4,445 - - - - - 9,097 21,848 - - 22,203 61,196 8,589 42,631 - 33,706 3,785 74 7,650 6,575 - 926 19,236 31,256 65,343 20,849 9,097 51,071 - - - - - - - - - - 22,962 130,574 36,400 327,979 104,314 - - - - - - 423,719 783,230 54% - - - - - - - - - - - - 30,000 86,906 45,839 92,724 193,883 405,405 111,100 - - - - - - - 5,729 306,978 2% - - - - - - - - 152,905 - - - - 274,021 83,044 152,905 429,448 2,678,294 1. 2. 3. 4. Mr. Khan ceased as a Director on 3 February 2011. Mr. Madan ceased as a Director on 3 February 2011. Mr. Moshiri ceased as a Director on 3 February 2011 (Mr. Horn was Mr. Moshiri’s alternate). Mr. Lowry ceased as an employee of the Company on 30 April 2011. Cash fees paid to the Non-Executive Directors during the year include payments for additional services or the undertaking of any executive or other work for the Consolidated Entity beyond their general Non-Executive Director’s duties. The value of equity-based beneﬁts are based on the fair value of KMP’s options (vested and unvested as at the reporting date). This is described in more detail in section three (3) of this Remuneration Report. The relative proportions of remuneration received during the year that are linked to performance and those that are ﬁxed are as follows: 42 Name Executive Directors Hellsten, K. Other Key Management Personnel Gethin, S. Lim, D. Lowry, M. Napier, A. Fixed remuneration At risk – STI At risk – LTI# 93% 93% 93% 100% 99% 7% 2% 2% - 1% - 5% 5% - - # Long-term incentives relate to options issued to Key Management Personnel and the percentages disclosed are based on the value of the options expensed during the reporting period. Service agreements: Details of the material terms of Service Agreements with Key Management Personnel are as follows: (cid:115) Mr S. Gethin’s service agreement does not contain any incentive bonuses. Details of Mr Gethin’s service agreement are as follows: - Commencement date – 4 March 2008 - Base salary - $206,422 p.a. (cid:115) Mr K. Hellsten’s service agreement contains incentive bonuses linked to the successful increase in the Consolidated Entity’s resource inventory, completion of feasibility studies and the successful development of the Consolidated Entity’s projects. These bonuses are designed to incentivise Mr Hellsten to advance the Consolidated Entity’s projects to the production phase. Details of Mr Hellsten’s service agreement are as follows: - Commencement date – 24 March 2010 - Base salary - $325,000 p.a. - Performance incentives: o Gross cash bonus of $100,000 or 30% of base salary per year. In the ﬁrst year the bonus will be up to $100,000 in 3 tranches as outlined below: (cid:115) $50,000, payable if Apurimac Ferrum S.A. (AF) increases the JORC iron ore Resource at its Apurimac Project to 400 million tonnes (Mt) within 12 months of his commencement date; (cid:115) $25,000 payable if AF commences a bankable feasibility study into an iron ore mine on its Apurimac Project concessions within 12 months of his commencement date; and (cid:115) $25,000 payable if Strike develops or disposes of its interest in the Berau coal project within 6-9 months from his commencement date. During the reporting period the above cash bonuses were forfeited by Mr. Hellsten as the performance criteria were not met. - Options – Mr Hellsten is to be issued the following options over the shares of Strike Resources, subject to shareholder approval. o 333,334 options, with an exercise price of $2.25, vesting on shareholder approval of the issue of the options; o 333,333 options, with an exercise price of $2.50, vesting on shareholder approval of the issue of the options; and o 333,333 options, with an exercise price of $2.75, vesting on shareholder approval of the issue of the options. At the date of this report no options have been granted to Mr Hellsten. - Termination Beneﬁt – 6 months gross base salary on termination other than for termination due to: o Misconduct; o Breach of contract; or o Removal as a Director by shareholders. 43 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT (cid:115) Mr D. Lim’s service agreement does not contain any incentive bonuses. Details of Mr Lim’s service agreement are as follows: - Commencement date – 9 December 2009 - Base salary - $206,422 p.a. (cid:115) All contracts with Key Management Personnel may be terminated by each party, with notice periods from 1 - 3 months. No speciﬁc termination beneﬁts are payable on termination of the service agreements other than those payable to Mr Hellsten. (cid:115) Other than those listed above, no other members of Key Management Personnel have entitlements to cash bonuses included in their service agreements. (cid:115) Members of the Consolidated Entity’s Key Management Personnel are entitled to participate in the Consolidated Entity’s employee share option plan. (3) Unlisted Directors’ and employees’ options During the year 1,200,000 options over ordinary shares of the Company were granted to members of the Consolidated Entity’s Key Management Personnel for no consideration. Key inputs for the valuation of the granted options are contained in the following table: Grant date 6/5/11 6/5/11 6/5/11 Description of unlisted options Exercise price Share price at grant date Risk-free rate Vesting date/ condition Expected volatility of Company’s share price Dividend yield $1.30 (23 March 2013) Employee Options $1.50 (23 March 2013) Employee Options $1.75 (23 March 2013) Employee Options $1.30 $0.365 5.090% Vested on 68% issue $1.50 $0.365 5.090% Vested on 68% issue $1.75 $0.365 5.090% Vested on 68% issue nil nil nil The fair value of Director and employee options are expensed on a pro rata basis, from their grant date, over their vesting period. Fair values are determined as at grant date using a Black-Scholes option valuation model that takes into account conditions such as the exercise price, the term of the option, the underlying share price as at grant date, dividends paid, the expected price volatility of the underlying shares and the risk-free interest rate for the term of the option. Details of options over ordinary shares in the Company provided as remuneration to each member the Consolidated Entity’s Key Management Personnel are set out below. When exercisable, each option is convertible into one ordinary share of Strike Resources Ltd. Name Gethin, S. Lim, D. Total Number of options granted Value of options at grant date1 Number of options vesting during the year Number of options lapsed during the year Value of lapsed options 600,000 600,000 1,200,000 $12,197 $12,197 $24,394 600,000 600,000 1,200,000 - - - - - - 1. The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration. There were no shares issued as a result of the exercise of Director or employee options which were issued as part of remuneration, during the current year (2010: nil). For each cash bonus and grant of options included in the tables on pages 41-42 and 44, the percentage of the available bonus or grant that was paid, or that vested, in the ﬁnancial year, and the percentage that was forfeited because the person did not meet the service or performance criteria is set out below. No part of the bonus is payable in a future periods. 44 Bonus Share-based compensation beneﬁts (options) Name Gethin, S. Hellsten, K. Lim, D. Paid % Forfeited % Year granted Vested % Forfeited % 100% 20% 100% - 80% - 2011 - 2011 100% - 100% - - - Financial years in which the options may vest Maximum total value of grant yet to vest $ - - - - - - Unlisted options held by Key Management Personnel as at the reporting date are as follows: No. Granted Grant date Vested Vest date & exercisable Expiry date Directors Value per option at grant date $ Fair value at grant date $ Exercise price $ Johnson, W. 390,000 03/12/2007 195,000 03/12/2007 02/12/2012 3.978 0.9541 186,050 500,000 13/09/2006 150,000 13/09/2006 12/09/2011 0.938 0.5580 83,700 195,000 03/12/2008 02/12/2012 3.978 0.9541 186,050 150,000 13/09/2007 12/09/2011 0.938 0.5580 83,700 200,000 13/09/2008 12/09/2011 2.788 0.5580 111,600 350,000 07/09/2007 105,000 07/03/2007 06/03/2012 2.788 1.1357 119,249 105,000 07/03/2008 06/03/2012 2.788 1.1357 119,249 140,000 07/03/2009 06/03/2012 2.788 1.1357 158,998 Richmond, M. 600,000 03/12/2007 300,000 03/12/2007 02/12/2012 3.978 0.9541 286,230 500,000 07/03/2007 150,000 07/03/2007 06/03/2012 2.078 1.3628 204,426 300,000 03/12/2008 02/12/2012 3.978 0.9541 286,230 150,000 07/03/2008 06/03/2012 2.078 1.3628 204,426 200,000 07/03/2009 06/03/2012 2.078 1.3628 272,568 600,000 07/03/2007 180,000 07/03/2007 06/03/2012 2.788 1.0626 191,265 180,000 07/03/2008 06/03/2012 2.788 1.0626 191,265 240,000 07/03/2009 06/03/2012 2.788 1.0626 255,020 Other Key Management Personnel Gethin, G. 250,000 04/06/2008 83,334 04/03/2008 05/03/2013 2.880 1.2865 107,213 83,333 04/09/2008 05/03/2013 2.880 1.2865 107,212 83,333 04/03/2009 05/03/2013 2.880 1.2865 107,212 600,000 06/05/2011 200,000 06/05/2011 23/03/2013 1.300 0.0232 200,000 06/05/2011 23/03/2013 1.500 0.0217 200,000 06/05/2011 23/03/2013 1.750 0.0161 Lim, D. 600,000 06/05/2011 200,000 06/05/2011 23/03/2013 1.300 0.0232 200,000 06/05/2011 23/03/2013 1.500 0.0217 200,000 06/05/2011 23/03/2013 1.750 0.0161 4.632 4,349 3,216 4.632 4,349 3,216 45 STRIKE RESOURCES ANNUAL REPORT 2011 DIRECTORS’ REPORT (4) Other beneﬁts provided to key management personnel No Key Management Personnel member has, during or since the end of the 30 June 2011 ﬁnancial year, received or become entitled to receive a beneﬁt, other than a remuneration beneﬁt as disclosed above by reason of a contract made by the Company or a related entity or with a ﬁrm of which the Key Management Personnel is a member, or with a company in which they have a substantial interest. (5) Securities trading policy The Company’s Share Trading Policy regulates Key Management Personnel’s dealings in the Company’s securities. The Policy prohibits: (a) subscribing for, purchasing or selling Company securities or entering into an agreement to do any of those things; and (b) advising, procuring or encouraging another person (including a family member, friend, associate, colleague, family company or family trust) to trade in Company securities, whilst in possession of market-sensitive information, prior to disclosure of that information to the market and thereafter until adequate time has elapsed for this to be reﬂected in the security’s price, in accordance with the Corporations Act. The Policy also prohibits communicating inside information to any other person when the Key Management Personnel should reasonably know that they may deal in the Company’s securities or encourage another person to do so. In order to further reduce the risk of inappropriate securities dealing, Key Management Personnel must not deal in Company securities without the written consent of the “Trading Ofﬁcers” nominated in the Company’s Share Trading Policy. Consent will not be given during certain “Prohibited Periods” before key reporting dates or while inside information exists. Key Management Personnel must inform the Company Secretary of all transactions they enter into involving the Company’s securities to enable disclosure to the market, where required. A copy of Strike’s Share Trading Policy can be found on the Company’s website at www.strikeresources.com.au This concludes the audited remuneration report. 46 DIRECTORS’ AND OFFICERS’ INSURANCE The Directors have not included details of the nature of the liabilities covered or the amount of premiums paid in respect of a Directors’ and Ofﬁcers’ liability and legal expenses insurance contract, as such disclosure is prohibited under the terms of the contract. DIRECTORS’ DEEDS In addition to the rights of indemnity provided under the Company’s Constitution (to the extent permitted by the Corporations Act) the Company has also entered into a deed with each of the Directors (other than Matthew Hammond and Ken Hellsten) to regulate certain matters between the Company and each Director. The deeds cover the periods whilst the Director holds ofﬁce with the Company and subsequent to the Director ceasing to be an ofﬁcer of the Company. Matters dealt with by the deeds include the following: (i) The Company’s obligation to indemnify a Director for liabilities or legal costs incurred as an ofﬁcer of the Company (to the extent permitted by the Corporations Act); and (ii) Subject to the terms of the deed and the Corporations Act, the Company may advance monies to the Director to meet any costs or expenses of the Director incurred in circumstances relating to the indemnities provided under the deed and prior to the outcome of any legal proceedings brought against the Director. PAYMENTS TO AUDITORS Details of the amounts paid or payable to the auditor (BDO Audit (WA) Pty Ltd) and to other parties for work performed on behalf of the auditor, for audit and non-audit services provided during the ﬁnancial year are set out below: Audit & Review Fees – BDO Audit (WA) Pty Ltd Fees for non-audit services Other afﬁliated practices of the BDO International Network Total 51,934 795 7,187 59,916 The Board is satisﬁed that the provision of non-audit services by the auditor during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Board is satisﬁed that the nature of the non-audit services disclosed above did not compromise the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. BDO Audit (WA) Pty Ltd continues in ofﬁce in accordance with section 327B of the Corporations Act 2001. AUDITOR’S INDEPENDENCE DECLARATION A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 forms part of this Directors’ Report and is set out on the following page. LEGAL PROCEEDINGS (DERIVATIVE ACTIONS) ON BEHALF OF COMPANY No person has applied for leave of a court to bring proceedings on behalf of the Consolidated Entity or intervene in any proceedings to which the Consolidated Entity is a party for the purpose of taking responsibility on behalf of the Consolidated Entity for all or any part of such proceedings. The Consolidated Entity was not a party to any such proceedings during and since the ﬁnancial year ended 30 June 2011. Signed for and on behalf of the Directors in accordance with a resolution of the Board. Malcolm Richmond Chairman 23 September 2011 Ken Hellsten Managing Director 47 STRIKE RESOURCES ANNUAL REPORT 2011 AUDITOR’S INDEPENDENCE DECLARATION Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia 23 September 2011 The Directors Strike Resources Limited Level 8, The Forrest Centre 221 St George’s Terrace PERTH WA 6000 Dear Sirs, DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF STRIKE RESOURCES LIMITED As lead auditor of Strike Resources Limited for the year ended 30 June 2011, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (cid:135) (cid:135) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. This declaration is in respect of Strike Resources Limited and the entities it controlled during the period. Brad McVeigh Director BDO Audit (WA) Pty Ltd Perth, Western Australia BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 48 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2011 Revenue from continuing operations Other income Operating expenses Personnel costs Other corporate costs Net gain on ﬁnancial instruments held as fair value through proﬁt and loss Impairment expense Gain on loss of control of subsidiaries Proﬁt on sale of as available-for-sale ﬁnancial assets Loss on sale of ﬁxed assets Foreign exchange loss Proﬁt/(loss) before income tax Income expense tax Proﬁt/(loss) for the year Proﬁt/(loss) is attributable to: Equity holders of Strike Resources Limited Other comprehensive losses Exchange differences on translation of foreign operations Other comprehensive losses net of tax Total comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year is attributable to: Equity holders of Strike Resources Limited Basic earnings/(loss) per share (cents) Diluted earnings/(loss) per share (cents) Note 2 2 2 3 6 6 Consolidated Entity 2011 $ 2,663,221 1,704,408 4,367,629 (346,057) (2,210,535) (1,682,301) - (22,644,435) - 1,785,620 (85,665) (3,636,311) (24,452,055) (439,564) (24,891,619) 2010 $ 2,191,586 1,797,640 3,989,226 (392,261) (3,400,012) (3,020,361) 440,295 (6,315,256) 28,659,995 - - - 19,961,626 - 19,961,626 (24,891,619) 19,961,626 (271,626) (271,626) (25,163,245) (4,669,610) (4,669,610) 15,292,016 (25,163,245) 15,292,016 (18.95) (18.95) 15.35 14.95 This consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 49 STRIKE RESOURCES ANNUAL REPORT 2011 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2011 Current assets Cash and cash equivalents Trade and other receivables Financial assets at fair value through proﬁt and loss Total current assets Non-current assets Trade and other receivables Property, plant and equipment Available-for-sale ﬁnancial assets Exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Provisions Total current liabilities Non-current liabilities Trade and other payables Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Note 7 8 11 8 10 11 13 14 15 14 16 17 Consolidated Entity 2011 $ 34,176,329 688,261 - 34,864,590 97,806 849,460 - 8,239,883 9,187,149 2010 $ 41,445,175 890,338 327,190 42,662,703 539 1,237,714 1,096,500 21,129,916 23,464,669 44,051,739 66,127,372 2,785,485 56,545 2,842,030 132,999 132,999 564,586 118,335 682,921 14,631 14,631 2,975,029 697,552 41,076,710 65,429,820 145,632,412 12,149,433 (116,705,135) 144,846,669 12,632,008 (92,048,857) 41,076,710 65,429,820 This consolidated statement of ﬁnancial position should be read in conjunction with the accompanying notes. 50 6 2 6 , 1 6 9 , 9 1 ) 0 1 6 , 9 6 6 , 4 ( 6 1 0 , 2 9 2 , 5 1 8 4 4 , 9 2 4 - - - - 0 2 8 , 9 2 4 , 5 6 ) 9 1 6 , 1 9 8 , 4 2 ( ) 6 2 6 , 1 7 2 ( ) 5 4 2 , 3 6 1 , 5 2 ( 2 9 3 , 4 2 7 6 6 , 9 8 7 ) 4 2 9 , 3 ( 0 1 7 , 6 7 0 , 1 4 - - - - - - - - ) 0 5 8 , 9 3 4 ( ) 0 5 8 , 9 3 4 ( - 8 4 4 , 9 2 4 - - - 8 4 4 9 2 4 , - - 0 2 8 , 9 2 4 , 5 6 ) 7 5 8 , 8 4 0 , 2 9 ( 2 8 2 , 1 9 9 2 1 , ) 4 7 2 9 5 3 ( , 9 6 6 , 6 4 8 , 4 4 1 6 2 6 , 1 6 9 , 9 1 , 6 2 6 1 6 9 9 1 , ) 0 1 6 , 9 6 6 , 4 ( - 6 1 0 , 2 9 2 , 5 1 6 2 6 1 6 9 , , 9 1 - - - - ) 0 1 6 , 9 6 6 4 , ( ) 0 1 6 , 9 6 6 , 4 ( 6 0 2 , 8 4 1 , 0 5 0 5 8 , 9 3 4 6 5 3 , 8 0 7 , 9 4 ) 3 8 4 , , 0 1 0 2 1 1 ( , 4 3 8 1 6 5 2 1 , 6 3 3 , 0 1 3 4 , 9 6 6 , 6 4 8 , 4 4 1 l a t o T y t i u q E $ - n o N g n i l l o r t n o C t s e r e t n I $ l a t o T $ l d e t a u m u c c A s e s s o L $ d e s a b - e r a h S s t n e m y a P e v r e s e R $ y c n e r r u C l n o i t a s n a r T e v r e s e R $ d e u s s I l a t i p a C $ I Y T U Q E N I S E G N A H C F O T N E M E T A T S D E T A D L O S N O C I 1 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o f ) 9 1 6 , 1 9 8 , 4 2 ( ) 9 1 6 , 1 9 8 , 4 2 ( ) 6 2 6 , 1 7 2 ( - ) 5 4 2 , 3 6 1 , 5 2 ( ) 9 1 6 , 1 9 8 4 2 , ( - - - - ) 6 2 6 , 1 7 2 ( ) 6 2 6 , 1 7 2 ( 2 9 3 , 4 2 7 6 6 , 9 8 7 ) 4 2 9 , 3 ( 0 1 7 , 6 7 0 , 1 4 - - - - 1 4 3 , 5 3 2 ) 9 4 9 , 0 1 2 ( - - - i . s e t o n g n y n a p m o c c a e h t h t i w n o i t c n u n o c j n i d a e r l e b d u o h s y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o c i s h T , ) 5 3 1 5 0 7 6 1 1 ( , 3 3 3 0 8 7 , , 2 1 ) 0 0 9 , 0 3 6 ( 2 1 4 , 2 3 6 , 5 4 1 - - - - - - - - - 7 6 6 , 9 8 7 ) 4 2 9 , 3 ( e m o c n i i e v s n e h e r p m o c r e h t O d o i r e p e h t r o f e m o c n i l a t o T t ﬁ o r p d o i r e p t n e r r u C i n g e r o f f o n o i t a s n a r t l n o s e c n e r e f f i d e g n a h c x E i e v s n e h e r p m o c l a t o T r a e y e h t r o f e m o c n i s n o i t a r e p o t a s a e c n a a B l 9 0 0 2 e n u J 0 3 : s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T s n o i t p o e r a h S n i t n e m e v o M g n i l l o r t n o c - n o n t a s a e c n a a B l 0 1 0 2 e n u J 0 3 t s e r e t n i e m o c n i i e v s n e h e r p m o c r e h t O d o i r e p e h t r o f e m o c n i l a t o T s s o l d o i r e p t n e r r u C i n g e r o f f o n o i t a s n a r t l n o s e c n e r e f f i d e g n a h c x E i e v s n e h e r p m o c l a t o T r a e y e h t r o f e m o c n i s n o i t a r e p o : s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T s n o i t p o e r a h S i n o s r e v n o c e u s s i e r a h S n o i t p O s t s o c t a s a e c n a a B l 1 1 0 2 e n u J 0 3 51 STRIKE RESOURCES ANNUAL REPORT 2011 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June 2011 Cash ﬂows from operating activities Payments to suppliers and employees Tax paid Note Consolidated Entity 2011 $ 2010 $ (3,188,005) (439,564) (5,464,554) (188) Net cash outﬂow from operating activities 7a (3,627,569) (5,464,742) Cash ﬂows from investing activities Exploration and evaluation expenditure Payments for property, plant and equipment Proceeds from sale of investments Proceeds from sale of ﬁxed assets Investment in associate Interest received Loan to associate – Apurimac Ferrum Loan to others (713,279) (114,215) 3,209,309 37,140 (1,149,115) 1,956,266 (7,578,294) (97,751) (2,396,344) (726,684) - - (1,138,786) 1,886,613 (6,519,966) - Net cash outﬂow from investing activities (4,449,939) (8,895,167) Cash ﬂows from ﬁnancing activities Proceeds from exercise of share options Payments for share issue cost Net cash inﬂow from ﬁnancing activities 789,667 (3,924) 785,743 - - - Net increase/(decrease) in cash and cash equivalents (7,291,765) (14,359,909) Cash and cash equivalents at beginning of the year Effect of exchange rate changes on cash balance 41,445,175 22,919 55,726,752 78,332 Cash and cash equivalents at year end 7 34,176,329 41,445,175 This consolidated statement of cash ﬂows should be read in conjunction with the accompanying notes. 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the material accounting policies adopted by the Consolidated Entity in the preparation of the ﬁnancial statements. The accounting policies have been consistently applied, unless otherwise stated. The ﬁnancial statements presented are for the Consolidated Entity consisting of Strike, its subsidiaries and its interest in associate entities. Separate ﬁnancial statements for Strike Resources Limited the entity are no longer presented as a consequence of a change to the Corporations Act 2001 and Australian Accounting Standards, however summary ﬁnancial information for the Company as a separate entity is included in Note 19. Strike Resources Limited is a company limited by shares, incorporated and domiciled in Australia. a) Basis of Preparation The ﬁnancial statements have been prepared on the going-concern basis which contemplates continuity of normal business activities and realisation of assets and settlement of liabilities in the ordinary course of business. The going concern status of the Consolidated Entity is dependent upon it maintaining sufﬁcient funds for its operations and commitments. The Directors continue to monitor the ongoing funding requirements of the Consolidated Entity. The Directors are conﬁdent that sufﬁcient funding can be secured if required to enable the Consolidated Entity to continue as a going concern and as such are of the opinion that the ﬁnancial statements have been appropriately prepared on a going-concern basis. The ﬁnancial statements (comprising the ﬁnancial statements and notes thereto) are general-purpose ﬁnancial statements that have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB), Australian Accounting Interpretations and the Corporations Act 2001. b) Compliance with IFRS The consolidated ﬁnancial statements of Strike Resources Ltd also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). c) Basis of Measurement The ﬁnancial statements have been prepared under the historical cost convention, as modiﬁed by the revaluation of ﬁnancial assets, ﬁnancial liabilities and capitalised exploration expenditure to their fair value. d) Critical Accounting Estimates and Judgements The preparation of ﬁnancial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Consolidated Entity’s accounting policies. These estimates and underlying assumptions are reviewed on an ongoing basis. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signiﬁcant to the ﬁnancial statements are: Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including the Consolidated Entity’s ability to develop the relevant area of interest itself or, if not, whether it can successfully recover the capitalised exploration and evaluation asset through sale. Factors that could impact the future recoverability include the grade and quantity of mineral resources, future technological changes which impact the cost of mining, future legal changes (including changes to environmental restoration obligations), changes to commodity prices and right of tenure. The Consolidated Entity, through a co-operation agreement with the concession holder PT KJB, holds a coal mining right over the Berau coal concession. As a result of changes to the Indonesian mining law which resulted in inconsistencies between the enacted legislation and the Co-operation Agreement, both parties to the agreement are in the process of negotiating to resolve the issues that have arisen. The Co-operation Agreement provides that if any of its provisions conﬂict with any law the parties must negotiate in good faith to agree on amendments to address the issue(s). Due to drawn out nature of the negotiations and the failure to date of Strike and PT KJB to resolve the dispute over the future development of the Berau Thermal Coal Project, management has deemed it prudent to impair the carrying value of the capitalised exploration and evaluation expenditure in relation to this project. The impairment charge against the value of the capitalised exploration and evaluation expenditure in relation to the Berau Project has been expensed through the Consolidated Statement of Comprehensive Income in the calculation 53 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS of proﬁt or loss in the current period. Management continues to monitor the status of negotiations with PT KJB in relation to the Berau Project and will review the carrying value of the exploration and evaluation asset accordingly. Share-based payment transactions The Consolidated Entity measures the cost of equity-settled transactions with Directors and employees by reference to the fair value of the equity instruments at the date at which they are granted, and applying an estimated probability that they will vest. The fair value is determined using a Black-Scholes option valuation model, with the assumptions detailed in Note 22. The accounting estimates and assumptions relating to equity-settled, share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. Impairment of property, plant and equipment Property, plant and equipment are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value in use’ (being the net present value of expected future cash ﬂows of the relevant cash- generating unit) and ‘fair value less costs to sell’. In determining value in use, future cash ﬂows are based on: (cid:115) Economic beneﬁts derived from the use of the asset; (cid:115) Estimates of the quantities of ore reserves and mineral resources for which there is a high degree of conﬁdence of economic extraction; (cid:115) Future production levels; (cid:115) Future commodity prices; and (cid:115) Future cash costs of production and capital expenditure. Variations to the expected future cash ﬂows and timing thereof could result in signiﬁcant changes to any impairment losses recognised, if any, which could in turn impact future ﬁnancial results. Fair value of investment in associate On the reclassiﬁcation of a subsidiary to an associate and due to the “loss of control”, the Consolidated Entity is required to fair-value the investment in the associate on initial recognition. Where the investment relates to an investment in an entity with quoted securities the Consolidated Entity values the investment with reference to the bid price of the securities on the day the control is lost. Where there is no active market in the securities of the fair- valued ﬁnancial asset the Consolidated Entity determines the fair value of the investment by reference to, among other things, the following: (cid:115) Current market conditions; (cid:115) Expected future cash ﬂows; and (cid:115) Fair value of similar ﬁnancial instruments or entities based on arm’s length market transactions between knowledgeable willing parties. When determining the fair value of an investment for which there is no active market the Consolidated Entity uses valuation techniques that best suit the ﬁnancial asset being valued. Valuations are inherently subjective and the Consolidated Entity makes critical judgements and estimates when determining both the type and quantum of inputs used in the valuation model. During a prior reporting period the Consolidated Entity engaged an “Independent Expert” to fair-value its investment in an associate entity (Apurimac Ferrum S.A.). As the value of the associate was deemed to be represented by the value of the underlying exploration projects held by the entity and, due to the early exploration phase of the project, it was determined that the empirical/yardstick valuation method would be the most appropriate method to use in determining a fair value. After receiving an initial independent valuation of the investment, due to the inherently uncertain nature of the inputs used in the valuation model, including the uncertainty surrounding the global economic climate, at the reporting date the Board of the Consolidated Entity exercised its discretion and decided that for ﬁnancial reporting purposes, it would be prudent to maintain a full impairment of the value of its shareholding in Apurimac Ferrum S.A. (2010: $nil). The Board and management of the Consolidated Entity continue to pursue the development of the iron ore projects held by Apurimac Ferrum S.A., along with its partners, and expect to re-evaluate the carrying value of the asset when a more robust valuation model is able to be used. 54 Treatment of investment in Apurimac Ferrum S.A. as an associate On 30 June 2011 Strike Resources Ltd increased its shareholding in Apurimac Ferrum S.A. (AF) from 44% to 56%. Pursuant to AASB 127 Consolidated and Separate Financial Statements control is deﬁned as “the power to govern the ﬁnancial and operating policies so as to obtain a beneﬁt from those activities”, and is normally presumed for a shareholding of greater than 50%. However, in the case of Strike’s investment in AF, the voting rights of AF’s shareholders are governed by the terms of the “AF Settlement Agreement”, which was executed in July 2009, until July 2012. This agreement requires unanimous support from all AF shareholders for a motion to be carried at a shareholders meeting. As a result of this requirement the Board of Strike has determined that “control” does not exist and therefore Strike doesn’t consolidated AF when presenting its consolidated ﬁnancial statements. e) Principles of Consolidation A controlled entity is any entity the Company has the power to control the ﬁnancial and operating policies of so as to obtain beneﬁts from its activities. A list of controlled entities is contained in Note 12 to the ﬁnancial statements. All inter-company balances and transactions between entities in the consolidated group, including any unrealised proﬁts or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those policies applied by the Company. Changes in ownership interests The Consolidated Entity treats transactions with non-controlling interests that do not result in a loss of control as transactions with the equity owners of the Consolidated Entity. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reﬂect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve with equity attributable to owners of Strike Resources Limited. When the Consolidated Entity ceases to have control, joint control or signiﬁcant inﬂuence, any retained interest in the entity is remeasured to its fair value with the change in carrying value recognised in proﬁt or loss. The fair value is the initial carrying value amount for the purposes of subsequently accounting for the retained interest as an associate, joint controlled entity or ﬁnancial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassiﬁed to proﬁt or loss. If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or signiﬁcant inﬂuence is retained, only a portion of the share of the amounts previously recognised in other comprehensive income are reclassiﬁed to proﬁt or loss where appropriate. f) Investments in Associates Associates are all entities over which the Group has signiﬁcant inﬂuence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the parent entity ﬁnancial statements using the cost method, or at fair value on transition from a subsidiary, and in the consolidated ﬁnancial statements using the equity method of accounting after initially being recognised at cost, or at fair value on transition from a subsidiary. The Consolidated Entity’s share of its associates’ post-acquisition proﬁts or losses is recognised in proﬁt or loss, and its share of post-acquisition movements in reserves is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends received from associates are recognised in the parent entity’s proﬁt or loss, while in the consolidated ﬁnancial statements they reduce the carrying amount of the investment. When the Consolidated Entity’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the Consolidate Entity does not recognise any further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Consolidated Entity and its associate are eliminated to the extent of the Group’s interest in the associate. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identiﬁed on acquisition (refer Note 9). Accounting for Strike’s investment in Apurimac Ferrum S.A. On 30 June 2011 Strike Resources entered into an agreement with Iron Associates Corporation (IAC) to purchase 55 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS IAC’s 12% shareholding in Apurimac Ferrum S.A. (AF). As a result of this transaction Strike’s shareholding in AF increased from 44% to 56%. Management has considered whether the increase of Strike’s shareholding in AF to more than 50% has resulted in Strike moving to a position of control as deﬁned by AASB 127 Consolidated and Separate Financial Statements. Management has determined that due the certain terms contained in the “AF Settlement Agreement” to which Strike and AF’s other shareholder, D&C Group, are parties, Strike does not have the power to govern the ﬁnancial and operating policies of AF is therefore not required to consolidated AF for ﬁnancial reporting purposes. g) Mineral Exploration and Evaluation Expenditure Exploration and evaluation expenditure incurred is initially capitalised in respect of each identiﬁable area of interest where the Company has right of tenure. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence or otherwise of economically-recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against proﬁt in the year in which the decision to abandon the area is made. Under AASB 6 Exploration for and Evaluation of Mineral Resources, if facts and circumstances suggest that the carrying amount of any recognised exploration and evaluation assets may be impaired, the Company must perform impairment tests on those assets and measure any impairment in accordance with AASB 136 Impairment of Assets. Any impairment loss is to be recognised as an expense. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. h) Operating Segments The Group determines and presents operating segments based on the information which is provided to the Managing Director internally, who is the Group’s chief operating decision maker. An operating segment is a component of the Consolidated Entity which engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses which relate to transactions with any of the Group’s other components. An operating segment is identiﬁed as a segment whose operating results are reviewed regularly by the Managing Director to make decisions about resources to be allocated to the segment, assess its performance, and for which discrete ﬁnancial information is available. Segment results which are reported to the Managing Director include items directly attributable to a segment as well as those which can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head ofﬁce expenses, foreign exchange movements and gain on loss of control of subsidiaries. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible assets other than goodwill. i) Revenue Recognition Revenue is measured as the fair value of the consideration received or receivable. Revenue is recognised to the extent that it is probable that the economic beneﬁts will ﬂow to the Consolidated Entity and the revenue can be reliably measured. All revenue is stated net of the amount of value added taxes (VAT). The following speciﬁc recognition criteria must also be met before revenue is recognised: (i) Sale of goods and disposal of assets Revenue from the sale of goods and disposal of other assets is recognised when the Consolidated Entity has passed control and the risks and rewards of ownership of the goods/assets to the buyer. (ii) Interest revenue Interest revenue is recognised using the effective interest method, whereby interest is recognised on a proportional basis taking into account the interest rates applicable to the ﬁnancial assets. (iii) Dividend revenue Dividend revenue is recognised when the right to receive a dividend has been established. The Consolidated Entity brings dividend revenue to account on the applicable ex-dividend entitlement date. (iv) Other revenues Other revenues are recognised on a receipts basis. 56 j) Foreign Currency Transaction and Balances Functional and presentation currency The functional currency of each entity within the Consolidated Entity is measured using the currency of the primary economic environment in which that entity operates. The consolidated ﬁnancial statements are presented in Australian dollars, which is the parent entity’s functional and presentation currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the reporting date exchange rate. Exchange differences arising on the translation of monetary items are recognised in the Consolidated Statement of Comprehensive Income, except where deferred in equity as a qualifying cash ﬂow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the Consolidated Statement of Comprehensive Income. Group companies The ﬁnancial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows: (a) assets and liabilities are translated at exchange rates prevailing at the reporting date; (b) income and expenses are translated at average exchange rates for the period; and (c) retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are transferred directly to the Consolidated Entity’s foreign currency translation reserve in the Consolidated Statement of Financial Position. These differences are recognised in the Consolidated Statement of Comprehensive Income in the period in which the operation is disposed. k) Income Tax The income tax expense or income for the period is the tax payable or receivable on the current period’s taxable income based on the notional income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the ﬁnancial statements, and for unused tax losses (if applicable). Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, which at the time of the transaction did not affect either accounting proﬁt or taxable proﬁt or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The amount of deferred tax assets brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Consolidated Entity will derive sufﬁcient future assessable income to enable the beneﬁt to be realised, and will comply with the conditions of deductibility imposed by the law. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities, and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. 57 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS l) Value Added Taxes (including GST) (VAT) Revenues, expenses and assets are recognised net of the amount of any VAT, except where the amount of VAT incurred is not recoverable from the taxation authority. In these circumstances the VAT is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the Consolidated Statement of Financial Position are shown inclusive of VAT where applicable. Cash ﬂows are presented in the Statement of Cash Flows on a gross basis, except for the VAT component of investing and ﬁnancing activities, which are disclosed as operating cash ﬂows. m) Employee Beneﬁts Provision is made for the Company’s liability for employee beneﬁts arising from services rendered by employees to the reporting date. Employee beneﬁts that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee beneﬁts payable later than one year hence have been measured at the present value of the estimated future cash outﬂows to be made for those beneﬁts. Employer superannuation contributions are made by the Consolidated Entity in accordance with statutory obligations and are charged as an expense when incurred. n) Director/Employee Options The fair value of options granted by the Company to Directors and employees are recognised as an employment expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the Directors/employees become unconditionally entitled to the options (vesting period). The fair value at grant date is determined using the Black-Scholes option valuation model that takes into account the exercise price, term of the option, vesting criteria, share price at grant date, dividends, expected price volatility of the underlying shares in the Company and the risk-free interest rate for the term of the option. Upon the exercise of options, the balance of the reserve relating to those options is transferred to share capital. o) Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term, highly-liquid investments with original maturities of six months or less and bank overdrafts. Bank overdrafts (if any) are shown within short-term borrowings in current liabilities on the Consolidated Statement of Financial Position. p) Receivables Trade receivables are recognised and carried at original invoice amount less any provision for impairment. A provision for impairment of trade receivables is made when there is objective evidence that the Consolidated Entity will not be able to collect debts. Indicators of impairment would include ﬁnancial difﬁculties of the debtor, likelihood of the debtor’s insolvency and default in payment. Any impairment is recognised in the Consolidated Statement of Comprehensive Income. q) Investments and Other Financial Assets Recognition The Consolidated Entity recognises receivables on the date that they originate. All other ﬁnancial assets are recognised initially on the trade date at which the Consolidated Entity becomes a party to the contractual provisions of the instrument. Financial assets are classiﬁed based on the objective of the Consolidated Entity’s business model for managing the ﬁnancial assets and the characteristics of the contractual cash ﬂows. The Consolidated Entity derecognises a ﬁnancial asset when the contractual cash ﬂows from the asset expire, or it transfers the rights to receive the contractual cash ﬂows such that substantially all the risks and rewards of ownership of the ﬁnancial asset are transferred. Financial assets at fair value are measured initially at fair value plus, in the case of ﬁnancial assets not at fair value through proﬁt or loss, transaction costs directly attributable to the acquisition of the ﬁnancial asset. Subsequent movements in fair value are recognised in proﬁt or loss. Financial assets at fair value through proﬁt or loss Financial assets at fair value through proﬁt or loss are ﬁnancial assets held for trading. A ﬁnancial asset is classiﬁed in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classiﬁed as current assets. 58 Loans and receivables Loans and receivables are non-derivative ﬁnancial assets with ﬁxed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period, in which case they are classiﬁed as non-current assets. Available-for-sale ﬁnancial assets Available-for-sale ﬁnancial assets comprising principally marketable equity securities are non-derivatives that are either designated in this category or not classiﬁed in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments are designated as available-for-sale if they do not have ﬁxed maturities and ﬁxed or determinable payments and management intends to hold them for the medium to long term. Proﬁt or loss arising on the sale of equity investments is recognised in proﬁt or loss Impairment Impairment losses on ﬁnancial assets at fair value are recognised in proﬁt or loss. Impairment losses on equity instruments that were recognised in proﬁt or loss are not reversed through proﬁt or loss in subsequent periods r) Financial Liabilities Non-derivative ﬁnancial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. At each reporting date, the Consolidated Entity assesses whether there is objective evidence that a ﬁnancial instrument has been impaired. In the case of available-for-sale ﬁnancial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the Consolidated Statement of Comprehensive Income. s) Fair Value Estimation The fair value of ﬁnancial assets and ﬁnancial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of ﬁnancial instruments traded in active markets (such as publicly-traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for ﬁnancial assets held by the Consolidated Entity is the current bid price, the appropriate quoted market price for ﬁnancial liabilities is the current ask price. The fair value of ﬁnancial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques. The Consolidated Entity may use a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Other techniques, such as estimated discounted cash ﬂows, are used to determine fair value for the remaining ﬁnancial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of ﬁnancial liabilities for disclosure purposes is estimated by discounting the future contractual cash ﬂows at the current market interest rate that is available to the Consolidated Entity for similar ﬁnancial instruments. t) Property, Plant and Equipment All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The carrying amount of property, plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash ﬂows that will be received from the assets employment and subsequent disposal. The expected net cash ﬂows have been discounted to their present value in determining recoverable amount. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁts associated with the item will ﬂow to the Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Consolidated 59 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Statement of Comprehensive Income during the ﬁnancial period in which they are incurred. The depreciation rates used for each class of depreciable assets are: Furniture & ﬁttings Computer equipment Plant & equipment Leasehold improvements 15% to 66.67% 33.33% to 66.67% 20% 15% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing consideration received with carrying amount. These are included in the Consolidated Statement of Comprehensive Income in the period in which the disposal occurs. u) Impairment of Assets At each reporting date the Consolidated Entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Consolidated Statement of Comprehensive Income. Impairment testing is performed annually for goodwill and intangible assets with indeﬁnite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Consolidated Entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. v) Trade and Other Payables These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the ﬁnancial year, which remain unpaid at reporting date. The amounts are unsecured and are usually paid within 30 days of invoice date. w) 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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are included in the cost of the acquisition as part of the purchase consideration. x) Earnings per Share Basic earnings per share are determined by dividing the operating result after income tax by the weighted average number of ordinary shares on issue during the ﬁnancial period. Diluted earnings per share adjusts the ﬁgures used in the determination of basic earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will arise from the exercise of dilutive options outstanding during the ﬁnancial period. y) Discontinued Operations A discontinued operation is a component of the Consolidated Entity’s business that represents a separate major line of business that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classiﬁcation as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classiﬁed as held for sale, if earlier. When an operation is classiﬁed as a discontinued operation, the comparative Consolidated Statement of Comprehensive Income is restated as if the operation had been discontinued from the start of the comparative period. z) Leases Leases in which a signiﬁcant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classiﬁed as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the period of the lease. aa) Parent Entity Financial Information The ﬁnancial information for the parent entity, Strike Resources Limited, disclosed in Note 19 has been prepared on 60 the same basis as the consolidated ﬁnancial statements. ab) Business Combinations The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition related costs are expensed as incurred. Identiﬁable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identiﬁable assets. The excess of the consideration transferred to the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identiﬁable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identiﬁable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in proﬁt or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent ﬁnancier under comparable terms and conditions. Contingent consideration is classiﬁed either as equity or a ﬁnancial liability. Amounts classiﬁed as a ﬁnancial liability are subsequently remeasured to fair value with changes in fair value recognised in proﬁt or loss. ac) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Consolidated Entity’s share of the net identiﬁable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. ad) Rehabilitation and Restoration Costs Long-term environmental obligations are based on the Consolidated Entity’s environmental management plans, in compliance with current environmental and regulatory requirements. Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the reporting date. Increases due to additional environmental disturbances, relating to the development of an asset, are capitalised and amortised over the remaining life of the relevant project. Annual increases in the provision relating to the change in the net present value of the rehabilitation and restoration costs are accounted for in the Consolidated Statement of Comprehensive Income as borrowing costs. The estimated cost of rehabilitation is reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Cost estimates are not reduced by potential proceeds from the sale of assets. ae) New Standards and Interpretations Released but not yet Adopted The following new standards and amendments to standards are mandatory for the ﬁrst time for the ﬁnancial year beginning 1 July 2010: (cid:115) AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project; (cid:115) AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-Settled, Share-Based Payment Transactions; (cid:115) AASB 2009-10 Amendments to Australian Accounting Standards - Classiﬁcation of Rights Issues; and (cid:115) AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project. 61 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods. (i) New accounting standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2011 reporting periods and have not yet been applied in the ﬁnancial report. The Group’s assessment of the impact of these new standards and interpretations is set out below. (cid:115) AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011). Amendments made to AASB 7 Financial Instruments: Disclosures in November 2010, introduce additional disclosures in respect of risk exposures arising from transferred ﬁnancial assets. The amendments are not expected to have any signiﬁcant impact on the Group’s disclosures. The Group intends to apply the amendment from 1 July 2011. (cid:115) AASB 10 Consolidated Financial Statements (effective for the annual reporting periods commencing on or after 1 January 2013). AASB 10 introduces certain changes to the consolidation principles, including the concept of de facto control and changes in relation to the special purpose entities. Strike is continuing to assess the impact of the standard. (cid:115) AASB 11 Joint Arrangements (effective for the annual reporting periods commencing on or after 1 January 2013). AASB 11 introduces certain changes to the accounting for joint arrangements. Joint arrangements will be classiﬁed as either joint operations (where parties with joint control have rights to assets and obligations for liabilities) or joint ventures (where parties with joint control have rights to the net assets of the arrangement). Joint arrangements structured as a separate vehicle will generally be treated as joint ventures and accounted for using the equity method. Strike is continuing to assess the impact of the standard. (cid:115) AASB 13 Fair Value Measurement (effective for annual reporting periods commencing on or after 1 January 2013). AASB 13 establishes a single framework for measuring fair value of ﬁnancial and non-ﬁnancial items recognised at fair value on the Consolidated Statement of Financial Position or disclosed in the notes to the ﬁnancial statements. Strike is continuing to assess the impact of the standard. (cid:115) IAS 1 Presentation of Financial Statements (effective for annual reporting periods commencing on or after 1 July 2013). IAS 1, amended in June 2011, introduces amendments to align the presentation items of other comprehensive income with US GAAP. Strike will apply the amended standard from 1 July 2013. When the standard is ﬁrst adopted, there will be changes to the presentation of the Consolidated Statement of Comprehensive Income. However, there will be no impact on any of the amounts recognised in the ﬁnancial statements. (cid:115) AASB 1054 Australian Additional Disclosures (effective for annual reporting periods beginning on or after 1 July 2011). AASB 1054, issued in May 2011, moves additional Australian speciﬁc disclosure requirements for for-proﬁt entities from various Australian Accounting Standards into this Standard as a result of Trans-Tasman Convergence Project. AASB 1054 Australian Additional Disclosures removes the requirement to disclose each class of capital commitments contracted for at the end of the reporting period (other than commitments for the supply of inventories). When the standard is adopted for the ﬁrst time for the ﬁnancial year ending 30 June 2012, the ﬁnancial statements will no longer include disclosures about capital and other expenditure commitments as these are no longer required by AASB 1054. (cid:115) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective for annual reporting periods beginning on or after 1 January 2011). In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clariﬁes and simpliﬁes the deﬁnition of a related party. Strike will apply the amended standard from 1 July 2011. When the amendments are applied, Strike will need to disclose any transactions between its subsidiaries and its associates. However, there will be no impact on any of the amounts recognised in the ﬁnancial statements. (cid:115) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013). On 30 June 2010 the AASB ofﬁcially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose ﬁnancial statements. Strike is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards - Reduced Disclosure Requirements. The two standards will therefore have no impact on the ﬁnancial statements of the entity. (cid:115) AASB 2010-8 Amendments to Australian Accounting Standards - Deferred Tax: Recovery of Underlying Assets 62 (effective from 1 January 2012). In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. AASB 112 requires the measurement of deferred tax assets and liabilities to reﬂect the tax consequences that would follow from the way management expects to recover or settle the carrying amount of the relevant assets or liabilities, which is through use or through sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. The amendment is not expected to have any signiﬁcant impact on Strike’s ﬁnancial statements. Strike intends to apply the amendment from 1 July 2012. (cid:115) AASB 119 - employee beneﬁts “expected to be settled” (as opposed to “due to settled” under the current standard) within 12 months after the end of the reporting period are short-term beneﬁts, and therefore not discounted when calculating leave liabilities. Annual leave not expected to be used within 12 months of the end of the reporting period will in future be discounted when calculating leave liability. This standard has no impact, as there are no annual leave provision amounts that are non-current. Strike will apply this standard from 1 July 2013. 2. PROFIT/(LOSS) FOR THE YEAR (a) Revenue Revenue from continuing operations Interest received – other Other income Foreign exchange gain Consulting fees Other income Consolidated Entity 2011 $ 2,663,221 - 1,655,546 48,862 1,704,408 2010 $ 2,191,586 1,797,640 - - 1,797,640 Total revenue and other income 4,367,629 3,989,226 (b) Expenses Operating expenses Occupancy costs Finance costs Borrowing costs – interest paid Personnel costs Cash remuneration Directors’ and employees’ options Administration costs Consultancy fees Professional fees Depreciation Other corporate expenses Impairment losses Resource projects Investment in associate entity Loans to associated entity 327,309 18,748 - 346,057 2,186,141 24,394 2,210,535 229,255 417,507 146,629 888,910 1,682,301 13,467,910 3,399,115 5,777,410 22,644,435 353,840 38,254 167 392,261 2,970,564 429,448 3,400,012 501,352 1,515,062 56,893 947,054 3,020,361 - - 6,315,256 6,315,256 63 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Fair value adjustment – ﬁnancial assets held as fair value through proﬁt or loss Proﬁt on sale of shares Loss on disposal of property, plant and equipment Foreign exchange loss Gain on deconsolidation of subsidiary (Apurimac Ferrum S.A.) Loss on deconsolidation of subsidiary – Iron Associates Corporation 3. INCOME TAX EXPENSE (a) Income tax expense Current tax Deferred tax Consolidated Entity 2011 $ - 1,785,620 85,665 3,636,311 2010 $ (440,295) - - - - (29,802,852) - 1,936,356 1,142,857 (29,100,290) 28,819,684 (15,972,400) 439,564 - 439,564 - - - (b) Numerical reconciliation between tax expense and pre-tax net proﬁt/(loss) Proﬁt/(loss) before income tax (24,452,055) 19,961,626 Income-tax expense/(beneﬁt) on above at 30% Increase in income tax due to: Non-deductible expenses and foreign losses Movement in unrecognised temporary differences Capital gains Decrease in income tax expenses due to: Non assessable income Utilisation of prior year tax losses Deductible equity raising costs Net gain on loss of control of AF and IAC Effect of current-year revenue losses not recognised Under provision for prior year taxable income Foreign jurisdiction withholding tax Income-tax expense attributable to operating proﬁt (c) Deferred tax assets not brought to account On Income-Tax Account Carry-forward tax losses Other On Capital Account Carry-forward tax losses Unrealised capital losses Total deferred tax assets not brought to account (d) Deferred tax liabilities Timing differences Offset by deferred tax assets recognised 64 (7,335,616) 5,988,488 4,320,752 - 731,811 1,096,202 (731,811) (328,368) - 2,247,029 653 438,911 439,564 7,448,146 - 7,448,146 - - - 7,448,146 628,619 (628,619) - 2,891,995 (2,559) - - - (335,240) (8,597,999) 55,315 - - - 6,096,618 760,920 6,857,538 64,676 - 64,676 6,922,214 1,568,372 (1,568,372) - (e) The deferred tax asset not brought to account for the 2011 and 2010 years will only be obtained if: (i) the Consolidated Entity derives future assessable income of a nature and of an amount sufﬁcient to enable the beneﬁt to be realised; (ii) the Consolidated Entity continues to comply with the conditions for deductibility imposed by tax legislation; and (iii) in relation to Australian carry-forward income tax losses the Consolidated Entity is able to meet the continuity of ownership and/or continuity of business tests. (f) The Company and controlled entities of the Company have not elected to consolidate for taxation purposes and have not entered into a tax sharing and funding agreement in respect of such arrangements. 4. KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Details of Key Management Personnel during the ﬁnancial year: Current Stephen Gethin Matthew Hammond Ken Hellsten William Johnson David Lim Malcolm Richmond Past Mark Horn Farooq Khan Mike Lowry H. Shanker Madan Farhad Moshiri Andrew Napier Company Secretary & General Counsel Non-Executive Director Managing Director Non-Executive Director Chief Financial Ofﬁcer Acting Chairman/Non-Executive Director Alternate Director for Mr. F. Moshiri (resigned 3 February 2011) Non-Executive Director (resigned 3 February 2011) General Manager – Berau (resigned 30 April 2011) Non-Executive Chairman (resigned 3 February 2011) Non-Executive Director (resigned 3 February 2011) Process Engineer (resigned 29 April 2011) (b) Compensation of Key Management Personnel Short-term employee beneﬁts Post-employment beneﬁts Long-term beneﬁts Termination beneﬁts Share-based payments Consolidated Entity 2011 $ 1,508,346 223,828 - - 24,394 1,756,568 2010 $ 1,738,876 274,021 83,044 152,905 429,448 2,678,294 Detailed remuneration disclosures are provide in the remuneration report on pages 39 to 46. 65 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (c) Number of Shares Held by Key Management Personnel Balance at beginning of year Received during the year on the exercise of options - - 187,083 - - 13,941,605 38,100 - 496,343 - - 100,000 14,763,131 - - - - - - - - - - - - - Balance at beginning of year Received during the year on the exercise of options - - - - - 24,751,791 - - 610,838 - - 102,460 25,465,089 - - - - - - - - - - - - - Net change other - - - - - (13,941,605) - - (496,343) - - - (14,437,948) Net change other - - 187,083 - - (10,810,186) 38,100 - (114,495) - - (2,460) Balance at the end of year - - 187,083 - - - 38,100 - - - - 100,000 325,183 Balance at the end of year - - 187,083 - - 13,941,605 38,100 - 496,343 - - 100,000 (10,701,958) 14,763,131 2011 Gethin, S. Hammond, M. Hellsten, K. Horn, M.4 Johnson, W. Khan, F.1 Lim, D. Lowry, M.2 Madan, H.S.4 Moshiri, F.5 Napier, A.6 Richmond, R. Total 2010 Gethin, S. Hammond, M. Hellsten, K. Horn, M. Johnson, W. Khan, F. Lim, D. Lowry, M. Madan, H.S. Moshiri, F. Napier, A. Richmond, R. Total 1. Mr. Khan ceased as a Director on 3 February 2011. 2. Mr. Lowry ceased as a member of Key Management Personnel on 30 April 2011. 3. Mr. Madan ceased as a Director on 3 February 2011. 4. Mr. Moshiri ceased as a Director on 3 February 2011. (Mr. Horn was alternate Director for Mr. Moshiri). 5. Mr. Napier was deemed to be a member of Key Management Personnel from 7 July 2010 to 29 April 2011. Options provided as remuneration and shares issued on exercise of such options. Details of options provided as remuneration are disclosed in the Remuneration Report section of the Directors’ Report. There were no shares issued on the exercise of these options during the ﬁnancial year. 66 (d) Number of Options Held by Key Management Personnel Balance at 1 July 2010 Balance at appointment compensation other7 Granted as Net change Balance at Vested and 30 June 2011 exercisable 2011 Gethin, S. Hammond, M. Horn, M1 Hellsten, K. Johnson, W. Khan, F.2 Lim, D. Lowry, M.3 Madan, H.S.4 Moshiri, F.5 Napier, A. Richmond, M. Total 250,000 - - - 1,240,000 3,050,000 - 250,000 6,130,000 - - 1,700,000 12,620,000 - - - - - - - - - - - - - 600,000 - - - - - 600,000 - - - - - 1,200,000 - - - - - (3,050,000) - (250,000) (6,130,000) - - - (9,430,000) 850,000 - - - 1,240,000 - 600,000 - - - - 1,700,000 4,390,000 850,000 - - - 1,240,000 - 600,000 - - - - 1,700,000 4,390,000 1. Mr. Horn ceased as an alternate Director on 3 February 2011. 2. Mr. Khan ceased as a Director on 3 February 2011. 3. Mr. Lowry ceased being a member of Key Management Personnel on 30 April 2011. 4. Mr. Madan ceased as a Director on 3 February 2011. 5. Mr. Moshiri ceased as a Director on 3 February 2011. 6. Mr. Napier was deemed to be a member of Key Management Personnel from 7 July 2010 to 29 April 2011. 7. Figures in “net change other” column represent ﬁnal holding when the individual ceased being a KMP. Balance at 1 July 2009 Balance at appointment compensation other7 Granted as Net change Balance at Vested and 30 June 2010 exercisable 2010 Gethin, S1 Hammond, M. Ho, V.2 Hobson, M. Horn, H. Hellsten, K.3 Johnson, W. Khan, F. Lim, D. Lowry, M. Madan, H.S. Moshiri, F. Richmond, M. Stephenson, J.4 Total - - 1,380,000 - - - 1,240,000 3,050,000 - - 3,880,000 - 1,700,000 1,650,000 12,900,000 250,000 - - - - - - - - 250,000 - - - - 500,000 - - - - - - - - - - 2,250,000 - - - 2,250,000 - - (1,380,000) - - - - - - - - - - (1,650,000) (3,030,000) 250,000 - - - - - 1,240,000 3,050,000 - 250,000 6,130,000 - 1,700,000 - 12,620,000 250,000 - - - - - 1,240,000 3,050,000 - 250,000 6,130,000 - 1,700,000 - 12,620,000 1. Mr. Gethin was deemed to be a member of Key Management Personnel from 1 May 2010. 2. Mr. Ho ceased holding the ofﬁce of Director on 25 September 2010 and ceased holding the ofﬁce of Company Secretary on 30 April 2010. 3. Mr. Hellsten commenced as Managing Director on 24 March 2010. 4. Mr. Stephenson ceased holding ofﬁce as a Director on 19 February 2010. 5. Figures in “net change other” column represent ﬁnal holding when the individual ceased being a KMP. (e) Loans to Key Management Personnel There were no loans to Key Management Personnel (or their personally-related entities) during the ﬁnancial year. (f) Other Transactions with Key Management Personnel Fees for services provided by Mr. Mark Horn, Alternate Director for Mr. Farhad Moshiri, are paid to M. Horn and Co, a business of which Mr. Horn is a principal. There were no other transactions with Key Management Personnel (or their personally-related entities) during the ﬁnancial year. 67 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. AUDITORS’ REMUNERATION Auditors of the Consolidated Entity Audit and review of ﬁnancial statements - BDO Audit (WA) Pty Ltd Other services – technical updates - BDO (WA) Pty Ltd Auditors of the Perúvian subsidiaries Audit and review of ﬁnancial statements - BDO Pazos, Lopez de Romana S.C 6. EARNINGS PER SHARE Basic earnings/(loss) per share Diluted earnings/(loss) per share Net proﬁt/(loss) Weighted average number of ordinary shares outstanding during the year used in calculation of basic earnings/(loss) per share Weighted average number of ordinary shares outstanding during the year used in calculation of diluted earnings/(loss) per share Consolidated Entity 2011 $ 2010 $ 51,934 72,450 795 - 7,187 59,916 8,334 80,784 Consolidated Entity 2011 cents (18.95) (18.95) 2010 cents 15.35 14.95 $ $ (24,891,619) 19,961,626 Number Number 131,367,145 130,034,268 131,367,145 133,534,268 Under AASB 133 Earnings per share, potential ordinary shares such as options will only be treated as dilutive when their conversion to ordinary shares would decrease/increase the earning/(loss) per share from continuing operations. Diluted earnings/(loss) per share is not disclosed if it does not increase the basic loss per share. 7. CASH AND CASH EQUIVALENTS Consolidated Entity 2011 $ 1,651,165 32,525,164 2010 $ 6,069,121 35,376,054 34,176,329 41,445,175 Cash at bank Term deposits 68 (a) Reconciliation of Proﬁt/(Loss) after Tax to Net Cash Flows from Operations Operating proﬁt/(loss) after tax Interest income Non cash ﬂows in proﬁt/(loss) from ordinary activities: Depreciation - plant & equipment Adjustment for movement in foreign exchange Adjustment on deconsolidation of subsidiary Fair value adjustments Loans Fair value through proﬁt and loss ﬁnancial assets Available-for-sale ﬁnancial assets Investment in associate Exploration and evaluation projects Directors’ and employee options Loss on sale of ﬁxed assets Loss on sale of investments Decrease/(increase) in assets: Receivables Increase/(decrease) in liabilities: Trade creditors and accruals Provisions Net cash outﬂows from operating activities 8. TRADE AND OTHER RECEIVABLES Current: Amounts receivable from sundry debtors Provision for doubtful debts Goods and service tax (GST) recoverable in Australia Prepayments Non-Current: Amounts receivable from sundry debtors Loans to associated entity Provision for impairment* Loans Consolidated Entity 2011 $ 2010 $ 19,961,626 (2,191,586) (24,891,619) (2,663,221) 146,629 3,979,521 - 5,777,410 - (2,268,015) 1,149,115 13,467,910 24,394 85,665 482,395 56,893 147,548 6,338,417 - (440,295) - - - 429,448 - - (897,206) 5,752,527 2,640,742 (661,289) (3,627,569) (24,270,023) (11,249,297) (5,464,742) 697,759 (32,675) 665,084 9,152 14,025 688,261 853,680 - 853,680 13,109 23,549 890,338 55 20,675,505 (20,675,505) 97,751 97,806 539 14,874,697 (14,874,697) - 539 * 2010 - $8,559,441of this loan was provided for while the entity was a subsidiary. Refer to Note 21 for the Consolidated Entity’s exposure to credit risk, foreign exchange risk and interest rate risk. 69 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Apurimac Ferrum S.A. (AF) is a company incorporated and domiciled in Perú, South America. During the ﬁnancial year Strike Resources Limited’s shareholding in AF increased from 44% as at 30 June 2010 to 56% on 30 June 2011. Due to the operation of an agreement between the AF shareholders executed on 5th of August 2009 Strike is not deemed to control AF pursuant to AASB 127 Consolidated and Separate Financial Statements and therefore does not consolidated the accounts of AF. Summarised ﬁnancial information of associate entity: The Consolidated Entity’s share of the results of its associate and it’s aggregate assets and liabilities are as follows: Apurimac Ferrum S.A. 2011 2010 Ownership interest1 Assets 56% 44% $ 11,441,652 9,832,629 Liabilities $ 12,108,636 4,148,281 1. Strike Resources Ltd increased its shareholding in Apurimac Ferrum to 56% from 44% on 30 June 2011. Consolidated Entity’s share of associate losses not bought to account: Opening share of carry-forward associate losses Current year share of associate loss Closing share of carry-forward associate losses 2011 $ 800,515 941,005 1,741,520 Loss $ 941,005 800,515 2010 $ - 800,515 800,515 The Consolidated Entity’s share of the associate’s loss has not been brought to account as the investment in the associate is fully impaired, refer Note 1(f). The remainder of this page has been intentionally left blank 70 10. PROPERTY, PLANT AND EQUIPMENT 2011 Consolidated $ $ $ $ Capital WIP Land Plant and equipment Leasehold improvements Carrying value at 1 July 2010 Adj. to opening balance Additions to CWIP Transfers out of CWIP Transfers from CWIP Depreciation expense Cost of asset disposals Accumulated depreciation on disposed assets Carrying value at 30 June 2011 At 1 July 2010 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2011 Cost or fair value Accumulated depreciation and impairment Net carrying amount 2010 Consolidated Carrying value at 1 July 2009 Additions Additions from capital WIP Disposal of asset Transfers to property, plant and equipment Depreciation expense Accumulated depreciation on disposed assets Foreign exchange adjustment Carrying value at 30 June 2010 At 1 July 2009 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2010 Cost or fair value Accumulated depreciation and impairment Net carrying amount 218,856 (102,891) 35,252 (150,257) - - - 678,267 (37,628) - - - - 273,957 - - - 30,853 (125,103) (217,518) 66,634 - - - 119,070 (21,526) (93,262) Total $ 1,237,714 (140,519) 35,252 (150,257) 149,923 (146,629) (310,780) - 960 - 640,639 143,046 105,235 31,710 102,626 174,756 849,460 218,856 678,267 510,068 95,935 1,503,126 - 218,856 - 678,267 (236,111) 273,957 (29,301) 66,634 (265,412) 1,237,714 960 640,639 219,755 121,743 983,097 - 960 - 640,639 (114,520) 105,235 (19,117) 102,626 (133,637) 849,460 $ - 381,043 - - (162,187) - - - 218,856 - - - $ 627,474 15,955 - - - - - 34,838 678,267 $ 312,736 27,870 159,514 (286,745) - (46,637) 104,534 2,685 273,957 $ 37,138 37,079 2,673 - $ 977,348 461,947 162,187 (286,745) - (10,256) (162,187) (56,893) - - 66,634 104,534 37,523 1,237,714 627,474 501,663 56,183 1,185,320 - 627,474 (188,927) 312,736 (19,045) 37,138 (207,972) 977,348 218,856 678,267 510,068 95,935 1,503,126 - 218,856 - 678,267 (236,111) 273,957 (29,301) 66,634 (265,412) 1,237,714 71 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. FINANCIAL ASSETS Investments comprise: Financial assets at fair value through proﬁt and loss Shares in listed companies – at cost Add: net change in fair value Available-for-sale ﬁnancial assets Shares in listed companies – at cost Less: provision for impairment Fair value of shares in listed companies Consolidated Entity 2010 $ 2011 $ - - - - - - - 575,182 (247,992) 327,190 2,188,160 (1,091,660) 1,096,500 1,423,690 Changes in fair value of ﬁnancial assets at fair value through proﬁt and loss are recorded as an expense in the current reporting period (Note 1(q)). The fair value of listed shares in ﬁnancial assets at fair value through proﬁt and loss and available-for-sale ﬁnancial assets have been determined directly by reference to bid prices in an active market. Information about the Consolidated Entity’s exposure to market and price risk is provided in Note 21(d). All ﬁnancial assets categorised as ﬁnancial assets through proﬁt and loss and available-for-sale ﬁnancial assets were disposed of during the current ﬁnancial year. 12. INVESTMENT IN CONTROLLED ENTITIES Country of incorporation Percentage of Ownership Strike Finance Pty Ltd Strike Australian Operations Pty Ltd Strike Operations Pty Ltd (SOPL) PT Indo Batubara (100% beneﬁcially owned by SOPL) Strike Indo Operations Pty Ltd (SIOPL) PT Orion Indo Mining (100% beneﬁcially owned by SIOPL) Ferrum Holdings Limited Strike Resources Perú S.A.C. Australia Australia Australia Indonesia Australia Indonesia British Anguilla Perú 13. EXPLORATION AND EVALUATION EXPENDITURE Balance at the beginning of the year Exploration and evaluation expenditure additions Impairment loss – exploration and evaluation (Note 2(b)) Foreign exchange adjustment Balance at the end of the year 2011 100% 100% 100% 100% 100% 100% 100% 100% 2010 100% 100% 100% 100% 100% 100% 100% 100% Consolidated Entity 2011 $ 21,129,916 577,877 (13,467,910) - 8,239,883 2010 $ 18,642,548 2,301,920 - 185,448 21,129,916 The ultimate recoverability of deferred exploration and evaluation expenditure is dependent on the successful development or sale of the relevant area of interest. Refer to Note 1(d) & (g). 72 14. TRADE AND OTHER PAYABLES Current Trade creditors Other creditors and accruals Tax payable Non Current Loan from associate (a) Risk exposure Consolidated Entity 2011 $ 504,781 2,254,934 25,770 2,785,485 2010 $ 326,323 136,296 101,967 564,586 132,999 14,631 Details of the Consolidated Entity’s exposure to risks arising from current payables are set out in Note 21. 15. PROVISIONS Current Provision for employee entitlements – annual leave Other 16. ISSUED CAPITAL 133,534,268 (2010: 130,034,268) fully-paid ordinary shares Consolidated Entity 2011 $ 56,545 - 56,545 2010 $ 110,160 8,175 118,335 145,632,412 144,846,669 Each fully-paid, ordinary share carries one vote per share and the right to participate in dividends. Movement in ordinary share capital At 1 July 2009 At 30 June 2010 Shares issued on exercise of options Share issue expenses At 30 June 2011 Capital risk management Date of movement No. $ 11 Feb 2011 130,034,268 130,034,268 3,500,000 - 133,534,268 144,846,669 144,846,669 789,667 (3,924) 145,632,412 The Consolidated Entity’s objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and beneﬁts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure the Consolidated Entity may return capital to shareholders, issue new shares or sell assets to reduce debt. The Consolidated Entity’s non-cash investments can be realised to meet accounts payable arising in the normal course of business. 73 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. RESERVES Foreign currency translation reserve Share-based payments reserve Foreign Currency Translation Reserve Nature and purpose of reserve Consolidated Entity 2011 $ (630,900) 12,780,333 12,149,433 2010 $ (359,274) 12,991,282 12,632,008 Exchange differences arising on translation of a foreign controlled entity are taken to the foreign currency translation reserve as described in Note 1(j). The reserve is recognised in proﬁt and loss when the net investment is disposed of. Share-Based Payment Reserve Nature and purpose of reserve The share-based payments reserve records the consideration (net of expenses) received by the Company on the issue of options. In relation to options issued to Directors and employees for nil consideration, the fair values of these options are included in the share-based payments reserve. Grant date Consolidated Entity $ No. 2011 - Movement in share-based payment reserve The number of unlisted options outstanding over unissued ordinary shares at the reporting date is as follows: Opening balance at 1 July 2010 Granted options Employee Options Unlisted options exercisable at $1.30; expiring 23 Mar 13 Unlisted options exercisable at $1.50; expiring 23 Mar 13 Unlisted options exercisable at $1.75; expiring 23 Mar 13 Exercised options Other Options Unlisted options exercised at $0.178 Unlisted options exercised at $0.278 Lapsed options Other Options Lapsed options exercisable at $0.178; expired 30 Jun 08 Closing balance at 30 June 2011 20,086,404 12,991,282 6 May 11 6 May 11 6 May 11 400,000 400,000 400,000 13 Feb 07 13 Feb 07 (1,833,333) (1,666,667) 9,264 8,698 6,432 - - - 17,786,404 (235,343) 12,780,333 74 Grant date Consolidated Entity $ No. 2010 - Movement in share-based payment reserve The number of unlisted options outstanding over unissued ordinary shares at the reporting date is as follows: Opening balance at 1 July 2009 Granted options Directors’ Options Unlisted options exercisable at $2.50; expiring 24 Nov 12 25 Nov 09 Unlisted options exercisable at $2.75; expiring 24 Nov 12 25 Nov 09 Unlisted options exercisable at $3.25; expiring 24 Nov 12 25 Nov 09 Employees’ Options Lapsed options Employee Options Unlisted options exercisable at $2.75; expiring 13 Oct 13 Lapsed options exercisable at $2.878; expiring 1 May 12 Lapsed options exercisable at $1.178; expiring 3 Oct 11 Lapsed options exercisable at $2.878; expiring 5 Sep 12 Closing balance at 30 June 2010 14 Oct 08 8 May 07 6 Oct 06 5 Sep 07 Equity-based Remuneration 18,286,404 12,561,834 750,000 750,000 750,000 155,197 143,759 124,763 - (100,000) (150,000) (200,000) 20,086,404 5,729 - - - 12,991,282 On 6 May 2011 the Company granted 1,200,000 unlisted Employee Options with exercise prices of $1.30 (400,000), $1.50 (400,000) and $1.75 (400,000) and a term of 1.9 years, vesting immediately. The expiry date of these options is 23 March 2013. The fair value of these options are expensed over the period from their date of grant to each respective vesting date, fair value is calculated using a Black-Scholes options valuation model with an assumed volatility rate of 68% for the underlying SRK shares (Note 22). 18. RELATED-PARTY DISCLOSURES (a) Subsidiaries Interests in subsidiaries are set out in Note 12. During the year $6,232,056 (2010: $8,391,752) was loaned to subsidiaries to fund exploration activities. (b) Associates Apurimac Ferrum S.A. is an associate as set out in Note 9. On 21 July 2009, through the AF Settlement Agreement, Strike Resources entered into a replacement loan agreement with Apurimac Ferrum S.A.(AF) in which US$21 million may be advanced to AF to undertake exploration on the Apurimac and Cusco Iron Ore projects. This loan is interest bearing (USD Monthly LIBOR rate + 2% per annum) as provided for under the AF Settlement Agreement. Loans to associates - Apurimac Ferrum Balance on recognition of investment in associate Loans advanced Interest charged Loan revalued due to foreign exchange movements Balance at 30 June Less provision for impairment Carrying value 2011 $ 14,930,769 8,901,390 347,692 (3,504,348) 20,675,503 20,675,503 - 2010 $ 8,615,492 6,571,038 123,736 (379,497) 14,930,769 (14,930,769) - 75 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (c) Transactions with Related Parties Fees for services provided by Mr. Mark Horn, Alternate Director for Mr. Farhad Moshiri, are paid to M. Horn and Co, a business of which Mr. Horn is a principal. Amounts payable at year end to related parties: M. Horn & Co 19. PARENT ENTITY INFORMATION 2011 $ 2010 $ 33,600 36,400 - - The following details information related to the parent entity, Strike Resources Limited, at 30 June 2011. The information presented here has been prepared using consistent accounting policies as presented in Note 1(a). Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Contributed equity Accumulated losses Option reserve Total equity Proﬁt/(loss) for the year Other comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year The parent entity does not have any contingent assets or liabilities. 20. SEGMENT REPORTING 2011 $ 34,670,794 19,023,382 53,694,176 2,793,974 - 2,793,974 50,900,202 145,632,412 (107,502,540) 12,780,330 50,910,202 (27,831,217) - (27,831,217) 2010 $ 41,458,968 37,159,607 78,618,575 697,290 - 697,290 77,921,285 144,846,669 (79,916,666) 12,991,282 77,921,285 15,830,109 - 15,830,109 The Consolidated Entity is based in Australia but has investment exposure to resource projects in Indonesia and Perú. 2011 Depreciation and amortisation Total segment results Total segment assets Total segment liabilities 2010 Depreciation and amortisation Total segment results Total segment assets Total segment liabilities Indonesia (Coal) 15,729 (13,802,875) 8,663,617 36,387 Indonesia (Coal) 5,170 (357,192) 21,577,500 - Perú (Iron Ore) 2,158 1,407,120 391,028 140,297 Perú (Iron Ore) 7,257 (386,543) 899,439 14,631 Total 17,887 (12,395,755) 9,054,645 176,684 Total 12,427 (743,735) 22,476,939 14,631 76 Proﬁt and loss Segment proﬁt/(loss) Interest revenue Other income Other corporate costs Foreign exchange gain/(loss) Impairment losses Fair-value adjustments Depreciation Gain/(loss) on control of subsidiaries Loss on disposal of available-for-sale ﬁnancial assets Loss on disposal of ﬁxed assets Tax expense Proﬁt and loss Assets Segment assets Unallocated Cash and cash equivalents Trade and other debtors Other receivables Property, plant & equipment Exploration expenditure Available-for-sale ﬁnancial assets Financial assets at fair value through proﬁt or loss Total assets as per the consolidated Statement of Financial Position Liabilities Segment liabilities Unallocated Trade & other payables Accruals and provisions Total liabilities as per consolidated Statement of Financial Position 21. FINANCIAL RISK MANAGEMENT Financial Risk Management Objectives and Policies 2011 $ (12,395,757) 2,314,822 151,083 (3,733,952) (3,636,975) (9,197,356) 2,268,015 (128,741) - (482,395) (49,710) (653) (24,891,619) 2011 $ 9,054,645 34,101,109 589,692 97,751 208,542 - - - 2010 $ (743,735) 2,191,586 - (6,023,780) 1,796,986 (6,315,256) 440,295 (44,465) 28,659,995 - - - 19,961,626 2010 $ 22,476,939 41,445,175 317,404 - 482,651 (18,487) 1,096,500 327,190 44,051,739 66,127,372 2011 $ 176,684 2,382,615 415,730 2,975,029 2010 $ 14,631 682,921 - 697,552 The Consolidated Entity’s ﬁnancial instruments mainly consist of deposits with banks, accounts receivable and payable and loans to related parties. The main risks arising from the Consolidated Entity’s ﬁnancial instruments are interest rate risk, foreign currency risk, credit risk, equity price risk and liquidity risk. The Board of Directors is responsible for the overall internal control framework (which includes risk management) but no cost-effective internal control system will preclude all errors and irregularities. The system is based, in part, on the appointment of suitably-qualiﬁed management personnel in conjunction with a range of policies and procedures, which incorporate monitoring and reporting mechanisms, to assist in the management of the various risks to which the business is exposed. The effectiveness of the system is continually reviewed by management and at least annually by the Board. The ﬁnancial receivables and payables of the Consolidated Entity in the table below are due or payable within 30 days. The ﬁnancial investments are held for trading and are realised at the discretion of the Board of Directors. 77 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Variable interest rate Fixed interest rate Non-interest bearing Total Consolidated Entity Financial assets Cash Receivables Financial assets 2011 $ 1,152,637 - - 1,152,637 2010 $ 2011 $ 4,695,190 32,525,164 - - 2010 $ 35,376,064 - 2011 $ 498,528 786,067 2010 $ 2011 $ 1,373,921 34,176,329 786,067 854,219 2010 $ 41,445,175 854,219 - - 4,695,190 32,525,164 - - 35,376,064 1,284,595 1,423,690 1,423,690 3,651,830 34,962,396 43,723,084 - Financial liabilities Payables Net ﬁnancial assets - - - - (2,703,170) (462,619) (2,703,170) (462,619) 1,152,637 4,695,190 32,525,164 35,376,064 (1,418,575) 3,189,211 32,259,226 43,260,465 (a) Interest Rate Risk Interest rate risk is the risk that the value of a ﬁnancial instrument will ﬂuctuate due to changes in market interest rates. The Consolidated Entity’s exposure to market risk for changes in interest rates relate primarily to investments held in interest-bearing cash deposits. Cash at bank Term deposit Weighted average interest rates (b) Foreign Currency Risk Consolidated Entity 2011 $ 1,651,165 32,525,164 34,176,329 2010 $ 6,069,121 35,376,054 41,445,175 6.04% 5.55% The Consolidated Entity is exposed to foreign currency risk on cash held by the Company and its controlled foreign entities, foreign resource project investment commitments and exploration and evaluation expenditure on foreign resource projects. The currencies giving rise to this risk are primarily US dollars (USD) and Indonesian Rupiah (IDR). The Consolidated Entity has a policy of not hedging foreign currency risk and therefore has not entered into any hedging against movements in foreign currencies against the Australian dollar, including forward exchange contracts, as at the reporting date and is currently fully exposed to foreign exchange risk. The Consolidated Entity’s exposure to foreign currency risk expressed in Australian dollars at the reporting date was as follows: Consolidated Entity Financial assets Cash at bank Receivables Financial liabilities Payables (c) Credit Risk USD CAD IDR 2011 2010 2011 2010 2011 2010 350,179 1,161,900 12,296 - - 97,750 (174,719) - 175,460 1,174,196 (149,145) (51,395) - - - - 23,566 - 39,196 - (36,090) (12,524) - 39,196 Credit risk refers to the risk that a counterparty under a ﬁnancial instrument will default (in whole or in part) on its contractual obligations resulting in ﬁnancial loss to the Consolidated Entity. Concentrations of credit risk are minimised primarily by undertaking appropriate due diligence on potential investments, carrying out all market transactions through approved brokers, settling non-market transactions with the involvement of suitably qualiﬁed legal and accounting personnel (both internal and external), and obtaining sufﬁcient collateral or other security (where appropriate) as a means of mitigating the risk of ﬁnancial loss from defaults. This ﬁnancial year there was no necessity to obtain collateral. The credit quality of the ﬁnancial assets are neither past due nor impaired and can be assessed by reference 78 to external credit ratings (if available with Standard & Poor’s) or to historical information about counterparty default rates: Consolidated Entity Cash and cash equivalents AA A+ A BB BBB+ No external credit rating available Receivables AA A+ A BB BBB+ No external credit rating available 2011 $ 27,466,469 6,300,000 403,717 - - 6,143 34,176,329 474,692 92,032 - - - 219,343 34,962,396 2010 $ 27,894,767 - 1,212,399 6,001 12,276,064 55,944 41,445,175 171,690 - - - 36,478 646,051 42,299,394 The Consolidated Entity measures credit risk on a fair-value basis. The carrying amount of ﬁnancial assets recorded in the ﬁnancial statements, net of any provision for losses, represents the Consolidated Entity’s maximum exposure to credit risk. All receivables noted above, except interest on term deposits, are due within 30 days. None of the above receivables are past due. (d) Equity Price Risk Equity-price risk represents the risk that the value of a ﬁnancial instrument will ﬂuctuate as a result of changes in market prices, whether those changes are caused by factors speciﬁc to the individual instrument or its issuer or factors affecting all instruments in the market. Market risk is minimised through ensuring that investment activities are undertaken in accordance with Board-established mandate limits and investment strategies. Equity-securities price risk arises on the ﬁnancial assets at fair value through proﬁt or loss and available-for-sale ﬁnancial assets. At the share investment portfolio level, the Consolidated Entity is not overly exposed (by majority of its net assets) to one company or one particular industry sector of the market. (e) Liquidity Risk Liquidity risk is the risk that the Consolidated Entity will encounter difﬁculty in meeting obligations associated with ﬁnancial liabilities. The Consolidated Entity’s non-cash investments can be realised to meet accounts payable arising in the normal course of business. The ﬁnancial liabilities disclosed have the following maturity obligations: Consolidated Entity Non-interest bearing less than 6 months 6 to 12 months Interest-bearing between 1 & 2 years between 2 & 5 years 2011 $ 2,785,485 - 2,785,485 132,999 - 132,999 2010 $ 462,619 - 564,586 14,631 - 14,631 79 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (f) Net Fair Value of Financial Assets and Liabilities The carrying amounts of ﬁnancial instruments recorded in the ﬁnancial statements represent their fair value determined in accordance with the accounting policies disclosed in Note 1(s). The aggregate fair value and carrying amount of ﬁnancial assets at the reporting date are set out in Notes 8 and 11. The carrying amount of the ﬁnancial liabilities at the reporting date as set out in Note 14 approximates the current fair value. (g) Fair Value Measurements The fair value of ﬁnancial assets and ﬁnancial liabilities must be estimated for recognition and measurement or for disclosure purposes. As of 1 July 2009, Strike Resources Limited has adopted the amendment to AASB 7 Financial Instruments: Disclosures that requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); (b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following table presents the Consolidated Entity’s assets and liabilities measured and recognised at fair value. 2011 Total Level 1 Level 2 Level 3 $ $ $ $ Assets Financial assets at fair value through proﬁt and loss Trading securities Available-for-sale ﬁnancial assets Equity securities Total assets 2010 - - - - - - - - - - - - Level 1 $ Level 2 $ Level 3 $ Total $ Assets Financial assets at fair value through proﬁt and loss Trading securities Available-for-sale ﬁnancial assets Equity securities Total assets 327,190 1,096,500 1,423,690 - - - - - - 327,190 1,096,500 1,423,690 All ﬁnancial assets categorised as ﬁnancial assets through proﬁt and loss and available-for-sale were disposed of during the current reporting period. (h) Sensitivity Analysis Interest rate risk analysis The Consolidated Entity has performed a sensitivity analysis on its exposure to interest rate risk at the reporting date. The management assessment is based upon an analysis of current and future market conditions, in particular comments from the Reserve Bank of Australia on the likely movement of interest rates. The analysis demonstrates the potential effect on the current year results and equity which could result from a change in these risks. Change in proﬁt increase by 25bps (2010: 25bps) decrease by 25bps (2010: 25bps) Change in equity increase by 25bps (2010: 25bps) decrease by 25bps (2010: 25bps) 80 Consolidated Entity 2011 $ 81,438 (81,438) 2010 $ 115,103 (115,103) 81,438 (81,438) 115,103 (115,103) Equity price risk analysis The Consolidated Entity has performed a sensitivity analysis on its exposure to market price risk at the reporting date. The management assessment is based upon an analysis of current and future market positions. The analysis demonstrates the effect on the current-year results and equity which could result from a change in these risks. The All Ordinaries Index was utilised as the benchmark for the listed share investments categorised as at fair value through proﬁt or loss and available-for-sale ﬁnancial assets. Change in proﬁt increase by 15% decrease by 15% Change in equity increase by 15% decrease by 15% Foreign currency risk analysis Consolidated Entity 2011 $ - - - - 2010 $ 213,553 (213,553) 213,553 (213,553) The Consolidated Entity has performed a sensitivity analysis on its exposure to currency risk. The management assessment is based upon an analysis of current and future market position. The analysis demonstrates the effect on the current-year results and equity when the Australian dollar strengthened or weakened by 10% (2010: 5%) against the foreign currencies detailed in Note 21(b), with all the other variables held constant. Change in proﬁt increase by 5% decrease by 5% Change in equity increase by 5% decrease by 5% Consolidated Entity 2011 $ (17,397) (4,298) (17,397) (4,298) 2010 $ (55,914) 61,800 (55,914) 61,800 22. SHARE-BASED PAYMENTS A total of 1,200,000 Employee Options were granted during the year (Note 17). These options were issued as part of Strike’s employee share scheme. The reasons for the grant of these options to the employees are as follows: (a) The options issue was designed to act as an incentive for the recipients to strive to achieve the Company’s goals with the aim of enhancing shareholder value. (b) The options provide an equity holding opportunity for the recipients which is linked to the Company’s share price performance. (c) Based on the option exercise price and the rate at which the options vest, the exercise of the options by the recipient is potentially only likely to occur if there is sustained upward movement in the Company’s share price. (d) The number of options issued to recipients has been determined having regard to the level of Directors’ fees and employees’ salaries being paid and is a cash-free, effective and efﬁcient way of providing an appropriate level of remuneration as well as providing ongoing equity-based incentives for the recipients to remain with the Company with a view to improving the future growth of the Company. (e) As a relatively-small company, with much of its available funds dedicated or committed to its resource projects (and also in seeking opportunities in relation to the same), and in ﬁnancing its day-to-day working capital requirements, the Company is not always in a position to maintain competitive cash salary ranges for its Directors and employees within the industry in which it operates. Directors’ and employees’ options carry no dividend or voting rights. 81 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Share-based payments expense Consolidated Entity 2011 $ 24,394 2010 $ 429,448 Vested and Exercise price $ Balance at start of year Granted during the year Exercised Forfeited during the year during the year Balance exercisable at end of at end of the year year Grant date Expiry date Consolidated entity - 2011 21 Jul 06 13 Sep 06 07 Mar 07 07 Mar 07 03 Dec 07 04 Jun 08 14 Oct 08 25 Nov 09 25 Nov 09 25 Nov 09 6 May 11 6 May 11 6 May 11 20 Jul 11 12 Sep 11 06 Mar 12 06 Mar 12 02 Dec 12 03 Mar 13 13 Oct 13 25 Nov 12 25 Nov 12 25 Nov 12 23 Mar 13 23 Mar 13 23 Mar 13 Weighted-average exercise price 0.938 0.938 2.078 2.788 3.978 2.878 2.750 2.500 2.750 3.250 1.300 1.500 1.750 3,200,000 - 500,000 - 500,000 - 2,600,000 - 3,070,000 - 250,000 - 250,000 - 750,000 - 750,000 - 750,000 - - 400,000 - 400,000 400,000 - 12,620,000 1,200,000 1.52 2.28 - (3,200,000)* - - - (1,650,000)* - (2,080,000)* - - - - - - - - - - - - 500,000 500,000 - 500,000 500,000 950,000 950,000 990,000 990,000 - 250,000 250,000 - - - - - - - - - 400,000 400,000 - 400,000 400,000 - 400,000 400,000 (9,430,000) 4,390,000 4,390,000 2.42 (250,000)* (750,000)* (750,000)* (750,000)* 2.12 2.42 * options issued to individuals who ceased employment with Strike Resources Ltd during the year, these options were not forfeited and did not lapse during the year. Grant date Expiry date Consolidated entity - 2010 21 Jul 06 13 Sep 06 06 Oct 06 07 Mar 07 07 Mar 07 01 May 07 05 Jun 07 03 Dec 07 04 Mar 08 04 Jun 08 14 Oct 08 24 Nov 10 24 Nov 10 24 Nov 10 20 Jul 11 12 Sep 11 05 Oct 11 06 Mar 12 06 Mar 12 01 May 12 01 May 12 02 Dec 12 04 Sep 12 03 Mar 13 13 Oct 13 23 Mar 13 23 Mar 13 23 Mar 13 Exercise price $ Balance at start of year Granted during the year Exercised Forfeited during the year during the year Balance exercisable at end of the year at end of year Vested and 0.938 0.938 1.178 2.078 2.788 2.878 2.878 3.978 2.878 2.878 2.750 1.300 1.500 1.750 - 4,600,000 - 500,000 - 150,000 - 500,000 - 3,300,000 - 100,000 - 33,000 - 4,000,000 - 200,000 - 250,000 - 250,000 750,000 - 750,000 - 750,000 - 13,883,000 2,250,000 - - (150,000) - (1,400,000)* 3,200,000 3,200,000 500,000 - 500,000 - - - - - 500,000 - 500,000 (700,000)* 2,600,000 2,600,000 - - (100,000) - - - (33,000)* (930,000)* 3,070,000 3,070,000 - - (200,000) - - 250,000 - - 250,000 250,000 - - 250,000 750,000 - - 750,000 750,000 - - 750,000 - 750,000 - 750,000 (3,513,000) 12,620,000 12,620,000 - Weighted-average exercise price 2.41 1.52 2.31 2.28 2.28 * options issued to individuals who ceased employment with Strike Resources Ltd during the year, these options were not forfeited and did not lapse during the year. No options were exercised during the period. The weighted-average remaining contractual life of share options outstanding at the end of the period was 1.14 years (2010: 1.82 years). 82 Fair value of options granted The assessed fair value at grant date of options granted during the year ended 30 June 2011 was $0.023 for $1.30 options, $0.022 for $1.50 options and $0.016 for $1.75 options (2010: $0.21 for $2.50 options, $0.19 for $2.75 options and $0.17 for $3.25 options). The fair value at grant date is independently determined using the Black- Scholes option pricing model which takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The model inputs for options granted during the year ended 30 June 2011 included: (a) options are granted for no consideration and vest immediately. Vested options are exercisable for a period of three years after vesting. (b) exercise prices of $1.30, $1.50 and $1.75 (2010: $2.50, $2.75 and $3.25) (c) grant date: 6 May 2010 (2010: 25 November 2009) (d) expiry date: 23 March 2013 (2010: 24 November 2012) (e) share price at grant date: $0.365 (2010: $0.77) (f) expected price volatility of the Company’s shares: 68% (2010: 80%) (g) expected dividend yield: 0% (2010: 0%) (h) risk-free interest rate: 5.145% (2010: 4.97%) The expected price volatility is based on the historic volatility adjusted for any expected changes to future volatility due to publicly available information. 23. COMMITMENTS a) Lease Commitments Non-cancellable operating lease commitments: not longer than one year between 1 year and 5 years Consolidated Entity 2011 $ 220,365 675,212 895,577 2010 $ 230,372 957,338 1,187,710 The Consolidated Entity leases ofﬁces in Perth, Australia and Jakarta, Indonesia under non-cancellable operating leases with expiry dates between 2 and 4 years. Signiﬁcant terms of each lease are as follows: Perth ofﬁce lease The lease rent is subject to a ﬁxed 4% increase on the anniversary of the commencement date. Strike is required to pay a portion of the annual outgoings incurred by the lessor. This ﬁgure is reviewed on an annual basis. The lease does not contain an option to renew the lease at expiry date. Jakarta ofﬁce lease The lease does not contain an option to renew the lease on expiry. b) Mineral Tenement/Concession/Mining Rights - Commitments for Expenditure Australian tenements In order to maintain current rights of tenure to exploration tenements, the holders of Australian mineral tenements are required to outlay lease rentals and meet minimum expenditure commitments. In the ﬁnancial year ended 30 June 2010 the Consolidated Entity entered into a farm-in agreement with Process Minerals International Pty Ltd (PMI), a subsidiary of ASX-listed Mineral Resources Limited. Under this agreement PMI is required to meet the minimum expenditure commitments over the Australian tenements in which Strike holds an interest. Financial commitments for subsequent periods are contingent upon the continuity of the farm-in arrangement with PMI, future exploration and evaluation results, and as such cannot be reliably estimated. 83 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Perúvian concessions The Consolidated Entity is required to pay annual licence fees by 30 June of each year, at rates which vary on an amount per-hectare basis. The total amount of this commitment will depend upon the area of concessions relinquished (if any) and the area of new concessions granted (if any) and therefore cannot be reliably estimated. As a result of ﬁnalising the arbitration process with the shareholders of Apurimac Ferrum S.A.(AF), the Consolidated Entity granted on option over Perúvian tenements held by its subsidiary, Strike Resources Perú S.A.C. Under the terms of the AF Settlement Agreement AF is obliged to make all necessary payments to keep the concessions in good standing. Financial commitments for subsequent periods are contingent upon the continuity of the agreement with AF, future exploration and evaluation results, and as such cannot be reliably estimated. Australian heritage protection agreements These agreements facilitate the preservation of Aboriginal heritage through the protection of Aboriginal sites and objects upon the grant of mining tenements in Western Australia. The Heritage Protection Agreements require the Consolidated Entity to conduct Aboriginal heritage surveys prior to conducting exploration that is not low-impact in nature and detail procedures to be followed if an Aboriginal site is identiﬁed. Agreements with Perúvian landowners and community groups The Company notes that holding a mineral concession in Perú does not grant automatic access to the surface land. Notwithstanding an easement procedure is contemplated in Perúvian law, in practice, mining companies have to negotiate and enter into private agreements with landowners/community groups in order to have access to their land for the purposes of conducting mining activities (exploration, evaluation, development and mining). Multiple landowners/community groups are affected by the Consolidated Entity’s proposed mining activities on a majority of the Consolidated Entity’s Perúvian concessions. To date, approvals have been sought and obtained for drilling on a programme by programme basis. Obtaining approvals from landowners/community groups can be a complicated and lengthy process. The Consolidated Entity will have to commit funds to community groups and/or landowners to secure land access agreements to develop its Perúvian projects. There can be no guarantees that such approvals will be obtained, or as to the terms upon which they will be obtained. At this stage it is not possible to quantify the potential ﬁnancial obligation of the Consolidated Entity in this regard. 24. CONTINGENT ASSETS AND LIABILITIES (a) Strike Resources Perú S.A.C. Option Strike Resources Perú S.A.C. (the Company’s Perúvian subsidiary) granted Apurimac Ferrum S.A. an option over its mining concessions exercisable for US$1.75 million. (b) Cristoforo Agreement On 15 June 2010, Strike Resources Perú S.A.C. (Strike Perú) entered into an assignment of mining rights and option agreement with the Perúvian owner of three mineral concessions in the Apurimac District totalling 1,900 hectares, being the Cristoforo 14, Cristoforo 28 and Ferroso 29 concessions (Cristoforo Agreement). The consideration paid (and payable) under the agreement was US$31,250 (paid on execution), US$50,000 payable within 12 months and 15 business days from execution, US$50,000 payable within 6 months thereafter and a further US$1.05 million is payable if Strike Perú exercises the option to acquire the concessions. The option may be exercised on or before 14 June 2012. Under the terms of the AF Settlement Agreement Strike Perú was required to assign the Cristoforo Agreement to Apurimac Ferrum S.A. (AF) for no consideration (other than reimbursement of the money paid by Strike Perú to the Cristoforo vendor). Accordingly, Strike Perú is currently in the process of executing the assignment. (c) Native Title The Consolidated Entity’s tenements in Australia may be subject to native title applications in the future. At this stage it is not possible to quantify the impact (if any) that native title may have on the operations of the Consolidated Entity. (d) Government Royalties The Consolidated Entity is liable to pay royalties on production obtained from its mineral tenements/concessions. For example, the applicable Government royalties in Perú are between 1% to 3% based on the value of production. At this stage it is not possible to quantify the potential ﬁnancial obligation of the Consolidated Entity under Government royalties. 84 (e) Berau Coal Project Royalties The Consolidated Entity is liable to pay a royalty to PT Kaltim Jaya Bara (KJB), the owner of the mining concession on which the Consolidated Entity’s Berau Coal Project is located. As a result of changes to the Indonesian mining law it is unclear if Strike would legally be able to pay this royalty should it commence production at Berau. Due to uncertainty created by the mining law changes and issues concerning the estimation of such a royalty at this stage of the project, it is not possible to quantify the potential ﬁnancial obligation of the Consolidated Entity to pay a royalty to KJB. (f) Directors’ Deeds The Consolidated Entity has entered into deeds of indemnity with certain Strike Resources Limited Directors, indemnifying them against liability incurred in discharging their duties as Directors/ofﬁcers of the Consolidated Entity. As at the reporting date, no claims have been made under any such indemnities and, accordingly, it is not possible to quantify the potential ﬁnancial obligation of the Consolidated Entity under these indemnities. (g) Paulsens East Royalty The Consolidated Entity entered into a farm-in agreement with Process Minerals International Pty Ltd (PMI), a subsidiary of ASX listed Mineral Resources Limited for the potential mining of iron ore from Strike’s Paulsens East project (EL47/1328 and PL47/1170) located in the Pilbara. Under this agreement PMI will pay Strike A$ 3.20 per dry tonne of ore mined. As this royalty is contingent on the successful development of a mine and due to the uncertain nature of mine production it is not possible to quantify the potential ﬁnancial beneﬁt to the Consolidated Entity of this royalty. 25. EVENTS AFTER THE REPORTING DATE During July 2011 Strike entered into an agreement with Canadian explorer, Cuervo Resources Inc (Cuervo), to potentially earn up to 49.2% in Cuervo in return for Strike loaning Cuervo up to $15m Canadian dollars (C$). These funds are to be used by Cuervo to undertake advanced exploration activities on their Perúvian iron-ore concessions. The program of work to be undertaken has been agreed by both parties and is included in the terms of the ﬁnancing agreement. Cuervo is a junior iron-ore explorer with concessions in Perú that are complementary to AF’s concessions in the Apurimac and Cusco regions in southern Perú. Cuervo’s main project area, Cerro Ccopane, is 65km south of the city of Cusco and hosts four (4) zones of magnetite mineralisation being the Aurora, Orcopura, Huillque and Bob 1 prospects. Financing Arrangement Key terms agreed by Strike and Cuervo are as follows: (cid:115) Strike to loan Cuervo up to C$15m by way of zero-coupon secured promissory notes in two tranches. (cid:115) Tranche 1 loan of C$5.25m will be advanced on the pre-registration of the mortgage and will have a term of 3 years from the execution date of the ﬁnancing agreements (cid:115) Tranche 2 loan of C$9.75m is to be advanced at Strike’s election. This loan will be in the form of a zero coupon secured promissory note with a term of 3 years from the execution date of the ﬁnancing agreement. (cid:115) Security for the loans is in the form of a mortgage over Cuervo’s Perúvian concessions and a pledge over the shares of Cuervo’s 100% owned Perúvian subsidiary and holder of Cuervo’s interest in its Perúvian concessions. (cid:115) As interest consideration for the loans Cuervo granted Strike two warrants9 to purchase common shares of Cuervo. If both warrants are exercised Strike will own over 49% of Cuervo’s issued common shares (approximately 46% of Cuervo on a fully diluted basis). (cid:115) The Tranche 1 Warrant gives Strike the right to purchase 17,500,000 common shares in Cuervo (32.5% of Cuervo, undiluted) at an exercise price of C$0.30 and have a term of 3 years, subject to adjustment in certain circumstances. This warrant was issued on the advance of the Tranche 1 loan. (cid:115) The Tranche 2 Warrant gives Strike the right to purchase up to 17,727,273 common shares in Cuervo (49.2% of Cuervo cumulative on the Tranche 1 Warrant, undiluted) at an exercise price of C$0.55 and have a term of 3 years. This Warrant was issued on the advance of the Trance 1 loan and will terminate if Strike elects not to advance the Tranche 2 Loan (C$9.75m) to Cuervo. 9 A warrant is in all material respects identical to an option – giving the holder the right, but not the obligation, to buy shares at a specified price dur- ing a specified period. 85 STRIKE RESOURCES ANNUAL REPORT 2011 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cid:115) The Warrants will be required to be exercised on the occurrence of any of the following events: o Cuervo’s shares trade for 20 consecutive days above C$1.00, with a minimum 20 day trading volume of 1.5 million shares; or o Cuervo ﬁles a Canadian National Instrument 43-101 compliant mineral resource estimate of at least 700Mt of iron ore with a grade of 40% Fe or above. (cid:115) If the Loans are outstanding the Warrants may be exercised by offsetting the outstanding loan amount with the amount due on the exercise of the warrants. (cid:115) During the term of the Tranche 1 Loan, Strike has the right to nominate 2 Directors to Cuervo’s Board and will have the right to nominate a further Director if Strike advances the Tranche 2 Loan or exercises the Tranche 2 Warrant. Strike’s Chairman, Prof. Malcolm Richmond and Managing Director, Mr. Ken Hellsten, have been appointed to Cuervo’s Board. DIRECTORS’ DECLARATION In the Directors’ opinion: 1. The Financial Statements, comprising the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows and accompanying notes as set out on pages 49-86 above, are in accordance with the Corporations Act 2001, and: (a) comply with Accounting Standards and the Corporations Regulations 2001; and (b) give a true and fair view of the Consolidated Entity’s ﬁnancial position as at 30 June 2011 and its performance for the year ended on that date; 2. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; 3. The remuneration disclosures set out in the Directors’ Report on pages 39-46 (as the audited Remuneration Report) comply with section 300A of the Corporations Act 2001; 4. The Directors have been given the declarations by the Managing Director (the person who performs the chief executive function) and the Chief Financial Ofﬁcer as required by section 295A of the Corporations Act 2001; and 5. Note 1 conﬁrms that the Financial Statements also comply with the International Financial Reporting Standards as issued by the International Accounting Standards Board. This declaration is made in accordance with a resolution of the Directors and is signed for and on behalf of the Directors by: Malcolm Richmond Chairman 23 September 2011 Ken Hellsten Managing Director 86 AUDITOR’S REPORT Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF STRIKE RESOURCES LTD Report on the Financial Report We have audited the accompanying financial report of Strike Resources Ltd, which comprises the consolidated balance sheet as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Strike Resources Ltd, would be in the same terms if given to the directors as at the time of this auditor’s report. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 87 STRIKE RESOURCES ANNUAL REPORT 2011 AUDITOR’S REPORT Opinion In our opinion: (a) the financial report of Strike Resources Ltd is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Emphasis of Matter Without qualifying our audit opinion, we draw attention to the matter disclosed in Note 1 (d). There remains a dispute as to the mining rights of the Berau coal concession. Given this dispute there may be uncertainty as to the recoverability of the deferred exploration, evaluation and development expenditure assets of Strike Resources Limited. The recoverability of the deferred exploration and evaluation expenditure asset is dependent upon successful resolution of this dispute and the successful development and commercialisation of the underlying areas of interest or their sale. This material uncertainty may cast doubt about the company’s ability to realise the asset at the values stated in the balance sheet. Our opinion is not qualified in respect of this matter. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Strike Resources Ltd for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001. BDO Audit (WA) Pty Ltd Brad McVeigh Director Perth, Western Australia Dated this 23rd day of September 2011 88 CORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE COMPLIANCE MATRIX The following matrix sets out, in summary form, the extent to which the Company has implemented the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (Principles). The Corporate Governance Statement (CGS), which appears in the next section of this Report, sets out in detail the way in which the Principles have been implemented. Corporate Governance Principle Compliance and Comments References Principle 1: Lay solid foundations for management and oversight 1.1 Companies should establish the functions reserved to the Yes board and those delegated to senior executives and disclose those functions. CGS 2.1 & 3.4 1.2 Companies should disclose the process for evaluating the Yes CGS 7.2 performance of senior executives. 1.3 Companies should provide: (cid:115)(cid:0)(cid:0)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:50)(cid:69)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:17)(cid:14)(cid:17)(cid:12)(cid:0)(cid:17)(cid:14)(cid:18)(cid:0) No departures or 1.3. (cid:115)(cid:0)(cid:0)(cid:0)(cid:87)(cid:72)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:69)(cid:86)(cid:65)(cid:76)(cid:85)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:83)(cid:69)(cid:78)(cid:73)(cid:79)(cid:82)(cid:0)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0) taken place in the reporting period and whether it was in accordance with the process disclosed. (cid:115)(cid:0)(cid:0)(cid:0)(cid:65)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:77)(cid:65)(cid:84)(cid:84)(cid:69)(cid:82)(cid:83)(cid:0)(cid:82)(cid:69)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:68)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0) charter or the statement of areas of delegated authority to senior executives should be made publicly available, ideally by posting it to the company’s website in a clearly-marked corporate governance section. Principle 2: Structure the board to add value 2.1 A majority of the board should be independent directors. Yes Yes No. (Note, however, that the Board has a majority of Non-Executive Directors and is seeking to appoint at least 1 additional independent Director.) 2.2 The chair should be an independent director. 2.3 The roles of chair and chief executive ofﬁcer should not be exercised by the same individual. 2.4 The board should establish a nomination committee. 2.5 Companies should disclose the process for evaluating the performance of the board, its committees and individual directors. 2.6 Companies should provide the following information in the corporate governance statement in the annual report: (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:75)(cid:73)(cid:76)(cid:76)(cid:83)(cid:12)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:84)(cid:73)(cid:83)(cid:69)(cid:0)(cid:82)(cid:69)(cid:76)(cid:69)(cid:86)(cid:65)(cid:78)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:79)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0) director held by each director in ofﬁce at the date of the annual report. (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:65)(cid:77)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:68)(cid:69)(cid:82)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:84)(cid:79)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:84)(cid:73)(cid:84)(cid:85)(cid:84)(cid:69)(cid:0) independent directors and the company’s materiality thresholds. (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:72)(cid:73)(cid:80)(cid:83)(cid:0)(cid:65)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0) listed in Box 2.1 and an explanation of why the board considers a director to be independent, notwithstanding the existence of these relationships. Yes Yes Yes Yes Yes Yes Yes CGS 7.2 Website CGS 2.1 CGS 3.2 CGS 3.2 CGS 3.2, 3.3 & 3.4 CGS 6.2 CGS 2.3 CGS 3 (refers to this material in the Directors’ Report) CGS 3.2 CGS 3.2 89 STRIKE RESOURCES ANNUAL REPORT 2011 CORPORATE GOVERNANCE STATEMENT (cid:115)(cid:0)(cid:0)(cid:65)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:65)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:87)(cid:72)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:82)(cid:69)(cid:0)(cid:73)(cid:83)(cid:0)(cid:65)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:68)(cid:85)(cid:82)(cid:69)(cid:0)(cid:65)(cid:71)(cid:82)(cid:69)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) board for directors to take independent professional advice at the expense of the company. (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:0)(cid:72)(cid:69)(cid:76)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:69)(cid:65)(cid:67)(cid:72)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:73)(cid:78)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:65)(cid:84)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0) the annual report. (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:65)(cid:77)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:79)(cid:77)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:73)(cid:82)(cid:0) attendance at meetings of the committee. Yes Yes Yes (cid:115)(cid:0)(cid:0)(cid:87)(cid:72)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:69)(cid:86)(cid:65)(cid:76)(cid:85)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:83)(cid:0) and directors has taken place in the reporting period and whether it was in accordance with the process disclosed. Yes (cid:115)(cid:0)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:50)(cid:69)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:18)(cid:14)(cid:17)(cid:12)(cid:0)(cid:18)(cid:14)(cid:18)(cid:12)(cid:0) 2.3, 2.4, 2.5 or 2.6. No departures The following material should be made publicly available, ideally by posting it to the company’s website in a clearly-marked corporate governance section: (cid:115)(cid:0)(cid:0)(cid:65)(cid:0)(cid:68)(cid:69)(cid:83)(cid:67)(cid:82)(cid:73)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:68)(cid:85)(cid:82)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) of new directors and the re-election of incumbent directors. (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:79)(cid:77)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) role, rights, responsibilities and membership requirements for that committee. (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:7)(cid:83)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:79)(cid:77)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0) directors. Principle 3: Ethical and responsible decision making Yes Yes Yes 3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to: Yes 3.1.1 the practices necessary to maintain conﬁdence in the company’s integrity. 3.1.2 the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders. 3.1.3 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. 3.2 Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them. 3.3 Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. 3.4 Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. Yes Yes No Yes 90 CGS 5.4 CGS 4.1 CGS 6.2 (Names) Director’s Report (All info) CGS 2.3 CGS 4.2 & 6.2 Website CGS 4.2 CGS 10. CGS 8 CGS 8 CGS 8 CGS 8 3.5 Companies should provide an explanation of any departures from Recommendations 3.1 to 3.4 in the corporate governance statement in the annual report. Yes The following material should be made publicly available, ideally by posting it to the company’s website in a clearly-marked corporate governance section: (cid:115)(cid:0)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:67)(cid:79)(cid:68)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:79)(cid:78)(cid:68)(cid:85)(cid:67)(cid:84)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:89)(cid:14) (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:68)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:84)(cid:89)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)(cid:14) Principle 4: Safeguard integrity in ﬁnancial reporting 4.1 The board should establish an audit committee. 4.2 Structure the audit committee so that it: (cid:115)(cid:0)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:83)(cid:0)(cid:79)(cid:78)(cid:76)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:78)(cid:79)(cid:78)(cid:13)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:14) (cid:115)(cid:0)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:0)(cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:14) (cid:115)(cid:0)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:72)(cid:65)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:67)(cid:72)(cid:65)(cid:73)(cid:82)(cid:12)(cid:0)(cid:87)(cid:72)(cid:79)(cid:0)(cid:73)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:67)(cid:72)(cid:65)(cid:73)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) board. (cid:115)(cid:0)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:84)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:83)(cid:14) 4.3 The audit committee should have a formal charter. 4.4 The following material should be included in the corporate governance statement in the annual report: (cid:115)(cid:0)(cid:0)(cid:68)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:65)(cid:77)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:81)(cid:85)(cid:65)(cid:76)(cid:73)(cid:108)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:79)(cid:83)(cid:69)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:69)(cid:68)(cid:0) to the audit committee and their attendance at meetings of the committee. (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:85)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:65)(cid:77)(cid:69)(cid:83)(cid:0) of the attendees. (cid:115)(cid:0)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:50)(cid:69)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:20)(cid:14)(cid:17)(cid:12)(cid:0)(cid:20)(cid:14)(cid:18)(cid:12)(cid:0) 4.3 or 4.4. The following material should be made publicly available, ideally by posting it to the company’s website in a clearly marked corporate governance section: (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:14) (cid:115)(cid:0)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:68)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) external auditor, and for the rotation of external audit engagement partners. Yes Yes Yes Yes No. (Not possible on present Board composition, however, the Company will seek to comply upon appointing an additional independent Director.) Partial (The Committee Chair is not the Chair of the Board but is not independent.) Yes Yes Yes Yes Yes Yes Yes Yes CGS 10 CGS 10 CGS 8 CGS 6.1 CGS 6.1 CGS 6.3 CGS 6.3 CGS 6.1 Website CGS 6.1 (Names) Directors’ Report (All info) Directors’ Report CGS 6.3 Website Audit Committee Charter 91 STRIKE RESOURCES ANNUAL REPORT 2011 CORPORATE GOVERNANCE STATEMENT Principle 5: Make timely and balanced disclosure 5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Yes 5.2 Companies should: (cid:115)(cid:0)(cid:0)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:50)(cid:69)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0) 5.1 or 5.2 in the corporate governance statement in the annual report. No departures (cid:115)(cid:0)(cid:0)(cid:77)(cid:65)(cid:75)(cid:69)(cid:0)(cid:80)(cid:85)(cid:66)(cid:76)(cid:73)(cid:67)(cid:76)(cid:89)(cid:0)(cid:65)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:73)(cid:69)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:79)(cid:83)(cid:69)(cid:0) policies designed to guide compliance with Listing Rule disclosure requirements, ideally by posting it to the company’s website in a clearly marked corporate governance section. Principle 6: Respect the rights of shareholders 6.1 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Yes Yes 6.2 Companies should provide: (cid:115)(cid:0)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:66)(cid:69)(cid:83)(cid:84)(cid:0)(cid:80)(cid:82)(cid:65)(cid:67)(cid:84)(cid:73)(cid:67)(cid:69)(cid:0) recommendations 6.1 or 6.2 in the corporate governance statement in the annual report. No departures (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:83)(cid:72)(cid:79)(cid:85)(cid:76)(cid:68)(cid:0)(cid:68)(cid:69)(cid:83)(cid:67)(cid:82)(cid:73)(cid:66)(cid:69)(cid:0)(cid:72)(cid:79)(cid:87)(cid:0)(cid:73)(cid:84)(cid:0)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:85)(cid:78)(cid:73)(cid:67)(cid:65)(cid:84)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:73)(cid:84)(cid:83)(cid:0) shareholders publicly, ideally by posting the information on the company’s website in a clearly-marked corporate governance section. Yes (cid:115)(cid:0)(cid:0)(cid:65)(cid:0)(cid:68)(cid:69)(cid:83)(cid:67)(cid:82)(cid:73)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:82)(cid:82)(cid:65)(cid:78)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:80)(cid:82)(cid:79)(cid:77)(cid:79)(cid:84)(cid:69)(cid:0) communication with shareholders. Yes Yes Yes Principle 7: Recognise and manage risk 7.1 Companies should establish policies for oversight and management of material business risks and disclose a summary of those policies. 7.2 The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. 7.3 The board should disclose whether it has received assurance from the chief executive ofﬁcer (or equivalent) and the chief ﬁnancial ofﬁcer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to ﬁnancial reporting risks. 7.4 Companies should include the following material in the corporate governance section of the annual report: 92 CGS 12.2 Website CGS 12.2 CGS 12.1 Website CGS 12.1 & 12.2 CGS 12.1 & 12.2 CGS 11.1 CGS 11.1 Yes CGS 11.1 (cid:115)(cid:0)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:23)(cid:14)(cid:17)(cid:12)(cid:0)(cid:23)(cid:14)(cid:18)(cid:12)(cid:0) 7.3 or 7.4. No departures (cid:115)(cid:0)(cid:0)(cid:87)(cid:72)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) under Recommendation 7.2. (cid:115)(cid:0)(cid:0)(cid:87)(cid:72)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0)(cid:65)(cid:83)(cid:83)(cid:85)(cid:82)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0) executive ofﬁcer (or equivalent) and the chief ﬁnancial ofﬁcer (or equivalent) under Recommendation 7.3. Companies should make publicly available a summary of the company’s policies on risk oversight and management of material business risks, ideally by posting it to the company’s website in a clearly-marked corporate governance section. Principle 8: Remunerate fairly and responsibly 8.1 The board should establish a remuneration committee. 8.2 Companies should clearly distinguish the structure of non- executive directors’ remuneration from that of executive directors and senior executives. 8.2 The remuneration committee should be structured so that it: (cid:115)(cid:0)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:0)(cid:77)(cid:65)(cid:74)(cid:79)(cid:82)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83) CGS 11.1 CGS 11.1 Website CGS 11.1 CGS 6.2 Remuneration Report CGS 6.3 Yes Yes Yes Yes Yes No. (Not possible on present Board composition, however, the Company will seek to comply upon appointing an additional independent Director.) (cid:115)(cid:0)(cid:0)(cid:73)(cid:83)(cid:0)(cid:67)(cid:72)(cid:65)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:65)(cid:78)(cid:0)(cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:84)(cid:0)(cid:67)(cid:72)(cid:65)(cid:73)(cid:82) (cid:115)(cid:0)(cid:0)(cid:72)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:76)(cid:69)(cid:65)(cid:83)(cid:84)(cid:0)(cid:84)(cid:72)(cid:82)(cid:69)(cid:69)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:83) Yes Yes CG 6.2 CG 6.2 8.3 Companies should provide the following material or a clear cross-reference to the location of the material in the corporate governance statement in the annual report: (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:65)(cid:77)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) their attendance at meetings of the committee. Yes (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:69)(cid:82)(cid:77)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:83)(cid:67)(cid:72)(cid:69)(cid:77)(cid:69)(cid:83)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:82)(cid:69)(cid:84)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:66)(cid:69)(cid:78)(cid:69)(cid:108)(cid:84)(cid:83)(cid:12)(cid:0) other than superannuation, for non-executive directors. Yes (cid:115)(cid:0)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:68)(cid:69)(cid:80)(cid:65)(cid:82)(cid:84)(cid:85)(cid:82)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:50)(cid:69)(cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:24)(cid:14)(cid:17)(cid:12)(cid:0) 8.2 or 8.3. (cid:115)(cid:0)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:67)(cid:72)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:69)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:0)(cid:83)(cid:85)(cid:77)(cid:77)(cid:65)(cid:82)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) role, rights, responsibilities and membership requirements for that committee. The Company should make publicly available a summary of the company’s policy on prohibiting entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes, ideally by posting it to the company’s website in a clearly marked corporate governance section. Yes Yes Yes CGS 6.2 (Names) Directors’ Report (Attendance) CGS 9 Remuneration Report CGS 6.3 Website CGS 9 Security Trading Policy - Website 93 STRIKE RESOURCES ANNUAL REPORT 2011 CORPORATE GOVERNANCE STATEMENT 1. STRIKE’S CORPORATE GOVERNANCE APPROACH The Strike Resources’ Board is committed to maintaining a high standard of corporate governance. Good corporate governance involves the Directors and Company personnel having and living by a set of core values and behaviours which underpin the Company’s activities and ensure transparency, fair dealing and protection of stakeholders’ interests. The Board of Directors strongly supports the Corporate Governance Principles and Recommendations. Strike’s practices are consistent with the Principles, subject to the exception that there is not an independent majority on the Board or on Board Committees. It is not considered appropriate to move to an independent Board majority immediately due to the scale of the Company’s activities, however, the Board supports moving to that position as the Company’s activities expand. At the date of this Statement, the Company is seeking to appoint at least one additional independent Director, and will continue to monitor the potential to further increase the number of independents on the Board going forward. When the ﬁrst new appointment is made it will present Strike with the opportunity to ensure that at least one - and potentially both - of its Board Committees have independent majorities. Strike Resources has a majority of non-Executive Directors, with the Managing Director being the only Executive on a four-member Board. A Board majority which is independent of management, lead by a strong, independent Chairman, is an important protection for shareholders. 2. BOARD RESPONSIBILITIES 2.1 Areas of Responsibility In general the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. The Board is also responsible for overall corporate governance and recognises the need for the highest standards of behaviour and accountability for all personnel. The Board also ensures that the Company complies with all of its contractual, statutory and social obligations. The Board has the ﬁnal responsibility for the successful operation of the Company. Where the Board considers that particular expertise or information is required which is not available from within its ranks, appropriate external advice may be taken before a decision is made. Without intending to limit the general role of the Board, the Board’s principal functions and responsibilities include the matters set out below, subject to delegation as speciﬁed elsewhere in this CGS or as otherwise appropriate: (cid:115)(cid:0) (cid:70)(cid:79)(cid:82)(cid:77)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:65)(cid:76)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0)(cid:83)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:73)(cid:67)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:71)(cid:79)(cid:65)(cid:76)(cid:83)(cid:27) (cid:115)(cid:0) (cid:67)(cid:65)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:0)(cid:82)(cid:65)(cid:73)(cid:83)(cid:73)(cid:78)(cid:71)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:83)(cid:83)(cid:85)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:27) (cid:115)(cid:0) (cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:65)(cid:76)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0)(cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:66)(cid:85)(cid:68)(cid:71)(cid:69)(cid:84)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:79)(cid:83)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:65)(cid:76)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:73)(cid:71)(cid:78)(cid:73)(cid:108)(cid:67)(cid:65)(cid:78)(cid:84)(cid:12)(cid:0)(cid:79)(cid:85)(cid:84)(cid:13)(cid:79)(cid:70)(cid:0) budget expenditure items; (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:80)(cid:82)(cid:85)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0) (cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0) (cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0) performance; (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:83)(cid:79)(cid:85)(cid:82)(cid:67)(cid:73)(cid:78)(cid:71)(cid:12)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:70)(cid:0)(cid:69)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:27) (cid:115)(cid:0) (cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:65)(cid:68)(cid:69)(cid:81)(cid:85)(cid:65)(cid:84)(cid:69)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:82)(cid:79)(cid:67)(cid:69)(cid:68)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:69)(cid:88)(cid:73)(cid:83)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)(cid:0) and procedures is maintained; (cid:115)(cid:0) (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:73)(cid:108)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:73)(cid:71)(cid:78)(cid:73)(cid:108)(cid:67)(cid:65)(cid:78)(cid:84)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:82)(cid:73)(cid:83)(cid:75)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:65)(cid:68)(cid:69)(cid:81)(cid:85)(cid:65)(cid:84)(cid:69)(cid:76)(cid:89)(cid:0)(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:68)(cid:27) (cid:84)(cid:72)(cid:69)(cid:0)(cid:84)(cid:73)(cid:77)(cid:69)(cid:76)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:12)(cid:0)(cid:65)(cid:67)(cid:67)(cid:85)(cid:82)(cid:65)(cid:67)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:67)(cid:79)(cid:77)(cid:77)(cid:85)(cid:78)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:79)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:12)(cid:0) including approving ﬁnancial and operational reports; and (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:83)(cid:84)(cid:65)(cid:66)(cid:76)(cid:73)(cid:83)(cid:72)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:84)(cid:69)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:0)(cid:69)(cid:84)(cid:72)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:78)(cid:68)(cid:65)(cid:82)(cid:68)(cid:83)(cid:14) The Board takes advice from the Audit Committee and the Remuneration and Nomination Committee on matters within their respective Charters, however the Board retains ﬁnal decision-making authority on those matters. 2.2 Board Meetings The Board holds regular meetings, approximately monthly, and holds additional meetings whenever necessary to deal with speciﬁc matters requiring attention. Circulating Directors’ resolutions are also used, where appropriate, in addition to formal meetings. Each member of the Board is committed to spending sufﬁcient time to enable them to carry out their duties as a Director of the Company. 94 It is recognised and accepted that Non-Executive Directors may also concurrently serve on other boards, either in an executive or non-executive capacity. 2.3 Performance Review and Evaluation The Company is not of a size to warrant the development of formal processes for evaluating the performance of Non-Executive Directors, however there is on-going monitoring of Board performance by the Chairman and self review by the Board. It is the Board’s policy to ensure that the Company’s Directors and Executives demonstrate the skills and experience which they need to discharge their responsibilities effectively. The Remuneration and Nomination Committee is scheduled to formally review the Managing Director’s performance in the December Quarter, 2011 and annually thereafter. A formal review of the Managing Director’s performance did not occur during the Reporting Period. 3. BOARD COMPOSITION AND STRUCTURE The Board has been formed so that it has the composition, size and commitment to adequately discharge its responsibilities and duties given its current size and the scale and nature of the Company’s activities. The names of the Directors in ofﬁce during the 2010-2011 ﬁnancial year and their qualiﬁcations and experience are stated in the Directors’ Report for that year in the Company’s Annual Report. 3.1 Skills, Knowledge and Experience Directors are appointed based on the speciﬁc corporate and governance skills and experience required by the Company. The Board recognises the need for Directors with a relevant blend of personal experience in mining, accounting, law, ﬁnance, capital markets, public company administration and chief-executive business experience, having regard to the scale and nature of the Company’s activities. A Director is initially appointed by the Board. All Directors (other than the Managing Director) retire at the next Annual General Meeting after their appointment and may stand for re-election. Once elected at an AGM, Directors hold ofﬁce for three years, with the right to stand for re-election for successive terms. 3.2 Independent Directors An independent Director, according to the Principles, is a Non-Executive Director who: (cid:115)(cid:0) (cid:73)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:65)(cid:0)(cid:83)(cid:85)(cid:66)(cid:83)(cid:84)(cid:65)(cid:78)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:12)(cid:0)(cid:79)(cid:82)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:87)(cid:73)(cid:83)(cid:69)(cid:0)(cid:65)(cid:83)(cid:83)(cid:79)(cid:67)(cid:73)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:76)(cid:89)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:12)(cid:0)(cid:65)(cid:0)(cid:83)(cid:85)(cid:66)(cid:83)(cid:84)(cid:65)(cid:78)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0) shareholder of the Company; (cid:115)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:69)(cid:77)(cid:80)(cid:76)(cid:79)(cid:89)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:78)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:67)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:71)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:73)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:80)(cid:82)(cid:69)(cid:86)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0) 3 years; (cid:115)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:65)(cid:0)(cid:80)(cid:82)(cid:73)(cid:78)(cid:67)(cid:73)(cid:80)(cid:65)(cid:76)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:0)(cid:77)(cid:65)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:80)(cid:82)(cid:79)(cid:70)(cid:69)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:0)(cid:65)(cid:68)(cid:86)(cid:73)(cid:83)(cid:69)(cid:82)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:0)(cid:77)(cid:65)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:85)(cid:76)(cid:84)(cid:65)(cid:78)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0) group member, or an employee materially associated with the provision of material professional or consulting services, within the previous 3 years; (cid:115)(cid:0) (cid:73)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:65)(cid:0)(cid:77)(cid:65)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:85)(cid:80)(cid:80)(cid:76)(cid:73)(cid:69)(cid:82)(cid:0)(cid:79)(cid:82)(cid:0)(cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:71)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:12)(cid:0)(cid:79)(cid:82)(cid:0)(cid:65)(cid:78)(cid:0)(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:79)(cid:82)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:87)(cid:73)(cid:83)(cid:69)(cid:0) associated directly or indirectly with a material supplier or customer; (cid:115)(cid:0) (cid:72)(cid:65)(cid:83)(cid:0)(cid:78)(cid:79)(cid:0)(cid:77)(cid:65)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:65)(cid:67)(cid:84)(cid:85)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:72)(cid:73)(cid:80)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:65)(cid:78)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68) (cid:115)(cid:0) (cid:73)(cid:83)(cid:0)(cid:70)(cid:82)(cid:69)(cid:69)(cid:0)(cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0)(cid:79)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:72)(cid:73)(cid:80)(cid:0)(cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0)(cid:67)(cid:79)(cid:85)(cid:76)(cid:68)(cid:0)(cid:8)(cid:79)(cid:82)(cid:0)(cid:67)(cid:79)(cid:85)(cid:76)(cid:68)(cid:0)(cid:82)(cid:69)(cid:65)(cid:83)(cid:79)(cid:78)(cid:65)(cid:66)(cid:76)(cid:89)(cid:0)(cid:66)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0) to) materially interfere with the Director’s ability to act in the Company’s best interests. Within the current Board, Chairman Professor Malcolm Richmond is regarded as an Independent Director. Ken Hellsten, the Managing Director is not regarded as independent as he is an Executive Director. William Johnson is a Director of a substantial shareholder of the Company and also served as an Executive Director of the Company from July 2006 until 1 May 2010. Accordingly he is not regarded as independent. Matthew Hammond holds a senior management position with a substantial shareholder of the Company and is not regarded as Independent. The Company is actively seeking to appoint at least one additional, Independent, Non-Executive Director. This process is well advanced as at the date of this Annual Report going to press. The Board, on advice from the Remuneration and Nomination Committee, will monitor the desirability of adding further Independent Directors on an ongoing basis. The Board considers that the Company is not currently of a size, nor are its affairs of such complexity, to justify appointing a majority of independent Directors. Non-Executive Directors who do not satisfy the full criteria for 95 STRIKE RESOURCES ANNUAL REPORT 2011 CORPORATE GOVERNANCE STATEMENT independence are, nevertheless, independent of management. The Board believes that the individuals on the Board can and do make independent and appropriate judgments in the Company’s best interests on all relevant issues. 3.3 Chairman The Chairman leads the Board and has responsibility for ensuring that the Board receives accurate, timely and clear information to enable Directors to perform their duties. The Chairman of the Company is Prof. Malcolm Richmond, whose qualiﬁcations and experience are stated in the Directors’ Report for the year ended 30 June 2011. 3.4 Managing Director The Managing Director is responsible - and accountable to the Board - for the Company’s day-to-day management. The Managing Director of the Company is Mr Ken Hellsten, whose qualiﬁcations and experience are stated in the Directors’ Report for the year ended 30 June 2011. 3.5 Company Secretary The Company Secretary is appointed by the Board and is responsible for developing and maintaining the information systems and processes that are appropriate for the Board to fulﬁl its role. The Company Secretary is responsible to the Board for ensuring compliance with Board procedures and governance matters. The Company Secretary is also responsible for overseeing and coordinating disclosure of information to the ASX as well as communications with the ASX. The Company Secretary is Mr Stephen Gethin, who is also the Company’s General Counsel. Mr Gethin has extensive company secretarial experience in listed companies and in the practice of corporate and resources law. 4. DIRECTORS: TENURE AND NOMINATIONS 4.1 Directors’ Tenure The Managing Director, Mr Ken Hellsten, has a contract of employment with no ﬁxed term and a notice period of two months. The Non-Executive Directors have not been appointed for ﬁxed terms. The Company’s constitution provides that a Director (other than any Managing Director) may not retain ofﬁce for more than three calendar years or beyond the third Annual General Meeting following their election, whichever is longer, without submitting himself or herself for re-election. One third of the Directors (save for any Managing Director) must retire each year and are eligible for re-election. The Directors who retire by rotation at each Annual General Meeting are those with the longest length of time in ofﬁce since their appointment or last election. The initial appointment and last re-election dates of each Director are listed below. Director Malcolm Richmond Ken Hellsten William Johnson Matthew Hammond 4.2 Board Nominations Appointed 25 October 2006 24 March 2010 14 July 2006 25 September 2009 AGM Last Re-elected 25 November 2010 (As Managing Director Mr Hellsten is not subject to re-election) 25 November 2009 25 November 2009 The Remuneration and Nomination Committee (Committee) is responsible for advising the Board on the desirable mix of skills which Directors of the Company should have and for making recommendations to the Board on potential new appointees, having regard to the corporate and governance skills which the Company requires. The Board takes into account the Committee’s advice when appointing Directors. When considering the appointment of a new Director, the Committee and the Board have regard to: (cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:73)(cid:88)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:75)(cid:73)(cid:76)(cid:76)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:68)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0)(cid:84)(cid:65)(cid:75)(cid:73)(cid:78)(cid:71)(cid:0)(cid:73)(cid:78)(cid:84)(cid:79)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:84)(cid:65)(cid:71)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:68)(cid:69)(cid:86)(cid:69)(cid:76)(cid:79)(cid:80)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) Company’s projects; (cid:84)(cid:72)(cid:69)(cid:0)(cid:77)(cid:73)(cid:88)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:75)(cid:73)(cid:76)(cid:76)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:80)(cid:82)(cid:69)(cid:83)(cid:69)(cid:78)(cid:84)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:27) (cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:66)(cid:74)(cid:69)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:69)(cid:78)(cid:83)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71)(cid:0)(cid:68)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:84)(cid:89)(cid:0)(cid:8)(cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:73)(cid:78)(cid:71)(cid:0)(cid:71)(cid:69)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0)(cid:68)(cid:73)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:84)(cid:89)(cid:9)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68) (cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:86)(cid:65)(cid:73)(cid:76)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)(cid:0)(cid:79)(cid:70)(cid:0)(cid:83)(cid:85)(cid:73)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:67)(cid:65)(cid:78)(cid:68)(cid:73)(cid:68)(cid:65)(cid:84)(cid:69)(cid:83)(cid:12)(cid:0)(cid:65)(cid:67)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:68)(cid:86)(cid:73)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:0)(cid:69)(cid:88)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:76)(cid:0)(cid:83)(cid:69)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:85)(cid:76)(cid:84)(cid:65)(cid:78)(cid:84)(cid:14) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) 96 5. KEY BOARD POLICIES 5.1 Conﬂicts of Interest Directors must: (cid:115)(cid:0) (cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:67)(cid:84)(cid:85)(cid:65)(cid:76)(cid:0)(cid:79)(cid:82)(cid:0)(cid:80)(cid:79)(cid:84)(cid:69)(cid:78)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0)(cid:67)(cid:79)(cid:78)(cid:109)(cid:73)(cid:67)(cid:84)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:69)(cid:83)(cid:84)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:77)(cid:65)(cid:89)(cid:0)(cid:79)(cid:82)(cid:0)(cid:77)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:82)(cid:69)(cid:65)(cid:83)(cid:79)(cid:78)(cid:65)(cid:66)(cid:76)(cid:89)(cid:0)(cid:66)(cid:69)(cid:0)(cid:84)(cid:72)(cid:79)(cid:85)(cid:71)(cid:72)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:69)(cid:88)(cid:73)(cid:83)(cid:84)(cid:0) between the Director’s interests or their duties to any other parties and the Company’s interests in carrying out its business; and (cid:115)(cid:0) (cid:73)(cid:70)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:69)(cid:83)(cid:84)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:12)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:73)(cid:78)(cid:0)(cid:23)(cid:0)(cid:68)(cid:65)(cid:89)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:70)(cid:85)(cid:82)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:80)(cid:69)(cid:82)(cid:73)(cid:79)(cid:68)(cid:0)(cid:65)(cid:83)(cid:0)(cid:77)(cid:65)(cid:89)(cid:0)(cid:66)(cid:69)(cid:0)(cid:80)(cid:69)(cid:82)(cid:77)(cid:73)(cid:84)(cid:84)(cid:69)(cid:68)(cid:12)(cid:0)(cid:84)(cid:65)(cid:75)(cid:69)(cid:0)(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:78)(cid:69)(cid:67)(cid:69)(cid:83)(cid:83)(cid:65)(cid:82)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) reasonable steps to remove any actual conﬂict of interest. If a Director is unwilling or unable to remove a conﬂict of interest then the Director must, under the Corporations Act, absent themself from the room when Board discussion and/or voting occurs on matters to which the conﬂict relates (save with the approval of the remaining Directors where the Corporations Act permits). 5.2 Related-Party Transactions Related party transactions include any ﬁnancial transaction, as deﬁned in the Corporations Act or the ASX Listing Rules, between a Director and the Company. A related-party transaction requires shareholders’ approval unless it is within one of the exemptions in the Corporations Act. The Company also discloses related party transactions in its ﬁnancial report as required under relevant Accounting Standards. 5.3 Share Dealings and Disclosures On 30 December 2010 the Company adopted a new Share Trading Policy. This Policy is available on the Company’s website and will be sent to interested persons on request. The Company’s policy in effect prior to the adoption of the new policy was based on the same principles as those underpinning the new policy. 5.4 Independent Professional Advice Subject to prior consultation with the Chairman, each Director has the right to seek independent legal and other professional advice at the Company’s expense concerning any aspect of the Company’s operations or undertakings in order to fulﬁl their duties and responsibilities as Directors. 5.5 Company Information and Conﬁdentiality All Directors have the right of access to all relevant Company books and access to the Company’s executives. In accordance with legal requirements and agreed ethical standards, Directors and executives of the Company have agreed to keep conﬁdential all information received in the course of the exercise of their duties and will not disclose non-public information except where disclosure is authorised or legally mandated. 5.6 Directors’ Indemnities The Company enters into standard-form deeds with its Directors and the Company Secretary to regulate certain matters between the Company and those ofﬁcers and to indemnify Directors against liabilities incurred in the course of their duties as directors. A summary of the terms of the deed is contained in the Company’s notice of the Annual General Meeting held on 25 November 2009. This notice is available on the Company’s website. 6. BOARD COMMITTEES The Strike Board has established an Audit Committee and a Remuneration and Nomination Committee, with the respective functions set out below. Due to the size of the Company and the nature and scale of its activities, there is no process to review the performance of Committees. 6.1 Audit Committee The Audit Committee is chaired by Non-Executive Director William Johnson. The other Audit Committee members are Non-Executive Company Chairman, Prof. Malcolm Richmond and Non-Executive Director Matthew Hammond. The Board has adopted an Audit Committee Charter. The Charter sets out the Committee’s responsibilities, which include: (cid:115)(cid:0) (cid:115)(cid:0) (cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:69)(cid:68)(cid:0)(cid:65)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:69)(cid:68)(cid:0)(cid:72)(cid:65)(cid:76)(cid:70)(cid:13)(cid:89)(cid:69)(cid:65)(cid:82)(cid:76)(cid:89)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:83)(cid:27) (cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:65)(cid:80)(cid:80)(cid:79)(cid:73)(cid:78)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:69)(cid:88)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:76)(cid:0) (cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:79)(cid:82)(cid:12)(cid:0) (cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:79)(cid:82)(cid:0) (cid:73)(cid:78)(cid:68)(cid:69)(cid:80)(cid:69)(cid:78)(cid:68)(cid:69)(cid:78)(cid:67)(cid:69)(cid:12)(cid:0) (cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0) (cid:70)(cid:69)(cid:69)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:78)(cid:89)(cid:0) (cid:81)(cid:85)(cid:69)(cid:83)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:79)(cid:70)(cid:0) 97 STRIKE RESOURCES ANNUAL REPORT 2011 CORPORATE GOVERNANCE STATEMENT resignation or dismissal of the auditor; and (cid:115)(cid:0) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:71)(cid:72)(cid:84)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0)(cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)(cid:0)(cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)(cid:14) 6.2 Remuneration and Nomination Committee Professor Malcolm Richmond, the independent, Non-Executive Company Chairman also chairs the Remuneration and Nomination Committee. The other Committee members are Non-Executive Directors William Johnson and Matthew Hammond. The Board has adopted a Remuneration and Nomination Committee Charter. The Charter sets out the Committee’s responsibilities, which include: (cid:115)(cid:0) (cid:115)(cid:0) (cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:69)(cid:82)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:27) (cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:46)(cid:79)(cid:78)(cid:13)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:27) (cid:115)(cid:0) (cid:83)(cid:69)(cid:84)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0)(cid:69)(cid:81)(cid:85)(cid:73)(cid:84)(cid:89)(cid:13)(cid:66)(cid:65)(cid:83)(cid:69)(cid:68)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:27)(cid:0) (cid:115)(cid:0) (cid:83)(cid:69)(cid:84)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:82)(cid:73)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:77)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:83)(cid:72)(cid:73)(cid:80)(cid:12)(cid:0)(cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:76)(cid:89)(cid:0)(cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:78)(cid:71)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:78)(cid:69)(cid:69)(cid:68)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:83)(cid:75)(cid:73)(cid:76)(cid:76)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0) and identifying speciﬁc individuals for nomination as Directors; and (cid:115)(cid:0) (cid:73)(cid:77)(cid:80)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:73)(cid:78)(cid:71)(cid:0)(cid:34)(cid:79)(cid:65)(cid:82)(cid:68)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:37)(cid:88)(cid:69)(cid:67)(cid:85)(cid:84)(cid:73)(cid:86)(cid:69)(cid:0)(cid:83)(cid:85)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:0)(cid:80)(cid:76)(cid:65)(cid:78)(cid:83)(cid:14) 6.3 Independent Majorities Neither the Audit Committee nor the Remuneration and Nomination Committee have a majority of independent Directors at present, as the Company only has one Director who satisﬁes all the criteria for independence. The Company is presently seeking to appoint at least one additional independent Director. The Board will review the composition of these Committees once the appointment(s) is made, in light of the principle that they should have a majority of independent Directors. 7. MANAGEMENT 7.1 Composition Please refer to Section 3.4 for details of the Company’s Managing Director. The Company’s other Executives are: (cid:115)(cid:0) (cid:51)(cid:84)(cid:69)(cid:80)(cid:72)(cid:69)(cid:78)(cid:0)(cid:39)(cid:69)(cid:84)(cid:72)(cid:73)(cid:78)(cid:0)(cid:13)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:51)(cid:69)(cid:67)(cid:82)(cid:69)(cid:84)(cid:65)(cid:82)(cid:89)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:39)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:76)(cid:0)(cid:35)(cid:79)(cid:85)(cid:78)(cid:83)(cid:69)(cid:76)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68) (cid:115)(cid:0) (cid:36)(cid:65)(cid:86)(cid:73)(cid:68)(cid:0)(cid:44)(cid:73)(cid:77)(cid:0)(cid:13)(cid:0)(cid:35)(cid:72)(cid:73)(cid:69)(cid:70)(cid:0)(cid:38)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:47)(cid:70)(cid:108)(cid:67)(cid:69)(cid:82)(cid:14) 7.2 Performance Reviews The Managing Director’s performance review is referred to in Section 2.3, above. The Managing Director reviews the performance of the Company’s senior executives annually. The performance of the senior executives were reviewed during the 2010-11 ﬁnancial year according to this process. 8. DIVERSITY The Company recognises the positive beneﬁts workplace diversity and has adopted a Diversity Policy to further this objective. 8.1 Board and Senior Executives As at the date of the 2011 Annual Report, Strike has no female directors or senior executives. The Diversity Policy contains measurable objectives for achieving gender diversity. Changing the gender make-up of the Board and the executive team is an organic process, dependent on vacancies arising and the availability of suitably-qualiﬁed candidates whose appointment will contribute to meeting that objective. No appointments were made to the Strike Board or the executive team between the date when the Principles were amended to promote gender diversity (1 January 2011) and the date this Statement was prepared. Accordingly there has been no opportunity to implement the diversity objectives in the Policy. At the date of this Statement, Strike is in the process of seeking to appoint at least one additional Director and one additional senior executive. The objective of promoting gender diversity is an important consideration in the search for the people to ﬁll these roles. 98 8.2 Other Personnel As at the date of preparation of this document, 24 October 2011, 50% of the Company’s employees are female, with the workforce representing a diverse mix of cultures. Historically, the degree of gender and cultural diversity in Company staff has been broadly consistent with present levels. 9. REMUNERATION POLICY Details of the Company’s remuneration policy are contained in the Remuneration Report in the Director’s Report for the year ended 30 June 2011. The Company does not currently have any unvested options on issue to Directors. If any options are issued to Directors in future which do not vest immediately, Company policy requires the option holder not to enter into transactions in associated products which limit the economic risk of holding unvested options, as required by the Corporations Act. There are no retirement beneﬁt schemes for Non-Executive Directors, other than contributions to their superannuation funds. These contributions do not exceed the statutory minimum superannuation contributions for Australian employees plus the whole or any part of a Director’s fees which they may choose to sacriﬁce into superannuation. 10. CODE OF CONDUCT AND ETHICAL STANDARDS Strike Resources has adopted a formal code of conduct, which may be viewed in the Corporate Governance section on the Company’s website: www.strikeresoruces.com.au. The purpose of the Code of Conduct is to seek to ensure that the Company and its personnel are fair and ethical in all their dealings, respecting the rights of all stakeholders; to secure the Company’s reputation as a good corporate citizen, a trusted business partner and a desirable employer. 11. INTERNAL CONTROL, RISK MANAGEMENT AND AUDIT 11.1 Internal Control and Risk Management The Board of Directors is responsible for the overall internal control framework (including risk management) and oversight of the Company’s policies on and management of risks which have the potential to signiﬁcantly affect its operations, ﬁnancial performance or reputation. The Board recognises that no cost-effective internal control system will preclude all errors and irregularities. The system is based, in part, on the appointment of suitably-qualiﬁed and experienced service providers and suitably- qualiﬁed and experienced management personnel. The effectiveness of the system is continually reviewed by management and at least annually by the Board. On a day-to-day basis, managing the various risks inherent in the Company’s operations is the responsibility of the Managing Director, supported by the senior executives. Risks facing the Company can be divided into the four broad categories se out below. Health and safety Health and safety risk is one of the most important risks faced by a resources company. Apart from the inherent unacceptability of threats to life or health, safety incidents have the potential to seriously damage the Company’s reputation and ability to operate its business. The Company takes a “zero tolerance” approach to any situation which might compromise the health or safety of staff, contractors or members of the community. This risk is addressed by comprehensive safety policies and training and a requirement that any safety incident or “near miss” is reported to the Board. Operations Operations risk refers to risks arising from day-to-day operational activities which may result in direct or indirect loss from inadequate or failed internal processes, people or systems or external events. The Managing Director, with the assistance of the senior executives, holds delegated responsibility from the Board for the identiﬁcation of operations risks generally, for putting processes in place to mitigate them and monitoring compliance with those processes. The Company has clear accounting and internal control systems to manage risks to the accuracy of ﬁnancial information and other ﬁnancial risks. 99 STRIKE RESOURCES ANNUAL REPORT 2011 CORPORATE GOVERNANCE STATEMENT Compliance Compliance risk is the risk of failure to comply with applicable legal and regulatory requirements and industry standards and the corresponding impact on the Company’s business, reputation and ﬁnancial condition. The Company’s compliance risk management strategy ensures compliance with key legislation affecting the Company’s activities. A key principle of the Company’s compliance risk management strategy is to foster an integrated approach where senior executives are responsible and accountable for compliance within their job descriptions. The Company’s compliance strategy is kept current with advice from senior external professionals and the ongoing training of executives and other personnel involved in compliance management. The Company operates principally in Perú, and retains leading local lawyers, accountants and other consultants to ensure that its Perúvian operations are in compliance with local laws. The Company has policies on responsible business practices and ethical behaviour, including the Code of Conduct and Conﬂict of Interest, Anti-Corruption and Share Trading Policies to maintain conﬁdence in the Company’s integrity and ensure legal compliance. Market risk Market risk encompasses risks to the Company’s performance from changes in resource prices, currency exchange rates, capital markets and economic conditions generally. The Board regularly assesses the Company’s exposure to these risks, including seeking external specialist advice and sets the strategic direction for managing them. The Company’s approach to risk management is not stationary; it evolves constantly in response to developments in operations and changing market conditions. The Board has determined that the Managing Director is the appropriate person to make the Chief Executive Ofﬁcer equivalent declaration on the risk management and internal compliance and control systems recommended by the Corporate Governance Council. The Board has received assurances from the Managing Director and the Chief Financial Ofﬁcer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to ﬁnancial reporting risks. Management has reported to the Board as to the effectiveness of the Company’s management of its material business risks. 11.2 Audit The Company’s external auditor is selected for its professional competence, reputation and the provision of value for professional fees. Within the audit ﬁrm, the partner responsible for the conduct of the Company’s audits (Audit Partner) is rotated every ﬁve years. The Audit Partner is invited to Annual General Meetings to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report. 12. COMMUNICATIONS 12.1 Market and Shareholder Communications The Company’s key mission is to maximise the value of the shareholders’ investment by developing resource tenements. Shareholders must receive timely and accurate information about the Company’s operations to enable them to understand how the Company is fulﬁlling that mission. As the Shareholder’s representatives, Directors need be aware of shareholders’ views on their performance to enable them to properly perform their role. The Board, therefore, considers it vital to ensure that shareholders are informed of all material developments affecting the Company and have the opportunity to communicate their views to the Board. The Company actively promotes communication with shareholders through a variety of means, including the use of the Company’s website and email. The Company’s reports and ASX announcements may be viewed and downloaded from its website: www. strikeresources.com.au or the ASX website: www.asx.com.au under ASX stock code “SRK”. The Company also maintains an email list for the distribution of announcements in a timely manner. 100 The Company communicates information to shareholders through various means including: (cid:115)(cid:0) (cid:33)(cid:78)(cid:0) (cid:79)(cid:86)(cid:69)(cid:82)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:80)(cid:76)(cid:65)(cid:78)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:86)(cid:73)(cid:68)(cid:69)(cid:79)(cid:0) (cid:65)(cid:68)(cid:68)(cid:82)(cid:69)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0) (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0) (cid:65)(cid:82)(cid:69)(cid:0) available on the on the Company’s website; (cid:115)(cid:0) (cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:12)(cid:0) (cid:38)(cid:85)(cid:76)(cid:76)(cid:13)(cid:57)(cid:69)(cid:65)(cid:82)(cid:12)(cid:0) (cid:40)(cid:65)(cid:76)(cid:70)(cid:13)(cid:57)(cid:69)(cid:65)(cid:82)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:49)(cid:85)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:76)(cid:89)(cid:0) (cid:50)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:78)(cid:78)(cid:79)(cid:85)(cid:78)(cid:67)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:76)(cid:79)(cid:68)(cid:71)(cid:69)(cid:68)(cid:0) (cid:79)(cid:78)(cid:0) (cid:33)(cid:51)(cid:56)(cid:0) (cid:85)(cid:78)(cid:68)(cid:69)(cid:82)(cid:0) (cid:67)(cid:79)(cid:78)(cid:84)(cid:73)(cid:78)(cid:85)(cid:79)(cid:85)(cid:83)(cid:0) disclosure rules are available on the ASX website under ASX stock code “SRK” and on the Company’s website and are emailed to shareholders who subscribe to a mailing list; (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0)(cid:65)(cid:68)(cid:68)(cid:82)(cid:69)(cid:83)(cid:83)(cid:69)(cid:83)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:33)(cid:78)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:39)(cid:69)(cid:78)(cid:69)(cid:82)(cid:65)(cid:76)(cid:0)(cid:45)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:8)AGM), updating them on the Company’s activities and future direction; and (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:77)(cid:65)(cid:73)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:78)(cid:0)(cid:69)(cid:77)(cid:65)(cid:73)(cid:76)(cid:0)(cid:65)(cid:68)(cid:68)(cid:82)(cid:69)(cid:83)(cid:83)(cid:0)(cid:69)(cid:83)(cid:84)(cid:65)(cid:66)(cid:76)(cid:73)(cid:83)(cid:72)(cid:69)(cid:68)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0)(cid:84)(cid:79)(cid:0)(cid:68)(cid:69)(cid:76)(cid:73)(cid:86)(cid:69)(cid:82)(cid:0)(cid:81)(cid:85)(cid:69)(cid:83)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) enquiries. Shareholders communicate with Directors through various means including: (cid:115)(cid:0) (cid:52)(cid:72)(cid:69)(cid:0) (cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:73)(cid:78)(cid:71)(cid:0) (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:0) (cid:82)(cid:69)(cid:71)(cid:85)(cid:76)(cid:65)(cid:82)(cid:76)(cid:89)(cid:0) (cid:108)(cid:69)(cid:76)(cid:68)(cid:83)(cid:0) (cid:69)(cid:77)(cid:65)(cid:73)(cid:76)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:84)(cid:69)(cid:76)(cid:69)(cid:80)(cid:72)(cid:79)(cid:78)(cid:69)(cid:0) (cid:81)(cid:85)(cid:69)(cid:83)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:67)(cid:79)(cid:77)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:65)(cid:66)(cid:79)(cid:85)(cid:84)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0) performance from shareholders. Issues raised by shareholders are regularly circulated to the full Board; (cid:115)(cid:0) (cid:39)(cid:73)(cid:86)(cid:73)(cid:78)(cid:71)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:79)(cid:80)(cid:80)(cid:79)(cid:82)(cid:84)(cid:85)(cid:78)(cid:73)(cid:84)(cid:89)(cid:0)(cid:84)(cid:79)(cid:0)(cid:65)(cid:83)(cid:75)(cid:0)(cid:81)(cid:85)(cid:69)(cid:83)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:83)(cid:7)(cid:0)(cid:77)(cid:69)(cid:69)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68) (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:84)(cid:84)(cid:69)(cid:78)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:69)(cid:88)(cid:84)(cid:69)(cid:82)(cid:78)(cid:65)(cid:76)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:79)(cid:82)(cid:0)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:33)(cid:39)(cid:45)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:65)(cid:75)(cid:69)(cid:0)(cid:83)(cid:72)(cid:65)(cid:82)(cid:69)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:82)(cid:0)(cid:81)(cid:85)(cid:69)(cid:83)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:89)(cid:0)(cid:73)(cid:83)(cid:83)(cid:85)(cid:69)(cid:0)(cid:82)(cid:69)(cid:76)(cid:69)(cid:86)(cid:65)(cid:78)(cid:84)(cid:0)(cid:84)(cid:79)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) audit. 12.2 Continuous Disclosure The Board has designated the Company Secretary the person responsible for overseeing disclosure of information to ASX and communications with ASX. In accordance with the Corporations Act and ASX Listing Rule 3.1 the Company immediately notiﬁes ASX of information concerning the Company which a reasonable person would expect to have a material effect on the price or value of the Company’s securities, subject to the permitted exceptions. A reasonable person is taken to expect information to have a material effect on the price or value of the Company’s securities if the information would be likely to, inﬂuence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities. All staff are required to inform a senior executive of any potentially price-sensitive information concerning the Company as soon as they become aware of it. The senior executives are in turn required to inform the Managing Director of such information. One key source of potentially price-sensitive information is the Company’s 50%-owned Perúvian joint venture vehicle Apurimac Ferrum S.A. (AF) which holds the great majority of Strike’s interests in mineral tenements. Strike’s Managing Director also serves as AF President and the AF CEO reports to him. The AF CEO is required to promptly report price-sensitive information to the Strike Managing Director. In general, the Company will not respond to market speculation or rumours unless required to do so by law or by the ASX listing rules. Only the Managing Director has general responsibility to speak to the media, investors and analysts on the Company’s behalf. Other Directors or senior executives may be given a brief to do so on particular occasions. The Company will consider requesting a trading halt from ASX to prevent trading in its securities pending the announcement of planned events which are particularly price-sensitive. : 101 STRIKE RESOURCES ANNUAL REPORT 2011 MINERAL TENEMENTS APURIMAC FERRUM S.A. CONCESSIONS (Strike Resources has a 50% interest in the Apurimac Ferrum S.A. (AF) concessions at Apurimac and Cusco, through its 50% interest in AF.) Apurimac Project, Peru - AF Concession Name (1) Opaban I (2) Opaban III (3) Los Andes I Area (Ha) 999 990 999 Province Code Title Andahuaylas 05006349X01 No 8625-94/RPM Dec 16, 1994 Andahuaylas 05006351X01 No 8623-94/RPM Dec 16, 1994 Andahuaylas 05006372X01 No 0134-95-RPM Jan 31, 1995 (4) Pitumarca II 1,000 Andahuaylas 05006385X01 No 8686-94-RPM Dec 22, 1994 (5) Lucrecia Esperanza 66 Andahuaylas 01-00649-99 No 00623-2001-INACC/J Jul 26, 2001 (6) Nueva Oropampa 6 (7) Mapsa 2001 400 800 Andahuaylas 01-00860-99 No 04043-2000-RPM Oct 13, 2000 Andahuaylas 01-01204-01 No 00590-2002-INACC/J Apr 8, 2002 (8) Coriminas II 1,000 Andahuaylas 01-01624-99 No 02760-2000-RPM Jul 25, 2000 (9) Coriminas V 1,000 Andahuaylas 01-01626-99 No 0936-00-RPM Mar 16, 2000 (10) Ferrum 1 (11) Ferrum 2 (12) Ferrum 3 (13) Ferrum 4 (14) Ferrum 5 (15) Ferrum 7 (16) Ferrum 8 965 Andahuaylas 01-02983-04 No 00228-2005-INACC/J Jan 19, 2005 1,000 Andahuaylas 01-02984-04 No 00227-2005-INACC/J Jan 19, 2005 1,000 Andahuaylas 01-02985-04 No 00229-2005-INACC/J Jan 19, 2005 1,000 Andahuaylas/ Aymaraes 01-02986-04 No 00230-2005-INACC/J Jan 19, 2005 959 437 900 Aymaraes 01-02987-04 No 00323-2005-INACC/J Jan 25, 2005 Aymaraes 01-02989-04 No 00396-2005-INACC/J Jan 27, 2005 Andahuaylas 01-02990-04 No 00232-2005-INACC/J Jan 19, 2005 (17) Ferrum 9 1,000 Aymaraes 01-02991-04 No 00324-2005-INACC/J Jan 25, 2005 (18) Ferrum 10 1,000 Aymaraes 01-02992-04 No 00325-2005-INACC/J Jan 25, 2005 (19) Ferrum 11 1,000 Aymaraes 01-02993-04 No 02512-2005-INACC/J Jun 12, 2005 File Number 20001465 20001464 200001481 20001478 11032475 11032603 11032600 11032965 20003140 11053798 11053836 11053807 11053810 11053816 11053822 11053827 11053830 11053833 11053835 11061068 (20) Ferrum 13 (21) Ferrum 26 600 827 Andahuaylas 01-03139-06 No 4416-2006-INACC/J Oct 16, 2006 Andahuaylas 01-02274-07 No 000853-2007-INGEMMET/PCD/PM Sept 7, 2007 11073793 (22) Ferrum 27 1,000 Andahuaylas 01-02629-07 No 000581-2007-INGEMMET/PCD/PM Sept 5, 2007 11073799 (23) Ferrum 36 1,000 Andahuaylas 10553307 RP 0176-2008-INGEMMET/PCD/PM Feb 29, 2008 11075418 (24) Cristoforo 22 379 Andahuaylas 01-01656-02 RP2849-2007-INGEMMET/PCD/PM Dec 13, 2007 11067786 (25) Ferrum 28 1,000 Andahuaylas 10507407 RP0601-2008-INGEMMET/PCD/PCM Mar 07, 2008 11075423 (26) Ferrum 29 1,000 Andahuaylas 10507507 RP0365-2008-INGEMMET/PCD/PM Mar 07, 2008 11075419 (27) Ferrum 30 (28) Ferrum 31 (29) Ferrum 32 (30) Ferrum 33 (31) Ferrum 34 963 327 900 900 800 Andahuaylas 10525907 PP 1024-2008-INGEMMET/PCD/PM May 05, 2008 11076757 Andahuaylas 10552807 RP 1266-2008-INGEMMET/PCD/PM May 12, 2008 11076509 Andahuaylas 10552907 RP0402-2008-INGEMMET/PCD/PM Mar 07, 2008 11075425 Andahuaylas 10553007 RP0547-2008-INGEMMET/PCD/PM Mar 07, 2008 11075421 Andahuaylas 10553107 RP0764-2008-INGEMMET/PCD/PM Apr 17, 2008 11075427 (32) Ferrum 35 1,000 Andahuaylas 10553207 RP0347-2008-INGEMMET/PCD/PCM Mar 07, 2008 11075426 (33) Ferrum 37 695 Andahuaylas 10621507 RP 1164-2008-INGEMMET/PCD/PM May 12, 2008 11076534 (34) Ferrum 56 1,000 Andahuaylas 10133508 RP 1971-2008-INGEMMET/PCD/PM Jun 19, 2008 11077123 (35) Ferrum 57 1,000 Andahuaylas 10133608 RP 3279-2008-INGEMMET/PCD/PM Sept 9, 2008 11081417 (36) Ferrum 58 1,000 Andahuaylas 10133708 RP 2206-2008-INGEMMET/PCD/PM 27 Jun, 2008 11077127 (37) Ferrum 59 1,000 Andahuaylas 10133808 RP 2272-2008-INGEMMET/PCD/PM 27 Jun, 2008 11077122 (38) Ferrum 61 1,000 Aymaraes 10073308 - in process (39) Pacunco 1 (40) Minas Huaycco 800 800 Andahuaylas 10019508 RP 1806-2008-INGEMMET/PCD/PM May 29, 2008 11076523 Abancay 10168708 RP 2541-2008-INGEMMET/PCD/PM Aug 08, 2008 11081416 102 Cusco Project, Peru - AF Concession Name Area (Ha) Province Code Title (1) Flor de María 907 Chumbivilcas 05006521X01 No 7078-95-RPM Dec 29, 1995 (2) Delia Esperanza 1,000 Chumbivilcas 05006522X01 No 0686-95-RPM Mar 31, 1995 (3) Julia Clara 1,000 Chumbivilcas 05006523X01 No 4600-95/RPM Sept 26, 1995 (4) El Pacíﬁco I 618 Chumbivilcas 05006536X01 No 7077-95/RPM Dec 29, 1995 (5) El Pacíﬁco II 1,000 Chumbivilcas 05006524X01 No 7886-94/RPM Nov 25, 1994 (6) Ferrum 14 (7) Ferrum 15 (8) Ferrum 17 (9) Ferrum 18 268 992 500 800 Chumbivilcas 01-03047-05 No 05032-2005-INACC/J Nov 30, 2005 Chumbivilcas 10494906 RJ 0753-2007-INACC/J Mar 05, 2007 Chumbivilcas 10026607 RP 1815-2007-INGEMMET/PCD/PM Oct 30, 2007 Chumbivilcas / Cotabambas 10026707 RP 1761-2008-INGEMMET/PCD/PM May 29, 2008 File Number 20001742 20001743 20001744 20001785 20001746 11053842 11073796 11073794 11076514 STRIKE RESOURCES LIMITED CONCESSIONS (The concessions at Apurimac and Cusco listed in the tables below are 100% owned by Strike Resources, subject to an option for AF to acquire those concessions.) Apurimac Project, Peru – Strike Resources Concession Name Area (Ha) Province Code Title (1) Ferrum 38 800 Andahuaylas 10015205 RP1288-2008-INGEMMET/PCD/PM May 12, 2008 (2) Ferrum 39 1,000 Andahuaylas 10047605 RP 1573-2008-INGEMMET/PCD/PM May 29, 2008 (3) Ferrum 40 1,000 Andahuaylas 10623507 RP 2905-2008-INGEMMET/PCD/PM Aug 19, 2008 (4) Ferrum 41 1,000 Andahuaylas 10131408 RP 1965-2008-INGEMMET/PCD/PM Jun 19, 2008 (5) Ferrum 42 1,000 Andahuaylas 10131508 RP 1975-2008-INGEMMET/PCD/PM Jun 19, 2008 (6) Ferrum 43 1,000 Andahuaylas 10131608 RP 3243-2008-INGEMMET/PCD/PM Sept 9, 2008 (7) Ferrum 44 1,000 Andahuaylas 10131908 RP 1934-2008-INGEMMET/PCD/PM Jun 19, 2008 (8) Ferrum 45 1,000 Andahuaylas 10132008 RP 2283-2008-INGEMMET/PCD/PM Jun 27, 2008 (9) Ferrum 46 1,000 Andahuaylas 10132108 RP 2523-2008-INGEMMET/PCD/PM Aug 08, 2008 (10) Ferrum 47 1,000 Andahuaylas 10132208 RP 1908-2008-INGEMMET/PCD/PM Jun 18, 2008 (11) Ferrum 48 1,000 Andahuaylas 10132308 RP 1756-2008-INGEMMET/PCD/PM May 29, 2008 (12) Ferrum 49 1,000 Andahuaylas 10132408 RP 2000-2008-INGEMMET/PCD/PM Jun 19, 2008 (13) Ferrum 50 900 Andahuaylas 10132508 RP 1922-2008-INGEMMET/PCD/PM Jun 19, 2008 (14) Ferrum 51 1,000 Andahuaylas 10132608 RP 1893-2008-INGEMMET/PCD/PM Jun 18, 2008 (15) Ferrum 52 1,000 Andahuaylas 10132708 RP 2803-2008-INGEMMET/PCD/PM Aug 18, 2008 (16) Ferrum 53 1,000 Andahuaylas 10132808 RP 2550-2008-INGEMMET/PCD/PM Aug 08, 2008 Andahuaylas 10132908 RP 2899-2008-INGEMMET/PCD/PM Aug 19, 2008 Andahuaylas 10133408 RP 2951-2008-INGEMMET/PCD/PM Aug 19, 2008 (17) Ferrum 54 (18) Ferrum 55 (19) Ferrum 60 (20) Ferrum 62 (21) Ferrum 63 (22) Pichirhua 1 (23) Pichirhua 2 700 800 200 900 300 800 400 Abancay Abancay Grau Abancay Abancay 10073208 RP 2986-2008-INGEMMET/PCD/PM Aug 19, 2008 10073408 RP 3177-2008-INGEMMET/PCD/PM Sept 8, 2008 TBA 10073008 RP 3040-2008-INGEMMET/PCD/PM Aug 28, 2008 10151708 RP 2638-2008-INGEMMET/PCD/PM Aug 11, 2008 10151808 RP 3183-2008-INGEMMET/PCD/PM Sept 8, 2008 (24) Colcabamba 1 600 Aymaraes 10212308 RP 2986-2008-INGEMMET/PCD/PM Aug 19, 2008 (25) Colcabamba 2 500 Aymaraes 10212408 RP 3177-2008-INGEMMET/PCD/PM Sept 8, 2008 (26) Colcabamba 3 900 Aymaraes 10217208 RP 3040-2008-INGEMMET/PCD/PM Aug 28, 2008 (27) Sillaccassa 1 (28) Sillaccasa 2 700 400 Andahuaylas 10212608 RP 5088-2008-INGEMMET/PCD/PM Nov 19, 2008 Andahuaylas 10212508 RP 3183-2008-INGEMMET/PCD/PM Sept 8, 2008 File Number 11064280 11064281 11076528 11076755 11077114 11077113 11077115 11077116 11079784 11077117 11076584 11077118 11077120 11077121 11079786 11079787 11079788 11079789 11084879 11076586 11079794 11081445 11079780 11081451 11079781 11079791 11081449 103 STRIKE RESOURCES ANNUAL REPORT 2011 MINERAL TENEMENTS Concession Name Area (Ha) Province Code Title (29) Cristoforo 14* 1000 Andahuaylas 01-02327-99 No 02693-2000 RPM Jul 24, 2000 File Number 11034702 11064280 11064281 (30) Cristoforo 28* (31) Ferroso 29* (32) Helimag 1 500 400 900 Aymaraes 01-00152-05 No 01824-2005 INACC/J May 4, 2005 Andahuaylas 01-00473-05 No 01709-2005 RPM Apr 21, 2004 Andahuaylas 01-00152-05 No 000741-2010 INGEMMET/PCD/PM Mar 22, 2010 11064280 *Strike Resources holds an option to acquire these concessions. Under the terms of the AF Settlement Agreement, Strike’s rights under the option are being transferred to AF. Cusco Project, Peru – Strike Resources Concession Name Area (Ha) Province Code Title File Number (1) Ferrum 72 1,000 Paruro 10408208 RP 4435-2008-INGEMMET/PCD/PM Oct 21, 2008 11084851 (2) Ferrum 73 1,000 Paruro 10409608 RP 5050-2008-INGEMMET/PCD/PM Nov 19, 2008 11084874 (3) Ferrum 74 1,000 Paruro 10408208 RP 5006-2008-INGEMMET/PCD/PM Nov 19, 2008 11084871 (4) Ferrum 75 (5) Ferrum 76 303 974 Paruro 10409808 RP 5130-2008-INGEMMET/PCD/PM Nov 19, 2008 11084873 Chumbivilcas 10409908 RP 4323-2008-INGEMMET/PCD/PM Oct 20, 2008 11084870 (6) Ferrum 77 1,000 Paruro 10408108 RP 5227-2008-INGEMMET/PCD/PM Nov 19, 2008 11084868 (7) Ferrum 65 1,000 Paruro 010580008 RP 0337-2009-INGEMMET/PCD/PM Feb 19, 2009 TBA (8) Ferrum 66 (9) Ferrum 67 100 100 Paruro 010580208 RP 1613-2009-INGEMMET/PCD/PM Jun 4, 2009 Chumbivilcas 010579908 RP 5849-2008-INGEMMET/PCD/PM Dec 17, 2008 TBA TBA (10) Ferrum 68 1,000 Acomayo 010579808 RP 1185-2009-INGEMMET/PCD/PM Mar 31, 2009 TBA (11) Ferrum 69 1,000 Acomayo 010579608 RP 1633-2009-INGEMMET/PCD/PM Jun 4, 2009 (12) Ferrum 70 1,000 Acomayo 010579608 RP 1848-2009-INGEMMET/PCD/PM Jun 11, 2009 TBA TBA (13) Ferrum 71 1,000 Acomayo 010579508 RP 1120-2009-INGEMMET/PCD/PM Mar 31, 2009 TBA (14) Colcabamba 4 400 Acomayo 010580108 RP 1117-2009-INGEMMET/PCD/PM Mar 31, 2009 TBA Paulsens East Project – Western Australia (These concessions are 100% beneﬁcially owned by Strike Resources, subject to the farm-out agreement detailed under the section on the Paulsens East Project in this Report above.) Tenement No Status Grant Date Expiry Date Area (block/ha) Area (km2) (1) EL 47/1328 (2) PL 47/1170 Granted Granted (3) M 47/1437+ Pending 05/10/06 27/03/06 N/A 04/10/11 26/03/11 N/A 6 blocks 164 hectares 164 hectares 18 1.64 1.64 * Subject to the farm-out referred to in the Paulsens East Project section of this report. + Representing an application to convert PL 47/1170 into a mining lease. 104 SECURITIES INFORMATION The information in this section is current as at 10 October, 2011. ISSUED CAPITAL Class of Security Quoted on ASX Not Quoted on ASX Total Fully-paid, ordinary shares 142,534,268 $2.078 (6 March 2012) director options $2.788 (6 March 2012) director options $1.30 (23 March 2013) employee options $1.50 (23 March 2013) employee options $1.75 (23 March 2013) employee options $2.878 (30 April 2012) employee options $3.978 (2 December 2012) director options $2.878 (3 March 2013) employee options $2.75 (13 October 2013) employee options $2.50 (24 November 2012 director options $2.75 (24 November 2012 director options $3.25 (24 November 2012 director options - - - - - - - - - - - - 500,000 2,950,000 400,000 400,000 400,000 33,000 142,534,268 500,000 2,950,000 400,000 400,000 400,000 33,000 3,500,000 3,500,000 250,000 250,000 750,000 750,000 750,000 250,000 250,000 750,000 750,000 750,000 Total 142,534,268 10,933,000 153,467,268 DISTRIBUTION OF FULLY-PAID, ORDINARY SHARES Spread of Holdings 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,000 - and over Total UNMARKETABLE PARCELS Spread of Holdings 1 - 1,923 1,924 - over Total Number of Holders Number of Units % of Issued Capital 489 1,209 466 635 95 230,612 3,817,241 3,819,675 20,190,714 114,476,026 2,894 142,534,268 0.16 2.68 2.68 14.16 80.32 100% Number of Holders Number of Units % of Issued Capital 711 2,183 2,894 555,030 141,979,238 142,534,268 0.4 99.60 100% 105 STRIKE RESOURCES ANNUAL REPORT 2011 SECURITIES INFORMATION TOP 20 HOLDERS OF FULLY-PAID, ORDINARY SHARES Rank Shareholder Total Shares % of Capital 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 HSBC Custody Nominees (Australia) Ltd Orion Equities Limited Database Systems Ltd National Nominees Ltd Iron Associates Corporation Ferrous Resources Ltd J P Morgan Nominees Australia Ltd Nefco Nominees Pty Ltd Citicorp Nominees Pty Ltd Alara Resources Limited Pater Investments Pty Ltd Mr George Macﬁe Mr Gordon Anthony Empire Holdings Pty Ltd Aliana Pty Ltd M&M Holdings Pty Ltd Renmuir Holdings Limited Mr Andrew Craig Leeson Mr Matthew Norman Bull Mr Nicholas Kenos & Mrs Pauline Kenos 26,079,440 16,690,802 9,377,090 9,331,609 9,000,000 6,370,000 5,268,681 4,331,760 4,006,456 3,573,889 1,125,000 800,000 800,000 700,000 700,000 606,000 487,439 457,800 421,700 400,000 18.31 11.71 6.58 6.55 6.31 4.47 3.7 3.04 2.81 2.51 0.79 0.56 0.56 0.49 0.49 0.43 0.34 0.32 0.30 0.28 Total 100,527,666 70.55 SUBSTANTIAL SHAREHOLDERS* Last Substantial Holder Notice Substantial Shareholder (s) Registered Holder (s) 4 Mar 2009 Gallagher Holdings HSBC Custody Nominees (Australia) Ltd & NEFCO Nominees Farooq Khan and Associates Orion Equities Limited Farooq Khan 18 Feb 2011 12 Aug 2008 Total Shares % of Issued Capital 25,825,909 19.86 17,220,812 12.9 Database Systems Ltd, Ambreen Chaudhri Database Systems Ltd 9,377,090 7.78 * This disclosure is made under ASX LR 4.10.4 As required by that rule, information is taken from substantial shareholding notices ﬁled by shareholders. 106 THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK 107 STRIKE RESOURCES ANNUAL REPORT 2011 108 THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK 109

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