Strike Resources Annual Report 2013

Plain-text annual report

S T R I K E R E S O U R C E S 2 0 1 3 A N N U A L R E P O R T Contents CONTENTS ................................................................................................................................................................... 1 CORPORATE DIRECTORY ......................................................................................................................................... 2 CHAIRMAN’S LETTER ............................................................................................................................................... 3 MANAGING DIRECTOR’S REVIEW .......................................................................................................................... 4 DIRECTORS’ REPORT............................................................................................................................................... 17 CORPORATE GOVERNANCE STATEMENT ...........................................................................................................35 AUDITOR’S INDEPENDENCE DECLARATION ......................................................................................................43 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................46 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................................. 47 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ..................................................................................48 CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................... 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................................................51 DIRECTORS’ DECLARATION ..................................................................................................................................85 INDEPENDENT AUDITOR’S REPORT ................................................................................................................... 86 ASX ADDITIONAL INFORMATION .........................................................................................................................88 1 A N N U A L R E P O R T 2 0 1 3 Corporate Directory DIRECTORS Mr Malcolm Richmond Chairman / Non-Executive Director Mr William Johnson Managing Director Mr Matthew Hammond Non-Executive Director Ms Samantha Tough Non-Executive Director COMPANY SECRETARY Mr David Palumbo REGISTERED OFFICE Level 11, London House, 216 St Georges Terrace, Perth WA 6000 GPO Box 2517, Perth WA 6000 Telephone: +61 8 9480 0111 Facsimile: +61 8 9382 8020 WEB SITE www.strikeresources.com.au INFORMATION EMAIL info@strikeresources.com.au SHARE REGISTRY AUDITORS SOLICITORS TO THE COMPANY Advanced Share Registry Services Suite 2, 150 Stirling Highway Nedlands, Western Australia, 6009 Telephone: +61 8 9389 8033 Facsimile: +61 8 9389 7871 Email: Website: www.advancedshare.com.au admin@advancedshare.com.au BDO Audit (WA) P/L 38 Station Street Subiaco, Western Australia 6008 Telephone: +61 8 9382 4600 Facsimile: +61 8 9382 4601 Website: www.bdo.com.au Ashurst Level 36, Grosvenor Place 225 George St Sydney, NSW 2000 Telephone: +61 2 9258 6000 Facsimile: +61 2 9258 6999 Website: www.ashurst.com STOCK EXCHANGE LISTING Strike Resource Limited’s shares are listed on the Australian Securities Exchange (“ASX”) ASX Code: SRK 2 S T R I K E R E S O U R C E S L I M I T E D Chairman’s Letter DEAR SHAREHOLDER, It has been my pleasure as Chairman of the Board to be part of the positive developments which have taken place for Strike Resources throughout the 2013 ﬁ nancial year. On behalf of the Board of Directors, I’m pleased to bring you this report on the most signiﬁ cant and important of these activities. In a transaction that redeﬁ ned the future for Strike Resources, on 31st December 2012, the Company announced that it had acquired 100% ownership of the previously 50% owned Peruvian subsidiary Apurimac Ferrum SA (AF). The strategic acquisition came after more than six months of negotiations with former Peruvian partners D&C Group, to obtain direct ownership of AF inclusive of the ﬂ agship Apurimac Iron Ore Project and the Cusco Project, both located in Peru. This event has provided a solid foundation for the Company to pursue a more focussed strategy, with Peru as a central hub for the Company’s operations. To support this strategy, the Board of Directors made a signiﬁ cant decision to focus on advancing the Apurimac Iron Ore Project which required the presence of Managing Director, Mr William Johnson, on the ground in Peru. Thank you, on behalf of the Board of Directors, to our Australian-based management and technical staff for the commitment and contribution in advancing the Company’s project to date. Thank you also to Mr The Company now has a ﬁ rm platform from which to launch into the pre-feasibility and ultimately development stages in the magnetite rich areas of Peru. Ken Hellsten, the preceding Managing Director, for aptly positioning Strike Resources where it is today, in particular, successfully securing 100% ownership of the Peruvian projects. Throughout 2013 and as we look toward 2014, Strike Resources is ﬁ rmly focussed on progressing further delineation of resources from the high grade magnetite exploration target at Apurimac Iron Ore Project. The Company’s ultimate goal is to establish a 15 – 20 million tonne per annum iron ore operation in Peru, but to achieve this, several community agreements need to be secured and Government pre-approval requirements met before new drilling commences. Securing the necessary community approvals remains a key risk factor for all exploration and mining companies operating in Peru and has in the past few years proven particularly problematic for Strike. However, the decision to locate Mr Johnson in Peru is already proving to be beneﬁ cial, allowing more direct and regular contact to occur between members of the local community and Strike leadership. As a result, in September 2013, Strike Resources reached an agreement with the Huinchos community which permits access to the area to complete an Environmental Impact Assessment for submission to the Peruvian Ministry of Energy and Mines. We are very mindful that substantial trust from the local community is required for the Company, and we are wholly committed to responsible management of our activities and fostering sustainable local partnerships with the members of the community. The Environmental Impact Assessment process is expected to be completed in time to allow Strike Resources to commence drilling during the second quarter of the 2014 calendar year. The drilling activities are expected to underpin the value of Strike Resources, with an already strong cash position and an experienced management team. The Company now has a ﬁ rm platform from which to launch into the pre-feasibility and ultimately development stages in the magnetite rich areas of Peru. I look forward to another positive year ahead for Strike Resources and thank each of our shareholders for your support. Yours Sincerely, Mr Malcolm R Richmond Independent Non Executive Chairman 3 A N N U A L R E P O R T 2 0 1 3 Managing Director’s Review HIGHLIGHTS • Move to 100% control of the Company’s Peruvian iron ore projects, alongside retention of a strong balance sheet position. • Decision to focus on the ﬂ agship Apurimac iron ore project, where the core objective is to validate Apurimac’s high grade magnetite exploration target of at least 500 million tonnes (Mt) of iron ore (including current resources) at a grade of 56 – 58% Fe to support the establishment of a 15 – 20 million tonnes per annum (Mtpa) iron ore operation. • Relocation of the Managing Director, William Johnson, to Peru successfully sees breakthrough made on community relations with a key Apurimac community. The 2012-2013 year for Strike Resources saw both signiﬁ cant corporate success, with the successful move to acquire 100% control of the Peruvian iron ore projects, and some constraint on project activity as the Company made the necessary changes to adapt to this new strategic position. By moving to 100% ownership, the Company is now in a position to completely control the direction and progress of the projects, as well as ensure that community relations are not comprised. To capitalise on this focus, the Company took the difﬁ cult decision to rebase the management team, and Managing Director, to Peru. The Company would like to thank all of the Australian-based management and technical staff for their skill and diligence to date in advancing the Company’s projects. The Company is now seeing some early success from the 100% focus on Peru, with initial community access agreements reached. The Company now hopes to commence drilling for additional resources at Apurimac in the second quarter of calendar 2014. Balance sheet strength was retained during the year, with the Company ending the year with $14.3 million in cash. This healthy balance sheet will stand the Company in good stead, as capital for junior resources ﬁ rms continues to prove scarce. The year ahead should see signiﬁ cant value added at the Apurimac project, as the Company regains access and seeks environmental approvals to recommence drilling and add further JORC resources. The 2012-2013 year for Strike Resources saw both signiﬁ cant corporate success, with the successful move to acquire 100% control of the Peruvian iron ore projects... Apurimac Ferrum Community Relations team member distributing books to local school children. 4 S T R I K E R E S O U R C E S L I M I T E D PROJECT OVERVIEW M A N A G I N G D I R E C T O R ’ S R E V I E W APURIMAC Apurimac is the Company’s ﬂ agship project. The core objective is to validate Apurimac’s high grade magnetite exploration target of at least 500 Mt of iron ore (including current resources) at a grade of 56 – 58% Fe to support the establishment of a 15 – 20 Mtpa iron ore operation. Current JORC Resources stand at 269Mt of iron ore at 57.3% Fe (142 Mt Indicated at 57.84% Fe and 127 Mt Inferred at 56.7% Fe). EVALUATION AND PRE-FEASIBILITY STUDIES The initial Pre-feasibility Study (PFS) completed in 2008 on the Apurimac Project focused upon the development of a 27 Mtpa mining operation producing 20 Mtpa of high quality iron ore concentrate transported to the coast for shipment via a slurry pipeline. The PFS has conﬁ rmed that the Apurimac Iron Ore Project has the potential to become a highly proﬁ table world class iron ore operation, with: • Average operating costs (OPEX) of approximately US$14.50 per tonne; • Total capital cost (CAPEX) of approximately US$2.3 billion; and • High quality product grading +68% Fe, very low in alumina, phosphorous and other impurities. Operating cash surplus of approximately US$1.44 billion forecast for ﬁ rst full year of production (based on iron ore concentrate prices of approximately US$94 per tonne FOB). The PFS included a series of studies project managed by Sinclair Knight Merz (SKM). Since that time AF has undertaken a number of optimisation studies including further metallurgical test work, transport option analysis (including a rope conveyor option), water management studies and alternate production rate options; covered in detail in previous reports. The extensive body of study work has conﬁ rmed the concentrate and slurry pipeline conﬁ gurations are the lowest technical risk option. Under this option production rates of 15 – 20 Mtpa are required over 15 to 20 years of operating life to provide robust ﬁ nancial returns. Current resources at Opaban are sufﬁ cient to supply at least 10 years of ore supply at the above rate. 5 The focus for AF remains the securing of access to Opaban and the Apurimac satellite concessions to complete exploration and resource deﬁ nition programs to increase its iron ore to at least 500 Mt at similar grades to the Opaban prospect. A N N U A L R E P O R T 2 0 1 3 M A N A G I N G D I R E C T O R ’ S R E V I E W Meeting the objective to validate the exploration target requires suitable access approvals from the local communities (in particular the Huinchos and Huancabamba communities), alongside a much stronger overall relationship with the communities. Necessary Government pre-approval on an environmental assessment of any planned drill program will also be required. Accordingly, the pursuit of these community and Government approvals, alongside drill program planning and non-ground disturbing exploration work (Surface mapping, ground sampling or remote sensing techniques including geophysics surveys) form the core of Strike’s immediate activities. Strike was successful during the year in reaching agreement with the Huinchos community covering signiﬁ cant portions of Apurimac. The agreement provides for Strike to access its most important concessions for the purpose of preparing an Environmental Impact Assessment (“EIA”) to enable assessment by the Peruvian Ministry of Energy and Mines of its proposed drilling campaign. This will entail mapping, surveying and geophysical studies to be undertaken by Strike staff. The agreement extends over the main Opaban 1 concession within Apurimac which contains the majority of resources deﬁ ned to date at Apurimac and the majority of the project area that Strike is seeking to drill in the future. Approval of the EIA and the associated community agreement will clear the way for Strike to commence drilling at Apurimac. The EIA study process in Peru is expected to take 6 – 9 months to complete, so Strike is targeting the second quarter of 2014 for the commencement of Drilling at Opaban. A two stage drilling program has been prepared in anticipation of receiving ﬁ nal approvals. Stage one of the drilling program consists of 135 mostly Reverse Circulation (RC) holes to test the extension of the Opaban ore bodies along strike and down dip. The strike length of the magnetic anomaly covering the Opaban ore bodies is 5.4 kilometres in Strike-owned concessions, with only 50% of this being tested to date with drilling. There is therefore considerable opportunity to signiﬁ cantly expand the current Opaban resource. EXPLORATION AND GEOLOGY The most advanced prospect, Opaban, currently contains iron ore resources totalling 269 Mt at an average grade of 57.3% Fe. The resources are high quality, being dominantly course-grained and friable magnetite, which provides several competitive advantages. The high grade provides excellent potential for direct shipping ore (DSO) as well as high quality products using conventional magnetic separation techniques. Metal recoveries are more than twice that seen in most magnetite deposits and the coarse-grained nature of the ore provides signiﬁ cant energy savings as only coarse grinding is required to liberate the magnetite. The combination of these factors delivered a project with competitive capital costs and low operating costs in an initial Pre-feasibility Study (PFS) completed in 2008. Strike was successful during the year in reaching agreement with the Huinchos community covering signiﬁ cant portions of Apurimac. The agreement provides for Strike to access its most important concessions for the purpose of preparing an Environmental Impact Assessment... REGIONAL EXPLORATION REVIEW During the year a review of previous exploration data within the Apurimac concessions was completed, alongside interpretation of high-quality remote sensing data. The objective of the review was to assess the potential for iron ore and copper/gold within the concessions and adjacent areas, to prioritise exploration targets and community relations programs to secure exploration access agreements. The data review included a compilation of the available airborne and ground magnetic surveys, geological mapping at the reconnaissance and prospect level, regional geochemistry, surface sampling and drilling results and the interpretation of detailed multi-spectral remote sensing (ASTER) data by an independent expert. The outcome of the review was the creation of a series of ranked exploration targets. The review also identiﬁ ed a number of high-priority satellite deposits in the Apurimac concessions, warranting further magnetic surveys and additional reconnaissance mapping and sampling prior to drill testing. The key potential satellite targets Sillaccassa and Colcabamba are covered in detail below. The top priority drilling area remains the Opaban prospect and, in particular, the extension of the existing resources at both Opaban I and Opaban III. The strike length of the magnetic anomaly on Opaban I and III is approximately 5.4 kilometres in Strike-owned concessions. Drilling presently only covers 50% of this area, so there is strong potential to discover additional iron ore on these properties. Analysis to identify the relative contributions of exoskarn (limestone hosted) and endoskarn (intrusive hosted) to the current Opaban resource will be undertaken. 6 S T R I K E R E S O U R C E S L I M I T E D M A N A G I N G D I R E C T O R ’ S R E V I E W Sillaccassa - The Sillaccassa concession block lies approximately 25 kilometres west of Opaban. Exploration to date has identiﬁ ed three magnetic anomalies; two of which extend for more than one kilometre and have coincident outcropping magnetite-rich ironstones. Iron grades from rock-chip sampling of the ironstones, which extend for approximately one kilometre in strike length, averaged 69% Fe. Based on the extent of the magnetic anomalies and ironstones these concessions have been assessed to have potential to contain 50 – 150 Mt of iron ore at grades of 35 – 60% Fe. Accordingly, this area could provide a signiﬁ cant satellite resource for an iron ore operation at Opaban. (The potential quantity of the target iron ore in this section of this document is conceptual in nature. There has been insufﬁ cient exploration to deﬁ ne 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.) The ASTER interpretation identiﬁ es this area as being of moderate to high importance, with a broad area of iron oxides, iron hydroxides, and iron silicates with clays and a magnetic anomaly. This area presents interesting zones of alteration nested in the area between northeast and east-northeast lineaments and zones of magnetic highs. A ground geophysical survey and 1:5000 scale mapping program were completed in 2011. Colcabamba - The Colcabamba project is 30 kilometres to the south of the Company’s Opaban concessions and is considered to be a potential satellite deposit. The iron ore is hosted by regional metasomatic skarns developed in both limestone roof pendants and diorite within the Andahuaylas-Yauri batholith. Field mapping at a 1:5000 scale and ground magnetics were undertaken at Colcabamba. Which identiﬁ ed magnetic anomalies and the magnetite outcrops. Colcabamba shows good ASTER iron anomalies as well as magnetic anomalies. The mapping shows numerous outcrops of diorite and monzodiorite in contact with limestones. The location of mapped diorite corresponds with a string of north-west trending magnetic highs. The main zone of interest is in the east where large iron oxide/silicon and gossan anomalies are ﬂ anking the magnetic highs and are associated with copper/iron anomalies. Although high-grade magnetite was intersected in all of the eight holes drilled in 2011, the intersections were generally narrower than expected when interpreted as being controlled by sub-vertical structures. The review determined that Colcabamba represents an attractive exploration target if the deposit is interpreted as dominantly exoskarn instead. This interpretation needs to be tested by further drilling. The presence of multiple phases of intrusives, anomalous copper and relatively high sulphur content at Colcabamba make it strongly prospective for copper/gold including skarn, epithermal and porphyry styles. AF has current environmental approval for drilling from a further 12 platforms in the area. As previously announced, however, the local community withdrew its drilling approval in 2012. APURIMAC FERRUM – MOVE TO 100% OWNERSHIP Most signiﬁ cantly during the year the lengthy “shoot out” process with Strike’s Peruvian partners, initiated in May 2012, concluded in December 2012. This event transformed the Company signiﬁ cantly, delivering 100% control of Apurimac Ferrum to the Company. Strategically, this allowed the Company to regain full control over the progress and direction of the Peruvian projects As a result, the Company’s future success lies in Peru and the advancing of the ﬂ agship Apurimac iron ore project. APURIMAC COMMUNITY In advancing the Company’s ﬂ agship Apurimac iron ore project, Strike requires suitable access approvals from the local communities (in particular the Huinchos and Huancabamba communities), alongside a much stronger overall relationship. These access approvals, in conjunction with necessary Government pre-approval on an environmental assessment are a key precondition to Strike commencing a two stage drilling program at Apurimac, which is designed to expand the current resource base. Agreement has been reached with the Huinchos community covering signiﬁ cant portions of Apurimac. The agreement provides for Strike to access its most important concessions for the purpose of preparing an Environmental Impact Assessment (“EIA”) to enable assessment by the Peruvian Ministry of Energy and Mines of its proposed drilling campaign. This will entail mapping, surveying and geophysical studies to be undertaken by Strike staff. The agreement extends over the main Opaban 1 concession within Apurimac which contains the majority of resources deﬁ ned to date at Apurimac and the majority of the project area that Strike is seeking to drill in the future. Reaching an agreement to access Apurimac formed a key plank of the company’s strategy to establish additional high grade resources at Apurimac, and was a signiﬁ cant step for Strike after several months of painstaking negotiations. Strike will build upon this breakthrough in future discussions. 7 Strike has now commenced necessary activities to prepare and lodge the EIA with Ministry of Energy and Mines. A N N U A L R E P O R T 2 0 1 3 M A N A G I N G D I R E C T O R ’ S R E V I E W Further community consultation is required prior to the commencement of any drilling at Apurimac, as an integral part of the EIA process. Discussions with the other principal community group at the Apurimac project, the Huancabamba community, are also continuing. Activities undertaken in conjunction with the community include investment in local education and skills training, improvements to social infrastructure, contributions to local community events and sponsorship of school extension programs. Strike is particularly pleased to be working with a local civil organisation with more than 30 years experience in community self-development, ICA-Peru, to deliver their “Community Leadership Training for Community Development” program based on the model experience at Azpitia. Azpitia was recognised as far back as 1984 as one of the most accomplished communities in Peru. CUSCO The Cusco project lies approximately 150 kilometres to the south - east of Apurimac and forms an attractive secondary development target for the Company in Peru. Like Apurimac, iron ore mineralisation at the project is coarse grained and dominated by magnetite, with high grades recorded. Preliminary metallurgical tests indicate a concentrate grade of >65% Fe can be produced from this ore using conventional grinding and magnetic separation processes. An initial inferred resource estimate of 104Mt at 32.6% Fe is recorded for the Project, which has the scope for upgrade following further exploration work (including drilling) which would support re-evaluation of the resource methodology. The company’s principal focus for the year has been on the Apurimac Project, which has seen Cusco take a lower priority for exploration activities. Activities during the year have centred on a regional review. Two concessions show ASTER iron and alteration anomalies. The ASTER interpretation has also shown numerous copper anomalies on the periphery of Santo Tomas. Two strong circular/semi-circular magnetic anomalies with apparent alteration overprint consisting of gossan/high sulphidation type are also present. The review recommended conducting further drilling, aimed at increasing the resource estimate for Santo Tomas, based on applying an interpretation using stratigraphic rather than structural controls. The company’s principal focus for the year has been on the Apurimac Project, which has seen Cusco take a lower priority for exploration activities. The review also assessed the copper/gold potential of the Cusco concessions. Malachite and azurite were identiﬁ ed in surface mapping and artisanal (informal) gold mining is understood to occur in the area. Only low levels of copper and gold were identiﬁ ed during previous drilling. An Induced Polarization (IP) survey was undertaken in order to assess the potential for a large porphyry copper/gold system. The surface extent of this survey was limited by community access agreements. There was no indication of a large porphyry system to a depth of 700 metres but several small chargeable bodies were identiﬁ ed, which will be followed up during a subsequent drilling campaign. The small chargeable bodies which were identiﬁ ed during the IP survey have also been recommended for further investigation. If these IP anomalies are associated in fact with occurrences of high-value metals then this would make a signiﬁ cant difference to the economic potential of the project. 8 S T R I K E R E S O U R C E S L I M I T E D M A N A G I N G D I R E C T O R ’ S R E V I E W EXPLORATION AND GEOLOGY The main Cusco project area of Santo Tomas is centred on a large two kilometre diameter circular magnetic anomaly with north and north-east trending magnetic highs extending both north and south of the circular feature. Extensive outcrops of high-grade iron ore coincide with the magnetic anomalies. Mapping and surface sampling indicates these outcropping zones commonly contain >60% Fe and contain a mixture of both haematite and magnetite. A resource estimate completed in 2011 based on a drilling program in 2008 outlined an Inferred Resources of 104.4 Mt at 32.6% Fe with potential for a further 23 – 26 Mt at 30 – 35% Fe. The mineralisation remains open along strike and at depth. In addition, due to the broad nature of the drilling, a number of mineralised intercepts could not be included in the resource estimate. Further exploration drilling is required at Santo Tomas to close off the existing mineralisation and test the remaining 60 – 70% of the magnetic anomaly. Magnetic image of Santo Tomas concessions showing current resource and potential outlines and target areas (black circles) 9 A N N U A L R E P O R T 2 0 1 3 M A N A G I N G D I R E C T O R ’ S R E V I E W CERRO CCOPANE The Cerro Ccopane project lies within the Cusco district approximately 25 kilometres north of Strike’s 100% owned Cusco Project. Resources at the project now stand at 395.6 Mt at an average grade of 43.8% Fe. Cerro Ccopane is operated by Cuervo Resources Inc (“Cuervo”), with Strike advancing funds for exploration in return for warrants and secured by a share pledge (see Cerro Ccopane project structure below for details). In August 2013, Strike made a conﬁ dential non-binding offer to Cuervo Resources in respect to certain Peruvian iron ore assets including the Cerro Ccopane project. Given Strike’s strong ﬁ nancial position, Strike formed the view that enhanced value for Strike shareholders in respect of future developments at Cerro Ccopane might best be achieved by the Company moving to full control of the project. Cuervo subsequently rejected Strike’s offer and no further action on this matter has been taken. The information presented below is extracted from the report entitled “Cerro Ccopane Resource and Funding Update” released by Strike to the ASX on 30 July 2013 and available at www.strikeresources.com.au. The Company conﬁ rms that it is not aware of any new information or data that materially affects the information included in the original market announcement. The company conﬁ rms that the form and context in which the Competent Peron’s ﬁ ndings are presented have not been materially modiﬁ ed from the original market announcement. Signiﬁ cant further potential remains at Cerro Ccopane based on the current drilling and other exploration data. An Exploration Target of an additional 160 Mt to 220 Mt at a grade of 35% to 40% Fe has been identiﬁ ed for Bob1. The Exploration Target was derived from the current geological model and extrapolated grade estimates that lie within a pit shell that was derived from a conceptual-level open pit optimisation completed by Golder. This potential is principally derived from extending the current Inferred Resources to a depth of approximately 400 metres below the current drilling. The tonnage and percentage ranges are approximations. The potential tonnage and grade of the Exploration Target are conceptual in nature and it is uncertain whether further exploration will result in the estimation of a Mineral Resource. Future exploration is expected to focus on surface exploration and drilling of the Parcco prospect as the top priority The Bob1 gravity and magnetic target also remains open along strike to the north extending into the Parcco prospect where extensive outcrops of massive ironstone have been identiﬁ ed in early reconnaissance exploration activities. In addition, all other resources at Cerro Ccopane remain open and a large gravity anomaly, similar to that at Bob1, has been identiﬁ ed at Huillque Norte. This gravity high is associated with a moderate magnetic anomaly and is interpreted as a large iron ore or copper/gold target. Future exploration is expected to focus on surface exploration and drilling of the Parcco prospect as the top priority in conjunction with further drilling to test the along strike and down dip potential at Bob1 and initial drill testing of the Huillque Norte gravity target. A ﬁ rm timetable for future drilling will be contingent upon Cuervo securing the necessary additional funds and reaching formal agreement with the communities at the Parcco and Huillque Norte. 1 0 S T R I K E R E S O U R C E S L I M I T E D M A N A G I N G D I R E C T O R ’ S R E V I E W CERRO CCOPANE PROJECT STRUCTURE Strike advanced Cuervo C$5.25 M to fund the Stage 1 drilling and exploration program and, in return, was issued warrants that can be converted to 31.5% of Cuervo’s shares on an undiluted basis, at C$0.30 per share. Strike holds a share pledge (similar to a share mortgage) over 90% of the shares in Cuervo’s 100%-owned Peruvian subsidiary that, in turn, owns Cuervo’s concessions. Upon Cuervo validly estimating a 500 Mt inferred Resource across its Cerro Ccopane Project, this security is reduced so as to cover only 45% of those shares. Cuervo announced on 26 February 2013 an Inferred Resource estimate that signiﬁ cantly exceeds the JORC 2012 compliant resource detailed here. On reviewing Cuervo’s 26 February 2013 announcement, Strike held some concerns regarding the methodology and assumptions used by Cuervo to determine the resource. The three key areas of concern were; • Use of a lower cut of 10% Fe, which Strike considers to be too low given the low magnetite content (and hence limited magnetic fraction recoveries) for mineralisation at that iron grade; • While there is a degree of conﬁ dence that the mineralisation extends below the current drilling data, Cuervo projected the mineralisation up to 400 metres down dip from the deepest drill intercept and included this as a substantial part of their Inferred Resource. This projection does not honour the trend of reduced thickness at depth and in Strike’s view should be more appropriately classiﬁ ed as “exploration potential” rather than Inferred Resources; and • Use of a grade interpolation method which excludes some data and does not reﬂ ect the trend of reducing iron grade with depth. In light of these concerns, Strike engaged Golder to review the Cuervo resource estimate and to independently produce a JORC compliant report on the Bob1 prospect. Strike notes that Golder holds similar concerns regarding the methodology and assumptions used by Cuervo to determine the resource. The methodology used by Golder to calculate a JORC Inferred Resource resulted in an estimate signiﬁ cantly less than that presented by Cuervo in its 26 February 2013 announcement. The Company notes that, if accepted, the Cuervo estimate would take its total resource at the Cerro Ccopane Project to a level above a trigger that reduces Strike’s security for its C$5.25 M loan to Cuervo. If the estimate produced by Golder were used, the reduction In Strike’s security would not be triggered. In light of Strike’s concerns about the Cuervo estimate and the Golder review, the Company therefore reserves its rights in the event that Cuervo seeks to reduce the security. RESOURCES JORC mineral resources at the Cerro Ccopane project have now more than doubled to 395.6 Mt at an average grade of 43.8% Fe. This increase arises following completion of a JORC (2012) resource estimate for the Bob1 prospect at Cerro Ccopane. The Bob1 prospect is a new resources area for Cerro Ccopane, adding to the existing resources at the project. Work by Golder Associates (“Golder”), commissioned by Strike, has outlined Inferred Resources of 217 Mt of magnetite dominant iron ore grading 40.2% Fe. The previously reported resources are in accordance with JORC (2004). Bob1 New Tonnes (Mt) Iron (%) SiO2 (%) Al2O3 (%) P (%) Resources Inferred 217.0 40.2 21.6 5.0 0.08 S% 2.2 Cerro Ccopane Tonnes (Mt) Iron (%) New Total1 Inferred Indicated Measured Total 340.0 35.9 19.7 395.6 43.3 45.9 48.3 43.8 1 Although a full suite of elementary analyses were completed on all drilling at Cerro Ccopane the resources apart from Bob1 (Golder) were not estimated for SiO2, Al2O3, or P and S grade estimates were completed only for Orcopura and Bob1 (Golder) resources. A N N U A L R E P O R T 2 0 1 3 1 1 M A N A G I N G D I R E C T O R ’ S R E V I E W DRILLING TECHNIQUES The resource estimate prepared by Golder is based on 18 diamond drill holes completed by Cuervo at Bob1 as part of a $5.25 M exploration program funded by Strike Resources (see above for further details on project structure). Drilling was completed using NQ and HQ sized diamond drilling techniques. HQ core was used as far as practical with reduction to NQ when drilling difﬁ culties were encountered. Golder reviewed and analysed the data base provided by Cuervo and believes it has been competently prepared and the raw data has been collected in accordance with sound industry practice. GEOLOGY AND GEOLOGICAL INTERPRETATION The Cerro Ccopane-Orcopura deposit is an iron skarn. The property comprises Cretaceous age limestones of the Arcurquina Formation and intermediate to felsic intrusive rocks of the Colquemarca pluton. The surface expression of the magnetite suggests the mineralisation is generally massive, with columnar magnetite outcrops. The Bob1 mineralisation exhibits good strike continuity extending as a continuous zone up to 150 metres in true thickness over at least 2 kilometres of strike length based on the current drilling. The mineralised system is deﬁ ned by surface outcrop, trenching and strong magnetic and gravity signatures with the geophysics which indicating further extensions to the north and south and potentially at depth below the current drilling. As noted above the magnetic data indicates the mineralised trend continues to the north into the Parcco prospect where extensive outcrops of massive magnetite have been identiﬁ ed in early stage reconnaissance work. While the magnetics also indicate extensions to the south of the current drilling the increased width of the anomaly and limited surface expression suggest it is plunging in this direction and may be predominantly at depth. Analysis of the drilling data indicates two material trends which have been honoured in the Golder resource estimate. Firstly, the iron grade reduces gradually with depth. From surface to approximately 30 metres depth, mild weathering has led to some conversion of magnetite to haematite resulting in higher than average grades. Below this level, the iron content of the magnetite zone reduces with depth as demonstrated by depth vs Fe grade plots. Secondly, the true thickness of the mineralised zones tends to reduce with depth. While continuity along strike and between drill holes is generally very good, there is evidence of some faulting with the apparent dip of the mineralisation abruptly ﬂ attening in the central portion of the Bob1 system. Accordingly Golder has used some caution in the interpretation of mineralisation thickness and geometry in this area. SAMPLING AND SUB-SAMPLING TECHNIQUES A total of 1414 sawn half-core samples, with an average length of 1.8 metres, were submitted to the laboratories for analysis. Marked samples were cut by an electric masonry saw with one-half of the core placed into a labelled sample bag with a double assay ticket. The second half of the core was returned to the core box for storage. Subsequent sample preparation was carried out by either SGS Laboratory or ALS Chemex Laboratory using their standard preparation techniques for iron ore analysis which involves crushing, pulverising then sub-sampling and further pulverisation to the required grain-size for analysis. CLASSIFICATION Mineralisation that is within 100 metres from the drill hole data is classiﬁ ed as an Inferred Resource. This classiﬁ cation is considered to be appropriate based on geological conﬁ dence criteria, location and quality of drilling and sampling information. 1 2 S T R I K E R E S O U R C E S L I M I T E D Ofﬁ cial opening ceremony for one of three new community sportsﬁ elds constructed and funded by Strike. M A N A G I N G D I R E C T O R ’ S R E V I E W SAMPLE ANALYSIS METHOD With the exception of three drill holes, BDH-12-06, BDH-12-07 and BDH-12-08, all analytical data were obtained using Inductively Coupled Plasma mass spectrometry (ICP). The samples from the other holes were assayed using X-Ray Fluorescence spectrometry (XRF). ESTIMATION METHODOLOGY Tonnage estimates were conducted using volumes deﬁ ned from wire frames of the mineralisation and bulk density determinations undertaken on representative core samples of magnetite mineralisation and host units. The wire frames were generated by linking each sectional geological interpretation based on the lower iron cut of 10% Fe. Grade estimation was completed into a block model (50m by 50m by 10m) of the mineralisation envelope deﬁ ned by the wireframe with sub-blocks of 25m by 25m by 5m at domain boundaries. Iron, silica, alumina, phosphorous and sulphur grades were estimated into each block using the Inverse Distance methodology. CUT-OFF GRADE(S), INCLUDING THE BASIS FOR THE SELECTED CUT-OFF GRADE(S) A 20% Fe cut-off grade was used for the Mineral Resource. This cut-off grade was selected based on nearby magnetite deposits and other analogous magnetite deposits. MINING AND METALLURGICAL METHODS AND PARAMETERS, AND OTHER MATERIAL MODIFYING FACTORS CONSIDERED TO DATE. For the purposes of this estimate, it is assumed that mining at Bob1 is likely to be undertaken using open pit techniques. Given that the resource is in the Inferred category, no detailed assessment of mining or processing parameters was conducted. CORPORATE NEW MANAGING DIRECTOR The Board appointed Mr William Johnson to the position of Managing Director during the year. Whilst Mr Johnson has relocated to Peru to spearhead the Company’s efforts in country, corporate secretarial and investor relations support continue to operate out of Australia and Mr Johnson will periodically return to Australia to maintain contact with Strike’s stakeholders. Mr Johnson has been acting in the capacity of Executive Director since 19 January 2013. He has been a Director of the Company since 2006, also serving in an executive capacity for almost ﬁ ve years from his initial appointment. 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, ﬁ nance and execution. Mr Johnson is currently a director of two other ASX-listed companies ), Bentley Capital Limited and Alara Resources Limited. NEW ERA IN PERU Following the successful acquisition of 100% of the previously 50% owned Peruvian subsidiary Apurimac Ferrum, Strike now directly owns 100% of the ﬂ agship Apurimac Iron Ore Project and 100% of the Cusco Project, both located in Peru. As a result, the Company determined that the key focus for 2013 and into 2014 would be to progress the further delineation of resources from the high grade magnetite exploration target at Apurimac. Additional resources at Apurimac would substantially enhance progress towards establishing a 15 – 20 Mtpa iron ore operation in Peru. The key interim steps required to increase the resource base include negotiating suitable further access approvals with the local communities, and meeting necessary Government pre-approval requirements before drilling can commence. 1 3 A N N U A L R E P O R T 2 0 1 3 M A N A G I N G D I R E C T O R ’ S R E V I E W To support the key focus, the Board determined that the objectives would be best served by having key management personnel and technical staff located in Peru, to better advance the project and realise signiﬁ cant cost savings over Australian based operations. This required the Managing Director to relocate to Peru. The move has proven successful, with a signiﬁ cant breakthrough in community relations reached after months of painstaking negotiations. Whilst the commencement of the new era in Peru has necessitated the closure of the Perth head ofﬁ ce, the Company would like to thank the Australian based management and technical staff for their skill and diligence to date in advancing the Company’s projects. The Company would also again like to thank Mr Ken Hellsten, the preceding Managing Director, for his efforts in placing Strike in the strong strategic position it is in today, in particular successfully securing 100% ownership of the Apurimac and Cusco Peruvian projects. SALE OF BERAU COAL PROJECT After a series of discussions with Strike’s Indonesian partner, the Compay was successful in September 2012 in reaching an agreement to settle the long running dispute over changes to the project legal arrangements to comply with new Indonesian Mining Laws. The settlement provided for Strike to receive US$4.3M and exit the project in 6 months, which duly occurred in April 2013. The settlement closed a difﬁ cult chapter in the Company’s history and freed management to focus solely on progressing the Company’s Peruvian iron ore projects, as well as supplying signiﬁ cant additional capital in a time of scarce capital for junior resources companies. PAULSENS EAST The Paulsens East Project is located approximately 140 kilometres west of Tom Price in the Pilbara region of Western Australia. The project consists of a 100% beneﬁ cial interest in: • Prospecting Licence P47/1170; and • Retention Licence application R47/7, covering the ground in P47/1170 (164 Ha) and part of the ground covered by expired Exploration Licence E47/1328 (a further 217 Ha). Strike held a 100% beneﬁ cial interest in E47/1328 until its expiry on 4 October 2013. Strike did not seek to renew that tenement as it was insufﬁ ciently prospective to justify further expenditure. Mining at Paulsens East is not economically feasible at present. A Retention Licence would allow Strike to keep the ground for a period determined by the Minister, of up to ﬁ ve years, with no minimum expenditure requirement. This would enable Strike to await developments that may make this Project economic in future. MILLENIUM PROCEEDINGS Strike’s Peruvian subsidiary Apurimac Ferrum S.A. (“AF”) commenced arbitration proceedings against Peruvian company Millenium Trading S.A.C. (Millenium) to ﬁ x 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 (Concession Acquisition Agreement) AF agreed to permit Millenium to mine up to 400,000 tonnes of iron ore per annum for 5 years on an unspeciﬁ ed AF concession, on terms to be agreed by subsequent negotiations (Mining Agreement). 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. Millenium has now re-asserted its right to have the Mining Agreement but has rejected AF’s approaches to enter into good faith negotiations. The Concession Acquisition 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 considers that it is now appropriate to refer the matter to arbitration given that the terms of the Mining Agreement were not resolved by negotiation in 2007 and Millenium’s refusal to open good-faith negotiations. Millenium’s proposed operation will not materially affect AF’s own proposed mine. 1 4 S T R I K E R E S O U R C E S L I M I T E D M A N A G I N G D I R E C T O R ’ S R E V I E W ARBITRATION AT THE LIMA CHAMBER OF COMMERCE (LCC) As detailed above, AF started this arbitration seeking that the arbitrator declares that the 6 September 2006 Agreement (the “Agreement”) and related contractual documents are valid and have been fully complied with by AF, and furthermore that the arbitrator decides on which concession should the Millenium or Minera Apu S.A.C. (“Minera Apu”) small-scale mining operation take place, if still applicable. This was a defensive action taken by AF in light of the threat of legal action by Millenium at the Judiciary (which did materialize, as described below). After Millenium / Minera Apu questioned several arbitrators as a stalling tactic, the LCC appointed Mr. Enrique Palacios who –despite being also challenged by Millenium / Minera Apu- was ratiﬁ ed in a ﬁ nal decision dated 12 August 2013 by the Superior Counsel for Arbitration of the LCC. The arbitrator has since taken charge of the proceedings and started acting during the last two weeks to advance the arbitration. CIVIL CASES BROUGHT BY MILLENIUM / MINERA APU AT THE JUDICIARY There are two cases directed at questioning the validity of the Agreement ﬁ led by Millenium and Minera Apu, respectively. That is, through these cases Millenium / Minera Apu generally seek that the Agreement is declared null and void. In the lawsuit started by Millenium seeking annulment of the Agreement and ﬁ led against AF, Strike Resources Limited (“Strike”) and Minera Los Andes y el Pacíﬁ co S.A. (“MAPSA”) (Dossier # 23912-2010, 12th Civil Judge of Lima), the Judge ruled in favor of the arbitration clause defense presented by AF and Strike on the basis of the corresponding clause in the Agreement and pre-existing LCC arbitration. This decision became ﬁ nal in the ﬁ rst instance, but Millenium ﬁ led a series of appeals. In parallel, Minera Apu requested to be included as “required joint defendant” and for all procedural acts to be null, on the basis that it also had rights under discussion (arguing that Millenium had in fact assigned its rights under the Agreement to them) and had had no chance to defend them. On 1 August 2013, AF was served with a Court Order issued by the Superior Court conﬁ rming the Courthouse’s decision declaring that Millenium failed to appeal the ruling in favor of the motion to dismiss (due to an arbitration clause) and rejected Minera Apu’s tactic to be included in the proceedings. Therefore, this ﬁ rst case has formally concluded with a result that is favourable to AF and Strike Resources Limited pursuant to the procedure contemplated in the law. However, Millenium / Minera Apu have once again ﬁ led an extraordinary appeal (cassation) requesting revision at the Supreme Court. Such extraordinary appeal is not legally admissible in this procedure, but the Company is waiting to be notiﬁ ed of it in order to ﬁ le defenses for AF. In the lawsuit started by Minera Apu seeking annulment of the Agreement and ﬁ led against AF, Strike and MAPSA (Dossier # 10586-2012, 19th Civil Judge of Lima), Strike, AF and MAPSA responded to the lawsuit and Strike and AF also ﬁ led procedural defenses, including a motion to dismiss on the grounds of an arbitration clause in the Agreement and the pre-existing LCC arbitration. There are no further developments in this case. The Judge is yet to issue a decision regarding the procedural defenses (motions to dismiss). CASES AT THE JUDICIARY QUESTIONING ADMINISTRATIVE DECISIONS (“ACAS”) There are thirty-eight proceedings started by Minera Apu or Mr. Carlos Navarro (an individual associated with MAPSA) that seek to question, revoke or otherwise annul certain administrative decisions made by the Ministry of Energy and Mines (“MEM”) and the Mining Cadastre Ofﬁ ce (“INGEMMET”) concerning certain applications for the granting of title to mining concessions that were made by Minera Apu and Mr. Navarro and were rejected due to such claims overlapping areas covered by pre-existing concessions held by AF and other third parties. These procedures are known as “ACA” proceedings and they seek to annul the administrative decisions and ultimately affect the title to certain concessions held by AF (and other third parties) in order to gain access to the areas covered by such concessions. The Company considers that there is no merit in these proceedings. 1 5 A N N U A L R E P O R T 2 0 1 3 M A N A G I N G D I R E C T O R ’ S R E V I E W JORC RESOURCES APURIMAC The Apurimac project has a JORC resource of 269.4 Mt, consisting of: • • a 142.2 Mt Indicated Mineral Resource at 57.8% Fe; and a 127.2 Mt Inferred Mineral Resource at 56.7% Fe. COMBINED MINERAL RESOURCES FOR OPABAN 1 AND OPABAN 3 Category Project Density t/ Mt Fe% SiO2% Al2O3% P% S% Inferred Indicated Opaban 1 Indicated Opaban 3 m3 4 4 4 Totals CUSCO 127.19 133.71 8.53 269.4 56.7 57.57 62.08 57.3 9.66 9.46 4.58 9.4 2.7 2.54 1.37 2.56 0.04 0.04 0.07 0.04 0.2 0.12 0.25 0.16 Category Project Density t/ Mt* Fe% SiO2% Al2O3% P% S% m3 4 Inferred Totals Santo Tomas CERRO CCOPANE 104.4 32.62 0.53 3.19 0.035 0.53 104.4 32.62 0.53 3.19 0.035 0.53 Bob1 New Tonnes (Mt) Iron (%) SiO2 (%) Al2O3 (%) P (%) Resources Inferred CERRO CCOPANE 217.0 40.2 21.6 5.0 0.08 Cerro Ccopane Tonnes (Mt) Iron (%) S% 2.2 New Total1 Inferred Indicated Measured Total 340.0 35.9 19.7 395.6 43.3 45.9 48.3 43.8 These resources are extracted from the report entitled “Cerro Ccopane Resource and Funding Update” released by Strike to the ASX on 30 July 2013 and available at www.strikeresources.com.au. The Company conﬁ rms that it is not aware of any new information or data that materially affects the information included in the original market announcement. The company conﬁ rms that the form and context in which the Competent Peron’s ﬁ ndings are presented have not been materially modiﬁ ed from the original market announcement. JORC CODE (2004) COMPETENT PERSON STATEMENT - APURIMAC AND CUSCO The information in this document which relates to exploration results and mineral resources at the Apurimac, Cusco and Cerro Ccopane projects has been prepared by Mr Ken Hellsten, who is a consultant to Strike Resources Limited and is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Hellsten has sufﬁ cient experience 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 deﬁ ned in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves” (the JORC Code). Mr Hellsten consents to the inclusion in this document of the matters based on this information in the form and context in which it appears. 1 6 2 Although a full suite of elementary analyses were completed on all drilling at Cerro Ccopane the resources apart from Bob1 (Golder) were not estimated for SiO2, Al2O3, or P and S grade estimates were completed only for Orcopura and Bob1 (Golder) resources. S T R I K E R E S O U R C E S L I M I T E D Directors’ Report AF Community Relations Chief Teodorico Orellana joining in local celebrations at Huinchos community. Your Directors present their report on the Consolidated Entity consisting of Strike Resources Limited (“Company” or “Strike”) and the entities it controlled at the end of, or during, the year ended 30 June 2013. DIRECTORS The following persons were Directors of Strike during the whole of the ﬁ nancial year and up to the date of this report: • Malcolm Richmond; • Matthew Hammond; • William Johnson was appointed Managing Director on 25 March 2013; • • Samantha Tough; and Ken Hellsten was a director from the beginning of the ﬁ nancial year until his resignation on 19 January 2013. PRINCIPAL ACTIVITIES The principal activities of the Consolidated Entity during the ﬁ nancial year consisted of the ongoing exploration and evaluation of the Consolidated Entity’s interest in the Apurimac and Cusco Iron Ore Projects located in Peru, South America. The Consolidated Entity sold its Berau Thermal Coal Project in Indonesia during the year. DIVIDENDS No dividends have been paid or declared during the ﬁ nancial year. At the date of this report, no dividend has been recommended for payment in respect of the reporting period. 1 7 A N N U A L R E P O R T 2 0 1 3 D I R E C T O R S ’ R E P O R T REVIEW OF OPERATIONS Highlights • Move to 100% control of the Company’s Peruvian iron ore projects, alongside retention of a strong balance sheet position; • Decision to focus on the ﬂ agship Apurimac iron ore project, where the core objective is to validate Apurimac’s high grade magnetite exploration target of at least 500Mt of iron ore (including current resources) at a grade of 56 – 58% Fe to support the establishment of a 15 – 20 Mtpa iron ore operation; and • Relocation of the Managing Director, William Johnson, to Peru successfully sees breakthrough made on community relations with a key Apurimac community. The 2012-2013 year for Strike Resources saw both signiﬁ cant corporate success, with the successful move to acquire 100% control of the Company’s key Peruvian projects, and some constraint on project activity as the Company made the necessary changes to adapt to this new strategic position. By moving to 100% ownership, the Company is now in a position to completely control the direction and progress of the projects, as well as ensure that community relations are not compromised. To capitalise on this focus, the Company rebased the management team, and Managing Director, to Peru. The Company is now seeing some early success from the 100% focus on Peru, with initial community access agreements reached. The Company now hopes to commence drilling for additional resources at Apurimac in the second quarter of calendar 2014. Balance sheet strength was retained during the year, with the Company ending the year with $14.4 million in cash. This healthy balance sheet will stand the Company in good stead, as capital for junior resources ﬁ rms continues to prove scarce. The Company is now seeing some early success from the 100% focus on Peru, with initial community access agreements reached. The year ahead should see signiﬁ cant value added at the Apurimac project, as the Company regains access and seeks environmental approvals to recommence drilling and add further JORC resources. A detailed discussion and analysis of Strike’s operations will be set out in the annual report. Carnival at Huinchos community, February 2013 1 8 S T R I K E R E S O U R C E S L I M I T E D SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In December 2012 the Company completed a settlement agreement with its Peruvian joint venture partner D&C, to acquire the remaining 50% equity interest in Apurimac Ferrum S.A. (AF). Under the Shootout Settlement Agreement Strike moved to 100% ownership of AF. D I R E C T O R S ’ R E P O R T The Settlement Agreement represents the achievement of Strike’s long- held objective of moving to 100% ownership of AF. Importantly, the acquisition terms were designed to preserve Strike’s cash. Moving to full control of AF enables Strike to focus on driving exploration efforts and progressing key project milestones at Apurimac. On 18 January 2013 Mr Ken Hellsten announced his retirement as Managing Director, a position he had held since March 2010. Non-Executive Director William Johnson was appointed Managing Director to succeed Mr Hellsten. Mr Johnson has been a Strike Director since 2006, serving in an executive capacity until 2010. On 7 December 2012, after protracted negotiations, Strike and its partner signed a set of agreements to settle the dispute over the Berau Coal Project. As a result Strike received US$4.3M in April 2013 for selling its interest in the project. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR On 30 July 2013 the Company advised of the increased resources reported at Cuervo Resources Inc.’s Cerro Ccopane project. On 15 August 2013, the Company conﬁ rmed it had made a conﬁ dential non-binding offer to Cuervo Resources Inc. in respect of certain Peruvian iron ore assets including the Cerro Ccopane project. This offer was subsequently rejected by Cuervo. On 9 September 2013, the Company reached an agreement with local Apurimac community to enable commencement of regulatory approvals for future drilling program. The approval forms part of key next stage in validating Apurimac’s high grade magnetite exploration target of at least 500 Mt or iron ore. There have been no further changes of signiﬁ cance since then. Strike was successful during the year in reaching agreement with the Huinchos community in Apurimac. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS Strike’s core objective is to validate its ﬂ agship Apurimac project’s high grade magnetite exploration target of at least 500Mt of iron ore (including current resources) at a grade of 56 – 58% Fe to support the establishment of a 15 – 20 Mtpa iron ore operation. Current JORC Resources stand at 269Mt of iron ore at 57.3% Fe (142 Mt Indicated at 57.84% Fe and 127 Mt Inferred at 56.7% Fe). Meeting the objective to validate the exploration target requires suitable access approvals from the local communities (in particular the Huinchos and Huancabamba communities), alongside a much stronger overall relationship with the communities. Necessary Government pre-approval on an environmental assessment of any planned drill program will also be required. Accordingly, the pursuit of these community and Government approvals, alongside drill program planning and non-ground disturbing exploration work (surface mapping, ground sampling or remote sensing techniques including geophysics surveys) form the core of Strike’s immediate activities. Strike was successful during the year in reaching agreement with the Huinchos community in Apurimac. The agreement allows Strike to access its most important concessions for the purpose of preparing an Environmental Impact Assessment (“EIA”) to enable assessment by the Peruvian Ministry of Energy and Mines of its proposed drilling campaign and to conduct non surface-disturbing exploration activities such as mapping, surveying and geophysical studies. 1 9 The agreement extends over the main Opaban 1 concession within Apurimac which contains the majority of resources deﬁ ned to date at Apurimac and the majority of the project area that Strike is seeking to drill during 2014. A N N U A L R E P O R T 2 0 1 3 D I R E C T O R S ’ R E P O R T Approval of the EIA and the associated community agreement will clear the way for Strike to commence drilling at Apurimac. The EIA study process in Peru is expected to take 6 – 9 months to complete, so Strike is targeting the second quarter of 2014 for the commencement of Drilling at Opaban. A two stage drilling program has been prepared in anticipation of receiving ﬁ nal approvals. Stage one of the drilling program consists of 135 mostly Reverse Circulation (RC) holes to test the extension of the Opaban ore bodies along strike and down dip. The strike length of the magnetic anomaly covering the Opaban ore bodies is 5.4 kilometres in Strike-owned concessions, with only 50% of this being tested to date with drilling. There is therefore considerable opportunity to signiﬁ cantly expand the current Opaban resource. ENVIRONMENTAL REGULATION The Consolidated Entity notes the reporting requirements of both the Energy Efﬁ ciency Opportunities Act 2006 (“EEOA”) and the National Greenhouse and Energy Reporting Act 2007 (“NGERA”). The Energy Efﬁ ciency Opportunities Act 2006 requires an affected company to assess its energy usage, including the identiﬁ cation, 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 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 signiﬁ cant 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. JORC CODE COMPETENT PERSON STATEMENT The information in this document which relates to exploration results and mineral resources at the Apurimac, Cusco and Cerro Ccopane projects has been prepared by Mr Ken Hellsten, who is a consultant to Strike Resources Limited and is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Hellsten has sufﬁ cient experience 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 deﬁ ned in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves” (the JORC Code). Mr Hellsten consents to the inclusion in this document of the matters based on this information in the form and context in which it appears. 2 0 S T R I K E R E S O U R C E S L I M I T E D D I R E C T O R S ’ R E P O R T I N F O R M AT I O N O N D I R E C T O R S Information on Directors 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 BSc Hons (Metallurgy) and B. Comm. 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 has also served as a Member on the Boards of a number of public and governmental bodies and other public listed companies. He is a qualiﬁ ed 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 served as Visiting Professor at the Graduate School of Management and School of Engineering, University of Western Australia until January 2012, and is 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 INTERESTS IN SHARES AND OPTIONS 100,000 Shares (indirect) OTHER CURRENT DIRECTORSHIPS IN LISTED ENTITIES Non-Executive Director of: Argonaut Resources Ltd (appointed March 2012) Water Resources Group Ltd (appointed July 2012) FORMER DIRECTORSHIPS IN OTHER LISTED ENTITIES IN PAST 3 YEARS Structural Monitoring Systems Plc (October 2006 to November 2010) MIL Resources Limited (August 2001 to November 2011) Advanced Braking Technology Ltd (appointed August 2006 – April 2013) Cuervo Resources Inc (appointed July 2011 – March 2013 ) 2 2 S T R I K E R E S O U R C E S L I M I T E D D I R E C T O R S ’ R E P O R T I N F O R M AT I O N O N D I R E C T O R S WILLIAM JOHNSON MANAGING DIRECTOR APPOINTED 25 March 2013 PREVIOUS POSITION HELD Executive Director (21 January to 25 March 2013) Non-Executive Director (30 April 2010 to 21 January 2013) 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, ﬁ nance and execution. SPECIAL RESPONSIBILITIES None INTERESTS IN SHARES AND OPTIONS 3,000,000 Unlisted Directors’ Options 249,273 Shares OTHER CURRENT DIRECTORSHIPS IN LISTED ENTITIES Non-Executive Director of: Alara Resources Limited (appointed October 2009) Bentley Capital Limited (appointed March 2009) Cuervo Resources Inc (appointed March 2013) FORMER DIRECTORSHIPS IN OTHER LISTED ENTITIES IN PAST 3 YEARS Orion Equities Limited (February 2003 – 3 May 2013) 2 3 A N N U A L R E P O R T 2 0 1 3 D I R E C T O R S ’ R E P O R T I N F O R M AT I O N O N D I R E C T O R S 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 INTERESTS IN SHARES AND OPTIONS Nil OTHER CURRENT DIRECTORSHIPS IN LISTED ENTITIES Mail.Ru. (appointed April 2011) Nautilus Minerals Inc (appointed October 2009) Puricore Inc. (appointed May 2010) FORMER DIRECTORSHIPS IN OTHER LISTED ENTITIES IN PAST 3 YEARS Nil 2 4 S T R I K E R E S O U R C E S L I M I T E D D I R E C T O R S ’ R E P O R T I N F O R M AT I O N O N D I R E C T O R S SAMANTHA TOUGH NON-EXECUTIVE DIRECTOR APPOINTED 23 January 2012 QUALIFICATIONS LIB, BJuris Western Australia, GAICD EXPERIENCE Ms Tough is a professional company director and chairman, with more than 14 years’ experience in public and private companies, including four positions as Chairman. She has strong, proven strategic expertise, particularly in identifying and implementing growth strategies for complex and substantial businesses and early-stage propositions. Ms Tough has served at senior executive level or on the Board in a wide range of industries, including metals and mining in particular iron ore, oil and gas, engineering services, infrastructure, energy and energy efﬁ ciency, venture capital, e-commerce, international telecommunications and law. Her previous executive roles include Senior Vice President, Strategic Counsel – Natural Resources at the Commonwealth Bank, General Manager North West Shelf at Woodside Energy Ltd and Director Strategy Hardman Resources Ltd. She also led the Pilbara Power Project on behalf of the Premier’s Department. Samantha’s involvement in these industries has given her a sound understanding of conducting business internationally. SPECIAL RESPONSIBILITIES Member of the Audit Committee INTERESTS IN SHARES AND OPTIONS Nil OTHER CURRENT DIRECTORSHIPS IN LISTED ENTITIES Non-Executive Chairman of: Southern Cross Goldﬁ elds Ltd (appointed July 2007) FORMER DIRECTORSHIPS IN OTHER LISTED ENTITIES IN PAST 3 YEARS Murchison Metals Ltd (May 2011 - Feb 2012) Enerji Ltd (February 2010 - July 2010) 2 5 A N N U A L R E P O R T 2 0 1 3 D I R E C T O R S ’ R E P O R T I N F O R M AT I O N O N D I R E C T O R S DAVID PALUMBO COMPANY SECRETARY APPOINTED 11 April 2012 QUALIFICATIONS BCom, CA EXPERIENCE Mr Palumbo has been involved in the listing of junior explorer companies on the ASX and has experience in corporate advisory and company secretarial services. Mr Palumbo is currently Company Secretary of Krakatoa Resources Limited, Rumble Resources Limited and Western Mining Network Limited. Mr Palumbo is a Corporate Compliance & Accounting Manager at Mining Corporate. MEETINGS OF DIRECTORS The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2013, and the numbers of meetings attended by each director were: Name of Director Board Meetings Committee Meetings Committee Meetings M Richmond K Hellsten W Johnson M Hammond S Tough Attended Meetings held1 Attended Meetings held1 Attended Meetings held1 (Audit) (Remuneration/Nomination) 8 2 8 7 6 8 2 8 8 6 1 - - 1 ** 1 - - 1 ** 1 ** - 1 ** 1 ** - 1 ** *Attended by invitation, not a member of the relevant committee ** Not a member of the relevant committee RETIREMENT, ELECTION AND CONTINUANCE IN OFFICE OF DIRECTORS Mr Johnson retired as Director by rotation under the Company’s Constitution at the November 2012 AGM and was re-elected at that meeting. Ms Tough was elected as Director at the November 2012 AGM. 2 6 S T R I K E R E S O U R C E S L I M I T E D D I R E C T O R S ’ R E P O R T REMUNERATION REPORT (AUDITED) The Directors are pleased to present the Company’s 2013 remuneration report which sets out remuneration information for Strike Resources Limited’s Non-Executive Directors, Executive Director and other key management personnel. DIRECTORS AND KEY MANAGEMENT PERSONNEL DISCLOSED IN THIS REPORT Name Position Non-executive and executive directors – see pages 6 –7 above Other key management personnel Julian Tambyrajah1 Ian Cullen2 Chief Financial Ofﬁ cer General Manager Exploration and Development 1. Mr Tambyrajah ceased from the position of Chief Financial Ofﬁ cer on 11 April 2013 2. Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012. ROLE OF REMUNERATION AND NOMINATION COMMITTEE The Remuneration and Nomination Committee is a committee of the Board. It is primarily responsible for making recommendations to the Board on: • • • • the necessary and desirable competencies of Directors and the extent to which these are reﬂ ected in the Board suitable candidates for the position of Managing Director, when required the development and review of Board succession plans the appointment and re-election of Directors • making recommendations to the Board on policy governing the beneﬁ ts of the Managing Director and any other Executive Director, including equity-based remuneration • making recommendations to the Board on the speciﬁ c beneﬁ ts to be provided to the Managing Director within the policy • • conducting an annual review of Non-Executive Directors’ fees and determining whether the limit on the Non- Executive Directors’ fee pool remains appropriate, and assisting the Managing Director to determine the remuneration (including equity- based remuneration) of Senior Management and advise on those determinations The purposes of the Remuneration and Nomination Committee are to: • • assist the Managing Director and the Board to adopt and implement a remuneration system that is required to attract, retain and motivate the personnel who will enable the Company to achieve long-term success; and identify appropriate candidates for membership of the Board and, when necessary, identify suitable candidates for the role of Managing Director. In doing this, the Remuneration and Nomination Committee seeks advice from independent remuneration consultants and consults market and industry surveys. Ultimate responsibility for the Company’s remuneration and nomination policies and practices remains with the full Board. The Corporate Governance Statement provides further information on the role of this Committee. A copy of Strike’s Remuneration and Nomination Committee Charter can be found on the Company’s website at www.strikeresources.com.au. 2 7 A N N U A L R E P O R T 2 0 1 3 D I R E C T O R S ’ R E P O R T NON-EXECUTIVE DIRECTOR REMUNERATION POLICY Fees and payments to Non-Executive Directors reﬂ ect the demands which are made on, and the responsibilities of, the directors. The Remuneration and Nomination Committee is responsible to review Non-Executive Directors’ fees annually and makes recommendation to the Board. The Board has also considered the advice of independent market consultants to ensure Non-Executive Directors’ fees and payments are appropriate and in line with the market. The Chair’s fees are determined independently to the fees of Non-Executive Directors’ based on comparative roles in the external market. Pursuant to the Company’s Constitution, each Director is entitled to receive: • • 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 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. Historically the Board had resolved to remunerate Non-Executive Directors for work over and above that included in their base Director’s fee under a Special Exertion Policy. Where additional services are approved by the Board the Non-Executive Director is entitled to receive $350 per hour plus reimbursement of expenses. With the exception of the above Special Exertion Policy, Non-Executive Directors do not receive performance- based pay. The Board had also previously resolved and issued Non-Executive Directors with options at various exercise prices and maturity dates as deemed appropriate at that time, however, in line with Corporate Governance Principles and Recommendations this is no longer the practice. DIRECTORS’ FEES Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $500,000 per annum and was approved by shareholders at the annual general meeting on 25 November 2009. The Chair’s remuneration was reviewed upon his appointment, in February 2011. Each Non-Executive Director receives $45,000 per year, except for Ms Tough. Ms Tough receives a higher fee, being the market rate that the Company determined was appropriate at the time she was appointed. During the year the aggregate fees paid to Non-Executive Directors of the Company were as follows: Director Ofﬁ ce held Gross Salary/fees and Superannuation for the Period Fees $ Special exertions Superannuation Total $ $ $ M Richmond Chairman M Hammond1 Non-Executive Director W Johnson2 Non-Executive Director S Tough3 Non-Executive Director 70,000 45,000 26,250 80,000 - - - - 6,300 76,300 - 45,000 2,362 28,612 7,200 87,200 1. The Director’s fee for Mr Hammond was reviewed in October 2010. 2. Mr Johnson ceased from the position of a Non-Executive Director on 21 January 2013. 3. Ms Tough was appointed as a Non-Executive Director on 23 January 2012. Her Director’s fee was approved upon appointment. 2 8 S T R I K E R E S O U R C E S L I M I T E D D I R E C T O R S ’ R E P O R T RETIREMENT ALLOWANCES FOR NON-EXECUTIVE DIRECTORS In line with the guidance from the ASX Corporate Governance Council on Non-Executive Directors’ remuneration, no Non-Executive Directors receive retirement allowances. Superannuation contributions required under the Australian superannuation guarantee legislation continue to be made and are deducted from the directors’ overall fee entitlements. EXECUTIVE REMUNERATION POLICY AND FRAMEWORK In determining executive remuneration, the Board aims to ensure that remuneration practices are: • • • • competitive and reasonable, enabling the Company to attract and retain key talent aligned to the Company’s strategic and business objectives and the creation of shareholder value transparent, and acceptable to shareholders. The executive remuneration framework has three components: • • • base pay and beneﬁ ts, including superannuation short-term performance incentives, and long-term incentives through participation in the Strike Resources Limited Employee Option Plan. EXECUTIVE REMUNERATION In accordance with the Company’s objective to ensure that executive remuneration is aligned to Company performance, a signiﬁ cant portion of the Managing Director’s target pay is “at risk”. TOTAL REMUNERATION MIX Other Executives 100% 0% Managing Director 76% 15% 8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Base pay and beneﬁ ts STI LTI BASE PAY AND BENEFITS Executives receive their base pay and beneﬁ ts structured as a total employment cost (TEC) package which may be delivered as a combination of cash and prescribed non-ﬁ nancial beneﬁ ts at the executive’s discretion. Executives are offered a competitive base pay that comprises the ﬁ xed component of pay and rewards. Independent remuneration consultants and/or reports provide analysis and advice to ensure base pay is set to reﬂ ect the market for a comparable role. Base pay for executives is also reviewed on promotion. There are no guaranteed base pay increases included in the executives’ contracts. 2 9 A N N U A L R E P O R T 2 0 1 3 D I R E C T O R S ’ R E P O R T SHORT-TERM INCENTIVES The Managing Director has the opportunity to earn an annual short-term incentive (STI) if predeﬁ ned targets are achieved. The targets are reviewed annually. STI targets for the Managing Director in the 2013 ﬁ nancial year were set by the Remuneration Committee for the Managing Director as follows. STI targets – Managing Director Metrics Execution of key Community approvals in Peru Securing additional funding to advance exploration activities and/or securing a strategic investor into the Apurimac and/or Cusco Projects. Weighting 50% 50% The Remuneration and Nomination Committee is responsible for assessing whether the KPIs are met. To assist in this assessment, the Committee receives detailed reports on performance from management which are veriﬁ ed by industry surveys and, where deemed appropriate, independent remuneration consultants. The Committee will make recommendations to the Board to adjust short-term incentives downwards in light of unexpected or unintended circumstances. Other senior executives currently do not have any short term incentives such as cash bonuses included in their employment contracts. The executives’ performance is assessed on an annual basis and bonuses may be awarded on achievement of key performance objectives by recommendation of the Managing Director and at the discretion of the Board. LONG-TERM INCENTIVES Long-term incentives are provided to certain employees via the Strike Resources Limited Employee Option Plan which was approved by shareholders at the 6 November 2008 annual general meeting. The Employee Option Plan was subsequently amended on 8 November 2011. The Strike Resources Limited Employee Option Plan is designed to provide long-term incentives for executives to deliver long-term shareholder returns. Under the plan, participants are granted options which are vested on issue. The Board has discretion to determine the exercise price and maturity date. Participation in the plan is at Board discretion and will often form part of an employment contract. Director options were granted during the 2013 ﬁ nancial year which contributed to the long-term incentives. Details are contained within the notes to the accounts. SHARE TRADING POLICY The Company’s Share Trading Policy regulates all Directors’ and, employees’ of Strike Resources Limited and its subsidiaries, and certain contractors’, dealings in the Company’s securities. The Policy prohibits: • • subscribing for, purchasing or selling Company securities or entering into an agreement to do any of those things; and 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 reﬂ ected in the security’s price, in accordance with the Corporations Act 2001. The Policy also prohibits communicating inside information to any other person when directors, employees of Strike Resources Limited and its subsidiaries, and certain contractors 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, directors, employees of Strike Resources Limited and its subsidiaries, and certain contractors, must not deal in Company securities without the written consent of the “Trading Ofﬁ cers” 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. Directors, employees of Strike Resources Limited and its subsidiaries, and certain contractors must inform the Company Secretary of all transactions they enter into involving the Company’s securities to enable disclosure to the market, where required. 3 0 A copy of Strike’s Share Trading Policy can be found on the Company’s website as www.strikeresources.com.au. VOTING AND COMMENTS MADE AT THE COMPANY’S 2012 ANNUAL GENERAL MEETING Strike Resources Limited received more than 99% (2011: 94%) of “yes” votes on its remuneration report for the 2012 ﬁ nancial year. The Company did not receive any speciﬁ c feedback at the AGM or throughout the year on its remuneration practices. S T R I K E R E S O U R C E S L I M I T E D DETAIL OF REMUNERATION The following tables show details of the remuneration received by the Directors and the key management personnel of the Consolidated Entity for the current and previous ﬁ nancial year. D I R E C T O R S ’ R E P O R T Short-term employee beneﬁ ts Post- Long-term employment beneﬁ ts Total Share- based payments beneﬁ ts Super- Long- Termination Options annuation service beneﬁ ts leave $ $ $ $ Cash salary and fees Cash bonus Non- Other monetary beneﬁ t 2013 $ $ $ $ $ Non-Executive Directors: M Richmond M Hammond W Johnson2 S Tough Executive Director: 70,000 45,000 26,250 80,000 - - - - - - - - K Hellsten1 216,666 70,000 6,750 W Johnson2 142,356 Other key management personnel J Tambyrajah3 151,630 13,977 I Cullen4 Total - - - - - - 745,879 70,000 6,750 - - - - - - - - - 6,300 - 2,362 7,200 19,500 6,812 18,559 1,420 62,153 - - - - - - - - - - - - - - - - - - - - 76,300 45,000 28,612 87,200 312,916 42,000 191,168 128,229 5,402 - - 298,418 20,799 133,631 42,000 1,060,413 1. Mr Hellsten ceased from position of Managing Director on 21 January 2013 2. Mr Johnson ceased from a position of Non-Executive Director and was appointed as Executive Director on 21 January 2013 and as Managing Director on 25 March 2013. 3. Mr Tambyrajah was appointed as Chief Financial Ofﬁ cer on 2 April 2012 and ceased on 11 April 2013. 4. Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012. The relative proportions of remuneration that are linked to performance and those that are ﬁ xed are as follows: Name Fixed remuneration At risk - STI At risk – LTI # 2013 2012 2013 2012 2013 2012 Executive Director K Hellsten1 W Johnson Other Key Management Personnel 75% 70% J Tambyrajah2 100% D Lim I Cullen3 0% 100% 66% 0% 42% 68% 82% 25% 30% 0% 0% 0% 13% 0% 0% 5% 3% 0% 0% 0% 0% 0% 21% 0% 58% 27% 15% # Long-term incentives are provided exclusively by way of options, the percentages disclosed also reﬂ ect the value of remuneration consisting of options, based on the value of options expensed during the year. Negative amounts indicate expenses reversed during the year due to a failure to satisfy the vesting conditions. 3 1 1. Mr Hellsten resigned as a Managing Director on 21 January 2013 2. Mr Tambyrajah was appointed as Chief Financial Ofﬁ cer on 2 April 2012. 3. Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012. A N N U A L R E P O R T 2 0 1 3 D I R E C T O R S ’ R E P O R T SERVICE AGREEMENTS Appointment to the Board as a Director is via resolution which outlines the Director’s agreed remuneration. The appointment is later ratiﬁ ed by shareholders at the next general meeting. No formal service agreements are executed for Non-Executive Directors. On the appointment to the Board, the Company enters into a deed with each Non- Executive Director to regulate certain matters between the Company and that Non-Executive Director, however Matthew Hammond has not executed such a deed. Remuneration and other terms of employment for the Managing Director and other key management personnel are formalised in Employment Agreements. The Employment Agreement of the Managing Director provides for the provision of performance-related cash bonuses, which are reviewed annually by the Remuneration and Nomination Committee. No speciﬁ c cash bonuses are provided in the Employment Agreements of other key management personnel. All agreements with Executives may be terminated early by either party with notice periods from 1-3 months, except for the Managing Director who has a 6 month notice period. SHARE-BASED COMPENSATION The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows: Grant date Vesting and Expiry date Exercise price Value per Performance % Vested exercise date option at grant date achieved 18 June 2013 18 June 2013 17 June 2018 $0.30 $0.014 N/A 100% Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share within 5 business days after the exercise. Details of options over ordinary shares in the Company provided as remuneration to each director of Strike Resources Limited and each of the key management personnel of the Company and the Consolidated Entity are set out below. When exercisable, each option is convertible into one ordinary share of Strike Resources Limited. Further information on the options is set out in note 29 to the ﬁ nancial statements. Name Number of Value of options Number of Number of Value at lapse options granted at grant date* options vested options lapsed date** during the year during the year during the year Directors of Strike Resources Limited M Richmond M Hammond W Johnson S Tough - - - - - - 3,000,000 $42,000 3,000,000 - - Other former key management personnel of the Consolidated Entity J Tambyrajah I Cullen - - - - - - - - - - - - - - - - - - - * The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration. ** The value at lapse date of options that were granted as part of remuneration and that lapsed during the year because a vesting condition was not satisﬁ ed, or the participant ceased to be employee of the Company. The value is determined at the time of lapsing, but assuming the condition was satisﬁ ed. The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. SHARES PROVIDED ON EXERCISE OF REMUNERATION OPTIONS There were no shares issued as a result of the exercise of Directors’ or employee options which were issued as part of remuneration during the current year (2012: nil). 3 2 S T R I K E R E S O U R C E S L I M I T E D D I R E C T O R S ’ R E P O R T DETAILS OF REMUNERATION: BONUSES AND SHARE-BASED COMPENSATION BENEFITS For each cash bonus and grant of options included in the tables on pages 15, the percentage of the available bonus or grant that was paid, or that vested, in the ﬁ nancial year and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonus is payable in future years. The options vest immediately and will lapse on termination of employment, except due to redundancy or disability, in which case they will continue for 12 months or until any earlier expiry date. The Board has discretion to vary the lapse dates of terminating employees’ options. Name Bonus Share-based compensation beneﬁ t (options) Paid Forfeited Year granted Vested Forfeited/ Financial Lapsed years in which options may M Richmond M Hammond W Johnson S Tough K Hellsten J Tambyrajah I Cullen - - - - 70,000 * * - - - - - * * * Service agreement does not contain cash bonuses. - - - - 2013 100% - - - - - - - - - - - - - - - vest - - 2013 - - - - SHARES UNDER OPTIONS Unissued ordinary shares of Strike Resources Limited under option at the date of this report are as follows: Date of options granted Expiry date Issue price of shares Number under option 24 November 2011* 23 November 2016 24 November 2011* 23 November 2016 24 November 2011* 23 November 2016 5 April 2012* 5 April 2012* 5 April 2012* 18 June 2013 23 November 2016 23 November 2016 23 November 2016 17 June 2018 $0.36 $0.42 $0.56 $0.36 $0.42 $0.56 $0.30 833,334 833,333 833,333 333,334 333,333 333,333 3,000,000 * Included in these options were options granted as remuneration to the directors and the ﬁ ve most highly remunerated ofﬁ cers during the year. Details of options granted to key management personnel are disclosed on page 12 – 14 above. No option holder has any right under the options to participate in any other share issue of the Company. THIS CONCLUDES THE AUDIT REMUNERATION REPORT 3 3 A N N U A L R E P O R T 2 0 1 3 D I R E C T O R S ’ R E P O R T INSURANCE OF OFFICER 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 Ofﬁ cers’ liability and legal expenses insurance contract, as such disclosure is prohibited under the terms of the contract. The Company has executed Directors’ deeds with each Director (other than Matthew Hammond) to indemnify the directors for liabilities or legal costs incurred as an ofﬁ cer and advance monies to meet costs in relation to the indemnities under the deed. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. NON-AUDIT SERVICES The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Consolidated Entity are important. 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 year are set out below. The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisﬁ ed that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisﬁ ed that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartially and objectivity of the auditor. • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for audit and non-audit services provided by the auditor of the Company, its related practices and non-related audit ﬁ rms: Audit & Review Fees – BDO Audit (WA) Pty Ltd Audit & Review Fees – Afﬁ liated practices of BDO International Total Consolidated 2012 $ 84,774 6,830 91,604 2013 $ 47,500 6,779 54,279 AUDITORS’ INDEPENDENCE DECLARATION A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 17. AUDITOR BDO Audit (WA) Pty Ltd continues in ofﬁ ce in accordance with section 327 of the Corporation Act 2001. This report is made in accordance with a resolution of directors. 3 4 William Johnson Managing Director 30 September 2013 S T R I K E R E S O U R C E S L I M I T E D C O R P O R AT E G O V E R N A N C E S TAT E M E N T Corporate Governance Statement Strike Resources Limited (“Company” or “Strike”) and the Board are committed to achieving and demonstrating the highest standards of corporate governance. The Board continues to review the framework and practices to ensure they meet the interests of shareholders. The Company and its controlled entities together are referred to as the Consolidated Entity in this statement. A description of the Consolidated Entity’s main corporate governance practices is set out below. All these practices were in place for the entire year and they comply with the ASX Corporate Governance Principles and Recommendations unless otherwise stated. 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. An additional independent director was appointed in January 2012 and the Board continues to monitor the potential to further increase the number of its independent members in the future. Principle 1: Lay a Solid Foundations for Management and Oversight The relationship between the Board and senior management is critical to the Consolidated Entity’s long term success. The Directors are responsible to shareholders for the performance of the Consolidated Entity in both the short term and the longer term and seek to balance sometimes competing objectives in the best interest of the Consolidated Entity as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Consolidated Entity is properly managed. The responsibilities of the Board include: • • providing strategic guidance to the Consolidated Entity including contributing to the development of and approving the corporate strategy reviewing and approving business plans, the annual budget and ﬁ nancial plans including available resources and major capital expenditure initiatives. • overseeing and monitoring: − organisational performance and the achievement of the Consolidated Entity’s strategic goals and objectives − compliance with the Company’s Code of Conduct (see page 39) − progress in relation to the Company’s diversity objectives and compliance with its diversity policy − progress of major capital expenditures and other signiﬁ cant corporate projects including any acquisitions and divestments • monitoring ﬁ nancial performance including approval of the annual and half-year ﬁ nancial reports and liaison with the auditors • • • • • appointment, performance assessment and, if necessary, removal of the Managing Director ratifying the appointment and/or removal and contributing to the performance assessment of the senior management team including the Chief Financial Ofﬁ cer and the Company Secretary ensuring there are effective management processes in place and approving major corporate initiatives enhancing and protecting the reputation of the organisation overseeing the operation of the Consolidated Entity’s system for compliance and risk management reporting to shareholders • ensuring appropriate resources are available to senior management. Day to day management of the Consolidated Entity’s affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the Board to the Managing Director and Senior Executives as set out in the Consolidated Entity’s delegations policy. These delegations are reviewed on an annual basis. 3 5 A performance assessment for Senior Executives last took place in December 2011. The process for these assessments is described on the Company’s website. A N N U A L R E P O R T 2 0 1 3 C O R P O R AT E G O V E R N A N C E S TAT E M E N T Principle 2: Structure the Board to Add Value The Board operates in accordance with the broad principles set out in its charter which is available from the corporate governance information section of the Company website at www.strikeresources.com.au. The charter details the Board’s composition and responsibilities. BOARD COMPOSITION The charter states: • • • • • the Board is to be comprised of both Executive and Non-Executive Directors with a majority of Non-Executive Directors. Non-Executive Directors bring a fresh perspective to the Board’s consideration of strategic, risk and performance matters in recognition of the importance of independent views and the Board’s role in supervising the activities of management, the Chairman must be an independent Non-Executive Director, the majority of the Board should be independent of management and all Directors are required to exercise independent judgement and review and constructively challenge the performance of management the Chairman is elected by the full board and is required to meet regularly with the Managing Director the Company is to maintain a mix of Directors on the board from different genders, age groups, ethnicity and cultural and professional backgrounds who have complementary skills and experience the Board will periodically consider the appropriate mix of skills required by the Board to maximise its effectiveness and its contribution to the Consolidated Entity. The Board seeks to ensure that: • at any point in time, its membership represents an appropriate balance between Directors with experience and knowledge of the Consolidated Entity and Directors with an external fresh perspective • measurable board gender diversity objectives are established, to assess the objectives and progress in achieving them periodically • the size of the Board is conducive to effective discussion and efﬁ cient decision-making. DIRECTORS’ INDEPENDENCE The Board has adopted speciﬁ c principles in relation to Directors’ independence. These state that when determining independence, a Director must be Non-Executive and the Board should consider whether the Director: • • is a substantial shareholder of the Company or an ofﬁ cer of, or otherwise associated directly with, a substantial shareholder of the Company is or has been employed in an executive capacity by the Company or any other Consolidated Entity member within three years before commencing to serve on the Board • within the last three years has been a principal of a material professional adviser or a material consultant to the Company or any other Consolidated Entity member, or an employee of such adviser or consultant materially associated with the service provided • • • is a material supplier or customer of the Company or any other Consolidated Entity member, or an ofﬁ cer of or otherwise associated directly or indirectly with a material supplier or customer has a material contractual relationship with the Company or a controlled entity other than as a Director of the Consolidated Entity is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s independent exercise of their judgement. Materiality for these purposes is determined on both quantitative and qualitative bases. An amount of over 5% of annual turnover of the Company or Consolidated Entity is considered material for these purposes. In addition, a transaction of any amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of the Director’s performance. Recent thinking on corporate governance has introduced the view that a Director’s independence may be perceived to be impacted by lengthy service on the Board. To avoid any potential concerns, the Board has determined that a Director will not be deemed independent if he or she has served on the Board of the Company for more than ten years. The Board will continue to monitor developments on this issue. The Board assesses independence each year. To enable this process, the Directors must provide all information that may be relevant to the assessment. 3 6 S T R I K E R E S O U R C E S L I M I T E D C O R P O R AT E G O V E R N A N C E S TAT E M E N T BOARD MEMBERS Details of the members of the Board, their experience, expertise, qualiﬁ cations, term of ofﬁ ce, relationships affecting their independence and their independent status are set out in the directors’ report under the heading ‘Information on Directors’. At the date of signing the Directors’ Report, there is one Executive Director and three Non-Executive Directors, two of whom have no relationships adversely affecting independence and so are deemed independent under the principles set out above: • Matthew Hammond is a representative Director for a major shareholder and has therefore been deemed ‘not independent’ as Directors of the Company • No Director has served on the Board of the Company for more than ten years. CHAIR AND MANAGING DIRECTOR (MD) The Chair is responsible for leading the Board, ensuring Directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board’s relationship with the Company’s senior executives. In accepting the position, the Chair has acknowledged that it will require a signiﬁ cant time commitment and has conﬁ rmed that other positions will not hinder his effective performance in the role of Chair. The Chair of the Company is Malcolm Richmond, whose qualiﬁ cations and experience are stated in the Company’s Full-Year Report. The MD is responsible for implementing Consolidated Entity strategies and policies. The board charter speciﬁ es that the roles of Chair and MD are separate roles to be undertaken by separate people. INDUCTION The induction provided to new Directors and senior managers enables them to actively participate in Board and management decision-making, respectively, as soon as possible. It ensures that they have a full understanding of the Company’s ﬁ nancial position, strategies, operations, culture, values and risk management policies. It also explains the respective rights, duties, responsibilities, interaction and roles of the Board and Senior Executives and the Company’s meeting arrangements. COMMITMENT The board held eight board meetings during the year. Non-Executive Directors are expected to spend the time required to prepare for and attending Board and Committee meetings and associated activities. The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2013, and the number of meetings attended by each Director is disclosed on page 26. It is the Company’s practice to allow its Executive Directors to accept appointments outside the Company with prior written approval of the Board. No appointments of this nature were accepted during the year ended 30 June 2013. The commitments of Non-Executive Directors are considered by the Nomination Committee prior to the Directors’ appointment to the Board of the Company and are reviewed each year. Prior to appointment or being submitted for re-election, each Non-Executive Director is required to speciﬁ cally acknowledge that they have and will continue to have the time available to discharge their responsibilities to the Company. CONFLICT OF INTERESTS No Director had business dealings with the Consolidated Entity during the year, as described in note 23 to the ﬁ nancial statements. In accordance with the board charter, the Directors concerned declared their interests in those dealings to the Company and took no part in decisions relating to them or the preceding discussions. In addition, those Directors did not receive any papers from the Consolidated Entity pertaining to those dealings. INDEPENDENT PROFESSIONAL ADVICE Subject to prior consultation with the Chair, 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 fulﬁ l their Directors’ duties. 3 7 A N N U A L R E P O R T 2 0 1 3 C O R P O R AT E G O V E R N A N C E S TAT E M E N T PERFORMANCE ASSESSMENT The Board’s has a policy to ensure that the Directors and Executives of the Company are equipped with the knowledge and information they need to discharge their responsibilities effectively and that individual and collective performance is regularly and fairly reviewed. Although the Company is not of a size to warrant the development of formal processes for evaluating the performance of its Board, individual Directors and Executives, there is on-going monitoring by the Chair and self-review by the Board. The Chair also speaks to Directors individually regarding their role as a Director. BOARD COMMITTEES The Board has established a number of committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current committees of the Board are the Remuneration and Nomination Committee and the Audit Committee. Each committee is comprised entirely of Non-Executive Directors. Each Committee has its own written charter setting out its role and responsibilities, composition, structure, membership requirements and the manner in which the committee is to operate. All of these charters are available on the Company’s website. All matters determined by committees are submitted to the full Board as recommendations for board decisions. Minutes of committee meetings are tabled at the subsequent board meeting. Additional requirements for speciﬁ c reporting by the Committees to the Board are addressed in the charter of the individual committees. NOMINATION COMMITTEE The Nomination Committee function is performed by the Remuneration and Nomination Committee (the Committee). The Strike Board is not of sufﬁ cient size to warrant separate Remuneration and Nomination Committees. The Committee consists of the following Non-Executive Directors (a majority of whom are not independent): Malcolm Richmond – Committee Chair (independent) Matthew Hammond (not independent) William Johnson (not independent) Details of these Directors’ attendance at Committee meetings are set out in the Directors’ Report on page 26. The Committee operates in accordance with its charter which is available on the Company’s website. The main responsibilities of the Committee in relation to its nomination function are to make recommendations to the Board as to: • • • • • the necessary and desirable competencies of Directors and the extent to which these are reﬂ ected in the Board suitable candidates for the position of Managing Director, when required the development and review of Board succession plans the appointment and re-election of Directors, and any other function conferred upon it by the Board related to Board membership and succession. When a new Director is to be appointed, the Committee reviews the range of skills, experience and expertise on the Board, and to identify its needs. From this the Committee prepares a short-list of candidates with appropriate skills and experience. A number of channels are used to source candidates to ensure the Company beneﬁ ts from a diverse range of individuals in the selection process. Where necessary, advice is sought from independent search consultants. The full Board then appoints the most suitable candidate. A Director appointed by the Board must stand for election at the next annual general meeting of the Company. The Board and the Committee are also aware of the advantages of Board renewal and succession planning. Details of the nomination, selection and appointment processes are available on the Company’s website. Notices of meetings for the election of Directors comply with the ASX Corporate Governance Council’s best practice recommendations. All new Directors participate in a comprehensive, formal induction program which covers the operation of the Board and its Committees and ﬁ nancial, strategic, operations and risk management issues. 3 8 S T R I K E R E S O U R C E S L I M I T E D C O R P O R AT E G O V E R N A N C E S TAT E M E N T Principle 3: Promote Ethical and Responsible Decision Making CODE OF CONDUCT The Company has developed a Code of Conduct (the Code) which has been fully endorsed by the Board and applies to all Directors and employees. The code is periodically reviewed and will be updated as necessary to ensure it reﬂ ects the highest standards of behaviour and professionalism and the practices necessary to maintain conﬁ dence in the Consolidated Entity’s integrity and to take into account legal obligations and reasonable expectations of the Company’s stakeholders. In summary, the Code requires that at all times all Company personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and Company policies. The Company has a trading policy which outlines the restrictions, closed periods and processes required when Directors, MD and key management personnel trade Company securities. Broadly, it states that the purchase and sale of Company securities by Directors and senior management is only permitted with written approval from the trading ofﬁ cer. Permission will not be given while inside information exists and will not in any case be given during the following blackout periods before the following key events: Event Start of Period Release of full-year results on ASX. 28 days before the proposed date for release. Release of half-year results on ASX. 28 days before the proposed date for release. Release of quarterly cash-ﬂ ow report on ASX. 14 days before the proposed date for release. Annual General Meeting (AGM). 14 days before the AGM. Signiﬁ cant exploration drilling campaign. 5 days before the proposed date for release of the drilling results on ASX. Due to the Company’s relatively small workforce, all staff is subject to the same securities trading restriction as Directors and senior management at the present time. The Code and the Company’s trading policy are discussed with each new employee as part of their induction training. Further training is periodically provided and all employees are asked to sign an annual declaration conﬁ rming their compliance with the Code and the trading policy. The Code requires employees who are aware of unethical practices within the Consolidated Entity or breaches of the Company’s trading policy to report these using the Company’s whistleblower policy. This can be done anonymously. The Directors are satisﬁ ed that the Consolidated Entity has complied with its policies on ethical standards, including trading in securities. A copy of the Code and the trading policy are available on the Company’s website. DIVERSITY POLICY The Company values diversity and recognises the beneﬁ ts it can bring to the organisation’s ability to achieve its goals. Accordingly the Company has developed a diversity policy, a copy of which can be found on the Company’s website. This policy outlines the Company’s diversity objectives in relation to gender, age, cultural background and ethnicity. It includes requirements for the Board to establish measurable objectives for achieving diversity, and for the Board to assess annually both the objectives, and the Company’s progress in achieving them. 3 9 A N N U A L R E P O R T 2 0 1 3 C O R P O R AT E G O V E R N A N C E S TAT E M E N T Principle 4: Safeguard Integrity in Financial Reporting AUDIT COMMITTEE The Audit Committee consists of the following Non-Executive Directors: Malcolm Richmond – Committee Chair (independent) Matthew Hammond (not independent) Samantha Tough (independent) Details of these Directors’ qualiﬁ cations and attendance at Audit Committee meetings are set out in the Directors’ Report on page 26. All members of the Audit Committee are ﬁ nancially literate and have an appropriate understanding of the industries in which the Consolidated Entity operates. The Audit Committee operates in accordance with a charter which is available on the Company’s website. The main responsibilities of the committee are to: • review, assess and approve the annual full and concise reports, the half-year ﬁ nancial report and all other ﬁ nancial information published by the Company or released to the market • assist the Board in reviewing the effectiveness of the organisation’s internal control environment covering: − effectiveness and efﬁ ciency of operations − reliability of ﬁ nancial reporting − compliance with applicable laws and regulations • oversee the effective operation of the risk management framework • • • • • recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, the scope and quality of the audit and assess performance consider the independence and competence of the external auditor on an ongoing basis review and approve the level of non-audit services provided by the external auditors and ensure it does not adversely impact on auditor independence review and monitor related party transactions and assess their propriety report to the Board on matters relevant to the committee’s role and responsibilities. In fulﬁ lling its responsibilities, the Audit Committee: • receives reports from management and the internal and the external auditors • meets with the external auditors at least twice a year, or more frequently if necessary • • reviews the processes the MD and Chief Financial Ofﬁ cer have in place to support their certiﬁ cations to the Board reviews any signiﬁ cant disagreements between the auditors and management, irrespective of whether they have been resolved • meets separately with the external auditors at least twice a year without the presence of management • provides the external auditors with a clear line of direct communication at any time to either the Chair of the Audit Committee or the Chair of the Board. The Audit Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party. EXTERNAL AUDITORS The Company and Audit Committee policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. BDO was appointed as the external auditor in 2008. It is BDO’s policy to rotate audit engagement partners on listed companies at least every ﬁ ve years, and in accordance with that policy a new audit engagement partner was introduced for the year ended 30 June 2013. 4 0 An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the Directors’ Report and in note 19 to the Financial Statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit Committee. The external auditor will attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. S T R I K E R E S O U R C E S L I M I T E D C O R P O R AT E G O V E R N A N C E S TAT E M E N T Principle 5 and 6: Make Timely and Balanced Disclosures and Respect the Rights of Shareholders CONTINUOUS DISCLOSURE The Company has written policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Consolidated Entity that a reasonable person would expect to have a material effect on the price of the Company’s securities. These policies and procedures also include the arrangements the Company has in place to promote communication with shareholders and encourage effective participation at general meetings. A summary of these policies and procedures is available on the Company’s website. The Company Secretary has been nominated as the person responsible for communications with the Australian Securities Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public. All information disclosed to the ASX is posted on the Company’s website as soon as it is disclosed to the ASX. When analysts are briefed on aspects of the Consolidated Entity operations, the material used in the presentation is released to the ASX and posted on the Company’s website. Analysts do not receive price-sensitive information at any time prior to disclosure to the market as a whole. Procedures have also been established for reviewing whether any price-sensitive information has been inadvertently disclosed and, if so, the policy requires this information to be immediately released to the market. The website also enables users to provide feedback and has an option for shareholders to register their email address for direct email updates on Company matters. All shareholders receive a copy of the Company’s annual (full or concise) and half-yearly reports. In addition, the Company seeks to provide opportunities for shareholders to participate through electronic means. Recent initiatives to facilitate this include making all Company announcements, media brieﬁ ngs, details of Company meetings, press releases for the last three years and ﬁ nancial reports for the last ﬁ ve years available on the Company’s website. Where possible, the Company arranges for advance notiﬁ cation of signiﬁ cant group brieﬁ ngs (including, but not limited to, results announcements) and makes them widely accessible. Principle 7: Recognise and Manage Risk The Board is responsible for satisfying itself annually, or more frequently as required, that management has developed and implemented a sound system of risk management and internal control. Detailed work on this task is delegated to the Audit Committee and reviewed by the full Board. The Audit Committee is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. They monitor the Company’s risk management by overseeing management’s actions in the evaluation, management, monitoring and reporting of material operational, ﬁ nancial, compliance and strategic risks. In providing this oversight, the committee: • • • • reviews the framework and methodology for risk identiﬁ cation, the degree of risk the Company is willing to accept, the management of risk and the processes for auditing and evaluating the Company’s risk management system reviews group-wide objectives in the context of the abovementioned categories of corporate risk reviews and, where necessary, approves guidelines and policies governing the identiﬁ cation assessment and management of the Company’s exposure to risk reviews and approves the delegations of ﬁ nancial authorities and addresses any need to update these authorities on an annual basis, and • reviews compliance with agreed policies. The Committee recommends any actions it deems appropriate to the Board for its consideration. Management is responsible for designing, implementing and reporting on the adequacy of the Company’s risk management and internal control system and has to report to the Audit Committee on the effectiveness of: • • the risk management and internal control system during the year, and the Company’s management of its material business risks. 4 1 A N N U A L R E P O R T 2 0 1 3 C O R P O R AT E G O V E R N A N C E S TAT E M E N T RISK MANAGEMENT GROUP The Company’s risk management policy and the operation of the risk management and compliance system are managed by the Company’s risk management group which consists of senior executives chaired by the Chief Financial Ofﬁ cer. The Board receives quarterly reports from this group as to the effectiveness of the Company’s management of material risks that may impede meeting business objectives. The Chief Financial Ofﬁ cer and accounting staff, carry out regular systematic monitoring of control activities and reports to both relevant business unit management and the Audit Committee. In addition, each business unit reports on the key business risks in their area to the risk management group. The basis for this report is a half-yearly review of the past performance of their area of responsibility, and the current and future risks they face. The review is undertaken by business unit management. Results of Chief Financial Ofﬁ cer work are incorporated into this review if applicable. The risk management group consolidates the business unit reports and recommends any actions to the Board for its consideration. CORPORATE REPORTING In complying with recommendation 7.3, the Managing Director and Chief Financial Ofﬁ cer have made the following certiﬁ cations to the Board: • • that the Company’s ﬁ nancial reports are complete and present a true and air view, in all material respects, of the ﬁ nancial condition and operational results of the Company and Consolidated Entity and are in accordance with relevant accounting standards that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board and that the Company’s risk management and internal compliance and control is operating efﬁ ciently and effectively in all material respects in relation to ﬁ nancial reporting risks. Principle 8: Remunerate Fairly and Responsibly REMUNERATION AND NOMINATION COMMITTEE The membership of this Committee has been disclosed above. The Remuneration and Nomination Committee, in performing its remuneration function, advises the Board on remuneration and incentive policies and practices generally, and makes speciﬁ c recommendations on remuneration packages and other terms of employment for Executive Directors, other senior executives and Non-Executive Directors. Each member of the senior executive team signs a formal Employment Contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. The standard contract refers to a speciﬁ c formal job description. Further information on Directors’ and Executives’ remuneration, including principles used to determine remuneration, is set out in the Directors’ Report under the heading “Remuneration Report”. In accordance with Consolidated Entity policy, participants in equity-based remuneration plans are not permitted to enter into any transactions that would limit the economic risk of options or other unvested entitlements. Details of this policy can be found on the Company’s website. The Committee also assumes responsibility for overseeing management succession planning, including the implementation of appropriate executive development programmes and ensuring adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior positions. This includes overseeing processes in relation to meeting diversity objectives for executives and staff below board level. 4 2 S T R I K E R E S O U R C E S L I M I T E D 4 3 A N N U A L R E P O R T 2 0 1 3 C O N S O L I D AT E D S TAT E M E N T O F P R O F I T O R L O S S Consolidated Statement of Proﬁ t or Loss and Other Comprehensive Income for the year ended 30 June 2013 Revenue from continuing operations Other income Operating expenses Personnel costs Other corporate costs Fair value adjustment -ﬁ nancial assets held as fair value through proﬁ t and loss Impairment expense Loss on sale of ﬁ xed assets Loss on sale of investment in associate Loss on sale of asset classiﬁ ed as held for sale Foreign exchange loss Proﬁ t/(loss) before income tax Income expense tax Proﬁ t/(loss) from continuing operations Proﬁ t/(loss) for the year Proﬁ t/(loss) is attributable to: Equity holders of Strike Resources Limited Other comprehensive income Items that may be reclassiﬁ ed subsequently to Proﬁ t and Loss 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 5 5 5 5 5 5 6 Consolidated Entity 2013 $ 1,281,593 33,162,958 34,444,551 2012 $ 5,630,977 1,558,348 7,189,325 (220,076) (1,765,610) (1,655,322) (1,869,704) (3,014,621) (18,318) - (138,186) (2,068,395) 23,694,319 (97,132) 23,597,187 23,597,187 (271,616) (2,235,607) (2,025,915) (2,055,850) (12,570,185) (40,577) (826,397) - - (12,836,822) (203,900) (13,040,722) (13,040,722) 23,597,187 (13,040,722) 3,086,017 3,086,017 26,683,204 (555,221) (555,221) (13,595,943) 26,683,204 (13,595,943) 28 28 16.44 16.44 (9.20) (9.20) 4 6 This consolidated statement of proﬁ t or loss and other comprehensive income should be read in conjunction with the accompanying notes. S T R I K E R E S O U R C E S L I M I T E D C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N Consolidated Statement of Financial Position and Other Comprehensive Income as at 30 June 2013 Current assets Cash and cash equivalents Trade and other receivables Financial assets at fair value through proﬁ t or loss Assets classiﬁ ed as held for sale Total current assets Non-current assets Trade and other receivables Financial assets at fair value through proﬁ t or loss Property, plant and equipment 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 Consolidated Entity 2013 $ 2012 $ Note 8 9 10 7 9 10 12 13 14 15 14 16 17 14,414,971 1,119,228 40,982 - 15,575,181 20,551,679 3,583,457 1,742,253 4,353,106 30,230,495 8,483 68,634 592,572 41,842,078 42,511,767 26,335 114,364 59,291 - 199,990 58,086,948 30,430,485 573,657 100,600 674,257 499,151 61,418 560,569 706,296 706,296 219,395 219,395 1,380,553 779,964 56,706,395 29,650,521 148,439,925 15,132,922 (106,866,452) 148,109,255 12,004,905 (130,463,639) 56,706,395 29,650,521 This consolidated statement of ﬁ nancial positon should be read in conjunction with the accompanying notes. A N N U A L R E P O R T 2 0 1 3 4 7 C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y Consolidated Statement of Changes in Equity for the year ended 30 June 2013 Balance as at 30 June 2011 Total income for the period Current period loss Other comprehensive income Exchange differences on translation of foreign operations Total comprehensive income for the year Transactions with owners in their capacity as owners: Ordinary shares Share options Option conversion Exploration impairment Share issue costs Balance as at 30 June 2012 Total income for the period Current period proﬁ t Other comprehensive income Exchange differences on translation of foreign operations Total comprehensive income for the year Transactions with owners in their capacity as owners: Ordinary shares Share options Share issue costs Balance as at 30 June 2013 Contributed Equity Currency Translation Reserve Share-based Payments Reserve $ $ $ 145,632,412 (630,900) 12,780,333 - - - 2,250,000 - 235,303 - (8,460) 148,109,255 - - - 336,000 - (5,330) 148,439,925 - (555,221) (555,221) - - - - - (1,186,121) - 3,086,017 3,086,017 - - - 1,899,896 - - - - 410,693 - - - 13,191,026 - - - - 42,000 - 13,233,026 4 8 S T R I K E R E S O U R C E S L I M I T E D C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y Accumulated Losses $ Total Equity $ (116,705,135) 41,076,710 (13,040,722) (13,040,722) - (13,040,722) (555,221) (13,595,943) - (235,303) - (482,479) - (130,463,639) 2,250,000 175,390 235,303 (482,479) (8,460) 29,650,521 23,597,187 23,597,187 - 23,597,187 - - - (106,866,452) 3,086,017 26,683,204 336,000 42,000 (5,330) 56,706,395 4 9 A N N U A L R E P O R T 2 0 1 3 C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S Consolidated Statement of Cash Flows for the year ended 30 June 2013 Cash ﬂ ows from operating activities Receipts from customers and associate Payments to suppliers and employees Tax paid Interest received Net cash outﬂ ow from operating activities Cash ﬂ ows from investing activities Exploration and evaluation expenditure Payments for property, plant and equipment Proceeds from sale of investments Proceeds from sale of ﬁ xed assets Investment in listed entity Investment in associate Loan to associate – Apurimac Ferrum Loan to others Other – Net Inﬂ ow from acquisition of subsidiary Proceeds from held for sale assets Note 26 22 Consolidated Entity 2013 $ 2012 $ - (4,739,748) (97,132) 803,088 (4,033,792) (1,279,099) (29,539) - - (120,703) - (4,954,844) - 209,723 4,110,051 1,763,473 (4,232,584) (203,900) 1,688,264 (984,747) (2,712) (63,769) 1,889,236 70,200 (214,563) (23,101) (9,310,500) (5,001,943) - - Net cash outﬂ ow from investing activities (2,064,411) (12,657,152) Cash ﬂ ows from ﬁ nancing activities Proceeds from exercise of share options Payments for share issue cost Net cash inﬂ ow from ﬁ nancing activities - (5,100) - (8,460) (5,100) (8,460) Net increase/(decrease) in cash and cash equivalents (6,103,303) (13,650,359) Cash and cash equivalents at beginning of the year Effect of exchange rate changes on cash balance 20,551,679 (33,405) 34,176,329 25,709 Cash and cash equivalents at year end 8 14,414,971 20,551,679 5 0 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S Notes to the Consolidated Financial Statements SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. The principal accounting policies adopted in the preparation of these consolidated ﬁ nancial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. The ﬁ nancial statements are for the consolidated entity consisting of Strike Resources Limited, its subsidiaries and its interest in associate entities. BASIS OF PREPARATION A. These general purpose ﬁ nancial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Strike Resources Limited is a for-proﬁ t entity for the purpose of preparing the ﬁ nancial statements. Compliance with IFRS (i) The consolidated ﬁ nancial statements of Strike Resources Limited also comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (IASB). New and amended standards adopted by the Consolidated Entity (ii) None of the new standards and amendments to standards that are mandatory for the ﬁ rst time for the ﬁ nancial year beginning 1 July 2012 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods. However, the adoption of AASB 1054 Australian Additional Disclosures and AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project enabled the removal of certain disclosures in relation to commitments and the franking of dividends. The amendment (part of AASB 2011-9 Amendments to Australian Accounting Standards - Presentation of Items of Other Comprehensive Income introduce new terminology for the statement of comprehensive income and income statement. Under the amendments to AASB 101, the statement of comprehensive income is renamed as a statement of proﬁ t or loss and other comprehensive income. The amendments to AASB 101 require items of other comprehensive income to be grouped into two categories in the other comprehensive income section: (a) items that will not be reclassiﬁ ed subsequently to proﬁ t or loss and (b) items that may be reclassiﬁ ed subsequently to proﬁ t or loss when speciﬁ c conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modiﬁ ed to reﬂ ect the changes. Other than the above mentioned presentation changes, the application of the amendments to AASB 101 does not result in any impact on proﬁ t or loss, other comprehensive income and total comprehensive income. Early adoption of standards (iii) The Consolidated Entity has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2013 apart from the early adoption of AASB 9 ‘Financial Instruments’. Historical cost convention (iv) These ﬁ nancial statements have been prepared under the historical cost convention, as modiﬁ ed by the revaluation of ﬁ nancial assets and liabilities at fair value though proﬁ t or loss, assets of disposal group held for sale and capitalised exploration and evaluation expenditure. Critical accounting estimates (v) The preparation of ﬁ nancial statements 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. The area involving a higher degree of judgement or complexity, or area where assumptions and estimates are signiﬁ cant to the ﬁ nancial statements, are disclosed in note 3. PRINCIPLES OF CONSOLIDATION Subsidiaries B. (i) The consolidated ﬁ nancial statements incorporate the assets and liabilities of all subsidiaries of Strike Resources Limited (“Company” or “Strike”) as at 30 June 2013 and the results of all subsidiaries for the year then ended. Strike Resources Limited and its subsidiaries together are referred to in this ﬁ nancial report as Consolidated Entity. Subsidiaries are all entities over which the Consolidated Entity has the power to govern the ﬁ nancial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Consolidated Entity controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Consolidated Entity (refer to note 1(h)). 5 1 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 1. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the Consolidated Statement of Comprehensive Income, Statement of Changes in Equity, and Consolidated Statement of Financial Position respectively. Associates (ii) Associates are all entities over which the Consolidated Entity has signiﬁ cant inﬂ uence 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 using the equity method of accounting, after initially being recognised at cost. The Consolidated Entity’s investment in associates includes goodwill identiﬁ ed on acquisition. The Consolidated Entity’s share of its associates’ post-acquisition proﬁ ts or losses is recognised in proﬁ t or loss and its share of post- acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in 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 associates are eliminated to the extent of the Consolidated Entity’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Consolidated Entity. Changes in ownership interests (iii) The Consolidated Entity treats transactions with non-controlling interests that do not result in a loss of control as transactions with 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 reﬂ ect 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 within equity attributable to owners of Strike Resources Limited. When the Consolidated Entity ceases to have control or signiﬁ cant inﬂ uence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in proﬁ t or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for retained interest as an associate. In addition, any amounts previously recognised in Other Comprehensive Income in respect of that entity are accounted for as if the Consolidated Entity had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in Other Comprehensive Income are reclassiﬁ ed to proﬁ t or loss. If the ownership interest in an associate is reduced but signiﬁ cant inﬂ uence is retained, only a proportionate share of the amounts previously recognised in Other Comprehensive Income are reclassiﬁ ed to proﬁ t or loss where appropriate. SEGMENT REPORTING C. Operating segments are reported in a manner consistent with the internal reporting provided to the Managing Director. The Managing Director is responsible for allocating resources and assessing performance of the operating segments. FOREIGN CURRENCY TRANSLATION Functional and presentation currency D. (i) Items included in the ﬁ nancial statements of each company in the Consolidated Entity are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated ﬁ nancial statements are presented in Australian dollars, which is Strike Resources Limited’s functional and presentation currency. Transactions and balances (ii) Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income, except when they are deferred in equity as qualifying cash ﬂ ow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. 5 2 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 1. Foreign exchange gains or losses that relate to borrowings are presented in the Consolidated Statement of Comprehensive Income within ﬁ nance costs. All other foreign exchange gains and losses are presented in the Consolidated Statement of Comprehensive Income on a net basis within other income or operating expenses. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Group companies (iii) The results and ﬁ nancial position of foreign operations (none of which has the currency of a hyperinﬂ ationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet income and expenses for Consolidated Statement of Comprehensive Income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and • all resulting exchange differences are recognised in Other Comprehensive Income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other ﬁ nancial instruments designated as hedges of such investments, are recognised in Other Comprehensive Income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassiﬁ ed to proﬁ t or loss, as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. REVENUE RECOGNITION E. Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. The Consolidated Entity recognises revenue when the amount of revenue can be reliably measured. It is probable that future economic beneﬁ ts will ﬂ ow to the entity and speciﬁ c criteria have been met for each of the Consolidated Entity’s activities as described below. The Consolidate Entity bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the speciﬁ cs of each arrangement. Revenue is recognised for the major business activities as follows: (i) Revenue from consulting services is recognised in the accounting period in which the services are rendered. Consultancy fees Sale of goods and disposal of assets (ii) 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. Interest income (iii) Interest income is recognised using the effective interest method. When a receivable is impaired, the Consolidated Entity reduces the carrying amount to its recoverable amount, being the estimated future cash ﬂ ow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. Dividends (iv) Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre- acquisition proﬁ ts. However, the investment may need to be tested for impairment as a consequence, refer note 1(m). (v) Other revenues are recognised on a receipts basis. Other revenues 5 3 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INCOME TAX 1. F. The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and for unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated ﬁ nancial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable proﬁ t or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. 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. Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Company 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 is recognised in proﬁ t or loss, except to the extent that it relates to items recognised in Other Comprehensive Income or directly in equity. In this case, the tax is also recognised in Other Comprehensive Income or directly in equity, respectively. LEASES G. Leases in which a signiﬁ cant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classiﬁ ed 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. BUSINESS COMBINATIONS H. 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 Consolidated Entity. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identiﬁ ed 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 Consolidated Entity 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 identiﬁ able assets. The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identiﬁ able assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identiﬁ able assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in the Consolidated Statement of Comprehensive Income as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted at their present value as at the date of exchange. The discount rate used is the Consolidated Entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent ﬁ nancier under comparable terms and conditions. Contingent consideration is classiﬁ ed either as equity or a ﬁ nancial liability. Amounts classiﬁ ed as a ﬁ nancial liability are subsequently remeasured to fair value with changes in fair value recognised in proﬁ t or loss. 5 4 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) IMPAIRMENT OF ASSETS 1. I. Goodwill and intangible assets that have an indeﬁ nite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which they are separately identiﬁ able cash inﬂ ows which are largely independent of the cash inﬂ ows from other assets or group of assets (cash-generating units). Non-ﬁ nancial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period. CASH AND CASH EQUIVALENTS J. For the purpose of presentation in the Consolidate Statement of Cash Flows, cash and cash equivalents includes cash on hand, deposits held at call with ﬁ nancial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insigniﬁ cant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Consolidated Statement of Financial Position. TRADE RECEIVABLES K. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of the receivables. Signiﬁ cant ﬁ nancial difﬁ culties of the debtor, probability that the debtor will enter bankruptcy or ﬁ nancial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash ﬂ ows, discounted at the original effective interest rate. Cash ﬂ ows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of impairment loss is recognised in the Consolidated Statement of Comprehensive Income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in proﬁ t or loss. ASSETS (OR DISPOSAL GROUPS) HELD FOR SALE AND DISCONTINUED OPERATIONS L. Assets (or disposal groups) are classiﬁ ed as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the asset (or disposal group) is recognised at the date of de-recognition. Assets (including those that are part of a disposal group) are not depreciated or amortised while they are classiﬁ ed as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classiﬁ ed as held for sale continue to be recognised. Assets classiﬁ ed as held for sale and the assets of a disposal group classiﬁ ed as held for sale are presented separately from the other assets in the Consolidated Statement of Financial Position. The liabilities of a disposal group classiﬁ ed as held for sale are presented separately from other liabilities in the Consolidated Statement of Financial Position. A discontinued operation is a component of the entity that has been disposed of or is classiﬁ ed as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of the business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Consolidated Statement of Comprehensive Income. 5 5 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVESTMENTS AND OTHER FINANCIAL ASSETS CLASSIFICATION 1. M. The Consolidated Entity classiﬁ es its ﬁ nancial assets in the following categories: ﬁ nancial assets at fair value through proﬁ t or loss, and loans and receivables. The classiﬁ cation depends on the purpose for which the investments were acquired. Management determines the classiﬁ cation of its investment at initial recognition. Financial assets at fair value through proﬁ t or loss (i) Financial assets at fair value through proﬁ t or loss are ﬁ nancial assets held for trading. A ﬁ nancial asset is classiﬁ ed in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classiﬁ ed as current assets if they are expected to be settled within 12 months; otherwise they are classiﬁ ed as non-current. Loans and receivables (ii) Loans and receivables are non-derivative ﬁ nancial assets with ﬁ xed 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 which are classiﬁ ed as non- current assets. Financial assets-reclassiﬁ cation The Consolidated Entity may choose to reclassify non-derivative trading ﬁ nancial assets out of the held for trading category if the ﬁ nancial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassiﬁ ed out of the held for trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the Consolidated Entity may choose to reclassify ﬁ nancial assets that would meet the deﬁ nition of loans and receivables out of held for trading if the Consolidated Entity has the intention and ability to hold these ﬁ nancial assets for the foreseeable future or until maturity at the date of reclassiﬁ cation. Reclassiﬁ cations are made at fair value as of the reclassiﬁ cation date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassiﬁ cation date are subsequently made. Effective interest rates for ﬁ nancial assets reclassiﬁ ed to loans and receivables are determined at the reclassiﬁ cation date. Further increases in estimates of cash ﬂ ows adjust effective interest rates prospectively. Recognition and de-recognition Regular way purchases and sales of ﬁ nancial assets are recognised on trade-date - the date on which the Consolidated Entity commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash ﬂ ows from the ﬁ nancial assets have expired or have been transferred and the Consolidated Entity has transferred substantially all the risks and rewards of ownership. Measurement At initial recognition, the Consolidated Entity measures a ﬁ nancial asset at its fair value plus, in case of a ﬁ nancial asset not at fair value through proﬁ t or loss, transaction costs that are directly attributable to the acquisition of the ﬁ nancial asset. Transaction costs of ﬁ nancial assets carried at fair value through proﬁ t or loss are expensed in the proﬁ t or loss. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Financial assets at fair value through proﬁ t or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the “ﬁ nancial asset at fair value through proﬁ t or loss” category are presented in proﬁ t or loss within Other Comprehensive Income or Other Operating Expenses in the period in which they arise. Dividend income from ﬁ nancial assets at fair value through proﬁ t or loss is recognised in the Consolidated Statement of Comprehensive Income as part of revenue from continuing operations when the Consolidated Entity’s right to receive payments is established. Interest income from these ﬁ nancial assets is included in the net gains/(losses). Details on how the fair value of ﬁ nancial instruments is determined are disclosed in note 2. Impairment The Consolidated Entity assesses at the end of each reporting period whether there is objective evidence that a ﬁ nancial asset or group of ﬁ nancial assets is impaired. A ﬁ nancial asset (or a group of ﬁ nancial assets) is impaired and the impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash ﬂ ows of the ﬁ nancial asset or group of ﬁ nancial assets that can be reliably estimated. 5 6 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial Assets carried at amortised cost 1. (i) For loans and receivables, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash ﬂ ows (excluding future credit losses that have not been incurred) discounted at the ﬁ nancial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the proﬁ t or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in proﬁ t or loss. PROPERTY, PLANT AND EQUIPMENT N. All items of 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. 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 beneﬁ ts associated with the item will ﬂ ow to the Consolidated Entity and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to proﬁ t or loss during the reporting period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or re-valued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements, the shorter lease term as follows: Furniture & ﬁ ttings 15% to 66.67% Computer equipment 33.33% to 66.67% Plant & equipment Leasehold improvements 20% 15% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount note 1(i). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in proﬁ t or loss. INTANGIBLE ASSETS Goodwill O. (i) Goodwill is measured as detailed in note 1(h). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it 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. Goodwill is allocated to cash-generating units for the purposes of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to beneﬁ t from the business combination in which the goodwill arose, identiﬁ ed according to operating segments (note 4). MINERAL EXPLORATION AND EVALUATION EXPENDITURE P. Exploration and evaluation expenditure incurred is initially capitalised in respect of each identiﬁ able area of interest where the Consolidated Entity 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 proﬁ t 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 Consolidated Entity 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. TRADE AND OTHER PAYABLES Q. These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the ﬁ nancial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. 5 7 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EMPLOYEE BENEFITS Short-term obligations 1. R. (i) Liabilities for wages and salaries, including non-monetary beneﬁ ts and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee beneﬁ ts. All other short-term employee beneﬁ t obligations are presented as payables. Other long-term employee beneﬁ t obligations (ii) The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee beneﬁ ts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outﬂ ows. The obligations are presented as current liabilities in the Consolidated Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. Share-based payments (iii) Shared-based compensation beneﬁ ts are provided to employees via the Strike Resources Limited Employee Option Plan. Information on these schemes is set out in note 29. The fair value of options granted under Strike Resources Limited Employee Option Plan is recognised as an employee beneﬁ ts expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non- market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the speciﬁ ed vesting conditions are to be satisﬁ ed. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in proﬁ t or loss with a corresponding adjustment to equity. CONTRIBUTED EQUITY S. Ordinary shares are classiﬁ ed 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. DIVIDENDS T. Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. EARNINGS PER SHARE Basic earnings per share U. (i) Basic earnings per share is calculated by dividing: • the proﬁ t attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares. • by the weighted average number of ordinary shares outstanding during the ﬁ nancial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. (ii) Diluted earnings per share adjusts the ﬁ gures used in the determination of basic earnings per share to take into account: Diluted earnings per share the after income tax effect of interest and other ﬁ nancing costs associated with dilutive potential ordinary shares, and the weighted average number of additional shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. • • 5 8 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) GOODS AND SERVICES TAX (“GST”) (INCLUDING VALUE ADDED TAX – “VAT”) 1. V. Revenues, expenses and assets are recognised net of the amount of any associated GST (VAT), unless the GST (VAT) incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST (VAT) receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash ﬂ ows are presented on a gross basis. The GST (VAT) components of cash ﬂ ows arising from investing or ﬁ nancing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash ﬂ ows. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS W. Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2013 reporting periods. The Consolidated Entity has elected not to early adopt any Standards or Interpretations. The Consolidated Entity’s assessment of the impact of these new standards and interpretations is set out below: Standard / Interpretation Effective for annual reporting periods Expected to be initially applied in beginning on or after the ﬁ nancial year ending AASB 10 ‘Consolidated Financial Statements’ and AASB 2011- 1 January 2013 30 June 2014 7 ‘Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’ AASB 11 ‘Joint Arrangements’ and AASB 2011-7 ‘Amendments 1 January 2013 30 June 2014 to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’ AASB 12 ‘Disclosure of Interests in Other Entities’ and AASB 1 January 2013 30 June 2014 2011-7 ‘Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’ AASB 127 ‘Separate Financial Statements’ (2011) and AASB 1 January 2013 30 June 2014 2011-7 ‘Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’ AASB 128 ‘Investments in Associates and Joint Ventures’ 1 January 2013 30 June 2014 (2011) and AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’ AASB 13 ‘Fair Value Measurement’ and AASB 2011-8 1 January 2013 30 June 2014 ‘Amendments to Australian Accounting Standards arising from AASB 13’ AASB 119 ‘Employee Beneﬁ ts’ (2011) and AASB 2011-10 1 January 2013 30 June 2014 ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011)’ AASB 2011-4 ‘Amendments to Australian Accounting 1 July 2013 30 June 2014 Standards to Remove Individual Key Management Personnel Disclosure Requirements’ There are no other standards that are not yet effective and that are expected to have material impact on the entity in the current or future reporting periods and on foreseeable future transactions. PARENT ENTITY FINANCIAL INFORMATION X. The ﬁ nancial information for the parent entity, Strike Resources Limited, disclosed in Note 30 has been prepared on the same basis as the consolidated ﬁ nancial statements. 5 9 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 2. FINANCIAL RISK MANAGEMENT FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Consolidated Entity’s ﬁ nancial 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 ﬁ nancial instruments are interest rate risk, foreign exchange 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-qualiﬁ ed 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 Consolidated Entity holds the following instruments. Variable interest rate Fixed interest rate Non-interest bearing Total 2013 $ 2012 $ 2013 $ 2012 $ 2013 $ 2012 $ 2013 $ 2012 $ Financial assets Cash Receivables 408,559 380,586 12,436,381 18,236,381 1,570,031 1,924,634 14,414,971 20,541,601 - - Loan receivable 728,181 3,038,997 Financial assets - - - - - - - - 357,663 570,795 357,663 570,795 - - 728,181 3,038,997 109,616 1,856,617 109,616 1,856,617 1,136,740 3,419,583 12,436,381 18,236,381 2,037,310 4,352,046 15,610,431 26,008,010 Financial liabilities Payables - - - - (1,380,553) (741,915) (1,380,553) (741,915) Net ﬁ nancial assets 1,136,740 3,419,583 12,436,381 18,236,381 656,757 3,610,131 14,229,878 25,266,095 MARKET RISK Foreign Exchange Risk A. i. The Consolidated Entity operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Peruvian Nuevo Soles and Canadian dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash ﬂ ow forecasting. The Consolidated Entity has a policy of not hedging foreign exchange 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 exchange risk expressed in Australian dollar at the reporting date was as follows: USD CAD Others 2013 2012 2013 2012 2013 2012 Financial assets Cash at bank Receivables Financial assets at fair value through proﬁ t or loss Loan receivable Financial liabilities Payables 538,915 1,622,747 217,370 183,032 - - - - - - - 25,796 109,616 728,181 1,856,617 3,013,201 (1,093,742) (337,457) (410,802) 1,420,773 - - 837,797 4,869,818 45,304 45,304 46,113 - - - - - - - (12,799) 33,314 6 0 Sensitivity The Consolidated Entity has performed a sensitivity analysis on its exposure to exchange 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% (2012: 10%) against the foreign currencies detailed above, with all the other variables held constant. S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 2. FINANCIAL RISK MANAGEMENT (CONTINUED) Change in proﬁ t increase by 10% decrease by 10% Change in equity increase by 10% decrease by 10% Consolidated Entity 2013 $ 2012 $ (54,564) 54,564 (632,390) 632,390 - - - - Price Risk ii. The Consolidated Entity is exposed to equity securities price risk. This arises from investments held by the Consolidated Entity and classiﬁ ed in the balance sheet as fair value through proﬁ t or loss. The Consolidated Entity is not exposed to commodity price risk. 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. The table below summaries the impact of increases/decreases of the equity index on the Consolidated Entity’s post-tax proﬁ t for the year. The analysis is based on the assumption that the equity index has increased by 9%/decreased by 6% with all other variables held constant. increase by 9% decrease by 6% Impact on post-tax proﬁ t Impact on other components of equity 2013 $ 6,177 (4,118) 2012 $ 10,293 (6,862) 2013 $ - - 2012 $ - - Interest Rate Risk iii. Interest rate risk is the risk that the value of a ﬁ nancial instrument will ﬂ uctuate 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 Consolidated Entity 2013 $ 2012 $ 1,978,590 12,436,381 14,414,971 2,305,220 18,236,381 20,541,601 3.84% 5.06% 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 proﬁ t increase by 25bps (2012: 25bps) decrease by 25bps (2012: 25bps) Change in equity increase by 25bps (2012: 25bps) decrease by 25bps (2012: 25bps) Consolidated Entity 2013 $ 2012 $ 32,112 (32,112) 46,542 (46,542) - - - - CREDIT RISK B. Credit risk refers to the risk that a counterparty under a ﬁ nancial instrument will default (in whole or in part) on its contractual obligations resulting in ﬁ nancial 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 qualiﬁ ed legal and accounting personnel (both internal and external), and obtaining sufﬁ cient collateral or other security (where appropriate) as a means of mitigating the risk of ﬁ nancial loss from defaults. 6 1 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S FINANCIAL RISK MANAGEMENT (CONTINUED) 2. Pursuant to the Cuervo Investment Agreement, the Company holds a pledge over the shares of Minera Cuervo S.A.C., which pledge is exercisable if Cuervo defaults under the Investment Agreement. The credit quality of the ﬁ nancial assets are neither past due nor impaired and can be assessed by reference to external credit ratings (if available with Standard & Poor’s) or to historical information about counterparty default rates: Cash and cash equivalents AA A+ A BB BBB+ No external credit rating available Receivables and loans AA A+ A BB BBB+ No external credit rating available Consolidated Entity 2013 $ 2012 $ 12,822,393 1,165,601 - - - 426,977 14,414,971 59,721 3,116 - - - 1,064,874 15,542,682 14,376,627 500,000 5,649,550 - - 15,424 20,541,601 133,426 1,528 47,260 - - 3,427,578 24,151,393 The Consolidated Entity measures credit risk on a fair-value basis. The carrying amount of ﬁ nancial assets recorded in the ﬁ nancial 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. LIQUIDITY RISK C. Prudent liquidity risk management implies maintaining sufﬁ cient cash and marketable securities to meet obligations when due and to close out the market positions. At the end of the reporting period the Consolidated Entity held deposits of $12,436,381 (2012: $18,236,381) that mature within the next 3 months after 30 June 2013 that are expected to readily generate cash inﬂ ows for managing liquidity risk. The ﬁ nancial liabilities disclosed have the following maturity obligation: Non-interest bearing less than 6 months 6 to 12 months more than 12 months Interest-bearing between 1 & 2 years between 2 & 5 years Carrying amount Contractual amount 2013 $ 2012 $ 2013 $ 336,067 338,190 706,298 1,380,555 522,520 219,395 - 741,915 336,067 338,190 706,298 1,380,555 - - - - - - - - - 2012 $ 522,520 219,395 - 741,915 - - - NET FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES D. The carrying amounts of ﬁ nancial instruments recorded in the ﬁ nancial statements represent their fair value determined in accordance with the accounting policies disclosed in Note 3. The aggregate fair value and carrying amount of ﬁ nancial assets at the reporting date are set out in Notes 9 and 10. The carrying amount of the ﬁ nancial liabilities at the reporting date as set out in Note 14 approximates the current fair value. 6 2 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S FINANCIAL RISK MANAGEMENT (CONTINUED) FAIR VALUE MEASUREMENTS 2. E. The fair value of ﬁ nancial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for ﬁ nancial assets held by the Consolidated Entity is the current bid price. These instruments are included in level 1. The fair value of ﬁ nancial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity speciﬁ c estimates. If all signiﬁ cant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the signiﬁ cant inputs is not based on observable market data, the instrument is included in level 3. Techniques such as discounted cash ﬂ ow analysis, are used to determine fair value for the remaining ﬁ nancial instruments. The fair value of ﬁ nancial instruments must be estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures 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 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 ﬁ nancial instruments measured and recognised at fair value at 30 June 2013 and 30 June 2012. 2013 Assets Financial assets at fair value through proﬁ t or loss − Trading securities Available-for-sale ﬁ nancial assets − Equity securities Total assets 2012 Assets Financial assets at fair value through proﬁ t or loss − Trading securities Available-for-sale ﬁ nancial assets − Equity securities Total assets Level 1 Level 2 Level 3 $ $ $ Total $ 68,634 40,982 - 68,634 - 40,982 Level 1 Level 2 Level 3 $ $ $ 114,364 1,742,253 - 114,364 - 1,742,253 - - - - - - 109,616 - 109,616 Total $ 1,856,617 - 1,856,617 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 3. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a ﬁ nancial impact on the entity and that are believed to be reasonable under the circumstances. IMPAIRMENT OF CAPITALISED EXPLORATION AND EVALUATION EXPENDITURE A. 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, right of tenure and community approvals or access. 6 3 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) SHARE-BASED PAYMENT TRANSACTIONS 3. B. 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 29. 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. FAIR VALUE ESTIMATION C. The fair value of ﬁ nancial assets and ﬁ nancial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of ﬁ nancial 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 ﬁ nancial assets held by the Consolidated Entity is the current bid price and the appropriate quoted market price for ﬁ nancial liabilities is the current ask price. The fair value of ﬁ nancial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques such as Binomial pricing model. 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 ﬂ ows, are used to determine fair value for the remaining ﬁ nancial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of ﬁ nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash ﬂ ows at the current market interest rate that is available to the Consolidated Entity for similar ﬁ nancial instruments. SEGMENT INFORMATION DESCRIPTION OF SEGMENTS 4. A. Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. The Board of Directors considers the business from both a product and a geographic perspective and has identiﬁ ed three reportable segments as follows: • Australia • Indonesia (Thermal Coal)* • Peru (Iron Ore) * Strike’s Indonesian subsidiary was sold during the year, with the settlement being complete on 2 April 2013. 6 4 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 4. A. The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2013 and 30 June 2012 are as SEGMENT INFORMATION (CONTINUED) SEGMENT INFORMATION PROVIDED TO THE BOARD OF DIRECTORS follows: 2013 Interest revenue Fees for consulting to Apurimac Ferrum S.A. Other income Inter-segment revenue Other income Adjusted EBITDA Depreciation and amortisation Personnel costs Impairment losses: - Resource projects - Land - Loan to Cuervo Resources Inc Fair value adjustment – ﬁ nancial assets held at fair value through proﬁ t or loss Loss/(gain) on sale of investment Total segment assets Total segment liabilities 2012 Interest revenue Fees for consulting to Apurimac Ferrum S.A. Other income Foreign exchange gain/(loss) Inter-segment revenue Other income Adjusted EBITDA Depreciation and amortisation Personnel costs Impairment losses: - Resource projects - Land - Investment in associated equity - Loan to Cuervo Resources Inc - Loans to associated entity Fair value adjustment – ﬁ nancial assets held at fair value through proﬁ t or loss Loss/(gain) on sale of investment Total segment assets Total segment liabilities Indonesia Peru Australia Total - - - - - - - - - - - - - - - - - - - - 1,402,857 (21,022) (245,185) (1,546) - - - - 1,281,593 22,648 33,140,310 - 34,444,551 20,137,798 (23,433) (1,520,425) 1,281,593 22,648 33,140,310 - 34,444,551 21,540,655 (44,455) (1,765,610) - - (1,546) - (2,667,865) (2,667,865) (1,869,704) 138,186 (1,869,704) 138,186 43,651,072 15,039,587 (13,316,569) (36,485,673) 58,690,659 (49,802,242) Indonesia Peru Australia Total 84 - - (541,818) - (541,734) (3,632,418) (2) - (2,657,633) (219,305) - - - - - - - - - - - (370,906) 5,630,893 835,942 - 1,264,224 - 7,731,059 (24,412,801) 5,630,977 835,942 - 722,406 - 7,189,325 (28,416,125) - - (77,521) (77,523) (2,235,607) (2,235,607) (218,303) - - - - - - - - 1,688,034 (2,125,576) (7,326,445) 2,055,850 (2,537,354) 25,810,008 (426,889) (2,875,936) (219,305) 1,688,034 (2,125,576) (7,326,445) 2,055,850 (2,537,354) 30,650,693 (14,490,324) 4,363,184 477,501 (10,619,550) (3,443,885) B. (i) Segment revenue reconciles to total revenue as per the Consolidated Comprehensive Income: OTHER SEGMENT INFORMATION Segment revenue Other income Interest revenue Other income Note 2013 $ 2012 $ 1,281,593 32,162,958 34,444,551 5,630,977 1,558,348 7,189,325 6 5 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 4. SEGMENT INFORMATION (CONTINUED) (ii) A reconciliation of adjusted EBITDA to operating proﬁ t before income tax is provided as follows: Adjusted EBITDA Adjusted EBITDA Intersegment eliminations Depreciation Proﬁ t/(loss) before tax from continuing operations (iii) Reportable segments’ assets and liabilities are reconciled to total assets and liabilities respectively as follows: Segment assets and segment liabilities Segment assets Intersegment eliminations Total assets as per the Consolidated Statement of Financial Position Segment liabilities Intersegment eliminations Total liabilities as per the Consolidated Statement of Financial Position 2013 $ 2012 $ 21,540,655 2,198,119 (44,455) 23,694,319 (28,416,125) 15,656,826 (77,523) (12,836,822) 23,694,319 23,694,319 (12,836,822) (12,836,822) 2013 $ 2012 $ 58,690,659 (603,711) 58,086,948 30,650,693 (220,208) 30,430,485 (49,802,242) 48,421,687 (1,380,555) (14,490,324) 13,710,360 (779,964) 6 6 S T R I K E R E S O U R C E S L I M I T E D 5. PROFIT/(LOSS) FOR THE YEAR (A) REVENUE Revenue from continuing operations Interest received – Cuervo loan Interest received – Cash on deposit Other income Foreign exchange gain Consulting fees Other income Capitalisation of loans and receivables due from AF as a result of the acquisition on 28 December 2012 Total revenue and other income (B) EXPENSES Operating expenses Occupancy costs Finance costs Personnel costs Cash remuneration Superannuation expense Directors’ and employees’ options expense Administration costs Consultancy fees Professional fees Depreciation Other corporate expenses Impairment losses Resource projects Land Investment in associate entity Loan to Cuervo Resources Inc. Loans to associated entity Sundry debtors N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S Consolidated Entity 2013 $ 2012 $ - 1,281,593 1,281,593 3,697,727 1,933,250 5,630,977 - 22,648 7,808 722,406 835,942 - 33,132,502 33,162,958 - 1,558,348 34,444,551 7,189,325 200,598 19,478 220,076 257,804 13,812 271,616 1,584,660 138,950 42,000 1,765,610 1,571,974 252,940 410,693 2,235,607 617,093 259,190 44,455 734,584 1,655,322 386,999 350,109 77,523 1,211,284 2,025,915 1,546 - 2,875,936 219,305 - 22,923 2,125,576 7,326,445 - 12,570,185 2,665,865 - 347,210 3,014,621 6 7 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 6. INCOME TAX EXPENSE (A) INCOME TAX EXPENSE Current tax Deferred tax Income tax expense attributable to: Proﬁ t from continuing operations Proﬁ t from discontinued operations Aggregate income tax expense Consolidated Entity 2013 $ 97,132 - 97,132 97,132 - 97,132 2012 $ 203,900 - 203,900 203,900 - 203,900 (12,836,822) (12,836,822) (B) NUMERICAL RECONCILIATION BETWEEN TAX EXPENSE AND PRE-TAX NET PROFIT/(LOSS) Proﬁ t/(loss) from continuing operations before income tax 23,694,319 23,694,319 Income-tax expense/(beneﬁ t) on above at 30% Increase in income tax due to: Non-deductible expenses and foreign losses Current year tax losses not recognised 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 proﬁ t (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 DEFERRED TAX LIABILITIES (D) Timing differences Offset by deferred tax assets recognised 7,108,296 (3,851,046) 774,257 242,114 1,710,922 - 2,214,454 55,608 2,558,411 - (9,835,589) - - - - - 97,132 97,132 - (719,752) (257,675) - - - 203,900 203,900 6,612,251 6,133,121 20,633,332 2,934,842 9,067,963 27,245,583 - - - 9,067,963 - - - 27,245,583 - - - 482,465 (482,465) - The deferred tax asset not brought to account for the 2013 and 2012 years will only be obtained if: i. the Consolidated Entity derives future assessable income of a nature and of an amount sufﬁ cient to enable the beneﬁ t to be realised; ii. the Consolidated Entity continues to comply with the conditions for deductibility imposed by tax legislation; and 6 8 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. 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. S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE DESCRIPTION 7. A. During the year ended 30 June 2012, the Board resolved to seek a settlement and exit its operations in Indonesia. On 2 April 2013 the Company settled the dispute and exited the Berau Thermal Coal Project, receiving settlement proceeds of US$4.3 million. B. ASSETS CLASSIFIED AS HELD FOR SALE Land Exploration and Evaluation C. LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS CLASSIFIED AS HELD FOR SALE Trade creditors Provision 8. CASH AND CASH EQUIVALENTS Cash at bank Term deposits 2013 $ - - - 2012 $ 332,078 4,021,028 4,353,106 2013 2012 $ - - - $ - - - Consolidated Entity 2013 $ 2012 $ 1,978,590 12,436,381 14,414,971 2,315,298 18,236,381 20,551,679 Risk exposure The Consolidated Entity’s exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. 9. TRADE AND OTHER RECEIVABLES Current Amounts receivable from sundry debtors Loan to Cuervo Resources Inc. Provision for impairment Goods and service tax (GST) recoverable in Australia VAT credit & Income Tax Credit Prepayments Non-Current: Amounts receivable from sundry debtors Loans to associated entity (Apurimac Ferrum S.A.) Provision for impairment Consolidated Entity 2013 $ 2012 $ 326,214 5,216,470 (4,488,289) 1,054,395 535,537 5,216,470 (2,203,269) 3,548,738 25,049 368 39,416 1,119,228 19,674 - 15,045 3,583,457 8,483 - - 8,483 539 33,160,045 (33,134,249) 26,335 Refer to Note 2 for the Consolidated Entity’s exposure to credit risk, foreign exchange risk and interest rate risk 6 9 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 10. Financial assets at fair value through proﬁ t or loss are held for trading and include the following: Investments comprise: Current: Cuervo Resources Inc. unlisted warrants – initial recognition Add: net change in fair value Non-current: Financial assets at fair value through proﬁ t and loss Cuervo Resources Inc. shares – at cost Add: net change in fair value Consolidated Entity 2013 $ 2012 $ 1,742,253 (1,701,271) 40,982 3,697,727 (1,955,474) 1,742,253 114,364 (45,730) 68,634 214,563 (100,199) 114,364 Changes in fair value of ﬁ nancial assets at fair value through proﬁ t or loss are recorded as an expense in the current reporting period (Note 1(m)). The fair value of listed shares in ﬁ nancial assets at fair value through proﬁ t or loss has 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 2(a). INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD 11. Apurimac Ferrum S.A. (“AF”) is a company incorporated and domiciled in Peru, South America. In the ﬁ nancial year ended 30 June 2012, the Group’s shareholding in AF decreased from 56% as at 30 June 2011 to 50% on 22 June 2012. Due to the operation of a series of agreements between the AF shareholders executed between 21 July and 5 August 2009 Strike was not deemed to control AF pursuant to AASB 127 Consolidated and Separate Financial Statements and therefore did not consolidate the accounts of AF. On 28 December 2012, the Group obtained control of AF, by acquiring the remaining 50% shares (13,126,085 shares) from its existing shareholders, increasing the Group’s equity interest in AF from 50% to 100%. As a result, AF was accounted for as an acquisition of subsidiary – refer to note 22. Summarised ﬁ nancial information of associate entity: The Consolidated Entity’s share of the results of its associate and its’ aggregate assets and liabilities are as follows: Apurimac Ferrum S.A. 2013 2012 Ownership interest 100% 50% Assets $ -* 16,487,774 Consolidated Entity’s share of associate losses not bought to account: Opening share of carry-forward losses Current year share of loss Transfer of loss on date of control obtained Closing share of carry-forward losses Liabilities $ -* 18,987,832 2013 $ 3,568,360 - (3,568,360) - Loss $ -* 1,826,840 2012 $ 1,741,520 1,826,840 3,568,360 Prior to gaining control, 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(b). * AF became a subsidiary on 28 December 2012 7 0 S T R I K E R E S O U R C E S L I M I T E D 12 PROPERTY, PLANT AND EQUIPMENT At 30 June 2011 Cost or fair value Accumulated depreciation and impairment Net carrying amount 2012 Consolidated Carrying value at 1 July 2011 Foreign exchange adjustment Additions to CWIP Transfers out of CWIP Transfers from CWIP Depreciation expense Cost of asset disposals Accumulated depreciation on disposed assets Reclassed to Assets classiﬁ ed as held for sale Carrying value at 30 June 2012 At 30 June 2012 Cost or fair value Accumulated depreciation and impairment Net carrying amount 2013 Consolidated Carrying value at 1 July 2012 Foreign exchange adjustment Cost of asset additions Acquisition of AF - Peru subsidiary Depreciation expense Cost of asset disposals Accumulated depreciation on disposed assets Carrying value at 30 June 2013 At 30 June 2013 Cost or fair value Accumulated depreciation and impairment Net carrying amount N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S Capital WIP Land Plant and equipment Leasehold improvements Total 960 - 960 640,639 - 640,639 219,755 (114,520) 105,235 121,743 (19,117) 102,626 983,097 (133,637) 849,460 960 - 41,769 (42,449) - - - - - 280 105,235 640,639 (29) - - - - - 27,513 - (70,063) - (77,905) - - 59,999 - 44,750 (640,639) - 102,626 - - - 14,936 (7,458) (121,743) 25,900 - 14,261 849,460 (29) 41,769 (42,449) 42,449 (77,521) (199,648) 85,899 (640,639) 59,291 280 - 280 280 - - - - - - 280 280 - 280 - - - 169,323 (124,573) 44,750 14,936 (675) 14,261 184,539 (125,248) 59,291 - 25,877 - 427,290 - - - 453,167 44,750 14,444 29,539 122,500 (42,533) (114,345) 84,770 139,125 14,261 - - - (1,922) (15,006) 2,667 - 59,291 40,321 29,539 549,790 (44,455) (129,351) 87,437 592,572 453,167 - 453,167 460,031 (320,906) 139,125 - - - 913,478 (320,906) 592,572 7 1 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 13. EXPLORATION AND EVALUATION EXPENDITURE Balance at the beginning of the year Exploration and evaluation recognised upon acquisition of AF Foreign exchange adjustment Exploration and evaluation expenditure additions Re-estimation of deferred consideration Impairment loss – exploration and evaluation Reclassed to assets classiﬁ ed as held for sale Balance at the end of the year Consolidated Entity 2013 $ - 46,052,125 1,565,978 1,945,292 (7,722,863) 1,546 - 41,842,078 2012 $ 8,239,883 - (1,345,053) 2,134 - (2,875,936) (4,021,028) - 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 (p) & 3(a). 14. TRADE AND OTHER PAYABLES Current Trade creditors Other creditors and accruals Non Current Loan from associate Other creditors and accruals Details of the Consolidated Entity’s exposure to risks arising from current payables are set out in Note 2. 15. PROVISIONS Current Provision for employee entitlements – annual leave Other 16. ISSUED CAPITAL Consolidated Entity 2013 $ 183,503 390,154 573,657 - 706,296 706,296 2012 $ 95,635 403,516 499,151 219,395 - 219,395 Consolidated Entity 2013 $ 48,602 51,998 100,600 2012 $ 61,306 112 61,418 Consolidated Entity 2013 $ 2012 $ 145,334,268 (2012: 142,534,268) fully-paid ordinary shares 148,439,925 148,109,255 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 2011 Shares issued on exercise of options Share issued Share issue expenses At 30 June 2012 Share issued Share issue expenses At 30 June 2013 7 2 S T R I K E R E S O U R C E S L I M I T E D Date of movement No. $ 5 Aug 2011 28 Dec 2012 133,534,268 - 9,000,000 - 142,534,268 2,800,000 - 145,334,268 145,632,412 235,303 2,250,000 (8,460) 148,109,255 336,000 (5,330) 148,439,925 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ISSUED CAPITAL (CONTINUED) 16. ORDINARY SHARE Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. OPTIONS Information relating to the Strike Resources Limited Employee Option Plan, including details of options issued, exercised and lapsed during the ﬁ nancial year and options outstanding at the end of the reporting period, is set out in note 28. CAPITAL RISK MANAGEMENT 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 beneﬁ ts 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. 17. RESERVES Foreign currency translation reserve Share-based payments reserve Consolidated Entity 2013 $ 2012 $ 1,899,896 13,233,026 15,132,922 (1,186,121) 13,191,026 12,004,905 Share-Based Payment NATURE AND PURPOSE OF OTHER RESERVES i. 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. ii. Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve as described in Note 1(d) and accumulate in a separate reserve within equity. The cumulative amount is reclassiﬁ ed to proﬁ t or loss when the net investment is disposed of. Foreign Currency Translation 7 3 A N N U A L R E P O R T 2 0 1 3 18 Jun 13 3,000,000 42,000 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 17. RESERVES (CONTINUED) 2013 - Movement in share-based payment reserve Grant date The number of unlisted options outstanding over unissued ordinary shares at the reporting date is as follows: Opening balance at 1 July 2012 Granted options Employee Options Unlisted options exercisable at $0.30; expiring 17 Jun 18 Lapsed options Other Options Lapsed options exercisable at $3.978; expired 3 Dec 12 Lapsed options exercisable at $2.50; expired 24 Nov 12 Lapsed options exercisable at $2.75; expired 24 Nov 12 Lapsed options exercisable at $3.25; expired 24 Nov 12 Lapsed options exercisable at $2.878; expired 3 Mar 13 Unlisted options cancelled at $0.36; cancelled 18 Jun 13 Unlisted options cancelled at $0.42; cancelled 18 Jun 13 Unlisted options cancelled at $0.56; cancelled 18 Jun 13 Closing balance at 30 June 2013 2012 - Movement in share-based payment reserve Grant date 24 Nov 11 24 Nov 11 24 Nov 11 5 Apr 12 5 Apr 12 5 Apr 12 The number of unlisted options outstanding over unissued ordinary shares at the reporting date is as follows: Opening balance at 1 July 2011 Granted options Employee Options Unlisted options exercisable at $0.36; expiring 23 Nov 16 Unlisted options exercisable at $0.42; expiring 23 Nov 16 Unlisted options exercisable at $0.56; expiring 23 Nov 16 Unlisted options exercisable at $0.36; expiring 23 Nov 16 Unlisted options exercisable at $0.42; expiring 23 Nov 16 Unlisted options exercisable at $0.56; expiring 23 Nov 16 Lapsed options Other Options Lapsed options exercisable at $0.938; expired 21 Jul 11 Lapsed options exercisable at $0.938; expired 13 Sep 11 Lapsed options exercisable at $2.788; expired 7 Mar 12 Lapsed options exercisable at $2.078; expired 7 Mar 12 Lapsed options exercisable at $3.978; cancelled 7 Oct 11 Lapsed options exercisable at $2.75; expired 29 Jul 11 Lapsed options exercisable at $1.30; cancelled 23 Nov 11 Lapsed options exercisable at $1.50; cancelled 23 Nov 11 Lapsed options exercisable at $1.75; cancelled 23 Nov 11 Lapsed options exercisable at $2.75; expired 4 Mar 12 Lapsed options exercisable at $0.36; cancelled 12 Apr 12 Lapsed options exercisable at $0.42; cancelled 12 Apr 12 Lapsed options exercisable at $0.56; cancelled 12 Apr 12 Lapsed options exercisable at $2.878; expired 1 May 12 Closing balance at 30 June 2012 Consolidated Entity No. $ 10,250,000 13,191,026 (3,500,000) (750,000) (750,000) (750,000) (250,000) (250,000) (250,000) (250,000) 6,500,000 - - - - - - - - 13,233,026 Consolidated Entity No. $ 17,786,404 12,780,333 1,416,668 1,416,666 1,416,666 333,334 333,333 333,333 (4,600,000) (500,000) (3,300,000) (500,000) (500,000) (903,404) (400,000) (400,000) (400,000) (250,000) (333,334) (333,333) (333,333) (33,000) 10,250,000 120,386 111,456 95,106 30,365 28,458 24,922 - - - - - - - - - - - - - - 13,191,026 74 EQUITY-BASED REMUNERATION On 18 June 2013 the Company granted 3,000,000 unlisted Director Options with an exercise price of $0.30, vesting immediately. The expiry date of these options is 17 June 2018. The fair value of these options are expensed over the period from their date of grant to each respective vesting date. The fair value is calculated using a Black-Scholes options valuation model with an assumed volatility rate of 85% for the underlying SRK shares (Note 29). S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 18. A. KEY MANAGEMENT PERSONNEL DISCLOSURES DETAILS OF KEY MANAGEMENT PERSONNEL DURING THE FINANCIAL YEAR: Current Malcolm Richmond Matthew Hammond William Johnson Samantha Tough Ken Hellsten Julian Tambyrajah Ian Cullen Chairman/ Non-Executive Director Non-Executive Director Managing Director (appointed 25 March 2013) Non-Executive Director Managing Director (resigned on 21 January 2013) Chief Financial Ofﬁ cer (ceased 11 April 2013) General Manager Exploration and Development (appointed 1 July 2011 and ceased on 15 July 2012) Past David Lim Chief Financial Ofﬁ cer (ceased on 10 April 2012) B. COMPENSATION OF KEY MANAGEMENT PERSONNEL Short-term employee beneﬁ ts Post-employment beneﬁ ts Long-term beneﬁ ts Termination beneﬁ ts Share-based payments Detailed remuneration disclosures are provided in the remuneration report on pages 8 to 15. Consolidated Entity 2013 $ 822,629 62,153 - 133,631 42,000 1,060,413 2012 $ 1,238,292 96,324 - - 333,764 1,668,380 EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL Options provided as remuneration and shares issued on exercise of such options C. i. 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 ﬁ nancial year. ii. The numbers of options over ordinary shares in the Company held during the ﬁ nancial year by each director of Strike Resources Limited and other key management personnel of the Consolidated Entity, including their personally related parties, are set out below: Options holdings Balance at 1 July 2012 Balance at appointment Granted as compensation 2013 M Richmond M Hammond W Johnson1 S Tough K Hellsten 2 J Tambyrajah 3 I Cullen4 Total 600,000 - 390,000 - 1,500,000 1,000,000 750,000 4,240,000 - - - - - - - - - - 3,000,000 - - - - 3,000,000 Net change other5 (600,000) - (390,000) - (1,500,000) (1,000,000) (750,000) (4,240,000) Balance at 30 June 2013 Vested and exercisable Unvested - - 3,000,000 - - - - 3,000,000 - - 3,000,000 - - - - 3,000,000 - - - - - - - - 1. Mr Johnson was appointed as Executive Director on 21 January 2013 and as Managing Director on 25 March 2013. 2. Mr Hellsten resigned as Managing Director on 21 January 2013 3. Mr Tambyrajah resigned as Chief Financial Ofﬁ cer on 11 April 2013. 4. Mr Cullen resigned as General Manager Exploration and Development on 15 July 2012. 5. Figures in “net change other” column represent ﬁ nal holding when the options have been cancelled or have lapsed. Balance at 1 July 2011 Balance at appointment Granted as compensation Net change other5 Balance at 30 June 2012 Vested and exercisable Unvested 2012 M Richmond M Hammond W Johnson S Tough 1 K Hellsten J Tambyrajah 2 I Cullen 3 D Lim 4 Total 1,700,000 - 1,240,000 - - - - 600,000 3,540,000 - - - - - - - - - - - - - 1,500,000 1,000,000 750,000 1,000,000 4,250,000 (1,100,000) - (850,000) - - - - (1,600,000) (3,550,000) 600,000 - 390,000 - 1,500,000 1,000,000 750,000 - 4,240,000 600,000 - 390,000 - 1,500,000 1,000,000 750,000 - 4,240,000 - - - - - - - - - 1. Ms Tough was appointed as Non-Executive Director on 23 January 2012. 2. Mr Tambyrajah was appointed as Chief Financial Ofﬁ cer on 2 April 2012. 3. Mr Lim ceased his position as the Chief Financial Ofﬁ cer on 10 April 2012. 4. Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011. 5. Figures in “net change other” column represent ﬁ nal holding when the options have been cancelled or have lapsed. 7 5 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) Share holdings 18. iii. The numbers of shares in the Company held during the ﬁ nancial year by each director of Strike Resources Limited and other key management personnel of the Consolidated Entity, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation. 2013 M Richmond M Hammond W Johnson 1 S Tough K Hellsten 2 J Tambyrajah3 I Cullen4 Total Balance at beginning of year Received during the year on the exercise of options 100,000 - - - 217,083 - - 317,083 - - - - - - - - Net change other - - 249,273 - (217,083) - - 32,190 Balance at the end of the year 100,000 - 249,273 - - - - 349,273 1. Mr Johnson was appointed as Executive Director on 21 January 2013 and as Managing Director on 25 March 2013. 2. Mr Hellsten resigned as Managing Director on 21 January 2013 3. Mr Tambyrajah resigned as Chief Financial Ofﬁ cer on 11 April 2013. 4. Mr Cullen resigned as General Manager Exploration and Development on 15 July 2012. 2012 M Richmond M Hammond W Johnson S Tough 1 K Hellsten Tambyrajah2 I Cullen3 D Lim4 Total Balance at beginning of year Received during the year on the exercise of options Net change other Balance at the end of the year 100,000 - - - 187,083 - - 38,100 325,183 - - - - - - - - - - - - - 30,000 - - (38,100) (8,100) 100,000 - - - 217,083 - - - 317,083 1. Ms Tough was appointed as Non-Executive Director on 23 January 2012. 2. Mr Tambyrajah was appointed as Chief Financial Ofﬁ cer on 2 April 2012. 3. Mr Lim ceased his position as the Chief Financial Ofﬁ cer on 10 April 2012. 4. Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011. LOANS TO KEY MANAGEMENT PERSONNEL D. There were no loans to Key Management Personnel (or their personally-related entities) during the ﬁ nancial year. E. There were no transactions with Key Management Personnel (or their personally-related entities) during the ﬁ nancial year. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AUDITORS’ REMUNERATION 19. During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non- related audit ﬁ rms. Auditors of the Consolidated Entity Audit and review of ﬁ nancial statements - BDO Audit (WA) Pty Ltd Auditors of the Peruvian subsidiaries Audit and review of ﬁ nancial statements - BDO Pazos, Lopez de Romana, Rodriguez 7 6 S T R I K E R E S O U R C E S L I M I T E D Consolidated Entity 2013 $ 2012 $ 47,500 84,774 6,779 54,279 6,830 91,604 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S CONTINGENT ASSETS AND LIABILITIES NATIVE TITLE 20. A. 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. GOVERNMENT ROYALTIES B. The Consolidated Entity is liable to pay royalties on production obtained from its mineral tenements/concessions. For example, the applicable Government royalties in Peru are between 1% to 3% based on the value of production. At this stage it is not possible to quantify the potential ﬁ nancial obligation of the Consolidated Entity under Government royalties DIRECTORS’ DEEDS C. 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/ofﬁ cers 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 ﬁ nancial obligation of the Consolidated Entity under these indemnities. MILLENIUM LEGAL DISPUTE D. Millenium Trading S.A.C (“Milenium”) has the right to conduct a small-scale mining operation on an AF concession, the identity of which is to be agreed. A mining operation of this kind by Millenium will not materially affect AF’s development plans. As the parties have been unable to agree on the identity of the concession, AF referred the matter to arbitration. After Millenium questioned several arbitrators as a stalling tactic, the Lima Chamber of Commerce (“LCC”) has now appointed Mr. Enrique Palacios who –despite being also challenged by Millenium was ratiﬁ ed in a ﬁ nal decision dated August 12 2013 by the Superior Counsel for Arbitration of the LCC. The arbitrator has since taken charge of the proceedings. AF is unlikely to have any liability arising out of these proceedings. DEFERRED CONSIDERATION TO D&C E. The D&C Group receives the following deferred payments if certain milestones are achieved (with the payments being allocated to the entities comprising the D&C Group as follows; D&C Pesca S.A.C. - 38.6%; Ausinca Peru S.A. - 61.4%): a. US$2 million on Apurimac Ferrum deﬁ ning a JORC Resource at the Apurimac project of 500 Mt of iron ore with an average grade of at least 55% iron (Fe) or 275 Mt of contained iron at an average grade of 52.5% Fe or above. b. US$3 million on Apurimac Ferrum S.A achieving environmental and community approvals for the construction of an iron ore mine and associated infrastructure with a design capacity of at least 10Mtpa of iron ore product. c. US$5 million on formal Apurimac Ferrum Board approval to commence construction of an iron ore project, or the commencement of bulk earthworks for an iron ore processing plant, with a design capacity of at least 10Mtpa of iron ore product (Construction Milestone). Under the terms of Shootout Settlement Agreement, Apurimac Ferrum S.A will also pay D&C Group the following royalties: • • 1.5% of the net proﬁ ts from sales of iron ore. 2% of the proceeds of sales of other metals (on a net smelter return basis). Or Apurimac Ferrum S.A may extinguish the royalties by paying D&C Group any one of the following amounts (Extinguishment Payment): • US$13 million within 2 years from 20 December 2012, or • US$15 million between 2 and 3 years from 20 December 2012, or • US$20 million between 3 and 4 years from 20 December 2012, or • US$30 million after 4 years from today but before the Construction Milestone occurs or the 15th anniversary of the agreement (whichever is sooner). Due to the inherent uncertainty surrounding the achievement and timing of the above milestones, as at 30 June 2013 the Company treated the deferred consideration as a contingent liability. 7 7 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 21. A. COMMITMENTS LEASE COMMITMENTS Non-cancellable operating lease commitments: not longer than one year between 2 years and 5 years Consolidated Entity 2013 $ 165,215 241,840 407,055 2012 $ 160,638 236,388 397,026 The Consolidated Entity leases an ofﬁ ce in Perth, Australia under a non-cancellable operating lease with an expiry date between 2 and 4 years. The lease rent is subject to a ﬁ xed 4.5% increase on each anniversary of the term. Strike is required to pay the annual outgoings incurred by the lessor in respect of the premises. This ﬁ gure varies on an annual basis. MINERAL TENEMENT/CONCESSION/MINING RIGHTS - COMMITMENTS FOR EXPENDITURE B. 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. The Company does not currently have any material commitments for expenditure relating to Australian tenements. Peruvian 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 ﬁ nalising the arbitration process with the shareholders of Apurimac Ferrum S.A.(“AF”), the Consolidated Entity granted on option over Peruvian tenements held by its subsidiary, Strike Resources Peru 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 identiﬁ ed. Agreements with Peruvian landowners and community groups The Company notes that holding a mineral concession in Peru does not grant automatic access to the surface land. Notwithstanding an easement procedure is contemplated in Peruvian 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 Peruvian 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 Peruvian 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 ﬁ nancial obligation of the Consolidated Entity in this regard. 7 8 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ACQUISITION OF SUBSIDIARY 22. On 28 December 2012, the Group obtained control of Apurimac Ferrum S.A. (AF), an iron ore explorer, by acquiring the remaining 50% shares (13,126,085 shares) from its existing shareholders. As a result, the Group’s equity interest in AF increased from 50% to 100%. The acquisition of AF was assessed by the Board in the current period and it was determined that the acquisition was an asset acquisition, rather than a business combination as the substance and intent of the transaction was for the Group to acquire the exploration and evaluation assets of AF for the purpose of expanding the Group’s overall resource base. The value of net assets acquired at the date of acquisition were as follows: Cash and cash equivalents Trade and other receivables Land Property, plant and equipment Exploration and evaluation expenditure Trade and other payables Loans and interests from Strike Resources Limited and Strike Finance Pty Ltd Net assets acquired Acquisition consideration: Shares issued (2,800,000 shares at $0.12 each), at fair value Deferred consideration Acquisition costs Total purchase consideration 209,723 258,568 427,290 122,500 46,052,125 (1,456,177) (37,992,172) 7,621,857 336,000 6,674,833 611,024 7,621,857 Deferred consideration The D&C Group receives the following deferred payments if certain milestones are achieved (with the payments being allocated to the entities comprising the D&C Group as follows; D&C Pesca S.A.C. - 38.6%; Ausinca Peru S.A. - 61.4%): a. US$2 million on Apurimac Ferrum deﬁ ning a JORC Resource at the Apurimac project of 500 Mt of iron ore with an average grade of at least 55% iron (Fe) or 275 Mt of contained iron at an average grade of 52.5% Fe or above. b. US$3 million on Apurimac Ferrum S.A achieving environmental and community approvals for the construction of an iron ore mine and associated infrastructure with a design capacity of at least 10Mtpa of iron ore product. c. US$5 million on formal Apurimac Ferrum Board approval to commence construction of an iron ore project, or the commencement of bulk earthworks for an iron ore processing plant, with a design capacity of at least 10Mtpa of iron ore product (Construction Milestone). The Company treated the deferred payments as a contingent liability at 30 June 2013. Refer to note 20. The cash inﬂ ow on acquisition is as follows: Net cash acquired with subsidiary Net cash outﬂ ow Net cash inﬂ ow on acquisition of subsidiary, net of cash acquired 209,723 - 209,723 RELATED-PARTY DISCLOSURES SUBSIDIARIES 23. A. Interests in subsidiaries are set out in Note 24. During the year $ 4,954,844 (2012: Nil) was loaned to subsidiaries to fund exploration activities. ASSOCIATES B. Apurimac Ferrum S.A. was an associate until 28 December 2012 as set out in Note 11. Loans to associates - Apurimac Ferrum On 21 July 2009, through the AF Settlement Agreement, Strike Resources Limited entered into a replacement loan agreement with Apurimac Ferrum S.A.(“AF”) in which US$20 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. On 16 May 2012, Apurimac Ferrum S.A. entered into the AF Finance Agreement with Strike Finance Pty Ltd for a principal amount US$6m, interest rate is 10% for principal amounts drawn and repaid before 31 December 2012 and 15% for principal amounts repaid after 31 December 2012. The latest repayment date is 31 January 2014. 7 9 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S RELATED-PARTY DISCLOSURES(CONTINUED) 23. Subsequent to Strike Resources acquiring the remaining 50% of ownership of AF, the intercompany loans between the two entities were extinguished and converted into equity in AF. Balance at 1 July Loans advanced Interest charged Loan and interest purchased from IAC (Iron Associates Corporation) Loan and interest sold to D&C Group S.A.C Expenses paid on behalf of AF Reclassed to Expense Claim Reclass to other receivables Foreign exchange movements Balance at 30 June Less provision for impairment Carrying value Opening Balance Reclassed from Loans to AF Expenses paid on behalf of AF Collected from AF Closing Balance Less provision for impairment Carrying value C. TRANSACTIONS WITH RELATED PARTIES Fees for services provided by: - Ms Helen Hellsten a related party of Mr Ken Hellsten 24. INVESTMENT IN CONTROLLED ENTITIES Strike Finance Pty Ltd Strike Australian Operations Pty Ltd Strike Operations Pty Ltd (“SOPL”) PT Indo Batubara (100% beneﬁ cially owned by SOPL)* Strike Indo Operations Pty Ltd (“SIOPL”) PT Orion Indo Mining (100% beneﬁ cially owned by SIOPL)* Ferrum Holdings Limited Strike Resources Peru S.A.C. Apurimac Ferrum S.A.** 2013 $ 33,160,045 1,584,900 597,880 - - - - (220,208) (591,966) 34,530,651 34,530,651 - 2013 $ 193,596 - 153,614 - 347,210 - 347,210 2012 $ 25,714,498 9,310,500 607,044 - (2,715,628) 543,578 (1,708,378) - 1,408,431 33,160,045 33,134,249 25,796 2012 $ 80,014 1,708,378 146,256 (1,741,052) 193,596 - 193,596 2013 $ 2012 $ - 5,668 Country of Percentage of Ownership Incorporation 2013 Australia Australia Australia Indonesia Australia Indonesia British Anguilla Peru Peru 100% 100% 100% - 100% - 100% 100% 100% 2012 100% 100% 100% 100% 100% 100% 100% 100% 50% * On 2 April 2013, Strike Resources Limited sold its Berau Coal Project and its subsidiaries, PT Indo Batubara and PT Orion Indo Mining. ** On 28 December 2012, Strike Resources Limited obtained control of Apurimac Ferrum S.A. (AF), an iron ore explorer by acquiring the remaining 50% shares from its existing shareholders. As a result, the Group’s equity interest in AF increased from 50% to 100%. 8 0 25. On 30 July 2013 the Company advised of the increased resources reported at Cuervo Resources Inc’s Cerro Ccopane project. EVENTS OCCURRING AFTER THE REPORTING PERIOD S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 25. EVENTS OCCURRING AFTER THE REPORTING PERIOD (CONTINUED) On 15 August 2013, the Company conﬁ rmed it had made a conﬁ dential non-binding offer to Cuervo Resources Inc. in respect of certain Peruvian iron ore assets including the Cerro Ccopane project. This offer was subsequently rejected by Cuervo. On 9 September 2013, the Company reached an agreement with local Apurimac community to enable commencement of regulatory approvals for future drilling program. The approval forms part of key next stage in validating Apurimac’s high grade magnetite exploration target of at least 500 million tonnes or iron ore. There have been no further changes of signiﬁ cance since then. 26. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES Operating proﬁ t/(loss) after tax Interest received – Cuervo loan Consulting fees Non cash ﬂ ows in proﬁ t/(loss) from ordinary activities: Depreciation - plant & equipment Adjustment for movement in foreign exchange Adjustment on deconsolidation of subsidiary Fair value adjustments Loan to associated entity Loan to Cuervo Resources Inc. Fair value through proﬁ t and loss ﬁ nancial assets Sundry debtors impairment Investment in associate Exploration and evaluation impairment Land impairment Finance costs Directors’ and employees’ options Loss on sale of ﬁ xed assets Loss on sale of held for sale assets Decrease/(increase) in assets: Receivables Increase/(decrease) in liabilities: Trade creditors and accruals Provisions Net cash outﬂ ows from operating activities Consolidated Entity 2013 $ 2012 $ 23,597,187 - 22,648 (13,040,722) (3,697,727) (835,942) 44,455 - - 77,522 (1,011,269) - (33,132,502) - 1,869,704 347,210 - 1,546 - - 42,000 18,318 138,186 9,310,500 2,125,576 2,055,850 - 22,923 2,875,936 219,305 - 410,693 40,577 826,397 2,626,624 (362,162) 430,014 (39,182) (4,033,792) 11,978 (14,182) (984,747) 8 1 A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 27. NON – CASH INVESTING AND FINANCING ACTIVITIES Shares issued to acquire Apurimac Ferrum S.A. Consolidated Entity 2013 $ 2012 $ 336,000 2,250,000 On 28 December 2012, Strike Resources Limited issued 2,800,000 shares to Iron Associates Corporation, as part of the acquisition costs to acquire remaining 50% of Apurimac Ferrum S.A.. 28. EARNINGS PER SHARE (a) Basic earnings/(loss) per share From continuing operations attributable to the ordinary equity holders of the Company (b) Diluted earnings/(loss) per share From continuing operations attributable to the ordinary equity holders of the Company (c) Reconciliations of earnings used in calculating earnings per share Basic earnings per share Loss attributable to the ordinary equity holders of the Company used in Calculating basic earnings per share: From continuing operations From discontinued operation (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 29. SHARE-BASED PAYMENTS Consolidated Entity 2013 cents 2012 cents 16.44 (9.20) 16.44 (9.20) Consolidated Entity 2013 2012 23,597,187 - (13,040,722) - 143,555,270 141,671,254 143,555,270 141,671,254 The establishment of the Strike Resources Limited Employee Option Plan was approved by shareholders on 6 November 2008. Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share within 5 business days after the exercise. A total of 3,000,000 Employee Options were granted during the year (Note 18). The reasons for the grant of these options to the Managing Director are as follows: (a) The options issue was designed to act as an incentive for the recipient 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 recipient which is linked to the Company’s share price performance. (c) Based on the option exercise price, 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 the recipient has been determined having regard to the level of the recipient’s salary being paid and is a cash-free, effective and efﬁ cient 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 ﬁ nancing 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. 8 2 S T R I K E R E S O U R C E S L I M I T E D N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 29. SHARE-BASED PAYMENTS (CONTINUED) Share-based payments expense Grant date Expiry date Exercise price $ Balance at start of year Granted during Exercised the year during the year Forfeited during the year Consolidated entity - 2013 3 Dec 12 4 Mar 13 25 Nov 12 25 Nov 12 25 Nov 12 23 Nov 16 23 Nov 16 23 Nov 16 23 Nov 16 23 Nov 16 23 Nov 16 17 Jun 18 3 Dec 07 4 Mar 08 25 Nov 09 25 Nov 09 25 Nov 09 24 Nov 11 24 Nov 11 24 Nov 11 5 Apr 12 5 Apr 12 5 Apr 12 18 Jun 13 Weighted-average exercise price 3.978 2.878 2.50 2.75 3.25 0.36 0.42 0.56 0.36 0.42 0.56 0.30 3,500,000 250,000 750,000 750,000 750,000 1,083,334 1,083,333 1,083,333 333,334 333,333 333,333 - 10,250,000 2.24 - - - - - - - - - - - 3,000,000 3,000,000 0.30 - - - - - - - - - - - - - - (3,500,000) (250,000) (750,000) (750,000) (750,000) (250,000) (250,000) (250,000) - - - - (6,750,000) 3.36 Grant date Expiry date Exercise price $ Balance at start of year Granted during Exercised the year during the year Forfeited during the year Consolidated entity - 2012 21 Jul 11 12 Sep 11 7 Mar 12 7 Mar 12 1 May 12 3 Dec 12 4 Mar 13 13 Oct 13 25 Nov 12 25 Nov 12 25 Nov 12 23 Mar 13 23 Mar 13 23 Mar 13 23 Nov 16 23 Nov 16 23 Nov 16 23 Nov 16 23 Nov 16 23 Nov 16 21 Jul 06 13 Sep 06 7 Mar 07 7 Mar 07 5 Jun 07 3 Dec 07 4 Mar 08 14 Oct 08 25 Nov 09 25 Nov 09 25 Nov 09 6 May 11 6 May 11 6 May 11 24 Nov 11 24 Nov 11 24 Nov 11 5 Apr 12 5 Apr 12 5 Apr 12 Weighted-average exercise price 0.938 0.938 2.788 2.078 2.878 3.978 2.878 2.75 2.50 2.75 3.25 1.30 1.50 1.75 0.36 0.42 0.56 0.36 0.42 0.56 4,600,000 500,000 3,300,000 500,000 33,000 4,000,000 250,000 250,000 750,000 750,000 750,000 400,000 400,000 400,000 - - - - - - 16,883,000 2.55 - - - - - - - - - - - - - - 1,416,668 1,416,666 1,416,666 333,334 333,333 333,333 5,250,000 0.45 - - - - - - - - - - - - - - - - - - - - - - (4,600,000) (500,000) (3,300,000) (500,000) (33,000) (500,000) - (250,000) - - - (400,000) (400,000) (400,000) (333,334)* (333,333)* (333,333)* - - - (11,883,000) 1.69 Consolidated Entity 2013 $ 2012 $ 42,000 410,693 of the year Balance at end Vested and exercisable at end of year - - - - - 833,334 833,333 833,333 333,334 333,333 333,333 3,000,000 6,500,000 0.38 - - - - - 833,334 833,333 833,333 333,334 333,333 333,333 3,000,000 6,500,000 0.38 of the year Balance at end Vested and exercisable at end of year - - - - - 3,500,000 250,000 - 750,000 750,000 750,000 - - - 1,083,334 1,083,333 1,083,333 333,334 333,333 333,333 10,250,000 2.24 - - - - - 3,500,000 250,000 - 750,000 750,000 750,000 - - - 1,083,334 1,083,333 1,083,333 333,334 333,333 333,333 10,250,000 2.24 * Options issued to individuals who ceased employment with Strike Resources Limited 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 1.78 years (2012: 2.08 years). Fair value of options granted The assessed fair value at grant date of options granted during the year ended 30 June 2013 was $0.014 for $0.30 options (2012: $0.086 for $0.36 options, $0.08 for $0.42 options and $0.07 for $0.56 options). The fair value at grant date is independently determined using the Black- Scholes option pricing model that takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. 8 3 The model inputs for options granted during the year ended 30 June 2013 included: A N N U A L R E P O R T 2 0 1 3 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 29. SHARE-BASED PAYMENTS (CONTINUED) Options granted on 18 June 2013 a. b. exercise prices of $0.30 t he options were granted for no consideration and vest immediately. Vested options are exercisable for a period of ﬁ ve years after vesting. c. grant date: 18 June 2013 d. expiry date: 17 June 2018 e. share price at grant date: $0.043 f. expected price volatility of the Company’s shares: 85.00% g. expected dividend yield: 0% h. risk-free interest rate: 2.84% The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information. PARENT ENTITY INFORMATION 30. The following details information related to the parent entity, Strike Resources Limited, at 30 June 2013 and 30 June 2012. The information presented here has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Contributed equity Accumulated losses Option reserve Total equity Proﬁ t/(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. 2013 $ 15,146,787 (210,133) 14,936,654 260,468 - 260,468 14,676,186 2012 $ 25,633,433 199,990 25,833,423 395,249 - 395,249 25,438,174 148,439,925 (146,996,764) 13,233,025 14,676,186 148,109,255 (135,862,107) 13,191,026 25,438,174 (11,134,658) - (11,134,658) (28,114,264) (235,303) (28,349,567) 8 4 S T R I K E R E S O U R C E S L I M I T E D Directors’ Declaration In the Directors’ opinion: a) 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 46-84 above, are in accordance with the Corporations Act 2001, and: (i) comply with Accounting Standards and the Corporations Regulations 2001; (ii) give a true and fair view of the Consolidated Entity’s ﬁ nancial position as at 30 June 2013 and of its performance for the ﬁ nancial year ended on that date; b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and c) The remuneration disclosures set out in the Directors’ Report on pages 17-34 (as the audited Remuneration Report). Note 1 conﬁ rms that the Financial Statements also comply with the International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the Managing Director (the person who performs the chief executive function) and the Chief Financial Ofﬁ cer as required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. William Johnson Managing Director 30 September 2013 8 5 A N N U A L R E P O R T 2 0 1 3 I N D E P E N D E N T A U D I T O R ’ S R E P O R T 8 6 S T R I K E R E S O U R C E S L I M I T E D I N D E P E N D E N T A U D I T O R ’ S R E P O R T 8 7 A N N U A L R E P O R T 2 0 1 3 ASX Additional Information Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is shown below. All information is current as at 2 October 2013. A) Analysis of holders of fully paid ordinary shares by size of holding: ISSUED CAPITAL Class of Security Ordinary Shares $0.36 Options exercisable on or before 23 November 2016 $0.42 Options exercisable on or before 23 November 2016 $0.56 Options exercisable on or before 23 November 2016 $0.30 Options exercisable on or before 17 June 2018 TOTAL Quoted 145,334,268 145,334,268 Not Quoted - 1,166,666 1,166,666 1,166,668 3,000,000 6,500,000 Total 145,334,268 1,166,666 1,166,666 1,166,668 3,000,000 151,834,268 B) DISTRIBUTION OF EQUITY SECURITIES Analysis of holders of fully paid ordinary shares by size of holding: Spread of holding Number of holders Number of units 1 – 1,500 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over TOTAL 446 942 391 560 111 2,450 202,128 2,870,393 3,207,163 19,236,464 119,818,120 145,334,268 Percentage of total issued capital 0.139 1.975 2.207 13.236 82.443 100 Of these, 1,554 individual shareholders collectively holding 4,147,409 shares had less than the marketable parcel of 7,936 shares. C) TWENTY LARGEST SHAREHOLDERS The twenty largest holders of fully paid ordinary shares are: Holder name Shares held J P Morgan Nominees Australia Limited 1 HSBC Custody Nominees (Australia) Limited 2 Orion Equities Limited 3 Database Systems Limited 4 HSBC Custody Nominees (Australia) Limited 5 Ferrous Resources Limited 6 Alara Resources Limited 7 Database Systems LTD 8 9 Merrill Lynch (Australia) Nominees Pty Limited 10 National Nominees Limited 11 JP Morgan Nominees Australia Limited 12 Ausinca Peru S.A. 13 Mr Nicholas Kenos + Mrs Pauline Kenos 14 D&C Pesca S.A. 15 Mr Gordon Anthony 16 ACN 139 886 025 Pty Ltd 17 Katana Equity Pty Ltd 18 Classic Capital Pty Ltd 19 Aliana Pty Ltd 20 Citicorp Nominees Pty Ltd 8 8 S T R I K E R E S O U R C E S L I M I T E D 35,480,475 16,690,802 8,877,090 7,019,372 6,370,000 3,573,889 3,530,000 2,551,983 2,465,000 1,896,751 1,802,569 1,718,973 1,200,000 1,081,027 800,000 762,895 750,000 750,000 700,000 698,932 Percentage of ordinary fully paid shares 24.41 11.48 6.11 4.83 4.38 2.46 2.43 1.76 1.70 1.31 1.24 1.18 0.83 0.74 0.55 0.52 0.52 0.52 0.48 0.48 D) These substantial shareholders have notiﬁ ed the company in accordance with section 671B of the Corporations Act 2001: SUBSTANTIAL SHAREHOLDER Substantial shareholder Abu Holding International Limited Mr Azhar Chaudhri / Renmuir Holdings Limited / Chi Tung Investments Ltd Database Systems Limited (DBS) / Ambreen Chaudhri Shares held 25,825,000 17,178,261 12,004,590 E) All ordinary shares are fully paid and carry one vote per share without restriction. VOTING RIGHTS F) Strike Resources holds interests in the following mining tenements as at 2 October 2013 INTERESTS IN MINING TENEMENTS PERÚ (STRIKE - 100%) Apurimac Project tenements Name Area (Ha) Province Code Title (1) Opaban I (2) Opaban III (3) Los Andes I (4) Pitumarca II 999 Andahuaylas 05006349X01 No 8625-94/RPM Dec 16, 1994 990 Andahuaylas 05006351X01 No 8623-94/RPM Dec 16, 1994 999 Andahuaylas 05006372X01 No 0134-95-RPM Jan 31, 1995 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 6 400 Andahuaylas 01-00860-99 No 04043-2000-RPM Oct 13, 2000 (7) Mapsa 2001 (8) Coriminas II (9) Coriminas V (10) Ferrum 1 (11) Ferrum 2 (12) Ferrum 3 (13) Ferrum 4 (14) Ferrum 5 (15) Ferrum 7 (16) Ferrum 8 (17) Ferrum 9 (18) Ferrum 10 (19) Ferrum 11 (20) Ferrum 13 (21) Ferrum 26 (22) Ferrum 27 (23) Ferrum 36 800 Andahuaylas 01-01204-01 No 00590-2002-INACC/J Apr 8, 2002 1,000 Andahuaylas 01-01624-99 No 02760-2000-RPM Jul 25, 2000 1,000 Andahuaylas 01-01626-99 No 0936-00-RPM Mar 16, 2000 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/ 01-02986-04 No 00230-2005-INACC/J Jan 19, 2005 Aymaraes 959 Aymaraes 437 Aymaraes 01-02987-04 No 00323-2005-INACC/J Jan 25, 2005 01-02989-04 No 00396-2005-INACC/J Jan 27, 2005 900 Andahuaylas 01-02990-04 No 00232-2005-INACC/J Jan 19, 2005 1,000 Aymaraes 1,000 Aymaraes 1,000 Aymaraes 01-02991-04 No 00326-2005-INACC/J Jan 25, 2005 01-02992-04 No 00325-2005-INACC/J Jan 25, 2005 01-02993-04 No 02512-2005-INACC/J Jun 16, 2005 600 Andahuaylas 01-03139-06 No 4416-2006-INACC/J Oct 16, 2006 827 Andahuaylas 01-02274-07 No 000853-2007-INGEMMET/PCD/PM Sept 7, 2007 1,000 Andahuaylas 01-02629-07 No 000581-2007-INGEMMET/PCD/PM Sept 5, 2007 1,000 Andahuaylas 10553307 RP 0176-2008-INGEMMET/PCD/PM Feb 29, 2008 (24) Cristoforo 22 379 Andahuaylas 01-01656-02 RP2849-2007-INGEMMET/PCD/PM Dec 13, 2007 (25) Ferrum 28 (26) Ferrum 29 (27) Ferrum 30 (28) Ferrum 31 (29) Ferrum 32 (30) Ferrum 33 (31) Ferrum 34 (32) Ferrum 35 (33) Ferrum 37 (34) Ferrum 56 1,000 Andahuaylas 10507407 RP0601-2008-INGEMMET/PCD/PCM Mar 07, 2008 1,000 Andahuaylas 10507507 RP0365-2008-INGEMMET/PCD/PM Mar 07, 2008 963 Andahuaylas 10525907 PP 1024-2008-INGEMMET/PCD/PM May 05, 2008 327 Andahuaylas 10552807 RP 1266-2008-INGEMMET/PCD/PM May 12, 2008 900 Andahuaylas 10552907 RP0402-2008-INGEMMET/PCD/PM Mar 07, 2008 900 Andahuaylas 10553007 RP0547-2008-INGEMMET/PCD/PM Mar 07, 2008 800 Andahuaylas 10553107 RP0764-2008-INGEMMET/PCD/PM Apr 17, 2008 1,000 Andahuaylas 10553207 RP0347-2008-INGEMMET/PCD/PCM Mar 07, 2008 695 Andahuaylas 10621507 RP 1164-2008-INGEMMET/PCD/PM May 12, 2008 1,000 Andahuaylas 10133508 RP 1971-2008-INGEMMET/PCD/PM Jun 19, 2008 File No 20001465 20001464 200001481 20001478 11032475 11032603 11032600 11032965 20003140 11053798 11053836 11053807 11053810 11053816 11053822 11053827 11053830 11053833 11053835 11061068 11073793 11073799 11075418 11067786 11075423 11075419 11076757 11076509 11075425 11075421 11075427 11075426 11076534 11077123 8 9 A N N U A L R E P O R T 2 0 1 3 Apurimac Project tenements Name Area (Ha) Province Code Title (35) Ferrum 57 (36) Ferrum 58 (37) Ferrum 59 (38) Ferrum 61 (39) Pacunco 1 1,000 Andahuaylas 10133608 RP 3279-2008-INGEMMET/PCD/PM Sept 9, 2008 1,000 Andahuaylas 10133708 RP 2206-2008-INGEMMET/PCD/PM 27 Jun, 2008 1,000 Andahuaylas 10133808 RP 2272-2008-INGEMMET/PCD/PM 27 Jun, 2008 1,000 Aymaraes 10073308 - 800 Andahuaylas 10019508 RP 1806-2008-INGEMMET/PCD/PM May 29, 2008 (40) Minas Huaycco 800 Abancay 10168708 RP 2541-2008-INGEMMET/PCD/PM Aug 08, 2008 (41) Roncco (42) Ferrum 12 400 Aymaraes 10521708 Notiﬁ cation 153150-2008 INGE<

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