Strike Resources
Annual Report 2014

Plain-text annual report

STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 0 of 66 Annual Report Strike Resources Limited and its controlled entities for the year ended 30 June 2014 Strike Resources Limited ASX Code: SRK Share Registry A.B.N. 94 088 488 724 Level 11, 216 St George’s Terrace Advanced Share Registry Services Perth, Western Australia 6000 110 Stirling Highway Nedlands Western Australia 6009 T | + 61 8 9481 0389 T | + 61 8 9389 8033 F | + 61 8 9463 6103 F | + 61 8 9262 3723 E | info@strikeresources.com.au E | admin@advancedshare.com.au W | www.strikeresources.com.au W | www.advancedshare.com.au  STRIKE RESOURCES LIMITED CONTENTS Page 1 of 65 Contents CONTENTS ........................................................................................................................................................ 1 CORPORATE DIRECTORY .................................................................................................................................. 2 DIRECTORS’ REPORT......................................................................................................................................... 3 AUDITOR’S INDEPENDENCE DECLARATION .................................................................................................... 17 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............................ 18 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................................... 19 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .................................................................................... 20 CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................... 21 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................................................. 22 DIRECTORS’ DECLARATION ............................................................................................................................. 50 INDEPENDENT AUDITOR’S REPORT ................................................................................................................ 51 CORPORATE GOVERNANCE ............................................................................................................................ 53 ASX ADDITIONAL INFORMATION ................................................................................................................... 60  STRIKE RESOURCES LIMITED CORPORATE DIRECTORY Page 2 of 65 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 Mr Victor Ho Non-Executive Director Mr Farooq Khan Alternate Director for Mr Ho Company Secretary Mr David Palumbo Registered Office Level 11, 216 St George’s Terrace Perth, Western Australia, 6000 Telephone: +61 8 9481 0389 Facsimile: +61 8 9463 6103 Web Site www.strikeresources.com.au Information Email info@strikeresources.com.au Share Registry Advanced Share Registry Services 110 Stirling Highway Nedlands, Western Australia, 6009 Telephone: +61 8 9389 8033 Facsimile: +61 8 9262 3723 Email: admin@advancedshare.com.au Website: www.advancedshare.com.au Auditors 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 Stock Exchange Listing Strike Resource Limited’s shares are listed on the Australian Securities Exchange (“ASX”) ASX Code: SRK  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 3 of 65 Directors’ Report 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 2014. Directors The following persons were Directors of Strike during the whole of the financial year and up to the date of this report: Malcolm Richmond Matthew Hammond William Johnson Samantha Tough Victor Ho was appointed as a Non-Executive Director on 20 January 2014 Farooq Khan was appointed as an alternate Director for Victor Ho on 20 January 2014 Principal Activities The principal activities of the Consolidated Entity during the financial year consisted of the ongoing exploration and evaluation of the Consolidated Entity’s interest in the Apurimac and Cusco Iron Ore Projects located in Peru, South America. On 14 April 2014, the Company announced that it was undertaking a full strategic review of all of its assets and has determined to close its office and operations in Peru. Dividends No dividends have been paid or declared during the financial year. At the date of this report, no dividend has been recommended for payment in respect of the reporting period. Review of Operations During the first half of the 2014 year, the Company continued to focus on advancing its large scale Apurimac Iron Ore Project in Peru. Activities included close consultation with and support for local communities, the undertaking of an Environmental Impact Assessment Study as a pre-cursor to further exploration drilling and the evaluation of opportunities for small scale iron ore mining activities. However, in the second half of the year the Company decided to suspend its Peru operations. The decision was taken mainly due to prevailing negative market conditions. In an environment of declining iron ore prices and negative market sentiment towards junior companies developing projects with large capital expenditure requirements, the Company believed that continued investment in the project was not in the best interests of shareholders. As a consequence, the Company suspended all Peru operations, closed its office in Peru and the Managing Director (who had re-located to Peru in April 2013) returned to Perth, Australia. A number of parties have subsequently expressed an interest in and undertaken due diligence on the Peru assets, but as of the date of this report no transaction has been concluded. The Company is able to continue to maintain title to its concessions in Peru so long as it continues to pay the necessary fees and penalties relating to those concessions; whist the Company holds a large number of concessions in Peru, not all are directly related to the key Apurimac project and the Company may consider releasing some non-core concessions in June 2015 when the annual fees are due. This would enable the Company to considerably reduce the holding costs of its key assets in Peru. As well as its wholly owned assets in Peru, Strike has an interest in Canadian listed Cuervo Resources Inc. (“Cuervo”) which holds the Cerro Ccopane iron ore project adjacent to Strike’s Cusco project in Peru. Strike holds security over shares in the Peruvian company which holds title to the Cerro Ccopane project and in December 2013 Strike issued a Demand Notice to Cuervo for C$5,250,000 plus interest, following concerns about the solvency of Cuervo. Strike continues to consider its options regarding its position with Cuervo. The Company continues to maintain a healthy statement of financial position, with approximately $10 million in cash.  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 4 of 65 Significant Changes in the State of Affairs 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 confirmed it had made a confidential 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. On 11 December 2013, the Company announced that it had issued a demand notice to Canadian listed Cuervo Resources Inc (“Cuervo”), in respect of the Investment Agreement between the two Companies, relating to the financing of the Cerro Ccopane iron ore project in Peru. The demand notice was for C$5,250,000 plus applicable interest. The demand notice was issued following Strike’s concerns regarding the solvency of Cuervo and events of default occurring under the current agreements between the Companies. Strike also issued a notice of its intention to enforce its security held over 90% of the shares of the Peruvian company holding the key assets of the Cerro Ccopane project. On 24 January 2014, Mr Victor Ho was appointed to the Board as a Non-Executive Director and Mr Farooq Khan as an alternate director to Mr Ho. In February 2014 a court injunction was temporarily issued against Strike subsidiary company Apurimac Ferrum S.A.C ("AF") in Peru, preventing it from working on its mineral concessions. The injunction arose from a legal dispute with certain Peruvian parties, regarding a 2006 agreement. The Company viewed the application behind the injunction as having no legal basis and the Company’s lawyers in Peru quickly had the injunction revoked on 13 March 2014. On 14 April 2014, following a strategic review the Company decided to close its local office and suspend operations in Peru. All Peru staff were released and the Managing Director, who had been based in Peru since May 2013, returned to Perth, Australia. In May 2014 a long running legal dispute with Peruvian companies Millenium Trading S.A.C. (“Millenium”) and Minera Apu (“Apu”) was resolved, with an award issued by the appointed arbitrator in favour of Strike subsidiary AF, on all accounts and completely rejecting all of Millenium and Apu’s arguments. The award also determined that Millenium’s mining operation activities shall take place on AF's Sillaccassa 1 and Sillaccassa 2 mining concessions for a maximum quantity of 400,000 tons per annum over a maximum term of ten years. Since determining to suspend its operations in Peru, the Company has been in discussions with a number of parties with regard to the disposal of some or all of its Peru assets. Events since the End of the Financial Year In July 2014 the Company received an offer to acquire its Peru assets. However the Company was unable to reach agreement with the party making the offer and in August 2014 the offer was withdrawn. Likely Developments and Expected Results of Operations Having suspended its Peru operations, the Company continues to explore opportunities to realise some value from its Peru assets. The Company is able to maintain its title to the key mineral concessions through payment of appropriate annual fees and penalties. The next scheduled payments are due in June 2015. The Company also continues to ensure that it’s other key assets in Peru such as drilling cores and samples are stored securely. With regard to its interest in Cuervo, the Company continues to review its options. The Company has concerns regarding the financial solvency of Cuervo and as its only secured creditor may consider take administrative proceedings to recover its security. The Company retains a strong balance with cash of approximately $10 million. With outsourced accounting and company secretarial services and no office lease expenses, corporate overhead is relatively low. The Company is reviewing opportunities to deploy some if its cash in other projects and or companies in the resources sector.  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 5 of 65 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 qualified metallurgist and economist with extensive senior executive and board experience in the resource and technology industries both in Australia and internationally. His special interests include corporate strategy and the development of markets for internationally traded minerals and metals - particularly in Asia. Professor Richmond 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 Chairman of the Audit Committee Relevant Interests in shares and options 100,000 Shares (indirectly) Other current directorships in listed entities Non-Executive Director of: Argonaut Resources Ltd (appointed March 2012) Former directorships in other listed entities in past 3 years MIL Resources Limited (August 2001 to November 2011) Advanced Braking Technology Ltd (August 2006 – April 2013) Cuervo Resources Inc (July 2011 – March 2013 ) Water Resources Group Ltd (July 2012 – June 2013) William Johnson Managing Director Appointed 25 March 2013 Previous position held Executive Director (January 2013 to March 2013) Non-Executive Director (April 2010 to January 2013) Executive Director (July 2006 to April 2010) Qualifications MA (Oxon), MBA Experience Mr Johnson commenced his career in resource exploration and has held senior management and executive roles in a number of public companies in Australia, New Zealand and Asia. Most recently, Mr Johnson has acted as an executive and non-executive director of a number of ASX listed resource exploration and development companies and brings a considerable depth of experience in business strategy, investment analysis, finance and execution. Special responsibilities None Relevant Interests in shares and options 3,000,000 Unlisted Directors’ Options ($0.30, 17 June 2018) 249,273 Shares Other current directorships in listed entities Non-Executive Director of: Bentley Capital Limited (appointed March 2009) Former directorships in other listed entities in past 3 years Orion Equities Limited (February 2003 – May 2013) Cuervo Resources Inc (March 2013 – December 2013) Alara Resources Limited (October 2009 – October 2013)  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 6 of 65 Information on Directors (continued) Matthew Hammond Non-Executive Director Appointed 25 September 2009 Qualifications BA (Hons) (Bristol) Experience Mr Hammond is the Group Managing Director of Mail.ru, one of the largest European internet businesses. Prior to that he was Group Strategist at Metalloinvest Holdings, where he had responsibility for part of the non-core asset portfolio. Prior to joining Metalloinvest, Mr Hammond was a director at Credit Suisse, where he worked for 12 years as an investment analyst. During his time with Credit Suisse Mr. Hammond was ranked number one 8 times in the Extell, Institutional Investor and Reuters surveys. Special responsibilities Member of the Audit and Remuneration and Nomination Committees Relevant Interests in shares and options Nil Other current directorships in listed entities Managing Director of: Mail.Ru. (appointed April 2011) Non-Executive director of: Puricore Inc. (appointed May 2010) Former directorships in other listed entities in past 3 years Nautilus Minerals Inc (October 2009 – September 2013) Samantha Tough Non-Executive Director Appointed 23 January 2012 Qualifications LLB, 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 efficiency, 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 Relevant Interests in shares and options Nil Other current directorships in listed entities Non-Executive Director of: Saracen Mineral Holdings Limited (appointed October 2013) Former directorships in other listed entities in past 3 years Murchison Metals Ltd (May 2011 - Feb 2012) Enerji Ltd (February 2010 - July 2010) Southern Cross Goldfields Ltd (July 2007 – 23 September 2013)  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 7 of 65 Information on Directors (continued) Victor P. H. Ho Non-Executive Director Appointed 24 January 2014 Qualifications BCom, LLB (Western Australia), CTA Experience Mr Ho is a previous Director and Company Secretary of Strike Resources (2000 to 2010) and has been in executive roles with a number of public listed companies since 2000. Previously, Mr Ho had 9 years’ experience in the taxation profession with the Australian Tax Office and in a specialist tax law firm. Mr Ho has extensive experience in the structuring and execution of commercial and corporate transactions, capital raisings, capital management matters, public company administration, corporations’ law, stock exchange compliance and shareholder relations. Special responsibilities None Relevant Interests in shares and options Nil Other current directorships in listed entities Executive Director of: Orion Equities Limited (appointed July 2003) Queste Communications Ltd (appointed April 2013) Former directorships in other listed entities in past 3 years None Farooq Khan Alternate Director for Mr Victor Ho Appointed 24 January 2014 Qualifications LLB, BJuris (Western Australia) Experience Mr Khan is a qualified lawyer having previously practised principally in the field of corporate law. Mr Khan is a previous Director of Strike Resources (1999 to 2011) and has extensive experience in the securities industry, capital markets and the executive management of ASX-listed companies. In particular, Mr Khan has guided the establishment and growth of a number of public listed companies in the investment, mining and financial services sectors. He has considerable experience in the fields of capital raisings, mergers and acquisitions and investments. Special responsibilities None Relevant Interests in shares and options 17,220,812 Shares (directly and indirectly1) Other current directorships in listed entities Executive Chairman of: Orion Equities Limited (appointed October 2006) Bentley Capital Limited (appointed December 2003) Executive Chairman and Managing Director of: Queste Communications Ltd (appointed March 1998) Former directorships in other listed entities in past 3 years Alara Resources Limited (May 2007 – August 2012) 1 Includes 16,690,802 shares held by Orion Equities Limited (ASX:OEQ); Queste Communications Ltd (ASX:QUE) is a controlling shareholder of OEQ; Mr Farooq Khan (and an associated company) is deemed to have a relevant interest in the securities in which QUE has a relevant interest by reason of having a greater than 20% voting power in QUE.  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 8 of 65 Company Secretary David Palumbo Company Secretary Appointed 14 August 2013 Qualifications BCom, CA Experience Mr Palumbo is a Chartered Accountant with over six years’ experience in the auditing and financial reporting of ASX listed and unlisted companies. 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 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 2014, and the numbers of meetings attended by each director were: Name of Director Board Meetings Committee Meetings (Audit) Committee Meetings (Remuneration/ Nomination) Attended Meetings Held1 Attended Meetings held1 Attended Meetings held1 M Richmond 9 9 1 1 1 1 W Johnson 9 9 * * * * M Hammond 8 9 1 1 1 1 S Tough 9 9 1 1 ** ** V Ho(i) - - - - - - F Khan (i) *** 4 4 - - - - * Attended by invitation, not a member of the relevant committee ** Not a member of the relevant committee *** Attended 4 Board Meetings as an alternate director for Mr Ho. (i) Mr Ho was appointed as a Non-Executive Director on 20 January 2014. Mr Khan was appointed as an alternate Director for Mr Ho on 20 January 2014. Retirement, Election and Continuance in Office of Directors Mr Richmond retired as Director by rotation under the Company’s Constitution at the November 2013 AGM and was re-elected at that meeting. On 24 January 2014, the Company announced the appointment of Non-Executive Director Mr Victor Ho and Mr Farooq Khan as an alternate Director for Mr Ho. Remuneration Report (Audited) The Directors are pleased to present the Company’s 2014 remuneration report which sets out remuneration information for Strike Resources Limited’s Non-Executive Directors, Executive Director and other key management personnel. Key management personnel disclosed in this report Non-Executive and Executive Directors (see pages 5 to 7 for details about each director) M Richmond Chairman W Johnson Managing Director M Hammond Non-Executive Director S Tough Non-Executive Director V Ho1 Non-Executive Director F Khan2 Alternate Director for Mr Ho 1. Mr Ho was appointed as a Non-Executive Director on 20 January 2014. 2. Mr Khan was appointed as an alternate Director for Mr Ho on 20 January 2014  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 9 of 65 Remuneration Governance (under which details of remuneration committee is disclosed) 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 reflected 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 benefits of the Managing Director and any other Executive Director, including equity-based remuneration  making recommendations to the Board on the specific benefits 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. Non-Executive Director Remuneration Policy Fees and payments to Non-Executive Directors reflect 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.  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 10 of 65 During the year the aggregate fees paid or due to be paid to Non-Executive Directors of the Company were as follows: Director Office held Gross Salary/fees and Superannuation for the Period Fees Special exertions Superannuation Total $ $ $ $ M Richmond Chairman 70,000 - 6,475 76,475 M Hammond1 Non-Executive Director 45,000 - - 45,000 S Tough 2 Non-Executive Director 80,000 - 7,200 87,200 V Ho3 Non-Executive Director 5,050 - 480 5,530 F Khan4 Alternate Director for Mr Ho 15,151 - 1,439 16,590 1. The Director’s fee for Mr Hammond was reviewed in October 2010. 2. Ms Tough was appointed as a Non-Executive Director on 23 January 2012. Her Director’s fee was approved upon appointment. 3. Mr Ho was appointed as a Non-Executive Director on 20 January 2014. His Director’s fee was approved upon appointment. 4. Mr Khan was appointed as an alternate Director for Mr Ho on 20 January 2014. 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 benefits, including superannuation  short-term performance incentives, and  long-term incentives through participation in the Strike Resources Limited Employee Option Plan. Base Pay and Benefits Executives receive their base pay and benefits structured as a total employment cost (TEC) package which may be delivered as a combination of cash and prescribed non-financial benefits at the executive’s discretion. Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Independent remuneration consultants and/or reports provide analysis and advice to ensure base pay is set to reflect 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. Short-term Incentives The Managing Director has the opportunity to earn an annual short-term incentive (STI) if predefined targets are achieved. The targets are reviewed annually. STI targets for the Managing Director in the 2014 financial year were set by the Remuneration Committee for the Managing Director as follows. STI targets – Managing Director Metrics Weighting Execution of key Community approvals in Peru 50% Securing additional funding to advance exploration activities and/or securing a strategic investor into the Apurimac and/or Cusco Projects. 50%  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 11 of 65 Short-term Incentives (continued) 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 verified 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 financial 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 reflected 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 Officers” nominated in the Company’s Share Trading Policy. Consent will not be given during certain “Prohibited Periods” before key reporting dates or while inside information exists. 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. 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 2013 Annual General Meeting Strike Resources Limited received more than 99% (2012: 99%) of “yes” votes on its remuneration report for the 2013 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 12 of 65 Detail of Remuneration The following tables show details of the remuneration received or due to be received by the Directors and the key management personnel of the Consolidated Entity for the current and previous financial years. Short-term employee benefits Post- employment benefits Long-term benefits Share-based payments Total Cash salary and fees Cash bonus Non-monetary benefit Other Super- annuation Long- service leave Termination benefits Options 2014 $ $ $ $ $ $ $ $ $ Non-Executive Directors: M Richmond 70,000 - - - 6,475 - - - 76,475 M Hammond 45,000 - - - - - - - 45,000 S Tough 80,000 - - - 7,200 - - - 87,200 V Ho1 5,050 - - - 480 - - - 5,530 F Khan1 15,151 - - - 1,439 - - - 16,590 Executive Director: W Johnson 400,000 - - - 37,000 - - - 437,000 Total 615,201 - - - 52,594 - - - 667,795 1. Mr Ho was appointed as a Non-Executive Director and Mr Khan was appointed as an Alternate Director for Mr Ho on 20 January 2014. Short-term employee benefits Post- employment benefits Long-term benefits Share-based payments Total Cash salary and fees Cash bonus Non-monetary benefit Other Super- annuation Long- service leave Termination benefits Options 2013 $ $ $ $ $ $ $ $ $ Non-Executive Directors: M Richmond 70,000 - - - 6,300 - - - 76,300 M Hammond 45,000 - - - - - - - 45,000 W Johnson2 26,250 - - - 2,362 - - - 28,612 S Tough 80,000 - - - 7,200 - - - 87,200 Executive Director: K Hellsten1 216,666 70,000 6,750 - 19,500 - - - 312,916 W Johnson2 142,356 - - - 6,812 - - 42,000 191,168 Other key management personnel J Tambyrajah3 151,630 - - - 18,559 - 128,229 - 298,418 I Cullen4 13,977 - - - 1,420 - 5,402 - 20,799 Total 745,879 70,000 6,750 - 62,153 - 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 ceased as Chief Financial Officer on 11 April 2013. 4. Mr Cullen ceased as General Manager Exploration and Development on 15 July 2012.  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 13 of 65 Detail of Remuneration (continued) The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Name Fixed remuneration At risk - STI At risk – LTI # 2014 2013 2014 2013 2014 2013 Executive Director K Hellsten1 W Johnson - 100% 70% 78% - - 25% - - - 27% 22% Other Key Management Personnel J Tambyrajah2 - 100% - - - - I Cullen3 - 100% - - - - # Long-term incentives are provided exclusively by way of options, the percentages disclosed also reflect 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. 1. Mr Hellsten resigned as a Managing Director on 21 January 2013 2. Mr Tambyrajah ceased as Chief Financial Officer on 11 April 2013. 3. Mr Cullen ceased as General Manager Exploration and Development on 15 July 2012. Service Agreements Appointment to the Board as a Director is via resolution which outlines the Director’s agreed remuneration. The appointment is later ratified 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 specific 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 There were no options granted to Directors’ or key management person as part of their remuneration during the current year (2013: 3,000,000). Details of options over ordinary shares in the Company that were granted as compensation and details of options that were vested are as follows: Director/Key Management Personnel Number Options Granted During Period Grant date Vesting and exercise date Expiry date Exercise price Value per option at grant date % Vested W Johnson 3,000,000 18 June 2013 18 June 2013 17 June 2018 $0.30 $0.014 100% 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. 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 (2013: nil).  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 14 of 65 Details of Remuneration: Bonuses and Share-based Compensation Benefits For each cash bonus and grant of options included in the tables on page 13, the percentage of the available bonus or grant that was paid, or that vested, in the financial year and the percentage that was forfeited because the person did not meet the service 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 benefit (options) Paid Forfeited Year granted Vested Forfeited/ Lapsed Financial years in which options may vest M Richmond - - - - - - M Hammond - - - - - - W Johnson - 100% 2013 100% - 2013 S Tough - - - - - - V Ho - - - - - - F Khan - - - - - - Equity instrument disclosures relating to key management personnel i. Options holdings The numbers of options over ordinary shares in the Company held during the financial 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: Balance at 1 July 2013 Balance at appointment Granted as compensation Net change other1 Balance at 30 June 2014 Vested and exercisable Unvested 2014 M Richmond - - - - - - - M Hammond - - - - - - - W Johnson 3,000,000 - - - 3,000,000 3,000,000 - S Tough - - - - - - - V Ho2 - - - - - - - F Khan2 - - - - - - - Total 3,000,000 - - - 3,000,000 3,000,000 - 1. Figures in “net change other” column represent final holding when the options have been cancelled or have lapsed. 2. Mr Ho was appointed as Non-Executive Director on 20 January 2014. Mr Khan was appointed as alternate Director for Mr Ho on 20 January 2014. ii. Share holdings The numbers of shares in the Company held during the financial year by each director of Strike Resources Limited and other key management personnel of the Consolidated Entity are set out below. There were no shares granted during the reporting period as compensation. Balance at beginning of year Received during the year on the exercise of options Net change other Balance at the end of the year 2014 M Richmond 100,000 - - 100,000 M Hammond - - - - W Johnson 249,273 - - 249,273 S Tough - - - - V Ho1 - - 116,001 116,001 F Khan1 - - 17,220,812 17,220,812 Total 349,273 - 17,336,813 17,686,086 1. Mr Ho was appointed as Non-Executive Director on 20 January 2014. Mr Khan was appointed as alternate Director for Mr Ho on 20 January 2014. 2. The disclosures of share holdings above are in accordance with the accounting standards which require disclosure of shares held directly, indirectly or beneficially by each key management person, a close member of the family of that person, or an entity over which either of these persons have, directly or indirectly, control, joint control or significant influence (as defined under Accounting Standard AASB 124 Related Party Disclosures). Loans to Key Management Personnel There were no loans to Key Management Personnel (or their personally-related entities) during the financial year. Other Transactions with Key Management Personnel There were no transactions with Key Management Personnel (or their personally-related entities) during the financial year. This concludes the Audit Remuneration Report  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 15 of 65 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 $0.36 833,334 24 November 2011 23 November 2016 $0.42 833,333 24 November 2011 23 November 2016 $0.56 833,333 5 April 2012 23 November 2016 $0.36 333,334 5 April 2012 23 November 2016 $0.42 333,333 5 April 2012 23 November 2016 $0.56 333,333 18 June 2013 17 June 2018 $0.30 3,000,000 No option holder has any right under the options to participate in any other share issue of the Company. 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 Officers’ liability and legal expenses insurance contract, as such disclosure is prohibited under the terms of the contract. The Company has entered into deeds of indemnity with each director whereby, to the extent permitted by the Corporations Act 2001, the Company agreed to indemnify each director against all loss and liability incurred as an officer of the Company, including all liability in defending any relevant proceedings. Environmental Regulation The Consolidated Entity notes the reporting requirements of both the Energy Efficiency Opportunities Act 2006 (“EEOA”) and the National Greenhouse and Energy Reporting Act 2007 (“NGERA”). The Energy Efficiency Opportunities Act 2006 requires an affected company to assess its energy usage, including the identification, investigation and evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including what action the company intends to take as a result. The Consolidated Entity has determined that it does not operate a recognised facility requiring registration and reporting under the NGERA and, in any event it would fall under the threshold of greenhouse gas emissions required for registration and reporting. Similarly, the Consolidated Entity’s energy consumption would fall under the threshold required for registration and reporting under the EEOA. The Consolidated Entity is not otherwise subject to any particular or significant environmental regulation under either Commonwealth or State legislation. To the extent that any environmental regulations may have an incidental impact on the Consolidated Entity's operations, the Directors are not aware of any breach by the Consolidated Entity of those regulations. 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 satisfied 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 satisfied 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 there were no non-audit fees paid or payable for the services provided by the auditor of the Company, its related practices and non-related audit firms.  STRIKE RESOURCES LIMITED DIRECTORS’ REPORT Page 16 of 65 Auditor’s 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 office in accordance with section 327 of the Corporation Act 2001. This report is made in accordance with a resolution of directors. William Johnson Managing Director 30 September 2014 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY WAYNE BASFORD TO THE DIRECTORS OF STRIKE RESOURCES LIMITED As lead auditor of Strike Resources Limited for the year ended 30 June 2014, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Strike Resources Limited and the entities it controlled during the period. Wayne Basford Director BDO Audit (WA) Pty Ltd Perth, 30 September 2014 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees Page 17 of 65  STRIKE RESOURCES LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Page 18 of 65 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2014 2014 2013 Note $ $ Revenue 5 609,339 34,444,551 Operating expenses 5 (241,090) (220,076) Personnel costs 5 (1,504,730) (1,765,610) Other corporate costs 5 (3,346,285) (1,655,322) Fair value adjustment -financial assets held as fair value through profit and loss (109,616) (1,869,704) Impairment expense 5 (44,077,886) (3,014,621) Loss on sale of fixed assets (14,411) (18,318) Loss on sale of asset classified as held for sale - (138,186) Foreign exchange loss - (2,068,395) Profit/(loss) before income tax (48,684,679) 23,694,319 Income tax expense 6 (76,771) (97,132) Profit/(loss) after income tax for the year (48,761,450) 23,597,187 Profit/(loss) is attributable to: Equity holders of Strike Resources Limited (48,761,450) 23,597,187 Other comprehensive income Items that may be reclassified subsequently to Profit or Loss Exchange differences on translation of foreign operations 494,292 3,086,017 Other comprehensive income net of tax 494,292 3,086,017 Total comprehensive income/(loss) for the year (48,267,158) 26,683,204 Total comprehensive income/(loss) for the year is attributable to: Equity holders of Strike Resources Limited (48,267,158) 26,683,204 Earnings / (Loss) per share for the year attributable to the members of Strike Resources Limited Basic earnings/(loss) per share (cents) 27 (33.55) 16.44 Diluted earnings/(loss) per share (cents) 27 (33.55) 16.44 This consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.  STRIKE RESOURCES LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Page 19 of 65 Consolidated Statement of Financial Position as at 30 June 2014 2014 2013 Note $ $ Current assets Cash and cash equivalents 7 10,350,983 14,414,971 Trade and other receivables 8 74,328 1,119,228 Financial assets at fair value through profit or loss 9 - 40,982 Non-Current assets held for sale 11 498,992 - Total current assets 10,924,303 15,575,181 Non-current assets Trade and other receivables 8 - 8,483 Financial assets at fair value through profit or loss 9 - 68,634 Property, plant and equipment 10 - 592,572 Exploration and evaluation expenditure 12 - 41,842,078 Total non-current assets - 42,511,767 Total assets 10,924,303 58,086,948 Current liabilities Trade and other payables 13 2,414,711 573,657 Provisions 14 70,355 100,600 Total current liabilities 2,485,066 674,257 Non-current liabilities Trade and other payables 13 - 706,296 Total non-current liabilities - 706,296 Total liabilities 2,485,066 1,380,553 Net assets 8,439,237 56,706,395 Equity Issued capital 15 148,439,925 148,439,925 Reserves 16 15,627,214 15,132,922 Accumulated losses (155,627,902) (106,866,452) Total equity 8,439,237 56,706,395 This consolidated statement of financial position should be read in conjunction with the accompanying notes STRIKE RESOURCES LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Page 20 of 65 Consolidated Statement of Changes in Equity for the year ended 30 June 2014 Contributed Equity Currency Translation Reserve Share-based Payments Reserve Accumulated Losses Total Equity $ $ $ $ $ Balance as at 30 June 2012 148,109,255 (1,186,121) 13,191,026 (130,463,639) 29,650,521 Total income for the period Current period profit - - - 23,597,187 23,597,187 Other comprehensive income Exchange differences on translation of foreign operations - 3,086,017 - - 3,086,017 Total comprehensive income for the year - 3,086,017 - 23,597,187 26,683,204 Transactions with owners in their capacity as owners: Ordinary shares 336,000 - - - 336,000 Share options - - 42,000 - 42,000 Share issue costs (5,330) - - - (5,330) Balance as at 30 June 2013 148,439,925 1,899,896 13,233,026 (106,866,452) 56,706,395 Total income for the period Current period (loss) - - - (48,761,450) (48,761,450) Other comprehensive income Exchange differences on translation of foreign operations - 494,292 - - 494,292 Total comprehensive income/(loss) for the year - 494,292 - (48,761,450) (48,267,158) Transactions with owners in their capacity as owners: Ordinary shares - - - - - Share options - - - - - Share issue costs - - - - - Balance as at 30 June 2014 148,439,925 2,394,188 13,233,026 (155,627,902) 8,439,237 This consolidated statement of changes in equity should be read in conjunction with the accompanying notes.  STRIKE RESOURCES LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS Page 21 of 65 Consolidated Statement of Cash Flows for the year ended 30 June 2014 2014 2013 Note $ $ Cash flows from operating activities Receipts from customers 161,724 - Payments to suppliers and employees (3,247,511) (4,739,748) Tax paid - (97,132) Interest received 467,326 803,088 Net cash outflow from operating activities 25 (2,618,461) (4,033,792) Cash flows from investing activities Exploration and evaluation expenditure (1,439,803) (1,279,099) Payments for property, plant and equipment (5,586) (29,539) Investment in listed entity - (120,703) Loan to associate – Apurimac Ferrum - (4,954,844) Other – Net Inflow from acquisition of subsidiary 21 - 209,723 Proceeds from held for sale assets - 4,110,051 Net cash outflow from investing activities (1,445,389) (2,064,411) Cash flows from financing activities Payments for share issue cost - (5,100) Net cash inflow from financing activities - (5,100) Net increase/(decrease) in cash and cash equivalents (4,063,850) (6,103,303) Cash and cash equivalents at beginning of the year 14,414,971 20,551,679 Effect of exchange rate changes on cash balance (138) (33,405) Cash and cash equivalents at year end 7 10,350,983 14,414,971 This consolidated statement of cash flows should be read in conjunction with the accompanying notes.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 22 of 65 Notes to the Consolidated Financial Statements 1. Summary of Significant Accounting Policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Strike Resources Limited and its subsidiaries. a. Basis of Preparation These general purpose financial 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-profit entity for the purpose of preparing the financial statements. (i) Compliance with IFRS The consolidated financial statements of Strike Resources Limited also comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (IASB). (ii) New and amended standards adopted by the Consolidated Entity The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: AASB 10 Consolidated Financial Statements The consolidated entity has applied AASB 10 from 1 July 2013, which has a new definition of ‘control’. Control exists when the reporting entity is exposed, or has the rights, to variable returns from its involvement with another entity and has the ability to affect those returns through its ‘power’ over that other entity. A reporting entity has power when it has rights that give it the current ability to direct the activities that significantly affect the investee’s returns. The consolidated entity not only has to consider its holdings and rights but also the holdings and rights of other shareholders in order to determine whether it has the necessary power for consolidation purposes. AASB 12 Disclosure of Interests in Other Entities The consolidated entity has applied AASB 12 from 1 July 2013. The standard contains the entire disclosure requirement associated with other entities, being subsidiaries, associates, joint arrangements (joint operations and joint ventures) and unconsolidated structured entities. The disclosure requirements have been significantly enhanced when compared to the disclosures previously located in AASB 127 ‘Consolidated and Separate Financial Statements’, AASB 128 ‘Investments in Associates’, AASB 131 ‘Interests in Joint Ventures’ and Interpretation 112 ‘Consolidation – Special Purpose Entities’. AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) The consolidated entity has applied AASB 119 and its consequential amendments from 1 July 2013. The standard eliminates the corridor approach for the deferral of gains and losses; streamlines the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring re-measurements to be presented in other comprehensive income; and enhances the disclosure requirements for defined benefit plans. The standard also changed the definition of short-term employee benefits, from ‘due to’ to ‘expected to’ be settled within 12 months. (iii) Early adoption of standards The Consolidated Entity has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2014 apart from the early adoption of AASB 9 ‘Financial Instruments’. (iv) Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value though profit or loss, assets of disposal group held for sale and capitalised exploration and evaluation expenditure. (v) Critical accounting estimates The preparation of financial 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 significant to the financial statements, are disclosed in note 3.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 23 of 65 1. Summary of Significant Accounting Policies (continued) b. Principles of Consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Strike Resources Limited (“Company” or “Strike”) as at 30 June 2014 and the results of all subsidiaries for the year then ended. Strike Resources Limited and its subsidiaries together are referred to in this financial report as Consolidated Entity. Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. 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)).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 Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity, and Consolidated Statement of Financial Position respectively. (ii) Associates Associates are all entities over which the Consolidated Entity has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The Consolidated Entity’s investment in associates includes goodwill identified on acquisition. The Consolidated Entity’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition 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. (iii) Changes in ownership interests The Consolidated Entity treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Consolidated Entity. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Strike Resources Limited. When the Consolidated Entity ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit 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 reclassified to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in Other Comprehensive Income are reclassified to profit or loss where appropriate. c. Segment Reporting 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.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 24 of 65 1. Summary of Significant Accounting Policies (continued) d. Foreign Currency Translation (i) Functional and presentation currency Items included in the financial 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 financial statements are presented in Australian dollars, which is Strike Resources Limited’s functional and presentation currency. (ii) Transactions and balances 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 Profit or Loss and Other Comprehensive Income, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains or losses that relate to borrowings are presented in the Consolidated Statement of Profit or Loss and Other Comprehensive Income within finance costs. All other foreign exchange gains and losses are presented in the Consolidated Statement of Profit or Loss and Other 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. (iii) Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:  assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position  income and expenses for Consolidated Statement of Profit or Loss and Other 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 financial 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 reclassified to profit 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. e. Revenue Recognition 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 benefits will flow to the entity and specific 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 specifics of each arrangement. Revenue is recognised for the major business activities as follows: (i) Consultancy fees Revenue from consulting services is recognised in the accounting period in which the services are rendered. (ii) Sale of goods and disposal of assets Revenue from the sale of goods and disposal of other assets is recognised when the Consolidated Entity has passed control and the risks and rewards of ownership of the goods/assets to the buyer. (iii) Interest income 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 flow 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.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 25 of 65 1. Summary of Significant Accounting Policies (continued) (iv) Dividends Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence, refer note 1(l). (v) Other revenues Other revenues are recognised on a receipts basis. f. Income Tax 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 financial 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 profit 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 profit 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. g. Leases Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the Consolidated Statement of Profit or Loss and Other Comprehensive Income on a straight-line basis over the period of the lease. h. Business Combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the 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. Identified 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 identifiable 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 identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in the Consolidated Statement of Profit or Loss and Other 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 financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 26 of 65 1. Summary of Significant Accounting Policies (continued) i. Impairment of Assets Goodwill and intangible assets that have an indefinite 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 identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period. j. Cash and Cash Equivalents 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 financial 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 insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Consolidated Statement of Financial Position. k. Trade Receivables 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. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial 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 flows, discounted at the original effective interest rate. Cash flows 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 Profit or Loss and Other 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 profit or loss. l. Investments and Other Financial Assets Classification The Consolidated Entity classifies its financial assets in the following categories: financial assets at fair value through profit or loss, and loans and receivables. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investment at initial recognition. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classified as current assets if they are expected to be settled within 12 months; otherwise they are classified as non-current. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. Financial assets-reclassification The Consolidated Entity may choose to reclassify non-derivative trading financial assets out of the held for trading category if the financial 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 reclassified 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 financial assets that would meet the definition of loans and receivables out of held for trading if the Consolidated Entity has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification. Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 27 of 65 1. Summary of Significant Accounting Policies (continued) Recognition and de-recognition Regular way purchases and sales of financial 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 flows from the financial 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 financial asset at its fair value plus, in case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the profit or loss. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the “financial asset at fair value through profit or loss” category are presented in profit or loss within Other Comprehensive Income or Other Operating Expenses in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income as part of revenue from continuing operations when the Consolidated Entity’s right to receive payments is established. Interest income from these financial assets is included in the net gains/(losses). Details on how the fair value of financial 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 financial asset or group of financial assets is impaired. A financial asset (or a group of financial 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 flows of the financial asset or group of financial assets that can be reliably estimated. (iii) Financial Assets carried at amortised cost 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 flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the profit 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 profit or loss. m. Property, Plant and Equipment 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 benefits associated with the item will flow 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 profit 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 & fittings 15% to 66.67% Computer equipment 33.33% to 66.67% Plant & equipment 20% Leasehold improvements 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 profit or loss.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 28 of 65 1. Summary of Significant Accounting Policies (continued) n. Intangible Assets (i) Goodwill 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 benefit from the business combination in which the goodwill arose, identified according to operating segments (note 4). o. Mineral exploration and evaluation expenditure Exploration and evaluation expenditure incurred is initially capitalised in respect of each identifiable 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 profit in the year in which the decision to abandon the area is made. Under AASB 6 Exploration for and Evaluation of Mineral Resources, if facts and circumstances suggest that the carrying amount of any recognised exploration and evaluation assets may be impaired, the 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. p. Trade and Other Payables These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year which 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. q. Employee Benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits 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 benefits. All other short-term employee benefit obligations are presented as payables. (ii) Other long-term employee benefit obligations 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 benefits 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 outflows. 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. (iii) Share-based payments Shared-based compensation benefits are provided to employees via the Strike Resources Limited Employee Option Plan. Information on these schemes is set out in note 28. The fair value of options granted under Strike Resources Limited Employee Option Plan is recognised as an employee benefits 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 specified vesting conditions are to be satisfied. 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 profit or loss with a corresponding adjustment to equity.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 29 of 65 1. Summary of Significant Accounting Policies (continued) r. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are included in the cost of the acquisition as part of the purchase consideration. s. Dividends 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. t. Earnings per Share (i) Basic earnings per share Basic earnings per share is calculated by dividing:  the profit 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 financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:  the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and  the weighted average number of additional shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. u. Goods and Services Tax (“GST”) (including Value Added Tax – “VAT”) 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 statement of financial position. Cash flows are presented on a gross basis. The GST (VAT) components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. v. New Accounting Standards and Interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2014 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 beginning on or after Expected to be initially applied in the financial year ending AASB 1031 ‘Materiality’, (2013) 1 January 2014 30 June 2015 AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offseting Financial Assets and Financial Liabilities’ 1 January 2014 30 June 2015 AASB 2013-3 ‘Amendments to AASB 135 – Recoverable Amount Disclosures for Non Financial Assets’ 1 January 2014 30 June 2015 AASB 2013-5 ‘Amendments to Australian Accounting Standards – Investment Entities’ 1 January 2014 30 June 2015 AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ 1 January 2014 30 June 2015 IFRS 15 – Revenue from contracts with customers 1 January 2017 1 July 2017 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. w. Parent Entity Financial Information The financial information for the parent entity, Strike Resources Limited, disclosed in Note 29 has been prepared on the same basis as the consolidated financial statements.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 30 of 65 2. Financial Risk Management Financial Risk Management Objectives and Policies The Consolidated Entity's financial instruments mainly consist of deposits with banks, accounts receivable and payable and loans to related parties. The main risks arising from the Consolidated Entity's financial instruments are interest rate risk, foreign 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-qualified management personnel in conjunction with a range of policies and procedures, which incorporate monitoring and reporting mechanisms, to assist in the management of the various risks to which the business is exposed. The effectiveness of the system is continually reviewed by management and at least annually by the Board. The Consolidated Entity holds the following instruments. Variable interest rate Fixed interest rate Non-interest bearing Total 2014 2013 2014 2013 2014 2013 2014 2013 Financial assets $ $ $ $ $ $ $ $ Cash 190,525 408,559 9,850,000 12,436,381 310,458 1,570,031 10,350,983 14,414,971 Receivables - - - - 74,328 357,663 74,328 357,663 Loan receivable - 728,181 - - - - - 728,181 Financial assets - - - - - 109,616 - 109,616 190,525 1,136,740 9,850,000 12,436,381 384,786 2,037,310 10,425,311 15,610,431 Financial liabilities Payables - - - - (2,485,066) (1,380,553) (2,485,066) (1,380,553) Net financial assets 190,525 1,136,740 9,850,000 12,436,381 (2,100,280) 656,757 7,940,245 14,229,878 a. Market Risk i. Foreign Exchange Risk 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 flow 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: 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% (2013: 10%) against the foreign currencies detailed above, with all the other variables held constant. USD CAD Others 2014 2013 2014 2013 2014 2013 Financial assets Cash at bank 189,495 538,915 - - 76,103 45,304 Receivables 47,918 217,370 - - - - Financial assets at fair value through profit or loss - - - 109,616 - - Loan receivable - - - 728,181 - - Financial liabilities Payables (1,982,756) (1,093,742) - - - - (1,745,343) (337,457) - 837,797 76,103 45,304  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 31 of 65 2. Financial Risk Management (continued) 2014 2013 $ $ Change in profit increase by 10% 166,924 (54,564) decrease by 10% (166,924) 54,564 Change in equity increase by 10% - - decrease by 10% - - ii. Price Risk The Consolidated Entity is exposed to equity securities price risk. This arises from investments held by the Consolidated Entity and classified in the statement of financial position as fair value through profit 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 profit 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. Impact on post-tax profit Impact on other components of equity 2014 2013 2014 2013 $ $ $ $ increase by 9% - 6,177 - - decrease by 6% - (4,118) - - iii. Interest Rate Risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Consolidated Entity's exposure to market risk for changes in interest rates relate primarily to investments held in interest-bearing cash deposits. 2014 2013 $ $ Cash at bank 500,983 1,978,590 Term deposit 9,850,000 12,436,381 10,350,983 14,414,971 Weighted average interest rates 3.51% 3.84% 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. 2014 2013 $ $ Change in profit increase by 25bps (2013: 25bps) 25,101 32,112 decrease by 25bps (2013: 25bps) (25,101) (32,112) Change in equity increase by 25bps (2013: 25bps) - - decrease by 25bps (2013: 25bps) - -  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 32 of 65 2. Financial Risk Management (continued) b. Credit Risk Credit risk refers to the risk that a counterparty under a financial instrument will default (in whole or in part) on its contractual obligations resulting in financial loss to the Consolidated Entity. Concentrations of credit risk are minimised primarily by undertaking appropriate due diligence on potential investments, carrying out all market transactions through approved brokers, settling non-market transactions with the involvement of suitably qualified legal and accounting personnel (both internal and external), and obtaining sufficient collateral or other security (where appropriate) as a means of mitigating the risk of financial loss from defaults. 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 financial 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: 2014 2013 $ $ Cash and cash equivalents AA 6,981,246 12,822,393 A+ 3,100,000 1,165,601 No external credit rating available 269,737 426,977 10,350,983 14,414,971 Receivables and loans AA 58,215 59,721 A+ 3,116 3,116 No external credit rating available 12,997 1,064,874 10,425,311 15,542,682 The Consolidated Entity measures credit risk on a fair-value basis. The carrying amount of financial assets recorded in the financial statements, net of any provision for losses, represents the Consolidated Entity’s maximum exposure to credit risk. All receivables noted above, except interest on term deposits, are due within 30 days. None of the above receivables are past due. c. Liquidity Risk Prudent liquidity risk management implies maintaining sufficient 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 $9,850,000 (2013: $12,436,381) that mature within the next 3 months after 30 June 2014 that are expected to readily generate cash inflows for managing liquidity risk. The financial liabilities disclosed have the following maturity obligation: Carrying Amount Contractual Amount 2014 2013 2014 2013 Non-interest bearing $ $ $ $ less than 6 months 276,184 336,067 276,184 336,067 6 to 12 months 2,208,882 338,190 2,208,882 338,190 more than 12 months - 706,296 - 706,296 2,485,066 1,380,553 2,485,066 1,380,553 d. Net Fair Value of Financial Assets and Liabilities The carrying amounts of financial instruments recorded in the financial statements represent their fair value determined in accordance with the accounting policies disclosed in Note 3. The aggregate fair value and carrying amount of financial assets at the reporting date are set out in Note 9. The carrying amount of the financial liabilities at the reporting date as set out in Note 12 approximates the current fair value.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 33 of 65 2. Financial Risk Management (continued) e. Fair Value Measurements The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Consolidated Entity is the current bid price. These instruments are included in level 1. The fair value of financial 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 specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Techniques such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. The fair value of financial 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 (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).The following table presents the Consolidated Entity’s financial instruments measured and recognised at fair value at 30 June 2014 and 30 June 2013. 2014 Level 1 Level 2 Level 3 Total $ $ $ $ Assets Financial assets at fair value through profit or loss  Trading securities - - - - Total assets - - - - 2013 Level 1 Level 2 Level 3 Total $ $ $ $ Assets Financial assets at fair value through profit or loss  Trading securities - - - - Total assets - - - - There were no transfer between levels during the year and prior year. 3. Critical Accounting Estimates and Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. a. Impairment of Capitalised Exploration and Evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including the Consolidated Entity’s ability to develop the relevant area of interest itself or, if not, whether it can successfully recover the capitalised exploration and evaluation asset through sale. Factors that could impact the future recoverability include the grade and quantity of mineral resources, future technological changes which impact the cost of mining, future legal changes (including changes to environmental restoration obligations), changes to commodity prices, right of tenure and community approvals or access. b. Share-based Payment Transactions The Consolidated Entity measures the cost of equity-settled transactions with Directors and employees by reference to the fair value of the equity instruments at the date at which they are granted, and applying an estimated probability that they will vest. The fair value is determined using a Black-Scholes option valuation model, with the assumptions detailed in Note 28. 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.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 34 of 65 3. Critical Accounting Estimates and Judgements (continued) c. Fair Value Estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly-traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Consolidated Entity is the current bid price and the appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques 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 flows, are used to determine fair value for the remaining financial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments. d. SUNAT tax The Peruvian Tax Administration (“SUNAT”) recently completed an audit on Apurimac Ferrum S.A (“AF”) relating to Non Resident Income Tax Withholding for the fiscal years 2010 and 2011. The SUNAT notified AF a set of Resolutions that determine a debt for Non Domiciled Income Tax Withholding and Fine Resolutions as a result of the Audit process. AF has obtained independent advice in respect to the SUNAT findings identifying that the Company has strong arguments in its defence. As a result, AF has officially lodged a claim against the SUNAT findings. At the date of this report, AF is yet to receive a resolution from SUNAT regarding the claim. Should the SUNAT deny AF’s claiming arguments, AF plans to appeal all findings before the Administrative Tax Court. 4. Segment Information a. Description of segments 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 identified two reportable segments as follows:  Australia  Peru (Iron Ore) On 14 April 2014, the Company announced that it was undertaking a full strategic review of all of its assets and has determined to close its office and operations in Peru. a. Segment information provided to the Board of Directors The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2014 and 30 June 2013 are as follows:  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 35 of 65 4. Segment Information (continued) 2014 Peru Australia Total Interest revenue - 418,462 418,462 Sale of iron ore 129,865 - 129,865 Other income - 61,012 61,012 Inter-segment revenue - - - Other income 129,865 479,524 609,339 Adjusted EBITDA (49,206,548) (4,942,921) (54,149,469) Depreciation and amortisation (37,721) (2,395) (40,116) Personnel costs (880,803) (623,927) (1,504,730) Impairment losses: - Loan to Cuervo Resources Inc. - Exploration & Evaluation expenditure - (43,242,933) (827,641) (7,312) (827,641) (43,250,245) Fair value adjustment – financial assets held at fair value through profit or loss - (109,616) (109,616) Total segment assets 1,641,801 10,233,180 11,874,981 Total segment liabilities (41,908,076) (502,310) (42,410,386) 2013 Peru Australia Total Interest revenue - 1,281,593 1,281,593 Fees for consulting to Apurimac Ferrum S.A. - 22,648 22,648 Other income - 33,140,310 33,140,310 Inter-segment revenue - - - Other income - 34,444,551 34,444,551 Adjusted EBITDA 1,402,857 20,137,798 21,540,655 Depreciation and amortisation (21,022) (23,433) (44,455) Personnel costs (245,185) (1,520,425) (1,765,610) Impairment losses: - Loan to Cuervo Resources Inc. - (2,667,865) (2,667,865) - Exploration & Evaluation expenditure (1,546) - (1,546) Fair value adjustment – financial assets held at fair value through profit or loss - (1,869,704) (1,869,704) Loss/(gain) on sale of investment - 138,186 138,186 Total segment assets 43,651,072 15,039,587 58,690,659 Total segment liabilities (13,316,569) (36,485,673) (49,802,242) b. Other segment information (i) Segment revenue Segment revenue reconciles to total revenue as per the Consolidated Comprehensive Income: 2014 2013 $ $ Other income Interest revenue 418,462 1,281,593 Other income 190,877 32,162,958 609,339 34,444,551  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 36 of 65 4. Segment Information (continued) (ii) Adjusted EBITDA A reconciliation of adjusted EBITDA to operating profit before income tax is provided as follows: 2014 2013 $ $ Adjusted EBITDA (54,149,469) 21,540,655 Intersegment eliminations 5,504,906 2,198,119 Depreciation (40,116) (44,455) Profit/(loss) before tax from continuing operations (48,684,679) 23,694,319 (iii) Segment assets and segment liabilities Reportable segments’ assets and liabilities are reconciled to total assets and liabilities respectively as follows: 2014 2013 $ $ Segment assets 11,874,981 58,690,659 Intersegment eliminations (950,678) (603,711) Total assets as per the Consolidated Statement of Financial Position 10,924,303 58,086,948 Segment liabilities (42,410,386) (49,802,242) Intersegment eliminations 39,925,320 48,421,687 Total liabilities as per the Consolidated Statement of Financial Position (2,485,066) (1,380,555) 5. Profit/(Loss) for the Year (a) Revenue 2014 2013 $ $ Revenue $ $ Interest received – Cash on deposit 418,462 1,281,593 Foreign exchange gain 61,012 22,648 Sale of iron ore 129,865 7,808 Capitalisation of loans and receivables due from AF as a result of the acquisition on 28 December 2012 - 33,132,502 Total revenue and other income 609,339 34,444,551 (b) Expenses Operating expenses Occupancy costs 104,548 200,598 Finance costs 136,542 19,478 241,090 220,076 Personnel costs Cash remuneration 1,454,462 1,584,660 Superannuation expense 50,268 138,950 Directors’ and employees’ options expense - 42,000 1,504,730 1,765,610 Administration costs Consultancy fees 370,297 617,093 Professional fees 1,035,545 259,190 Depreciation 40,116 44,455 Other corporate expenses 1,900,327 734,584 3,346,285 1,655,322 Impairment losses Exploration and evaluation 43,250,245 1,546 Loan to Cuervo Resources Inc. 827,641 2,665,865 Sundry debtors - 347,210 44,077,886 3,014,621  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 37 of 65 6. Income Tax Expense 2014 2013 $ $ (a) Income tax expense Current tax 76,771 97,132 Deferred tax - - 76,771 97,132 (b) Numerical reconciliation between tax expense and pre-tax net profit/(loss) Profit/(loss) from continuing operations before income tax (48,684,679) 23,694,319 Income-tax expense/(benefit) on above at 30% (14,605,403) 7,108,296 Increase in income tax due to: Non-deductible expenses and foreign losses 1,704,579 774,257 Current year tax losses not recognised 1,417,202 242,114 Movement in unrecognised temporary differences 11,485,101 1,710,922 Decrease in income tax expenses due to: Non assessable income (1,479) (9,835,589) Foreign jurisdiction withholding tax 76,771 97,132 Income-tax expense attributable to operating profit 76,771 97,132 (c) Deferred tax assets not brought to account On income-tax account  Carry-forward tax losses 9,467,078 6,133,121  Other 12,161,566 2,934,842 Total deferred tax assets not brought to account 21,628,644 9,067,963 (d) Deferred tax liability not brought to account On income-tax account - - Carry-forward tax losses - - Other - - Total deferred tax losses not brought to account - - The deferred tax asset not brought to account for the 2014 and 2013 years will only be obtained if: i. the Consolidated Entity derives future assessable income of a nature and of an amount sufficient to enable the benefit to be realised; ii. the Consolidated Entity continues to comply with the conditions for deductibility imposed by tax legislation; and iii. in relation to Australian carry forward income tax losses the Consolidated Entity is able to meet the continuity of ownership and/or continuity of business tests. 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. 7. Cash and Cash Equivalents 2014 2013 $ $ Cash at bank 500,983 1,978,590 Term deposits 9,850,000 12,436,381 10,350,983 14,414,971 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.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 38 of 65 8. Trade and Other Receivables 2014 2013 $ $ Current: Loan to Cuervo Resources Inc. 5,216,470 5,216,470 Provision for impairment (5,216,470) (4,488,289) - 728,181 Amounts receivable from sundry debtors 60,839 326,214 Goods and service tax (GST) recoverable in Australia 12,436 25,049 VAT credit & Income Tax Credit 1,053 368 Prepayments - 39,416 74,328 1,119,228 Non-Current: Amounts receivable from sundry debtors - 8,483 Refer to Note 2 for the Consolidated Entity’s exposure to credit risk, foreign exchange risk and interest rate risk. 9. Financial Assets at Fair Value through Profit or Loss 2014 2013 $ $ Financial assets at fair value through profit or loss are held for trading and include the following: $ $ Current: Cuervo Resources Inc. unlisted warrants – initial recognition - 1,742,253 Add: net change in fair value - (1,701,271) - 40,982 Non-current: Financial assets at fair value through profit and loss Cuervo Resources Inc. shares – opening carrying value 68,634 114,364 Add: net change in fair value (68,634) (45,730) - 68,634 Changes in fair value of financial assets at fair value through profit or loss are recorded as an expense in the current reporting period (Note 1(l)). The fair value of listed shares in financial assets at fair value through profit 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).  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 39 of 65 10. Property, Plant and Equipment Capital WIP Land Plant and equipment Leasehold improvements Total At 30 June 2012 Cost or fair value 280 - 169,323 14,936 184,539 Accumulated depreciation and impairment - - (124,573) (675) (125,248) Net carrying amount 280 - 44,750 14,261 59,291 2013 Consolidated Carrying value at 1 July 2012 280 - 44,750 14,261 59,291 Foreign exchange adjustment - 25,877 14,444 - 40,321 Cost of asset additions - - 29,539 - 29,539 Acquisition of AF - Peru subsidiary - 427,290 122,500 - 549,790 Depreciation expense - - (42,533) (1,922) (44,455) Cost of asset disposals - - (114,345) (15,006) (129,351) Accumulated depreciation on disposed assets - - 84,770 2,667 87,437 Carrying value at 30 June 2013 280 453,167 139,125 - 592,572 At 30 June 2013 Cost or fair value 280 453,167 460,031 - 913,478 Accumulated depreciation and impairment - - (320,906) - (320,906) Net carrying amount 280 453,167 139,125 - 592,572 2014 Consolidated Carrying value at 1 July 2013 280 453,167 139,125 - 592,572 Foreign exchange adjustment - (24,255) 7,479 - (16,776) Cost of asset additions - - 5,786 - 5,786 Depreciation expense - - (40,116) - (40,116) Cost of asset disposals - - (166,669) - (166,669) Accumulated depreciation on disposed assets - - 124,195 - 124,195 Reclassification of property, plant and equipment held for sale (280) (428,912) (69,800) - (498,992) Carrying value at 30 June 2014 - - - - - At 30 June 2014 Cost or fair value 280 428,912 299,148 - 728,340 Accumulated depreciation and impairment - - (229,348) - (229,348) Reclassification of property, plant and equipment held for sale (280) (428,912) (69,800) - (498,992) Net carrying amount - - - - -  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 40 of 65 11. Non-Current Assets Held for Sale 2014 2013 $ $ Property, plant and equipment 498,992 - On 14 April 2014, following a strategic review the Company decided to close its office and operations in Peru. Since determining to suspend its operations in Peru, the Company is actively looking to dispose of its assets in Peru. 12. Exploration and Evaluation Expenditure 2014 2013 $ $ Balance at the beginning of the year 41,842,078 - Exploration and evaluation recognised upon acquisition of AF - 46,052,125 Foreign exchange adjustment 158,264 1,569,070 Exploration and evaluation expenditure additions 1,249,903 1,945,292 Re-estimation of deferred consideration - (7,722,863) Impairment loss – exploration and evaluation* (43,250,245) (1,546) Balance at the end of the year - 41,842,078 *The Consolidated Entity has assessed the carrying amount of the exploration and evaluation in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources and has recognised an impairment expense of $43,250,245 during the current financial year following the decision to review its commitment to continue sole funding the advancement of its projects in Peru. On 14 April 2014, the Group announced that it was undertaking a full strategic review of all of its assets and due to this it was closing AF’s office and operations in Peru. 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 (o) & 3(a). 13. Trade and Other Payables 2014 2013 $ $ Current Trade creditors 182,590 183,503 Other creditors and accruals 2,232,121 390,154 2,414,711 573,657 Non-Current Other creditors and accruals - 706,296 - 706,296 Details of the Consolidated Entity's exposure to risks arising from current payables are set out in Note 2.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 41 of 65 14. Provisions 2014 2013 $ $ Current Provision for employee entitlements – annual leave 53,266 48,602 Other 17,089 51,998 70,355 100,600 15. Issued Capital 2014 2013 $ $ 145,334,268 (2013: 145,334,268) fully-paid ordinary shares 148,439,925 148,439,925 Each fully-paid, ordinary share carries one vote per share and the right to participate in dividends. Date of movement No. $ Movement in ordinary share capital At 1 July 2012 142,534,268 148,109,255 Share issued 28 Dec 2012 2,800,000 336,000 Share issue expenses - (5,330) At 30 June 2013 145,334,268 148,439,925 Share issued - - Share issue expenses - - At 30 June 2014 145,334,268 148,439,925 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 financial 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 benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure the Consolidated Entity may return capital to shareholders, issue new shares or sell assets to reduce debt. The Consolidated Entity's non-cash investments can be realised to meet accounts payable arising in the normal course of business. 16. Reserves 2014 2013 $ $ Foreign currency translation reserve 2,394,188 1,899,896 Share-based payments reserve 13,233,026 13,233,026 15,627,214 15,132,922 Nature and Purpose of Other Reserves i. Share-Based Payment 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.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 42 of 65 16. Reserves (continued) Nature and Purpose of Other Reserves ii. Foreign Currency Translation 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 reclassified to profit or loss when the net investment is disposed of. 2013 - Movement in share-based payment reserve Grant date No. $ The number of unlisted options outstanding over unissued ordinary shares at the reporting date is as follows: Opening balance at 1 July 2012 10,250,000 13,191,026 Granted options Employee Options Unlisted options exercisable at $0.30; expiring 17 Jun 18 18 Jun 13 3,000,000 42,000 Lapsed options Other Options Lapsed options exercisable at $3.978; expired 3 Dec 12 (3,500,000) - Lapsed options exercisable at $2.50; expired 24 Nov 12 (750,000) - Lapsed options exercisable at $2.75; expired 24 Nov 12 (750,000) - Lapsed options exercisable at $3.25; expired 24 Nov 12 (750,000) - Lapsed options exercisable at $2.878; expired 3 Mar 13 (250,000) - Unlisted options cancelled at $0.36; cancelled 18 Jun 13 (250,000) - Unlisted options cancelled at $0.42; cancelled 18 Jun 13 (250,000) - Unlisted options cancelled at $0.56; cancelled 18 Jun 13 (250,000) - Closing balance at 30 June 2013 6,500,000 13,233,026 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 values 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 28). 17. Key Management Personnel Disclosures a. Compensation of Key Management Personnel Refer to the remuneration report contained in the directors’ report for details of the remuneration paid or payable to each member of the Company’s key management personnel for the year ended 30 June 2014. The totals of remuneration paid to KMP of the Company during the year are as follows: 2014 2013 $ $ Short-term employee benefits 615,201 822,629 Post-employment benefits 52,594 62,153 Long-term benefits - - Termination benefits - 133,631 Share-based payments - 42,000 667,795 1,060,413 2014 - Movement in share-based payment reserve Grant date No. $ The number of unlisted options outstanding over unissued ordinary shares at the reporting date is as follows: Opening balance at 1 July 2013 6,500,000 13,233,026 Closing balance at 30 June 2014 6,500,000 13,233,026  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 43 of 65 18. Auditors’ Remuneration 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 firms. 19. Contingent Assets and Liabilities a. Native Title The Consolidated Entity's tenements in Australia may be subject to native title applications in the future. At this stage it is not possible to quantify the impact (if any) that native title may have on the operations of the Consolidated Entity. b. Government Royalties The Consolidated Entity is liable to pay royalties on production obtained from its mineral tenements/concessions. c. Directors' Deeds The Consolidated Entity has entered into deeds of indemnity with Strike Resources Limited Directors, indemnifying them against liability incurred in discharging their duties as Directors/officers of the Consolidated Entity. As at the reporting date, no claims have been made under any such indemnities and, accordingly, it is not possible to quantify the potential financial obligation of the Consolidated Entity under these indemnities. d. Deferred Consideration to D&C D&C Group receives the following deferred payments if certain milestones are achieved: a. US$2 million on Apurimac Ferrum defining 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 profits 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 the Company treated the deferred consideration as a contingent liability. 2014 2013 $ $ Auditors of the Consolidated Entity Audit and review of financial statements - BDO Audit (WA) Pty Ltd 41,000 47,500 Auditors of the Peruvian subsidiaries Audit and review of financial statements - BDO Pazos, Lopez de Romana, Rodriguez 4,000 6,779 45,000 54,279  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 44 of 65 20. Commitments a. Lease Commitments The Consolidated Entity leased an office in Perth, Australia under a non-cancellable operating lease with an expiry date between 2 and 4 years. The lease expired in 2013. b. Mineral Tenement/Concession/Mining Rights - Commitments for Expenditure Australian tenements In order to maintain current rights of tenure to exploration tenements, the holders of Australian mineral tenements are required to outlay lease rentals and meet minimum expenditure commitments. 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 finalising 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. On 14 April 2014, the Company announced that it was undertaking a full strategic review of all of its assets and has determined to close its office and operations in Peru. Australian heritage protection agreements These agreements facilitate the preservation of Aboriginal heritage through the protection of Aboriginal sites and objects upon the grant of mining tenements in Western Australia. The Heritage Protection Agreements require the Consolidated Entity to conduct Aboriginal heritage surveys prior to conducting exploration that is not low-impact in nature and detail procedures to be followed if an Aboriginal site is identified. Agreements with 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 financial obligation of the Consolidated Entity in this regard. 2014 2013 $ $ Non-cancellable operating lease commitments: not longer than one year - 165,215 between 2 years and 5 years - 241,840 - 407,055  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 45 of 65 21. Acquisition of subsidiary 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 209,723 Trade and other receivables 258,568 Land 427,290 Property, plant and equipment 122,500 Exploration and evaluation expenditure 46,052,125 Trade and other payables (1,456,177) Loans and interests from Strike Resources Limited and Strike Finance Pty Ltd (37,992,172) Net assets acquired 7,621,857 Acquisition consideration: Shares issued (2,800,000 shares at $0.12 each), at fair value 336,000 Deferred consideration 6,674,833 Acquisition costs 611,024 Total purchase consideration 7,621,857 Deferred consideration D&C Group receives the following deferred payments if certain milestones are achieved: a. US$2 million on Apurimac Ferrum defining 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 2014. Refer to note 19. The cash inflow on acquisition is as follows: Net cash acquired with subsidiary 209,723 Net cash outflow - Net cash inflow on acquisition of subsidiary, net of cash acquired 209,723 22. Related-Party Disclosures Subsidiaries Interests in subsidiaries are set out in Note 23. During the year $2,811,122 (2013: $4,954,844) was loaned to subsidiaries to fund exploration activities and closure costs of Peru office.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 46 of 65 23. Investment in Controlled Entities Country of Incorporation Percentage of Ownership 2014 2013 Strike Finance Pty Ltd Australia 100% 100% Strike Australian Operations Pty Ltd Australia 100% 100% Strike Operations Pty Ltd (“SOPL”) Australia 100% 100% Strike Indo Operations Pty Ltd (“SIOPL”) Australia 100% 100% Ferrum Holdings Limited British Anguilla 100% 100% Strike Resources Peru S.A.C. Peru 100% 100% Apurimac Ferrum S.A. Peru 100% 100% Ferrum Trading S.A.C Peru 100% - 24. Events Occurring after the Reporting Period In July 2014 the Company received an offer to acquire its Peru assets. However the Company was unable to reach agreement with the party making the offer and in August 2014 the offer was withdrawn. There have been no further changes of significance since then. 25. Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities 26. Non – cash Investing and Financing Activities 2014 2013 $ $ Shares issued to acquire Apurimac Ferrum S.A. - 336,000 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. 2014 2013 $ $ Operating profit/(loss) after tax (48,761,450) 23,597,187 Consulting fees - 22,648 Non cash flows in profit/(loss) from ordinary activities: Depreciation - plant & equipment 40,116 44,455 Adjustment for movement in foreign exchange 348,753 - Fair value adjustments Loan to associated entity - (33,132,502) Loan to Cuervo Resources Inc. impairment 827,641 - Fair value through profit and loss financial assets 109,616 1,869,704 Sundry debtors impairment - 347,210 Exploration and evaluation impairment 43,250,245 1,546 Directors’ and employees’ options - 42,000 Loss on sale of fixed assets 14,411 18,318 Loss on sale of held for sale assets - 138,186 Decrease/(increase) in assets: Receivables 299,070 2,626,624 Increase/(decrease) in liabilities: Trade creditors and accruals 933,382 430,014 Provisions 319,755 (39,182) Net cash outflows from operating activities (2,618,461) (4,033,792)  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 47 of 65 27. Earnings/(Loss) per Share 2014 2013 cents cents (a) Basic earnings/(loss) per share From continuing operations attributable to the ordinary equity holders of the Company (33.55) 16.44 (b) Diluted earnings/(loss) per share From continuing operations attributable to the ordinary equity holders of the Company (33.55) 16.44 (c) Reconciliations of earnings/(Losses) used in calculating earnings/(Loss) per share Basic earnings/(loss) per share Loss attributable to the ordinary equity holders of the Company used in Calculating basic earnings/(loss) per share: From continuing operations (48,761,450) 23,597,187 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/(loss) per share 145,334,268 143,555,270 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings/(loss) per share 145,334,268 143,555,270 28. Share-Based Payments 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. There were no Employee Options granted during the year. A total of 3,000,000 Employee Options were granted during the 2013 financial year (Note 16). 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 efficient way of providing an appropriate level of remuneration as well as providing ongoing equity-based incentives for the recipients to remain with the Company with a view to improving the future growth of the Company. (e) As a relatively-small company, with much of its available funds dedicated or committed to its resource projects (and also in seeking opportunities in relation to the same), and in financing its day to day working capital requirements, the Company is not always in a position to maintain competitive cash salary ranges for its directors and employees within the industry in which it operates. 2014 2013 $ $ Share-based payments expense - 42,000  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 48 of 65 28. Share-Based Payments (continued) Grant date Expiry date Exercise price $ Balance at start of year Granted during the year Exercised during the year Forfeited during the year Balance at end of the year Vested and exercisable at end of year Consolidated entity - 2014 24 Nov 11 23 Nov 16 0.36 833,334 - - - 833,334 833,334 24 Nov 11 23 Nov 16 0.42 833,333 - - - 833,333 833,333 24 Nov 11 23 Nov 16 0.56 833,333 - - - 833,333 833,333 5 Apr 12 23 Nov 16 0.36 333,334 - - - 333,334 333,334 5 Apr 12 23 Nov 16 0.42 333,333 - - - 333,333 333,333 5 Apr 12 23 Nov 16 0.56 333,333 - - - 333,333 333,333 18 Jun 13 17 Jun 18 0.30 3,000,000 - - - 3,000,000 3,000,000 6,500,000 - - - 6,500,000 6,500,000 Weighted-average exercise price 0.38 - - - 0.38 0.38 Grant date Expiry date Exercise price $ Balance at start of year Granted during the year Exercised during the year Forfeited during the year Balance at end of the year Vested and exercisable at end of year Consolidated entity - 2013 3 Dec 07 3 Dec 12 3.978 3,500,000 - - (3,500,000) - - 4 Mar 08 4 Mar 13 2.878 250,000 - - (250,000) - - 25 Nov 09 25 Nov 12 2.50 750,000 - - (750,000) - - 25 Nov 09 25 Nov 12 2.75 750,000 - - (750,000) - - 25 Nov 09 25 Nov 12 3.25 750,000 - - (750,000) - - 24 Nov 11 23 Nov 16 0.36 1,083,334 - - (250,000) 833,334 833,334 24 Nov 11 23 Nov 16 0.42 1,083,333 - - (250,000) 833,333 833,333 24 Nov 11 23 Nov 16 0.56 1,083,333 - - (250,000) 833,333 833,333 5 Apr 12 23 Nov 16 0.36 333,334 - - - 333,334 333,334 5 Apr 12 23 Nov 16 0.42 333,333 - - - 333,333 333,333 5 Apr 12 23 Nov 16 0.56 333,333 - - - 333,333 333,333 18 Jun 13 17 Jun 18 0.30 - 3,000,000 - - 3,000,000 3,000,000 10,250,000 3,000,000 - (6,750,000) 6,500,000 6,500,000 Weighted-average exercise price 2.24 0.30 - 3.36 0.38 0.38 * 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 2.63 years (2013: 3.63 years). Fair value of options granted There were no options granted during the year ended 30 June 2014. (The assessed fair value at grant date of options granted during the year ended 30 June 2013 was $0.014 for $0.30 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. The model inputs for options granted during the year ended 30 June 2013 included: Options granted on 18 June 2013 a. the options were granted for no consideration and vest immediately. Vested options are exercisable for a period of five years after vesting. b. exercise prices of $0.30 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.  STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 49 of 65 29. Parent Entity Information The following details information related to the parent entity, Strike Resources Limited, at 30 June 2014 and 30 June 2013. The information presented here has been prepared using consistent accounting policies as presented in Note 1. 2014 2013 $ $ Current assets 10,231,293 15,146,787 Non-current assets 1,887 (210,133) Total assets 10,233,180 14,936,654 Current liabilities 502,310 260,468 Non-current liabilities - - Total liabilities 502,310 260,468 Net assets 9,730,870 14,676,186 Contributed equity 148,439,925 148,439,925 Accumulated losses (151,942,080) (146,996,764) Option reserve 13,233,025 13,233,025 Total equity 9,730,870 14,676,186 Profit/(loss) for the year (4,945,316) (11,134,658) Other comprehensive income/(loss) for the year - - Total comprehensive income/(loss) for the year (4,945,316) (11,134,658) The parent entity does not have any contingent assets or liabilities.  STRIKE RESOURCES LIMITED DIRECTORS’ DECLARATION Page 50 of 65 Directors’ Declaration In the Directors’ opinion: a) The Financial Statements, comprising the Consolidated Statement of Profit or Loss and Other 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 18-49 above, are in accordance with the Corporations Act 2001, and: (i) comply with Accounting Standards and the Corporations Regulations 2001 other mandatory professional reporting requirements; (ii) give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2014 and of its performance for the financial year ended on that date; and b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and Note 1 confirms 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 Company Secretary (the person who performs the Chief Financial Officer function) 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 2014 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR’S REPORT To the members of Strike Resources Limited Report on the Financial Report We have audited the accompanying financial report of Strike Resources Limited, which comprises the consolidated statement of financial position as at 30 June 2014, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees Page 51 of 65 Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Strike Resources Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of Strike Resources Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2014. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Strike Resources Limited for the year ended 30 June 2014 complies with section 300A of the Corporations Act 2001. BDO Audit (WA) Pty Ltd Wayne Basford Director Perth, 30 September 2014 Page 52 of 65  STRIKE RESOURCES LIMITED CORPORATE GOVERNANCE Page 53 of 65 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 financial 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 56)  progress in relation to the Company’s diversity objectives and compliance with its diversity policy  progress of major capital expenditures and other significant corporate projects including any acquisitions and divestments  monitoring financial performance including approval of the annual and half-year financial reports and liaison with the auditors  appointment, performance assessment and, if necessary, removal of the Managing Director (MD)  ratifying the appointment and/or removal and contributing to the performance assessment of the senior management team including 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 as set out in the Consolidated Entity’s delegations policy. These delegations are reviewed on an annual basis. A performance assessment for Senior Executives last took place in December 2011. The process for these assessments is described on the Company’s website. 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  STRIKE RESOURCES LIMITED CORPORATE GOVERNANCE Page 54 of 65 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 efficient decision-making. Directors’ Independence The Board has adopted specific 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 officer 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 officer 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. Board Members Details of the members of the Board, their experience, expertise, qualifications, term of office, 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 four 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 and Victor Ho are representative Directors for major shareholders and have 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 significant time commitment and has confirmed that other positions will not hinder his effective performance in the role of Chair. The Chair of the Company is Malcolm Richmond, whose qualifications 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 specifies that the roles of Chair and MD are separate roles to be undertaken by separate people.  STRIKE RESOURCES LIMITED CORPORATE GOVERNANCE Page 55 of 65 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 financial 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 nine 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 2014, and the number of meetings attended by each Director is disclosed on page 8. 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 2014. 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 specifically 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 22 to the financial statements. In accordance with the board charter, the Directors concerned are required to declare their interests in those dealings to the Company and take no part in decisions relating to them or the preceding discussions. In addition, those Directors are not to 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 fulfil their Directors’ duties. 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 specific 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 sufficient size to warrant separate Remuneration and Nomination Committees. The Committee consists of the following 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 8.  STRIKE RESOURCES LIMITED CORPORATE GOVERNANCE Page 56 of 65 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 reflected 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 benefits 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 financial, strategic, operations and risk management issues. 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 reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence 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 officer. 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-flow report on ASX. 14 days before the proposed date for release. Annual General Meeting (AGM). 14 days before the AGM. Significant 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 confirming 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 satisfied 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.  STRIKE RESOURCES LIMITED CORPORATE GOVERNANCE Page 57 of 65 Diversity Policy The Company values diversity and recognises the benefits 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. 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’ qualifications and attendance at Audit Committee meetings are set out in the Directors’ Report on page 8. All members of the Audit Committee are financially 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 financial report and all other financial 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 efficiency of operations  reliability of financial 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 fulfilling 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 Company Secretary have in place to support their certifications to the Board  reviews any significant 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 five years, and in accordance with that policy a new audit engagement partner was introduced for the year ended 30 June 2013. 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 18 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.  STRIKE RESOURCES LIMITED CORPORATE GOVERNANCE Page 58 of 65 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 briefings, details of Company meetings, press releases for the last three years and financial reports for the last five years available on the Company’s website. Where possible, the Company arranges for advance notification of significant group briefings (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, financial, compliance and strategic risks. In providing this oversight, the committee:  reviews the framework and methodology for risk identification, 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 identification assessment and management of the Company’s exposure to risk  reviews and approves the delegations of financial 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. 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 MD. 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 MD 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 MD’s work are incorporated into this review if applicable.  STRIKE RESOURCES LIMITED CORPORATE GOVERNANCE Page 59 of 65 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 Company Secretary have made the following certifications to the Board: that the Company’s financial reports are complete and present a true and air view, in all material respects, of the financial 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 efficiently and effectively in all material respects in relation to financial 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 specific 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 specific 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.  STRIKE RESOURCES LIMITED ASX ADDITONAL INFORMATION Page 60 of 65 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 20 October 2014. a) Issued capital Analysis of holders of fully paid ordinary shares by size of holding: Class of Security Quoted Not Quoted Total Ordinary Shares 145,334,268 - 145,334,268 $0.36 Options exercisable on or before 23 November 2016 - 1,166,666 1,166,666 $0.42 Options exercisable on or before 23 November 2016 - 1,166,666 1,166,666 $0.56 Options exercisable on or before 23 November 2016 - 1,166,666 1,166,666 $0.30 Options exercisable on or before 17 June 2018 - 3,000,000 3,000,000 TOTAL 145,334,268 6,500,000 151,834,268 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 Percentage of total issued capital 1 – 1,500 431 192,636 0.133 1,001 – 5,000 851 2,567,502 1.767 5,001 – 10,000 359 2,920,025 2.009 10,001 – 100,000 515 17,821,467 12.262 100,001 and over 105 121,832,638 83.829 TOTAL 2,261 145,334,268 100 Less than market parcel Number of holders Number of units Percentage of total issued capital 1 – 10,000 1,525 4,536,213 3.121 c) Twenty largest shareholders The twenty largest holders of fully paid ordinary shares are: Holder name Shares held Percentage of ordinary fully paid shares 1 HSBC Custody Nominees (Australia) Limited 41,898,622 28.83 2 Orion Equities Limited 16,690,802 11.48 3 Database Systems Limited 12,537,090 8.63 4 Ferrous Resources Limited 6,370,000 4.38 5 Alara Resources Limited 3,573,889 2.46 6 Merrill Lynch (Australia) 2,275,000 1.57 7 Thunderdome Pty Ltd 2,200,000 1.53 8 National Nominees Limited 1,755,051 1.21 9 Ausinca Peru SA 1,718,973 1.18 10 HSBC Custody Nominees 1,568,983 1.08 11 JP Morgan Nominees Australia 1,325,536 0.91 12 ACN 139 886 025 Pty Ltd 1,232,250 0.85 13 Mr Nicholas Kenos & Mrs Pauline Kenos 1,200,000 0.83 14 Brevmar Pty Ltd 1,180,000 0.82 15 D&C Pesca S.A.C. 1,081,027 0.74 16 Pathold No 77 Pty Ltd 1,072,809 0.74 17 Mr Chi Mau Phuong 1,013,657 0.70  STRIKE RESOURCES LIMITED ASX ADDITONAL INFORMATION Page 61 of 65 18 Citicorp Nominees Pty Limited 950,799 0.65 19 Mr Vu Quang Minh Dang & Mrs Thi Kim Dau Nguyen 897,560 0.62 20 Mr Gordon Anthony 800,000 0.55 d) Substantial shareholder These substantial shareholders have notified the company in accordance with section 671B of the Corporations Act 2001: Substantial shareholder Shares held ABU Holding International Limited 25,825,000 Orion Equities Limited 16,690,802 Dreemskerry Limited / Stefano Roma 14,000,000 Database Systems Ltd 12,537,090 e) Voting rights All ordinary shares are fully paid and carry one vote per share without restriction. f) Interests in mining tenements Strike Resources holds interests in the following mining tenements as at 20 October 2014 Apurimac Project tenements Name Area (Ha) Province Code Title File No (1) Opaban I 999 Andahuaylas 05006349X01 No 8625-94/RPM Dec 16, 1994 20001465 (2) Opaban III 990 Andahuaylas 05006351X01 No 8623-94/RPM Dec 16, 1994 20001464 (3) Los Andes I 999 Andahuaylas 05006372X01 No 0134-95-RPM Jan 31, 1995 200001481 (4) Pitumarca II 1,000 Andahuaylas 05006385X01 No 8686-94-RPM Dec 22, 1994 20001478 (5) Lucrecia Esperanza 66 Andahuaylas 01-00649-99 No 00623-2001-INACC/J Jul 26, 2001 11032475 (6) Nueva Oropampa 6 400 Andahuaylas 01-00860-99 No 04043-2000-RPM Oct 13, 2000 11032603 (7) Mapsa 2001 800 Andahuaylas 01-01204-01 No 00590-2002-INACC/J Apr 8, 2002 11032600 (8) Coriminas II 1,000 Andahuaylas 01-01624-99 No 02760-2000-RPM Jul 25, 2000 11032965 (9) Coriminas V 1,000 Andahuaylas 01-01626-99 No 0936-00-RPM Mar 16, 2000 20003140 (10) Ferrum 1 965 Andahuaylas 01-02983-04 No 00228-2005-INACC/J Jan 19, 2005 11053798 (11) Ferrum 2 1,000 Andahuaylas 01-02984-04 No 00227-2005-INACC/J Jan 19, 2005 11053836 (12) Ferrum 3 1,000 Andahuaylas 01-02985-04 No 00229-2005-INACC/J Jan 19, 2005 11053807 (13) Ferrum 4 1,000 Andahuaylas/ Aymaraes 01-02986-04 No 00230-2005-INACC/J Jan 19, 2005 11053810 (14) Ferrum 5 959 Aymaraes 01-02987-04 No 00323-2005-INACC/J Jan 25, 2005 11053816 (15) Ferrum 7 437 Aymaraes 01-02989-04 No 00396-2005-INACC/J Jan 27, 2005 11053822 (16) Ferrum 8 900 Andahuaylas 01-02990-04 No 00232-2005-INACC/J Jan 19, 2005 11053827 (17) Ferrum 9 1,000 Aymaraes 01-02991-04 No 00326-2005-INACC/J Jan 25, 2005 11053830 (18) Ferrum 10 1,000 Aymaraes 01-02992-04 No 00325-2005-INACC/J Jan 25, 2005 11053833 (19) Ferrum 11 1,000 Aymaraes 01-02993-04 No 02512-2005-INACC/J Jun 16, 2005 11053835 (20) Ferrum 13 600 Andahuaylas 01-03139-06 No 4416-2006-INACC/J Oct 16, 2006 11061068 (21) Ferrum 26 827 Andahuaylas 01-02274-07 No 000853-2007-INGEMMET/PCD/PM Sept 7, 2007 11073793 (22) Ferrum 27 1,000 Andahuaylas 01-02629-07 No 000581-2007-INGEMMET/PCD/PM Sept 5, 2007 11073799 (23) Ferrum 36 1,000 Andahuaylas 10553307 RP 0176-2008-INGEMMET/PCD/PM Feb 29, 2008 11075418 (24) Cristoforo 22 379 Andahuaylas 01-01656-02 RP2849-2007-INGEMMET/PCD/PM Dec 13, 2007 11067786 (25) Ferrum 28 1,000 Andahuaylas 10507407 RP0601-2008-INGEMMET/PCD/PCM Mar 07, 2008 11075423 (26) Ferrum 29 1,000 Andahuaylas 10507507 RP0365-2008-INGEMMET/PCD/PM Mar 07, 2008 11075419 (27) Ferrum 30 963 Andahuaylas 10525907 PP 1024-2008-INGEMMET/PCD/PM May 05, 2008 11076757 (28) Ferrum 31 327 Andahuaylas 10552807 RP 1266-2008-INGEMMET/PCD/PM May 12, 2008 11076509  STRIKE RESOURCES LIMITED ASX ADDITONAL INFORMATION Page 62 of 65 Apurimac Project tenements Name Area (Ha) Province Code Title File No (29) Ferrum 32 900 Andahuaylas 10552907 RP0402-2008-INGEMMET/PCD/PM Mar 07, 2008 11075425 (30) Ferrum 33 900 Andahuaylas 10553007 RP0547-2008-INGEMMET/PCD/PM Mar 07, 2008 11075421 (31) Ferrum 34 800 Andahuaylas 10553107 RP0764-2008-INGEMMET/PCD/PM Apr 17, 2008 11075427 (32) Ferrum 35 1,000 Andahuaylas 10553207 RP0347-2008-INGEMMET/PCD/PCM Mar 07, 2008 11075426 (33) Ferrum 37 695 Andahuaylas 10621507 RP 1164-2008-INGEMMET/PCD/PM May 12, 2008 11076534 (34) Ferrum 56 1,000 Andahuaylas 10133508 RP 1971-2008-INGEMMET/PCD/PM Jun 19, 2008 11077123 (35) Ferrum 57 1,000 Andahuaylas 10133608 RP 3279-2008-INGEMMET/PCD/PM Sept 9, 2008 11081417 (36) Ferrum 58 1,000 Andahuaylas 10133708 RP 2206-2008-INGEMMET/PCD/PM 27 Jun, 2008 11077127 (37) Ferrum 59 1,000 Andahuaylas 10133808 RP 2272-2008-INGEMMET/PCD/PM 27 Jun, 2008 11077122 (38) Ferrum 61 1,000 Aymaraes 10073308 - in process (39) Pacunco 1 800 Andahuaylas 10019508 RP 1806-2008-INGEMMET/PCD/PM May 29, 2008 11076523 (40) Minas Huaycco 800 Abancay 10168708 RP 2541-2008-INGEMMET/PCD/PM Aug 08, 2008 11081416 (41) Roncco 400 Aymaraes 10521708 Notification 153150-2008 INGE<

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