Tertiary Minerals
Annual Report 2013

Plain-text annual report

Tertiary Minerals plc Annual Report & Accounts for the year ended 30 September 2013 www.tertiaryminerals.com BUILDING A STRATEGIC POSITION IN THE FLUORSPAR SECTOR 22975.02 13 January 2014 12:12 PM proof 6 At a Glance Tertiary Minerals plc is an AIM traded mineral exploration and development company building a strategic position in the fluorspar sector. The Opportunity in Fluorspar Contents Fluorspar is an essential raw material in the basic chemical, steel and aluminium industries and in a growing number of high-tech green technologies and pharmaceutical applications. Fluorspar has a growing economic and strategic importance; ranked the fourth most important strategic mineral in the US; identified by the European Commission as a critical raw material facing a supply shortage. Read more about fluorspar on pages 3 and 4 Company’s Aim The Company’s aim is to add value to the Group’s mineral projects through the discovery of mineral resources and to become a reliable long-term and competitive supplier of fluorspar to world markets. Read more about our opportunities in fluorspar on pages 7 to 9 Company Strategy The strategy is to acquire and develop large fluorspar deposits located to established infrastructure and markets in stable, democratic and mining friendly jurisdictions. Our Performance Chairman’s Statement Our Project Locations Fluorspar Market Strategic Report Our Governance Corporate Governance Corporate Responsibility Board of Directors Directors’ Responsibilities Directors’ Report Our Financials Independent Auditor’s Report to the Members of Tertiary Minerals plc Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated and Company Statements of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated and Company Statements of Cash Flows Notes to the Financial Statements Notice of Annual General Meeting Annual General Meeting Explanatory Notes Shareholder Notes Form of Proxy Read more about our company strategy on page 5 Proxy Form Notes and Instructions 2 3 4 5 11 13 14 15 16 18 19 19 20 21 21 22 23 40 41 42 43 44 Company Information IBC 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201301 Welcome to Tertiary Minerals plc Highlights • Work continuing on Storuman Fluorspar Project Preliminary Feasibility Study. • Storuman Exploitation Concession (Mining Lease) application in preparation. • Large Exploration Target delineated by independent review of historical data: 85–105 million tonnes grading 9-11% fluorspar (CaF2) at 8% CAF2 cut-off. • First drill programme completed at MB Project - results awaited. Read more about our highlights on pages 2 and 5 EXPLORATION MB Fluorspar Project, Nevada USA CLOSURE & REHABILITATION FEASIBILITY & PLANNING Lassedalen Fluorspar Project, Norway Storuman Fluorspar Project, Sweden MINING DEVELOPMENT Visit our website for further information at www.tertiaryminerals.com Look Out For This Icon View more content within this Annual Report 22975.02 13 January 2014 12:12 PM proof 6 Our FinancialsOur GovernanceOur Performancewww.tertiaryminerals.com Stock code: TYM02 Chairman’s Statement We are reporting further significant progress during the year in our ambition to be a significant supplier of fluorspar. drawn on various innovative funding arrangements including a £1.3 million equity placing and equity swap in May 2013. I would like to thank my fellow Board members for their contributions during the year and was delighted with the Board’s decision to appoint Richard Clemmey as Managing Director of the Company. Formerly our Operations Director, Richard will continue to manage the Group’s projects and will assume responsibility for the day-to-day running of the Company. This will allow me more time to focus on the Group’s corporate development and strategy, whilst the separation of the roles of Chairman and Managing Director brings this aspect of the Company’s governance in line with best practice. This Annual Report follows a revised format following the introduction of the new Companies Act requirements to include a Strategic Report. This is widely seen as an opportunity to more clearly and concisely set out the Company’s aims, strategies and business plan whilst also highlighting those aspects of the Financial Statements that best reflect the Company’s and your Board’s progress and performance during the year. The Strategic Report contains some information formerly included in the Directors’ Report and incorporates the Managing Director’s Operating Review. Our 30 September year-end means that we are amongst the first companies required to comply with the Strategic Report requirement and no doubt our new reporting format will evolve with time. As its purpose is to enable a more effective communication with you, our shareholders, I encourage you to contact me with any suggestions for improvement in the presentation of your Annual Report & Financial Statements. In the meantime I look forward to meeting shareholders at the Annual General Meeting which is to be held on Wednesday 19 February 2014 as set out on page 40. Patrick Cheetham Executive Chairman 12 December 2013 I have great pleasure in presenting the Company’s Annual Report & Financial Statements for the year ended 30 September 2013. I am pleased that we are reporting further significant progress during the year in our ambition to be a significant supplier of fluorspar to world markets, despite very difficult equity market conditions. Highlights undoubtedly include the delineation of a world class Exploration Target at the recently acquired MB Fluorspar Project in Nevada where, following a review of historical exploration data, an initial tonnage grade estimate was made of 85–105 million tonnes grading 9–11% fluorspar. The first drilling programme has just been completed with the objective of defining a Mineral Resource large enough for an initial 10 year mine life. The results are eagerly awaited. At the Storuman Fluorspar Project, our most advanced project, we have experienced some delay with metallurgical test work and a consequential delay to the preliminary feasibility study. Nevertheless, a major development for the Storuman project was the decision to apply for an Exploitation Permit which is now in preparation and which we expect to submit in the first quarter of 2014. The equity markets have been all but closed to junior mining companies during the year and in order to maintain the momentum in our work programmes through the year we have 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201303 Our Fluorspar Project Locations Sweden Storuman Norway Lassedalen USA Nevada n Acid-Spar Key markets Fluorspar Market Dynamics • China accounts for over half of world fluorspar production • Chinese exports have continued to decline since 2000 • Potential for China to become a net importer in the future • Acid-spar prices have continued to trend upwards since 2000 • Western Europe, Canada and the USA are the largest acid-spar consuming regions outside of China, importing more than 900,000 tonnes per year • Fluorspar is classified as a critical raw material by the European Commission • USA considers fluorspar as a strategic mineral Average Acid-Spar Prices 2009–2013 US$/t FOB China t / $ S U e c i r P 500 450 400 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 22975.02 13 January 2014 12:12 PM proof 6 Our FinancialsOur GovernanceOur Performancewww.tertiaryminerals.com Stock code: TYM 04 Fluorspar Market The largest acid-spar consuming regions outside of China are Western Europe, Canada and the USA. The current global demand for fluorspar is 6.0 – 6.5 million tonnes per year. Acid-spar represents the largest share of the fluorspar market by volume, with current demand being around 3.8 million tonnes per year, and commands the highest price per tonne in comparison to metallurgical and ceramic grade fluorspar. The two primary uses of acid-spar are: • The manufacture of Aluminium Fluoride (AlF3) which is used as a flux in the aluminium manufacturing process. • The manufacture of Hydrogen Fluoride (HF) with the largest use of the HF being the manufacturer of refrigerant gases. The global supply and demand for fluorspar has seen steady growth over the decade 1998 to 2008. In 2009 the global financial crisis contributed to a contraction in acid-spar supply and demand followed by a recovery in 2011. During the latter part of 2012 and through 2013 demand for acid-spar has softened which has been reflected in the price. The China export price for acid-spar is a traditional benchmark price and is currently published as $310–330/tonne (Industrial Minerals Magazine). The equivalent price delivered into Europe (CIF Rotterdam) is published as US$420/tonne. However, given the current sea freight rates, it is understood that CIF Rotterdam prices are currently below this level. It is the Company’s view that the Chinese supply-demand dynamics coupled with increasing global demand for the downstream uses of fluorine such as refrigeration, energy reduction in the steel and aluminium industry, development of more environmentally friendly refrigerants, HFCs to HFOs, and emerging uses, fluoropolymers in lithium batteries for example, will increase global demand and price for fluorspar in the long term. This view is shared amongst the leading global analysts in the business. The largest acid-spar consuming regions outside of China are Western Europe, Canada and the USA, collectively importing more than 900,000 tonnes of acid-spar per year. The uncertainty of Chinese acid-spar supply has resulted in increasing pressure on these regions to secure long term sources and recent upstream merger and acquisition integration in the industry reflects this position. The changing fluorspar supply-demand dynamics has been recognised by the European Commission (EC) who in 2010 classified fluorspar as 1 of the 14 critical raw materials, where the high risk of supply shortage has been identified and the subsequent impact on the economy is higher compared with most of the other raw materials. The USA also considers fluorspar as a strategic mineral. The current price weakness does not affect the Company as it is not in production and the positive macro-drivers for future prices are unchanged. * The information in this Fluorspar Market Summary is drawn from various sources, including Industrial Minerals Magazine, United States Geological Survey, Roskill, UN Comtrade and CRU. China is the leading producer of acid-spar representing over 50% of the total output. However, during the last decade there has been a continued trend of reducing Chinese acid- spar exports. This significant reduction in exports is due to a combination of growth in internal demand and China’s Government policies aimed at guaranteeing domestic supply and to protect limited reserves. As the downstream value added fluorspar consumer industry continues to grow this could result in China becoming a net importer of fluorspar in the future. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201305 Strategic Report The Group’s business model has established it as a successful, efficient and low cost explorer. The Directors of the Company and its subsidiary undertakings (which together comprise “the Group”) present their Strategic Report for the year ended 30 September 2013. The Strategic Report is a new statutory requirement under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 and is intended to provide fair and balanced information that enables the Directors to be satisfied that they have complied with s172 of the Companies Act 2006 which sets out the Directors’ duty to promote the success of the Company. Principal Activities The principal activity of the Company is that of a holding company for its subsidiaries. The principal activity of the Group is the identification, acquisition, exploration and development of mineral projects with a principal focus on fluorspar, the main raw material source of fluorine for the chemical, steel and aluminium industries. The areas of activity are Sweden, Finland, Norway, USA and Saudi Arabia. Organisation Overview The Group’s management is based in Macclesfield in the United Kingdom, but it operates in five other countries through UK and foreign subsidiaries and branches of those subsidiaries. The corporate structure of the Group reflects the historical pattern of acquisition by the Group and the need where appropriate, for fiscal and other reasons, to have incorporated entities in particular territories. The Group’s exploration activity is undertaken in Norway through a UK subsidiary Tertiary Gold Ltd and in Sweden and Finland through registered branches Svensk filial till Tertiary Gold Limited and Tertiary Gold Limited, Filial i Finland. In the USA the Company operates through a subsidiary, Tertiary Minerals US Inc. A UK subsidiary Tertiary (Middle East) Limited was incorporated to hold the Company’s interest in the Ghurayyah project in Saudi Arabia. The Board of Directors comprises two independent non- executive directors, the Managing Director and the Executive Chairman. Their profiles are provided on page 14. Aims, Strategy & Business Plan The Company’s aim is to add value to the Group’s mineral projects through the discovery of mineral resources and to become a reliable long-term and competitive supplier of fluorspar to world markets. The strategy is to acquire and develop large fluorspar deposits located to established infrastructure and markets in stable, democratic and mining friendly jurisdictions. Large deposits are essential to support a long mine life and to provide for future expansion. Proximity to infrastructure is critical for the development of industrial mineral deposits as they tend to be niche developments that do not stand substantial infrastructure costs. Transport costs can be a significant part of the costs of fluorspar delivered to a customer and so proximity to markets is important, especially in periods of low prices and so the Company has deliberately sought out projects close to the major markets in Europe and North America. Mineral development is a high-risk business and as a result Tertiary seeks projects in countries with low levels of corruption and political risk. This helps satisfy the Company’s potential customers’ needs to demonstrate that their fluorspar raw materials are ethically sourced with minimum chance of political interference or supply disruption. The Group’s business model has established it as a successful, efficient and low costs explorer. The Company identifies mineral project opportunities through internal research and prefers to acquire its interests by licence of “open ground” from the relevant authority. This allows Tertiary to acquire 100% ownership of valuable assets often at minimal cost – as was originally the case for the Storuman and Lassedalen projects. In other cases, rights are negotiated rights from existing owners for initially low periodic payments that rise over time as confidence in the project value increases – as is the case for the recently acquired MB project in Nevada USA. The Group seeks to run the Company with a low cost base in order to maximise the amount that can be spent on exploration and development as this is where value can be added. The Company has 5 full time employees including the two executive directors who work with and oversee a range of carefully selected and experienced consultants and contractors as and when work requires. 22975.02 13 January 2014 12:12 PM proof 6 Our FinancialsOur GovernanceOur Performancewww.tertiaryminerals.com Stock code: TYM06 Strategic Report continued The administration costs are reduced through a management agreement with Sunrise Resources, where Tertiary is a substantial shareholder (as defined under the AIM Rules), and whereby Sunrise Resources shares Tertiary’s office costs and staff costs. The Company’s activities are financed through periodic capital raisings, through placings and other innovative equity based financial instruments. As the projects become more advanced the Board aims to secure at least some project funding from future customers via production sharing and other marketing arrangements should fluorspar supplies from traditional Chinese suppliers become harder to obtain. Financial & Performance Review The Group is not yet producing minerals and so has no income other than a small amount of bank interest. Consequently the Group is not expected to report profits until it disposes of, or is able to profitably develop or otherwise turn to account its exploration and development projects. The results for the Group are set out in detail on page 19. The Group reports a loss of £451,160 for the year (2012: £494,945) after administration costs of £437,857 (2012: £466,211) and after crediting interest of £5,668 (2012: £4,050). The loss includes expensed pre-licence and reconnaissance exploration costs of £32,131 (2012: £32,784), the impairment of deferred exploration costs of £7,140 (2012: nil) and a non cash amount of £20,300 (2012: nil) representing a reduction in the Company’s independently valued liability, under the Equity Swap Agreement, from inception to the end of the financial year. Administration costs include £88,506 as non-cash costs for the value of certain options and warrants held by employees and others as required by IFRS 2. The Financial Statements show that, at 30 September 2013, the Group had net current assets of £1,298,847 (2012: £782,913). This represents the cash position after allowing for receivables and trade and other payables and the value of the equity swap. These amounts are shown in the Consolidated and Company Statements of Financial Position on page 20 and are also components of the Net Assets of the Group. Net assets also include various “intangible” assets of the Company. As the name suggests, these intangible assets are not cash assets but include some of this year’s and previous year’s expenditure on minerals projects where that expenditure meets the criteria in Note 1(d) accounting policies. The individual intangible assets total £2,420,947 (2012: £1,843,349) and breakdown by project is shown in Note 2 to the Financial Statements on page 27. Expenditures which do not meet the criteria in Note 1(d), such as pre-licence and reconnaissance costs are expensed and add to the Company’s loss. The loss reported in any year can also include expenditure that was carried forward in previous reporting periods as an intangible asset but which the Board determines is “impaired” in the reporting period. The extent to which expenditure is carried forward as intangible assets is a measure of the extent to which the value of the Company’s expenditure is preserved. In the current reporting period an amount of £7,140 was impaired for the Gjerpen fluorspar project, which was relinquished during the year. The intangible asset value of a project should not be confused with the realisable or market value of a particular project which will, in the Directors’ opinion, be at least equal in value and often considerably higher. Hence the Company’s market capitalisation on AIM is usually in excess of the net asset value of the Group. Details of intangible assets, property, plant & equipment and investments are set out in Notes 8, 9 and 10 of the financial statements. Administration and overhead costs have been shared with Sunrise Resources plc, to the benefit of both companies. This cost sharing is continuing. Key Performance Indicators The Financial Statements of a mineral exploration company can provide a moment in time snapshot of the financial health of the Company but do not provide a reliable guide to the performance of the Company or its Board. The usual financial key performance indicators (“KPIs”) cannot be applied to a company with no turnover and so the Directors consider that the detailed information in the Operating Review is the best guide to the Group’s progress and performance during the year. In addition, the Directors highlight the following KPIs and expect that further KPIs will be reported as the Company progresses through development. Minerals Resources, Ore Reserves & Exploration Targets The Company reports Exploration Targets, Mineral Resources and Ore Reserves as defined and categorised under the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ores Reserves Committee (JORC) of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and the Minerals Council of Australia. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201307 The Company has been successful in defining increasing amounts of fluorspar in these various categories since acquiring its first fluorspar exploration project in 2008. 14 12 10 8 6 4 2 0 ) s n o i l l i m ( r a p s r o u l F d e n a t n o C s e n n o T i 2008 2009 2010 2011 2012 2013 Position at Reporting Year End Exploration Targets Mineral Resources Source: Company Estimate and Technical Reports Health & Safety The Group has not lost any man-days through injury and there have been no Health & Safety incidents or reportable accidents during the year. Environment No Group company has had or been notified of any instance of non-compliance with environmental legislation in any of the countries in which they work. Fundraising Since 2008, when the Company acquired its first fluorspar project at Storuman, the Company has raised just £4,233,333 in equity and your Board is therefore proud of the progress it has made since that date, on limited financial resources in a period of considerable financial turmoil. During the 2013 financial year the Company raised a total of £1,616,986 net of expenses from a variety of sources as shown in Note 14 of the Financial Statements. A part of this fundraising was tied to an Equity Swap Agreement with YA Global Master SPV which, in the Consolidated and Company Statements of Financial Position at 30 September 2013, had an independently assessed value of £264,286. This Swap Agreement was settled on 8 November 2013 and returned an amount of £336,333 to the Company on closure, as set out in Note 18 on page 37. Operating Review In 2013 the Company has made solid progress with the development of its 100% owned fluorspar projects. An Exploitation Permit application is now being prepared following the completion of two years of environmental baseline studies at Storuman in Sweden. Preliminary feasibility studies are continuing in parallel to this process. Following the acquisition of the MB Project in Nevada USA the Company has completed a JORC compliant exploration target and two phases of drilling with the objective of defining a JORC compliant Mineral Resource Estimate and targeting potentially higher grade areas of the known deposit. Fluorspar Projects Storuman Fluorspar Project, Sweden The Company’s 100% owned Storuman project is located in north central Sweden and is linked by the E12 highway to the port city of Mo-i-Rana in Norway and by road and rail to the port of Umeå on the Gulf of Bothnia. A positive development for the Storuman project is the recent construction of a bulk rail terminal 25km from the project site which provides a direct rail link to the deep water port of Umeå. The directors believe that the project is ideally located to serve the key European fluorspar market. Exploitation and Environmental Permitting Studies The Company has now passed the critical two year mark for baseline environmental studies required as a condition to submit the Environmental and Exploitation Permit applications. Further milestones have been reached this year with the completion of a reindeer husbandry impact analysis in co-operation with the local reindeer husbandry cooperative. The Company is currently in the process, together with its Swedish based consultants and advisers, of using the results from the technical, social and environmental studies to prepare the technical description, environmental impact assessment and legal documents required for the Exploitation Permit application. The current target for submission of the application is Q1 2014 followed by the preparation and submission of the Environmental Permit application by the end of 2014. Preliminary Feasibility Study A critical task of the Preliminary Feasibility Study and subsequent Environmental Permit preparation is the completion of the metallurgical testwork and development of a process-flow sheet. The Company’s Scoping Study previously assumed fine grinding a blend of the Upper and Lower mineralised horizons in order to produce acid grade fluorspar. The Company has been working hard alongside its consultants to optimise the grind size and recovery of fluorspar from the blended ore and from the Upper and Lower Horizon separately. 22975.02 13 January 2014 12:12 PM proof 6 Our FinancialsOur GovernanceOur Performancewww.tertiaryminerals.com Stock code: TYM 08 Strategic Report continued The results of the testwork have confirmed the Upper Horizon can be concentrated to produce acid grade fluorspar at a coarser size distribution than was assumed in the Scoping Study. Further work is continuing to optimise the recovery and simplify the process. The results from the Lower Horizon have confirmed that fine grinding is still required in order to produce acid grade fluorspar with lower recoveries than the Upper Horizon. Due to the differing nature of the two ore horizons and periodic delays at the testing laboratory the planned schedule to complete the metallurgical testwork has been delayed this year. This has subsequently delayed progress with the preliminary feasibility study engineering design, mine design, capital and operating cost estimation. The metallurgical testwork is ongoing with the current target for completion being the end of 2013. Based on the results of the testwork the Company will evaluate different options at scoping study level for processing and mine planning prior to progressing with further elements of the Preliminary Feasibility Study. The current target for completing the evaluation and Preliminary Feasibility Study is the end of 2014. MB Fluorspar Project, Nevada USA The MB Property comprises 89 contiguous unpatented mining claims covering an area of 1,712 acres and is located 19km south-west of the town of Eureka in central Nevada, USA, recognised as one of the most attractive mining jurisdictions in the world. Eureka is located on US Highway 50 and the main rail road is located 165 km to the north of the deposit providing bulk freight distribution to the east and west of the USA. Together with Europe, the USA is a key fluorspar market currently importing the majority of its fluorspar demand. Having distribution access to the west coast provides access to Asian markets which may be a potential target market in the future. Tonnage-Grade Estimate Earlier this year the Company commissioned Wardell Armstrong International Ltd (WAI) to complete a Tonnage-Grade Estimate for the MB Project, classified as an Exploration Target under the JORC code (2004). The Tonnage-Grade range was estimated at 85-105 million tonnes grading 9–11% fluorspar (CaF2) at 8% cut-off grade. The Exploration Target is part of a larger mineralised system estimated at 395–615 million tonnes grading 5–7% fluorspar at 2% cut-off grade. WAI recommended a staged drilling programme in order to upgrade the Exploration Target to a JORC compliant Mineral Resource and to target potential higher grade areas of the deposit having limited historic drilling information. Pictured: Managing Director, Richard Clemmey at MB Fluorspar Project, Nevada Pictured: Storuman Bulk Rail Terminal 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201309 Drilling Programme The drilling programme was planned in May 2013 and the Drilling Permit was subsequently approved by the US Bureau of Land Management (BLM) in late June 2013. Phase 1 of the drilling was a 550 metre (4 holes) programme designed to test and compare results from core and reverse circulation percussion drilling techniques and to evaluate suitable analytical techniques for fluorine. Significant intersections of fluorspar (CaF2) were reported in phase 1 e.g. 42.67m grading 12.4% CaF2 from 4.57m in hole 13TMBRC001 including 4.57m grading 26.1% CaF2 from 6.10m depth and 12.19m grading 16.5% CaF2 from 25.91m depth. Phase 2 of the drilling programme was completed using the reverse circulation percussion method and was a 2,670 metre (22 holes) programme designed to define a JORC compliant Mineral Resource for a part of the deposit which would support planning of a mine-starter pit for up to the first ten years of production. Additionally some of the planned holes targeted potentially higher grade areas of the deposit. The results from phase 2 are expected to be reported over the next few months. The Next Step The Company’s objective is to contract an independent consultant to define a JORC compliant resource by the end of Q1 2014. Following successful completion of this critical milestone the aim is to complete early stage bench scale metallurgical testwork to ascertain whether acid grade fluorspar can be produced from the ore followed by an independent scoping study, targeting completion by the end of 2014. Lassedalen Fluorspar Project, Norway The Lassedalen Fluorspar Project is favourably located near Kongsberg, 80km to the south-west of Oslo in Norway. It is less than 1km from highway E134 and approximately 50km from the nearest Norwegian port. The Company views this resource as strategically important alongside its Storuman project for the European market. However, due to financial market conditions in 2013, the project has had a lower priority this year. The objective in the future is further drilling aimed at increasing the size of the already defined JORC compliant Mineral Resource. Other Non-Core Projects Finland Gold Project The Company’s gold projects in Finland include the Kaaresselkå and Kiekerömaa gold prospects in the Lappland Greenstone Belt. This belt hosts a number of advanced gold projects and two operating gold mines including the six million ounce Kittila Gold mine operated by Canadian major, Agnico Eagle Mines. Pictured: Reverse Circulation Percussion Drilling, MB Project, Nevada Application to renew the Kaaresselkä exploration licences was made in 2012 and subsequently granted under the new mining act in March 2013 for a period of three years. The Company is currently re-evaluating its historic exploration results and further work will be planned as budgets allow. Rosendal Tantalum Project The Rosendal project contains a pegmatite hosted JORC compliant Inferred Mineral Resource of 1 million tonnes grading 255ppm tantalum pentoxide (Ta2O5), open at depth. The majority of the pegmatite comprises sodium feldspar which is used in the manufacture of glass, glazes and in other industrial applications. Tantalum is used mainly in electronic applications. The Company’s 2002 PFS evaluation considered production of tantalum only using the prevailing tantalite price of US$35–40/lb Ta2O5. It showed the project to be marginal and no further work was carried out. Since 2002, the price for tantalite has increased and is currently in the range $80–90/lb Ta2O5. A Scandinavian source of tantalum could be well received as tantalite buyers and consumers of tantalum metal now seek ethically sourced, conflict-free supplies in compliance with the requirements of the 2011 US Dodd-Frank Wall Street Reform and Consumer Protection Act. The Company is currently evaluating production opportunities and how best to valorise the project. Ghurayyah Tantalum-Niobium-Rare-Earth Project During 2013 preliminary feasibility studies for development of Ghurayyah have continued to be on hold pending the issue of a new exploration licence. 22975.02 13 January 2014 12:12 PM proof 6 Our FinancialsOur GovernanceOur Performancewww.tertiaryminerals.com Stock code: TYM10 Strategic Report continued Risks & Uncertainties The Board regularly reviews the risks to which the Group is exposed and ensures through its meetings and regular reporting that these risks are minimised as far as possible. Details of how the directors mitigate these risks can be found in the Strategic Report on pages 5 and 6. The principal risks and uncertainties facing the Group at this stage in its development are: Exploration Risk The Company’s business is mineral exploration and evaluation which are speculative activities and whilst the directors are satisfied that good progress is being made, there is no certainty that the Group will be successful in the definition of economic mineral deposits, or that it will proceed to the development of any of its projects or otherwise realise their value. Resource Risk All mineral deposits have risk associated with their defined grade and continuity. Mineral Reserves and Resources are calculated by the Group in accordance with accepted industry standards and codes but are always subject to uncertainties in the underlying assumptions which include geological projection and metal price assumptions. Development Risk Delays in permitting, financing and commissioning a project may result in delays to the Group meeting future production targets. Changes in commodity prices can affect the economic viability of mining projects and affect decisions on continuing exploration activity. Mining and Processing Technical Risk Notwithstanding the completion of metallurgical testwork, test mining and pilot studies indicating the technical viability of a mining operation, variations in mineralogy, mineral continuity, ground stability, groundwater conditions and other geological conditions may still render a mining and processing operation economically or technically non-viable. Environmental Risk Exploration and development of a project can be adversely affected by environmental legislation and the unforeseen results of environmental studies carried out during evaluation of a project. Once a project is in production unforeseen events can give rise to environmental liabilities. Financing & Liquidity Risk Liquidity risk is the risk that the Company will not be able to raise working capital for its ongoing activities. The Group’s goal is to finance its exploration and evaluation activities from future cash flows but until that point is reached the Company is reliant on raising working capital from equity markets or from industry sources. There is no certainty such funds will be available when needed. Political Risk All countries carry political risk that can lead to interruption of activity. Politically stable countries can have enhanced environmental and social permitting risks, risks of strikes and changes to taxation whereas less developed countries have enhanced risks associated with changes to the legal framework, civil unrest and government expropriation of assets. Partner Risk Whilst there has been no past evidence of this, the Group can be adversely affected if joint venture partners are unable or unwilling to perform their obligations or fund their share of future developments. Financial Instruments Details of risks associated with the Group’s Financial Instruments are given in Note 20 to the financial statements on page 38. Internal Controls & Risk Management The directors are responsible for the Group’s system of internal financial control. Although no system of internal financial control can provide absolute assurance against material misstatement or loss, the Group’s system is designed to provide reasonable assurance that problems are identified on a timely basis and dealt with appropriately. In carrying out their responsibilities, the directors have put in place a framework of controls to ensure as far as possible that ongoing financial performance is monitored in a timely manner, that corrective action is taken and that risk is identified as early as practically possible, and they have reviewed the effectiveness of internal financial control. The Board, subject to delegated authority, reviews capital investment, property sales and purchases, additional borrowing facilities, guarantees and insurance arrangements. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201311 Pictured: Reverse Circulation Percussion Drilling, MB Project Pictured: Environmental Baseline Testwork, Storuman Project Forward Looking Statements This Annual Report contains certain forward looking statements that have been made by the directors in good faith based on the information available at the time of the approval of the Annual Report. By their nature, such forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements. Corporate Governance Companies whose shares trade on AIM are not required to make an annual statement to shareholders regarding compliance with the UK Corporate Governance Code. The Company is committed to high standards of corporate governance and the Board seeks to comply with the principles of the UK Corporate Governance Code, insofar as it is appropriate to the Company at this stage in its development. The Board of Directors currently comprises the Executive Chairman, Managing Director and two non-executive directors. The Board considers that this structure is suitable for the Company having regard to the fact that it is not yet revenue-earning. Recently, the roles of Chairman and Managing Director were separated with the promotion of Richard Clemmey from Operations Director to Managing Director, a move which, amongst other things, brings this aspect of governance into line with best practice. The two non-executive directors have both served for more than ten years and under the terms of the Code cannot now be regarded as independent. It is proposed that they should continue to seek annual re-election rather than retiring by rotation. The Company has been fortunate to secure the services of Donald McAlister and David Whitehead during that time and both continue to provide valuable advice based on their long experience of the mining industry. The Board can be improved by the appointment of independent non-executive directors but is satisfied that it is currently suitable for an AIM listed company. Role of the Board The Board’s role is to agree the Group’s long term direction and strategy and monitor achievement of its business objectives. The Board meets four times a year for these purposes and holds additional meetings when necessary to transact other business. The Board receives reports for consideration on all significant strategic and operational matters. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance12 Strategic Report continued Pictured: Drilling chip samples MB Project, Nevada Pictured: Drilling core samples MB Project, Nevada Notwithstanding that the non-executive directors are not considered to be independent under the terms of the Code they are considered by the Board to be independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement. Directors have the facility to take external independent advice in furtherance of their duties at the Group’s expense and have access to the services of the Company Secretary. The Board delegates certain of its responsibilities to the Audit, Remuneration and Nomination Committees of the Board. These Committees operate within clearly defined terms of reference. Audit Committee The Audit Committee, composed entirely of non-executive directors, meets at least twice a year and assists the Board in meeting responsibilities in respect of external financial reporting and internal controls. The Audit Committee also keeps under review the scope and results of the audit. It also considers the cost-effectiveness, independence and objectivity of the Auditor taking account of any non-audit services provided by them. Remuneration Committee The Remuneration Committee also comprises the non- executive directors. The Remuneration Committee meets at least once a year to determine the appropriate remuneration for the Company’s executive directors, ensuring that this reflects their performance and that of the Group, and to demonstrate to shareholders that executive remuneration is set by Board members who have no personal interest in the outcome of their decisions. Because of the difficulty in defining KPIs for exploration companies the remuneration of executive directors does not currently include any element of performance related bonus. The Company has in place an Inland Revenue approved share option scheme and also issues warrants to subscribe for shares to executive directors and employees. The Remuneration Committee will set performance targets for executives when the Group’s projects reach a more advanced stage. Directors’ emoluments are disclosed in Note 4 to the financial statements and details of directors’ warrants are disclosed in Note 17. The Board is aware that non-executive directors are not considered to be independent under the terms of the Code if they hold warrants to buy shares in the Company and so they no longer participate in the issue of warrants. Nomination Committee The Nomination Committee comprises the Chairman, Managing Director and the non-executive directors. The Nomination Committee meets at least once per year to lead the formal process of rigorous and transparent procedures for Board appointments and to make recommendations to the Board in accordance with the requirements of the UK Corporate Governance Code and other applicable rules and regulations, insofar as they are appropriate to the Group at this stage in its development. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201313 Conflicts of Interest The Companies Act 2006 permits directors of public companies to authorise directors’ conflicts and potential conflicts, where appropriate and the Articles of Association contain a provision to this effect. The Group’s activities, carried out in accordance with Environmental Policy, have had only minimal environmental impact and this policy is regularly reviewed. Where appropriate, all work is carried out after advance consultation with affected parties. At 30 September 2013, Tertiary Minerals plc held 8.75% of the issued share capital of Sunrise Resources plc and the Chairman of Tertiary Minerals plc is also Chairman of Sunrise Resources plc. Tertiary Minerals plc also provides management services to Sunrise Resources plc, in the search, evaluation and acquisition of new projects. Procedures are in place in order to avoid any conflict of interest between the Company and Sunrise Resources plc. Corporate Responsibility The Board takes regular account of the significance of social, environmental and ethical matters affecting the business of the Group. At this stage in the Group’s development the Board has not adopted a specific policy on Corporate Social Responsibility as it has a limited pool of stakeholders other than its shareholders. Rather, the Board seeks to protect the interests of the Group’s stakeholders through individual policies and through ethical and transparent actions. The Company has adopted an Anti-corruption Policy and Code of Conduct. Shareholders As set out above, the Board seeks to protect shareholders’ interests by following, where appropriate, the guidelines in the UK Corporate Governance Code and the directors are always prepared, where practicable, to enter into a dialogue with shareholders to promote a mutual understanding of objectives. The Annual General Meeting provides the Board with an opportunity to informally meet and communicate directly with investors. Environment The Board recognises that its principal activity, mineral exploration, has potential to impact on the local environment and consequently has adopted an Environmental Policy to ensure that the Group’s activities have minimal environmental impact. Where appropriate, the Group’s contracts with suppliers and contractors legally bind those suppliers and contractors to do the same. Employees The Group encourages its employees to understand all aspects of the Group’s business and seeks to remunerate its employees fairly, being flexible where practicable. The Group gives full and fair consideration to applications for employment received regardless of age, gender, colour, ethnicity, disability, nationality, religious beliefs, transgender status or sexual orientation. The Board takes account of employees’ interests when making decisions, and suggestions from employees aimed at improving the Group’s performance are welcomed. Suppliers and Contractors The Group recognises that the goodwill of its contractors, consultants and suppliers is important to its business success and seeks to build and maintain this goodwill through fair dealings. The Group has a prompt payment policy and seeks to settle all agreed liabilities within the terms agreed with suppliers. The amount shown in the Consolidated and Company Statement of Financial Position in respect of trade payables at the end of the financial year represents 59 days of average daily purchases (2012: 37 days). Health and Safety The Board recognises it has a responsibility to provide strategic leadership and direction in the development of the Group’s health and safety strategy in order to protect all of its stakeholders. The Company has developed a Health and Safety Policy to clearly define roles and responsibilities and in order to identify and manage risk. This Strategic Report was approved by the Board of Directors on 12 December 2013 and signed on its behalf. Patrick Cheetham Chairman 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance14 Board of Directors 5 1 4 2 3 The Directors and Officers of the Company are: 1 Patrick Cheetham, aged 53 Executive Chairman Mr Cheetham, the founder of the Company, is a mining geologist with 31 years’ experience in mineral exploration and 25 years in public company management. He started his career as an exploration geologist in Australia with Western Mining Corporation and prior to that worked for Imperial Metals Corporation in British Columbia, Canada. From 1986 to 1993 he was joint managing director of Dragon Mining NL, and was responsible for the formation of that company, the identification of and acquisition of its exploration projects, its listing on the Australian Stock Exchange and the subsequent development of its exploration projects. In 1993 Patrick co-founded Archaean Gold N.L. which, in 1996, was the subject of a successful $50 million takeover bid by Lachlan Resources NL. He is currently also Chairman of Sunrise Resources plc. 2 Richard Clemmey, aged 41 Managing Director Mr Clemmey is a Chartered Engineer with more than 20 years of mine/ quarry development and management experience. A graduate of the Royal School of Mines in London, Richard spent the first 7 years of his career in the Middle East for Derwent Mining Ltd developing and managing a chromite mining business. Richard has held many senior positions including Operations Manager for Lafarge running their flagship industrial minerals operation in the north of England. He was General Manager for Hargreaves GB Ltd responsible for their quarrying and recycling operations and UK Operations Manager for Marshalls plc responsible for 8 quarrying operations. Richard was General Manager for CFE Rock managing their industrial minerals operations in Oman before joining Tertiary Minerals plc in September 2011. He was appointed by the Board to the position of Operations Director in May 2012 and became Managing Director in November 2013. * Chairman of the Audit Committee and member of the Remuneration Committee. † Chairman of the Remuneration Committee and member of the Audit Committee. 3 Donald McAlister, aged 54 Non-Executive Director* Mr McAlister is a founding director of the Company. He was until recently Finance Director of Mwana Africa. Prior to that he was Finance Director of Ridge Mining plc and Reunion Mining, having worked previously at Enterprise Oil plc, Texas Eastern N Sea Inc. and Cluff Oil Holdings plc. He has over 20 years’ experience in all financial aspects of resource industry, including metal hedging, tax planning and economic modelling. Donald’s experience also includes the economic evaluation of gold and base metal mines and the arranging of project finance for feasibility studies and mine developments. He was also involved in the listing of Reunion Mining plc on the Luxembourg and London Stock Exchanges. 4 David Whitehead, aged 71 Non-Executive Director† Mr Whitehead is a mining geologist with over 40 years’ experience of all aspects of mineral exploration, mine development and operations management including 20 years at senior executive level in one of the world’s major mining companies where he was responsible for long-term strategic planning and the management of a portfolio of gold mines and exploration and development programmes. He joined Tertiary in April 2002 on retiring as Vice-President, Integration, Exploration and Innovation at BHP Billiton Group Plc, having been with the Billiton Group since 1976. As Chief Executive, Exploration and Development of Billiton Plc from 1997, David created and introduced a market oriented and commercial approach to minerals exploration, involving the formation of strategic alliances with junior exploration companies. Mr Whitehead is currently a director of Consolidated Mines & Investments Ltd and Chairman of its subsidiary Consolidated Nickel Mines Ltd. 5 Colin Fitch LLM, FCIS, Company Secretary Colin Fitch is a Barrister-at-Law, and was previously Corporate Finance Director of Kleinwort Benson, Partner and Head of Corporate Finance at Rowe & Pitman (SG Warburg Securities) and Assistant Secretary at the London Stock Exchange. He has also held a number of non-executive directorships of public and private companies, including Merrydown Plc, African Lakes and Manders Plc. He is currently Company Secretary for Sunrise Resources plc. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201315 The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Website publication The directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. Directors’ Responsibilities The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance16 Directors’ Report The directors are pleased to submit their Annual Report and audited accounts for the year ended 30 September 2013. The Strategic Report starting on page 5 contains details of the principal activities of the Company and includes the Operating Review which provides detailed information on the development of the Group’s business during the year and indications of likely future developments. Going Concern In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches, as and when required. When any of the Company’s projects move to the development stage, specific project financing will be required. The directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. These projections include the proceeds of future fundraising and planned discretionary project expenditures necessary to maintain the Company and Group as going concerns. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. However, the directors have a reasonable expectation that they will secure additional funding when required to continue meeting corporate overheads and exploration costs for the foreseeable future and therefore believe that the “going concern” basis is appropriate for the preparation of the financial statements. For further information see Note 1(b) on page 23. Dividend The directors are unable to recommend the payment of any ordinary dividend. Financial Instruments & Other Risks Details of the Group’s Financial Instruments and risk management objectives and of the Group’s exposure to risk associated with its Financial Instruments is given in Note 20 to the financial statements. The business of mineral exploration and evaluation has inherent risks. Details of risks and uncertainties that affect the Group’s business are given in the Strategic Report on page 10. Directors The Directors holding office in the period were: Mr P L Cheetham Mr R H Clemmey Mr D A R McAlister Mr D Whitehead Shareholders As at the date of this report the following interests of 3% or more in the issued share capital of the Company appeared in the register: As at 12 December 2013 Barclayshare Nominees Limited TD Direct Investing Nominees (Europe) Limited SMKTNOMS HSDL Nominees Limited Ronald Bruce Rowan Patrick Lyn Cheetham Hargreaves Lansdown (Nominee) HLNOM HSBC Client Holdings Nominee (UK) Limited 731504 Hargreaves Lansdown Limited VRA Number of shares 21,357,185 17,322,009 9,677,022 8,000,000 7,533,288 6,330,520 6,313,533 5,890,004 % of share capital 13.20 10.71 5.98 4.95 4.66 3.91 3.90 3.64 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201317 Accounting Policies The financial statements have been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (IFRS), as adopted by the European Union, and their interpretations adopted by the International Accounting Standards Board (IASB). They have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Further details of the Group’s accounting policies can be found in Note 1 of the financial statements starting on page 23. Disclosure of Audit Information Each of the directors has confirmed that so far as he is aware, there is no relevant audit information of which the Company’s Auditor is unaware, and that he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information. Annual Report Copies of the Tertiary Minerals plc Group financial statements are available, free of charge, from the Company’s Registered Office or from the offices of the Company’s Nominated Adviser, Cantor Fitzgerald Europe, One Churchill Place, Level 20, Canary Wharf, London E14 5RB and also on the Company’s website: www.tertiaryminerals.com. Annual General Meeting Notice of the Company’s Annual General Meeting convened for Wednesday 19 February 2014 at 2.30 p.m. is set out on page 40 of this report. A Proxy Form is provided on page 43. Explanatory Notes giving further information about the proposed resolutions are set out on page 41. Approved by the Board of Directors on 12 December 2013 and signed on its behalf. Auditor PKF (UK) LLP has merged its business into BDO LLP and accordingly has signed their Auditor’s report in the name of the merged firm. Patrick Cheetham Chairman A resolution to reappoint BDO LLP as Auditor of the Company and the Group will be proposed at the forthcoming Annual General Meeting. Suppliers and Contractors Details of the Group’s policy and payment of creditors is disclosed on page 13. This policy will continue unchanged in the next financial year. Charitable and Political Donations During the year, the Group made no charitable or political donations. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance18 Independent Auditor’s Report to the Members of Tertiary Minerals plc for the year ended 30 September 2013 We have audited the financial statements of Tertiary Minerals plc for the year ended 30 September 2013 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of changes in equity, the consolidated and company statements of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC’s website at: www.frc.org.uk/auditscopeukprivate. Opinion on financial statements In our opinion: Emphasis of matter – going concern In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1(b) to the financial statements concerning the group’s and the company’s ability to continue as going concerns. As explained in note 1(b) to the financial statements, the group will need to raise further funds within the next 12 months in order to cover the company’s and group’s overheads and carry out the company’s and group’s planned discretionary project expenditure. As there is no assurance that adequate funds will be obtained, these conditions, along with the other matters explained in note 1(b) to the financial statements, indicates the existence of a material uncertainty which may cast significant doubt about the group’s and the company’s ability to continue as going concerns. The financial statements do not include the adjustments that would result if the group and company were unable to continue as going concerns. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we • the financial statements give a true and fair view of the state require for our audit. of the group’s and the parent company’s affairs as at 30 September 2013 and of the group’s loss for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Timothy Entwistle (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor Manchester United Kingdom 12 December 2013 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 2013Consolidated Income Statement for the year ended 30 September 2013 Pre-licence exploration costs Impairment of deferred exploration costs Non-cash movement of liability under Equity Swap Agreement Administrative expenses Operating loss Interest receivable Loss on ordinary activities before taxation Tax on loss on ordinary activities Loss for the year attributable to equity holders of the parent Loss per share — basic and diluted (pence) All amounts relate to continuing activities. 19 Notes 8 3 7 6 2013 £ 32,131 7,140 (20,300) 437,857 (456,828) 5,668 (451,160) – (451,160) (0.31) 2012 £ 32,784 – – 466,211 (498,995) 4,050 (494,945) – (494,945) (0.41) Consolidated Statement of Comprehensive Income for the year ended 30 September 2013 Loss for the year Other comprehensive income Items that will not be reclassified subsequently to the income statement: Movement in revaluation of available for sale investment Items that could be reclassified subsequently to the income statement: Foreign exchange translation differences on foreign currency net investments in subsidiaries Total comprehensive loss for the year attributable to the equity holders of the parent 2013 £ (451,160) 2012 £ (494,945) (159,045) (159,045) 69,529 69,529 (10,204) (10,204) (620,409) 10,956 10,956 (414,460) 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance20 Consolidated and Company Statements of Financial Position at 30 September 2013 Company Number 03821411 Non-current assets Intangible assets Property, plant & equipment Investment in subsidiary Available for sale investment Current assets Receivables Cash and cash equivalents Restricted cash Current liabilities Trade and other payables Equity swap Net current assets Net assets Equity Called up share capital Share premium account Merger reserve Share option reserve Available for sale revaluation reserve Foreign currency reserve Accumulated losses Equity attributable to the owners of the parent Group 2013 £ Company 2013 £ Group 2012 £ Company 2012 £ Notes 8 9 10 10 11 12 12 13 14 14 2,420,947 8,605 – 230,251 2,659,803 81,490 1,187,612 366,007 1,635,109 – 6,839 4,896,896 230,251 5,133,986 61,735 1,110,892 366,007 1,538,634 1,843,349 15,272 – 355,375 2,213,996 75,936 841,299 – 917,235 – 12,770 4,323,095 355,375 4,691,240 67,987 805,135 – 873,122 (233,881) (102,381) (336,262) 1,298,847 3,958,650 (72,268) (102,381) (174,649) 1,363,985 6,497,971 (134,322) – (134,322) 782,913 2,996,909 (79,183) – (79,183) 793,939 5,485,179 1,617,662 8,008,604 131,096 404,194 (86,399) 137,104 (6,253,611) 3,958,650 1,617,662 8,008,604 131,096 404,194 (43,874) – (3,619,711) 6,497,971 1,305,862 6,826,760 131,096 315,688 72,646 147,308 (5,802,451) 2,996,909 1,305,862 6,826,760 131,096 315,688 115,171 – (3,209,398) 5,485,179 These financial statements were approved and authorised for issue by the Board of Directors on 12 December 2013 and were signed on its behalf. P L Cheetham Executive Chairman D A R McAlister Director 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201321 Consolidated Statement of Changes in Equity Share capital Group £ At 30 September 2011 1,188,161 – Loss for the period – Change in fair value – Exchange differences Total comprehensive loss for the year – Share issue 117,700 – Share based payments At 30 September 2012 1,305,861 – Loss for the period – Change in fair value – Exchange differences Total comprehensive – loss for the year – Recognition of equity swap 311,801 Share issue Share based payments – At 30 September 2013 1,617,662 Share premium account £ 6,449,238 – – – – 377,522 – 6,826,760 – – – – (123,341) 1,305,185 – 8,008,604 Merger reserve £ 131,096 – – – – – – 131,096 – – – – – – – 131,096 Share option reserve £ 187,567 – – – – – 128,121 315,688 – – – – – – 88,506 404,194 Available for sale revaluation reserve £ 3,117 – 69,529 – 69,529 – – 72,646 – (159,045) – (159,045) – – – (86,399) Foreign currency reserve £ 136,352 – – 10,956 10,956 – – 147,308 – – (10,204) (10,204) – – – 137,104 Accumulated losses £ Total £ (5,307,506) 2,788,025 (494,945) 69,529 10,956 (494,945) – – (494,945) – – (414,460) 495,222 128,121 (5,802,451) 2,996,908 (451,160) (159,045) (10,204) (451,160) – – (451,160) – – – (620,409) (123,341) 1,616,986 88,506 (6,253,611) 3,958,650 Company Statement of Changes in Equity Company At 30 September 2011 Loss for the period Change in fair value Total comprehensive loss for the year Share issue Share based payments At 30 September 2012 Loss for the period Change in fair value Total comprehensive loss for the year Recognition of equity swap Share issue Share based payments At 30 September 2013 Share capital £ 1,188,161 – – – 117,700 – 1,305,861 – – – – 311,801 – 1,617,662 Share premium account £ 6,449,238 – – – 377,522 – 6,826,760 – – – (123,341) 1,305,185 – 8,008,604 Merger reserve £ 131,096 – – – – – 131,096 – – – – – – 131,096 Share option reserve £ 187,567 – – – – 128,121 315,688 – – – – – 88,506 404,194 Available for sale revaluation reserve £ 45,642 – 69,529 69,529 – – 115,171 – (159,045) (159,045) – – – (43,874) Accumulated losses £ (2,750,910) (458,488) – (458,488) – – (3,209,398) (410,313) – Total £ 5,250,794 (458,488) 69,529 (388,959) 495,222 128,121 5,485,178 (410,313) (159,045) (410,313) – – – (3,619,711) (569,358) (123,341) 1,616,986 88,506 (6,497,971) 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance22 Consolidated and Company Statements of Cash Flows for the year ended 30 September 2013 Operating activity Total loss after tax Depreciation charge Impairment charge Share based payment charge Non-cash movement of liability under Equity Swap Agreement Increase/(decrease) in provision for impairment of loans to subsidiaries (Increase)/decrease in receivables Increase/(decrease) in payables Net cash outflow from operating activity Investing activity Interest received Purchase of intangible assets Purchase of property, plant & equipment Purchase of available for sale investment Additional loans to subsidiaries Net cash outflow from investing activity Financing activity Issue of share capital (net of expenses) Net transfer to restricted cash Net cash inflow from financing activity Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at start of year Exchange differences Cash and cash equivalents at 30 September Group 2013 £ Company 2013 £ Group 2012 £ Company 2012 £ Notes (456,828) 8,293 7,140 88,506 (20,300) – (5,554) 18,709 (360,034) 5,668 (480,227) (1,626) (33,921) – (510,106) 1,616,986 (366,667) 1,250,319 380,179 841,299 (33,866) 1,187,612 (415,883) 7,234 – 88,506 (20,300) 416 6,252 (6,915) (340,690) 5,570 – (1,304) (33,921) (574,217) (603,872) 1,616,986 (366,667) 1,250,319 305,757 805,135 – 1,110,892 (498,995) 8,100 – 128,121 – – 12,035 (14,944) (365,683) 4,050 (481,604) (527) – – (478,081) (462,402) 7,210 – 128,121 – 762 (12,855) 27,444 (311,720) 3,914 – – – (507,768) (503,854) 495,222 – 495,222 (348,542) 1,178,941 10,900 841,299 495,222 – 495,222 (320,352) 1,125,487 – 805,135 11 13 9 12 12 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 2013 23 Notes to the Financial Statements for the year ended 30 September 2013 Background Tertiary Minerals plc is a public company incorporated and domiciled in England. It is traded on the AIM market of the London Stock Exchange and its shares also trade on AIM – EPIC: TYM. The Company is a holding company for a number of companies (together, “the Group”) and is incorporated and domiciled in England. The Group’s financial statements are presented in Pounds Sterling (£) which is also the functional currency of the Company. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s financial statements. 1. Accounting policies (a) Basis of preparation The financial statements have been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (IFRS), as adopted by the European Union. They have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Company has not adopted any standards or interpretations in advance of the required implementation dates. It is not expected that adoption of standards or interpretations which have been issued by the International Accounting Standards Board, but have not been adopted, will have a material impact on the financial statements. (b) Going concern In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches. Further funding is raised as and when required. When any of the Group’s projects move to the development stage, specific project financing will be required. The directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. These projections include the proceeds of future fundraising necessary within the next 12 months to meet the Company’s and Group’s overheads and planned discretionary project expenditures and to maintain the Company and Group as going concerns. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. This represents a material uncertainty related to events or conditions which may cast significant doubt on the Group’s and Company’s ability to continue as going concerns and, therefore, that they may be unable to realise their assets and discharge their liabilities in the normal course of business. However, the directors have a reasonable expectation that they will secure additional funding when required to continue meeting corporate overheads and exploration costs for the foreseeable future and therefore believe that the going concern basis is appropriate for the preparation of the financial statements. (c) Basis of consolidation Investments, including long term loans, in subsidiaries are valued at the lower of cost or recoverable amount, with an ongoing review for impairment. The Group’s financial statements consolidate the financial statements of Tertiary Minerals plc and its subsidiary undertakings using the acquisition method and eliminate intercompany balances and transactions. The Group has contractual arrangements with other participants to engage in joint activities that do not create an entity carrying on a trade or business of its own. The Group includes its share of assets and liabilities in such joint arrangements, measured in accordance with the terms of each arrangement, which is usually pro rata to the Group’s interest in the joint arrangement. In accordance with section 408 of the Companies Act 2006, Tertiary Minerals plc is exempt from the requirement to present its own Statement of Comprehensive Income. The amount of the loss for the financial year recorded within the financial statements of Tertiary Minerals plc is £392,930 (2012: £458,488). 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance24 Notes to the Financial Statements for the year ended 30 September 2013 1. Accounting policies — continued (d) Intangible assets Exploration and evaluation Accumulated exploration and evaluation costs incurred in relation to separate areas of interest (which may comprise more than one exploration licence or exploration licence applications) are capitalised and carried forward where: (1) such costs are expected to be recouped through successful exploration and development of the area, or alternatively by its sale; or (2) exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to the areas are continuing. A bi-annual review is carried out by the directors to consider whether any exploration and development costs have suffered impairment in value and, if necessary, provisions are made according to these criteria. Accumulated costs where the Group does not yet have an exclusive exploration licence and in respect of areas of interest which have been abandoned, are written off to the income statement in the year in which the pre-licence expense was incurred or in which the area was abandoned. Development Exploration, evaluation and development costs are carried at the lower of cost and expected net recoverable amount. On reaching a mining development decision, exploration and evaluation costs are reclassified as development costs and all development costs on a specific area of interest will be amortised over the useful economic life of the projects, once they become income generating, and the costs can be recouped. (e) Property, plant & equipment All property, plant and equipment assets are stated at cost less accumulated depreciation. Depreciation is provided by the Group on all property, plant & equipment, at rates calculated to write off the cost, less estimated residual value, of each asset evenly over its expected useful life, as follows: Fixtures and fittings 20% to 33% per annum. Useful life and residual value are reassessed annually. (f) Available for sale investments Available for sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. Available for sale investments are initially measured at cost and subsequently at fair value, being the equivalent of market value, with changes in value recognised in equity. Gains and losses arising from available for sale investments are recognised in the income statement when they are sold or impaired. (g) Trade and other receivables and payables Trade and other receivables and payables are measured at initial recognition at fair value and subsequently measured at amortised cost. (h) Cash and cash equivalents Cash and cash equivalents consist of cash at bank and in hand and short term bank deposits with a maturity of three months or less. (i) Deferred taxation Deferred taxation, if applicable, is provided in full in respect of taxation deferred by temporary differences between the treatment of certain items for taxation and accounting purposes. Deferred tax assets are recognised to the extent that they are regarded as recoverable. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201325 1. Accounting policies — continued (j) Foreign currencies The Group’s consolidated financial statements are presented in Pounds Sterling (£), being the functional currency of the Company, and the currency of the primary economic environment in which the Company operates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. For consolidation purposes, the net investment in foreign operations and the assets and liabilities of overseas subsidiaries, associated undertakings and joint arrangements, that have a functional currency different from the Group’s presentation currency, are translated at the closing exchange rates. Income statements of overseas subsidiaries, that have a functional currency different from the Group’s presentation currency, are translated at exchange rates at the date of transaction. Exchange differences arising on these transactions are taken to the foreign currency reserve. (k) Leasing and hire purchase commitments Rentals applicable to operating leases where substantially all the benefits and risks of ownership remain with the lessor are charged to the income statement on a straight-line basis. (l) Share based payments The Company issues warrants and options to employees (including directors) and suppliers. For all options and warrants issued after 7 November 2002 the fair value of the services received is recognised as a charge measured at fair value on the date of grant and determined in accordance with IFRS 2, adopting the Black–Scholes–Merton model. The fair value is charged to administrative expenses on a straight-line basis over the vesting period, together with a corresponding increase in equity, based on the management’s estimate of shares that will eventually vest. The expected life of the options and warrants is adjusted based on management’s best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. The details of the calculation are shown in Note 15. (m) Equity swap agreements The Company entered into an equity swap agreement during the year to 30 September 2013. At the date of the agreement, the Company was required to deposit a sum of money into an escrow account, by way of transfer from unrestricted cash. The escrow account balance is treated as a restricted cash asset on the statement of financial position. The amount deposited is adjusted by the net present value of the deposit over the term of the agreement, with the adjustment being charged to administrative expenses The fair value of the agreement is determined by independent valuation at the date of the agreement and is deducted from the escrow deposit to determine the Company’s potential liability under the agreement. The liability is entered onto the statement of financial position and charged to the share premium account, because the agreement was entered into as part of the share subscription (Note 14). An independent revaluation is obtained at the end of each financial year and the liability amended, the adjustment being charged to administrative expenses. Upon each of the periodical settlement dates during the term of the agreement a proportion of the initial escrow deposit is returned to the Company after the deduction of any amounts payable under the equity swap agreement. At each settlement date, an average market price of the Company’s shares is calculated and compared to a benchmark price and the return payments to the Company are then adjusted in accordance with the outcome of the comparison. The details of the calculation are explained in Note 14. Payments from the escrow account on each of the settlement dates are treated as a transfer of funds to the Company’s unrestricted cash, with the amount of the adjustments being charged or credited to administrative expenses. (n) Judgements and estimations in applying accounting policies In the process of applying the Group’s accounting policies above, the Group has identified the judgemental areas that have the most significant effect on the amounts recognised in the financial statements: 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance26 Notes to the Financial Statements for the year ended 30 September 2013 1. Accounting policies — continued Intangible fixed assets — exploration and evaluation Capitalisation of exploration and evaluation costs requires that costs be assessed against the likelihood that such costs will be recoverable against future exploitation or sale or alternatively, where activities have not reached a stage which permits a reasonable estimate of the existence of mineral reserves, a judgement that future exploration or evaluation should continue. This requires management to make estimates and judgements and to make certain assumptions, often of a geological nature, and most particularly in relation to whether or not an economically viable mining operation can be established in future. Such estimates, judgements and assumptions are likely to change as new information becomes available. When it becomes apparent that recovery of expenditure is unlikely the relevant capitalised amount is written off to the income statement. Impairment Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. The Group will review information produced by its exploration activities and consider whether the carrying value is impaired. Assessment of the impairment of assets is a judgement based on analysis of the probability of future cash flows from the relevant project, including consideration of: (a) The period for which the entity has the right to explore in the specific area and whether this right will expire in the near future, and whether the right is expected to be renewed. (b) The availability of funds for expenditure on further exploration for and evaluation of mineral resources on the specific project. (c) Exploration for and evaluation of mineral resources on the specific project has not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities on the project. (d) Sufficient data exist to indicate that, although a development on the specific project is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development of a mine or by the sale of the project. Impairment reviews for investments in subsidiaries and available for sale investments are carried out on an individual basis. The Group reviews performance indicators of the investment, such as market share price, to indicate whether the carrying value is impaired. Going concern The preparation of financial statements requires an assessment of the validity of the going concern assumption. The validity of the going concern assumption is dependent on finance being available for the continuing working capital requirements of the Group. Based on the assumption that such finance will become available, the directors believe that the going concern basis is appropriate for these accounts. Share based payments The estimates of share based payments costs require that management selects an appropriate valuation model and makes decisions on various inputs into the model including the volatility of its own share price, the probable life of the options before exercise, and behavioural considerations of employees. Valuation of equity swap agreements Management appoints independent valuers to estimate the fair value of the agreement at the agreement date and at the end of each financial year. The main inputs to the valuation model are the length of the agreement and the volatility of the Company’s share price. Valuation of restricted cash Where the Group deposits cash into restricted accounts, a discounted cash flow is applied to determine the net present value of the cash at the date of deposit. The main estimates to the valuation model are the expected term of the deposit and a risk free interest rate. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201327 2. Segmental analysis The Chief Operating Decision Maker is the Board of Directors. The Board considers the business has one reportable segment, the management of exploration projects, which is supported by a Head Office function. For the purpose of measuring segmental profits and losses the exploration segment bears only those direct costs incurred by or on behalf of those projects. No Head Office cost allocations are made to this segment. The Head Office function recognises all other costs. 2013 Consolidated Income Statement Impairment of deferred exploration costs Pre-licence exploration costs Share based payments Other expenses Operating Loss Bank interest received Loss on ordinary activities before taxation Tax on loss on ordinary activities Loss for the year attributable to equity holders Non-current assets Intangible assets: Deferred exploration costs: Kaaresselkä Gold Project, Finland Kiekerömaa Gold Project, Finland Lassedalen Fluorspar Project, Norway Storuman Fluorspar Project, Sweden Ghurayyah Tantalum Project, Saudi Arabia MB Fluorspar Project, USA Property, plant & equipment Investment in subsidiary Available for sale investment Current assets Receivables Cash and cash equivalents Restricted cash Current liabilities Trade and other payables Equity swap Net current assets Net assets Other data Deferred exploration additions Exchange rate adjustments to deferred exploration costs Exploration Projects £ Head Office £ (7,140) – – – – – – – (7,140) – (32,131) (88,506) (329,051) (449,688) 5,668 (444,020) – (444,020) 277,809 123,449 341,365 1,316,345 – 361,979 2,420,947 – – – 2,420,947 – – – – – – – 8,605 – 230,251 238,856 – – – – 81,490 1,187,612 366,007 1,635,109 Total £ (7,140) (32,131) (88,506) (329,051) (456,828) 5,668 (451,160) – (451,160) 277,809 123,449 341,365 1,316,345 – 361,979 2,420,947 8,605 – 230,251 2,659,803 81,490 1,187,612 366,007 1,635,109 (149,815) – (149,815) (149,815) 2,271,132 (84,066) (102,381) (186,447) 1,448,662 1,687,518 (233,881) (102,381) (336,262) 1,298,847 3,958,650 561,077 – – (23,661) 561,077 (23,661) 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance28 Notes to the Financial Statements for the year ended 30 September 2013 2. Segmental analysis — continued 2012 Consolidated Income Statement Impairment of deferred exploration costs Pre-licence exploration costs Share based payments Other expenses Operating Loss Bank interest received Loss on ordinary activities before taxation Tax on loss on ordinary activities Loss for the year attributable to equity holders Non-current assets Intangible assets: Deferred exploration costs: Kaaresselkä Gold Project, Finland Kiekerömaa Gold Project, Finland Kolari Iron Project, Finland Rosendal Tantalum Project, Finland Lassedalen Fluorspar Project, Norway Gjerpen Fluorspar Project, Norway Storuman Fluorspar Project, Sweden Ghurayyah Tantalum Project, Saudi Arabia MB Fluorspar Project, USA Property, plant & equipment Investment in subsidiary Available for sale investment Current assets Receivables Cash and cash equivalents Current liabilities Trade and other payables Net current assets Net assets Other data Deferred exploration additions Exchange rate adjustments to deferred exploration costs Exploration Projects £ Head Office £ – – – – – – – – – (32,784) (128,121) (338,090) (498,995) 4,050 (494,945) – (494,945) 259,582 123,237 – – 314,220 7,140 1,114,955 – 24,215 1,843,349 – – – 1,843,349 – – – – – – – – – – – – 15,272 – 355,375 370,647 75,935 841,299 917,234 Total £ – (32,784) (128,121) (338,090) (498,995) 4,050 (494,945) – (494,945) 259,582 123,237 – – 314,220 7,140 1,114,955 – 24,215 1,843,349 15,272 – 355,375 2,213,996 75,935 841,299 917,234 (68,965) (68,965) 1,774,384 (65,357) 851,877 1,222,524 (134,322) 782,912 2,996,908 466,347 – – (56) 466,347 (56) 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 20133. Loss on ordinary activities before taxation The operating loss is stated after charging Operating lease rentals — land and buildings Fees payable to the Group’s Auditor for: The audit of the Group’s annual accounts Fees payables to the Group’s Auditor and its associates for other services: The audit of the Group’s subsidiaries, pursuant to legislation Other services relating to taxation Other services Depreciation — owned assets 4. Directors’ emoluments Remuneration in respect of directors was as follows: P L Cheetham (salary) R H Clemmey (salary) D A R McAlister (salary) D Whitehead (fees) D A R McAlister (gain on exercise of share options) 29 2013 £ 2012 £ 18,206 17,849 6,210 6,210 3,200 – 1,050 3,200 12,750 1,050 8,293 8,100 2013 £ 2012 £ 53,343 70,925 12,000 12,000 17,715 165,983 56,949 61,710 11,500 11,500 – 141,659 The above remuneration amounts are net of the recharges to Sunrise Resources plc as set out in Note 17. They do not include non cash share based payments charged in these financial statements in respect of warrants issued to the directors amounting to £68,072 (2012: £82,235) or Employer’s National Insurance contributions of £16,137 (2012: £15,290). 5. Staff costs Staff costs for Group and Company, including directors, were as follows: Wages and salaries Social security costs Share based payments 2013 £ 2012 £ 206,261 21,876 81,681 309,818 190,461 20,220 85,466 296,147 The average monthly number of employees, including directors, employed by the Group and Company during the year was as follows: Technical employees Administration employees (including non-executive directors) 2013 Number 3 4 7 2012 Number 3 3 6 The cost of employing technical and administrative employees is shared with Sunrise Resources plc as set out in Note 17. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance30 Notes to the Financial Statements for the year ended 30 September 2013 Loss per share 6. Loss per share has been calculated on the loss and the weighted average number of shares in issue during the year. Loss (£) Weighted average shares in issue (No.) Basic and diluted loss per share (pence) 2013 (451,160) 2012 (494,945) 143,365,584 121,137,967 (0.41) (0.31) The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for the basic earnings per ordinary share. This is because the exercise of share warrants and options would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive. Taxation on ordinary activities 7. No liability to corporation tax arises for the year due to the Group recording a taxable loss (2012: £nil). The tax credit for the year is lower than the credit resulting from the loss before tax at the standard rate of corporation tax in the UK — 23 % (2012: 24%). The differences are explained below. Tax reconciliation Loss on ordinary activities before tax Tax at 23% (2012: 24%) Effects (at 23%) (2012: 24%) of: Differences between capital allowances and depreciation Pre-trading expenditure no longer deductible for tax purposes Utilisation of losses brought forward Tax losses carried forward Tax on loss from ordinary activities 2013 £ 2012 £ (451,160) (103,767) (494,945) (118,787) 3,865 302,192 (202,290) – – 2,169 278,411 (161,793) – – Factors that may affect future tax charges The Group has total losses carried forward of £4,598,142 (2012: £4,330,434). This amount would be recoverable if sufficient profits were made in the future. The deferred tax asset has not been recognised as the future recovery is uncertain given the exploration status of the Group. 8. Intangible assets Group Cost At start of year Additions Exchange adjustments At 30 September Impairment losses At start of year Charge during year At 30 September Carrying amounts At 30 September At start of year Deferred exploration expenditure 2013 £ 3,090,911 561,077 23,661 3,675,649 Deferred exploration expenditure 2012 £ 2,624,508 466,347 56 3,090,911 (1,247,562) (7,140) (1,254,702) (1,247,562) – (1,247,562) 2,420,947 1,843,349 1,843,349 1,376,946 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201331 Group fixtures and fittings 2013 £ Company fixtures and fittings 2013 £ Group fixtures and fittings 2012 £ Company fixtures and fittings 2012 £ 61,456 1,626 – 63,082 (46,184) (8,293) (54,477) 8,605 15,272 31,204 1,304 – 32,508 (18,434) (7,235) (25,669) 6,839 12,770 60,929 527 – 61,456 (38,084) (8,100) (46,184) 15,272 22,845 31,204 – – 31,204 (11,224) (7,210) (18,434) 12,770 19,980 Country of incorporation/ registration England & Wales England & Wales Nevada, USA Type and percentage of shares held at 30 September 2013 100% of ordinary shares 100% of ordinary shares 100% of ordinary shares Principal activity Mineral exploration Mineral exploration Mineral exploration 9. Property, plant & equipment Cost At start of year Additions Disposals At 30 September Depreciation At start of year Charge for the year At 30 September Net Book Value At 30 September At start of year 10. Investments Subsidiary undertakings Company Tertiary Gold Limited Tertiary (Middle East) Limited Tertiary Minerals US Inc. Investment in subsidiary undertakings Ordinary shares — Tertiary (Middle East) Limited Ordinary shares — Tertiary Gold Limited Loan — Tertiary (Middle East) Limited Less — Provision for impairment Loan — Tertiary Gold Limited Loan — Tertiary Minerals US Inc. At 30 September Company 2013 £ 1 93,792 679,683 (679,683) 4,454,903 348,200 4,896,896 Company 2012 £ 1 93,792 679,267 (679,267) 4,214,532 14,770 4,323,095 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance32 Notes to the Financial Statements for the year ended 30 September 2013 Investments — continued 10. Available for sale investment Company Sunrise Resources plc Country of incorporation/ registration England & Wales Type and percentage of shares held at 30 September 2013 8.75% of ordinary shares Mineral exploration Principal activity Available for sale investment Value at start of year Additions to available for sale investment Movement in valuation of available for sale investment At 30 September Group 2013 £ 355,375 33,921 (159,045) 230,251 Company 2013 £ 355,375 33,921 (159,045) 230,251 Group 2012 £ 285,846 – 69,529 355,375 Company 2012 £ 285,846 – 69,529 355,375 The additions to available for sale investment are shares issued in lieu of a payment for management fees. The fair value of the available for sale investment is equal to the market value of the shares in Sunrise Resources plc at 30 September 2013, based on the closing mid-market price of shares on the AIM Market. These are level one inputs for the purpose of the IFRS 7 fair value hierarchy. 11. Receivables Trade receivables Other receivables Prepayments The Group aged analysis of trade receivables is as follows: 2013 Trade receivables 2012 Trade receivables 12. Cash and cash equivalents Cash at bank and in hand Short-term bank deposits Group 2013 £ 43,173 16,497 21,820 81,490 Company 2013 £ 43,173 1,195 17,367 61,735 Not impaired £ 43,173 33,610 30 days or less £ 43,173 33,610 Group 2012 £ 33,610 16,345 25,981 75,936 Over 30 days £ – – Company 2012 £ 33,610 15,015 19,362 67,987 Total carrying amount £ 43,173 33,610 Group 2013 £ 160,003 1,027,609 1,187,612 Company 2013 £ 83,283 1,027,609 1,110,892 Group 2012 £ 39,340 801,959 841,299 Company 2012 £ 5,204 799,931 805,135 Restricted cash In order to satisfy any payments under the equity swap agreement (Note 14), the Company deposited £400,000 in an escrow account in May 2013. Portions of the restricted funds are released to the Company on each monthly settlement date after deducting any payments that may be owed to YA Global Master SPV Ltd. At 30 September 2013, the net amount held in escrow was £366,007. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201333 13. Trade and other payables Trade payables Other taxes and social security costs Accruals Other payables 14. Share capital Allotted, called up and fully paid Ordinary shares of 1p each Group 2013 £ 125,042 10,516 95,822 2,501 233,881 Company 2013 £ 20,274 10,516 38,977 2,501 72,268 Group 2012 £ 71,874 10,792 48,044 3,612 134,322 Company 2012 £ 43,340 10,792 21,439 3,612 79,183 2013 No. 2013 £ 2012 No. 2012 £ 161,766,214 161,766,214 1,617,662 130,586,214 1,617,662 130,586,214 1,305,862 1,305,862 During the year to 30 September 2013 the following share issues took place: An issue of 2,730,000 1.0p ordinary shares at 6.08p per share, being a drawdown under the Equity Finance Facility (Note 15), for a total consideration of £155,151 net of expenses (21 December 2012). An issue of 1,950,000 1.0p ordinary shares at 9.18p per share, being a drawdown under the Equity Finance Facility (Note 15), for a total consideration of £169,249 net of expenses (6 March 2013). An issue of 200,000 1.0p ordinary shares at 2.38p per share, being a share warrant exercise, for a total consideration of £4,750 (7 March 2013). An issue of 300,000 1.0p ordinary shares at 2.38p per share, being a share warrant exercise, for a total consideration of £7,125 (15 March 2013). An issue of 26,000,000 1.0p ordinary shares at 5.5p per share, being a Subscription Agreement with YA Global Master SPV Ltd, for a total consideration of £1,280,711 net of expenses (23 May 2013). During the year to 30 September 2012 a total of 11,770,000 1.0p ordinary shares were issued, at an average price of 4.25p, for a total consideration of £495,223. Equity Swap On 23 May 2013 the Company entered into new funding arrangements with YA Global Master SPV (“YAGM”), whereby in addition to the issue of 26,000,000 ordinary shares to YAGM under a subscription agreement, the Company and YAGM have entered into an equity swap agreement over a notional 11,818,176 ordinary shares in the Company. Under the terms of the equity swap upon each of 12 monthly settlement dates an average market price of the Company’s shares will be calculated and compared to a benchmark price of 5.78p per share. If the average market price exceeds the benchmark price then a sum is payable to the Company by YAGM, if the average market price is less than the benchmark price then a sum is payable to YAGM by the Company, depending on the amount by which the average market price exceeds or falls short of the benchmark price. The difference of £122,681 between the £400,000 deposited into an escrow account (Note 12) and the valuation of £277,319 at the agreement’s inception date was treated as a liability on the Statement of Financial Position and charged to the share premium account, because the agreement was entered into as part of the share subscription. Following the second valuation at 30 September 2013 the movement in the liability of £20,300 since 23 May 2013 was credited to administrative expenses within the Income Statement. These are level three inputs for the purpose of the IFRS 7 fair value hierarchy. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance34 Notes to the Financial Statements for the year ended 30 September 2013 15. Warrants and options granted Unexercised warrants Issue date 31/10/07 31/10/07 09/12/08 09/12/08 07/12/09 07/12/09 17/12/10 17/12/10 01/09/11 01/09/11 01/09/11 01/09/11 26/01/12 26/01/12 15/06/12 10/01/13 10/01/13 Unexercised options Issue date 29/01/04 31/01/05 Exercise price 8.75p 8.75p 2.375p 2.375p 4.375p 4.375p 6.25p 6.25p 6.75p 6.75p 11.00p 11.00p 9.75p 9.75p 7.50p 7.63p 7.63p Exercise price 15.0p 10.0p Number 1,300,000 200,000 1,700,000 400,000 2,300,000 600,000 2,300,000 600,000 250,000 250,000 250,000 250,000 2,300,000 400,000 2,000,000 1,700,000 500,000 Exercisable Any time before expiry Any time before expiry Any time before expiry Any time before expiry Any time before expiry Any time before expiry Any time before expiry Any time before expiry Any time before expiry Any time before expiry Any time after 01/09/2014 Any time after 01/09/2015 Any time before expiry Any time before expiry Any time before expiry Any time after 10/01/2014 Any time after 10/01/2014 Expiry dates 31/10/13 31/10/13 09/12/14 09/12/14 07/12/14 07/12/14 07/12/15 07/12/15 01/09/16 01/09/16 01/09/16 01/09/16 26/01/17 26/01/17 15/06/15 10/01/18 10/01/18 Number 60,000 50,000 Exercisable Any time before expiry Any time before expiry Expiry dates 29/01/14 31/01/15 Warrants and options are issued for nil consideration and are exercisable as disclosed above. They are exchangeable on a one for one basis for each ordinary share of 1.0p at the exercise price on the date of conversion. On 15 June 2012 the Company entered into a three year Equity Financing Facility (“EFF”) with Darwin Strategic Limited (“Darwin”). The agreement provides the Company with the facility to draw down up to £10 million, by issuing subscription notices requiring Darwin to subscribe for ordinary shares of the Company on certain terms and conditions. In conjunction with the EFF agreement the Company has entered into a warrant agreement allowing Darwin to subscribe for up to 2,000,000 new Ordinary Shares in the capital of the Company at 7.5p per share, exercisable at any time before 15 June 2015. Share based payments The Company has an Inland Revenue approved share option scheme for all employees. Options are exercisable at a price equal to the market price of the Company’s shares on the date of grant. The vesting period is three years. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options may be forfeited if the employee leaves the Company. In addition, the Company issues warrants to directors and employees, outside of the approved scheme, on varying terms and conditions. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201335 15. Warrants and options granted — continued Details of the share warrants and options outstanding during the year are as follows: Outstanding at start of year Granted during the year Exercised during the year Forfeited during the year Expired during the year Outstanding at 30 September Exercisable at 30 September 2013 Number of warrants and share options 15,710,000 2,200,000 (500,000) – – 17,410,000 15,210,000 Weighted average exercise price Pence 6.470 7.630 2.375 – – 6.738 6.326 2012 Number of warrants and share options 11,505,000 4,700,000 – (150,000) (345,000) 15,710,000 12,260,000 Weighted average exercise price Pence 5.800 8,793 – 10,000 14,170 6.470 5.560 The warrants and options outstanding at 30 September 2013 had a weighted average exercise price of £0.06 and a weighted average remaining contractual life of 2 years. In the year ended 30 September 2013, warrants were granted on 10 January 2013. The aggregate of the estimated fair values of the warrants granted on these dates is £64,364. In the year ended 30 September 2012, warrants were granted on 26 January 2012 and 15 June 2012. The aggregate of the estimated fair values of the warrants granted on these dates is £144,570. No options were granted in the year ended 30 September 2013 or the year ended 30 September 2012. The inputs into the Black–Scholes–Merton Option Pricing Model are as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk-free rate Expected dividend yield 2013 6.10p 7.63p 80% 4 years 1.12% 0% 2012 7.03p 8.79p 80% 3 years 0.73% 0% Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous four years. The expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. The Company recognised total expenses of £88,506 and £128,121 related to equity-settled share based payment transactions in 2013 and 2012 respectively. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance36 Notes to the Financial Statements for the year ended 30 September 2013 16. Operating lease commitments The Company rents office premises under an operating lease agreement. The current lease term is for one year, expiring on 30 November 2014. No contingent rent is payable. Future minimum lease payments under non-cancellable operating leases are: Office accommodation: Within one year The Company does not sub-lease any of its leased premises. Lease payments recognised in loss for the period amounted to £18,206 (2012: £17,849). 2013 Land & buildings £ 2012 Land & buildings £ 3,044 2,985 17. Related party transactions Key management personnel The directors holding office in the period and their beneficial interests in the share capital of the Company are: P L Cheetham* Shares Number 10,376,913 D A R McAlister 481,579 D Whitehead R H Clemmey – 6,333 At 30 September 2013 Warrants Number 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 500,000 100,000 300,000 300,000 300,000 100,000 300,000 300,000 300,000 250,000 250,000 250,000 250,000 1,000,000 Exercise price Expiry date 8.750p 31/10/2013 2.375p 09/12/2014 4.375p 07/12/2014 6.250p 17/12/2015 9.750p 26/01/2017 7.630p 10/01/2018 8.750p 31/10/2013 4.375p 07/12/2014 6.250p 17/12/2015 9.750p 26/01/2017 8.750p 31/10/2013 4.375p 07/12/2014 6.250p 17/12/2015 9.750p 26/01/2017 6.750p 01/09/2016 6.750p 01/09/2016 11.000p 01/09/2016 11.000p 01/09/2016 7.630p 10/01/2018 At 30 September 2012 Shares Number 10,376,913 Warrants Number 8,500,000 457,821 1,300,000 – 1,000,000 – 1,000,000 * Includes 2,843,625 shares held by K E Cheetham, wife of P L Cheetham. The directors have no beneficial interests in the shares of the Company’s subsidiary undertakings as at 30 September 2013. The directors of the Company are the directors of all Group companies. Details of the parent company’s investment in subsidiary undertakings are shown in Note 10. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201337 17. Related party transactions — continued Sunrise Resources plc During the year the Company recharged costs of £134,277 (2012: £108,464) to Sunrise Resources plc being shared overheads of £22,977 (2012: £21,770), costs paid on behalf of Sunrise Resources plc of £5,802 (2012: £7,343), staff salary costs of £52,583 (2012: £45,137) and directors’ salary costs of £52,915 (2012: £34,214). The salary costs in Notes 4 and 5 are shown net of these recharges. At the balance sheet date an amount of £43,157 (2012: £33,579) was due from Sunrise Resources plc, which was repaid in November 2013. P L Cheetham, a director of Tertiary Minerals plc, is also a director of Sunrise Resources plc. Shares and warrants held in Sunrise Resources plc by the Tertiary Minerals plc directors are as follows: P L Cheetham* D A R McAlister D Whitehead R H Clemmey At 30 September 2013 Warrants Shares Number 12,942,462 550,000 – – Number 500,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 – – 500,000 500,000 Exercise price 2.000p 0.575p 0.850p 2.500p 1.250p 0.850p – – Expiry date 31/10/13 08/12/14 07/12/15 07/12/15 24/02/17 19/12/17 – – 1.250p 24/02/2017 19/12/17 0.850p At 30 September 2012 Shares Number 11,673,386 Warrants Number 7,000,000 550,000 – – – – – * Includes 5,500,000 shares held by K E Cheetham, wife of P L Cheetham. 18. Post-balance sheet event Equity Swap On 8 November 2013, the Equity Swap Agreement (Note 14) between the Company and YA Global Master SPV Ltd (“YAGM”) was settled. The parties agreed that all remaining monthly settlements were to be accelerated and included in a new settlement date at a price of 5.5p per share. On that settlement date, the remaining escrow funds of £366,666 (Note 12) were distributed between the Company (£336,333) and YAGM (£30,333). For comparison at 30 September 2013 the Company’s liability to YAGM was £102,381 (Note 14). 19. Capital management The Group’s capital requirements are dictated by its project and overhead funding requirements from time to time. Capital requirements are reviewed by the Board on a regular basis. The Group manages its capital to ensure that entities within the Group will be able to continue as going concerns, to increase the value of the assets of the business and to provide an adequate return to shareholders in the future when exploration assets are taken into production. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its assets. In order to maintain or adjust the capital structure the possibilities open to the Group in future include issuing new shares, consolidating shares, returning capital to shareholders, taking on debt, selling assets and adjusting the amount of dividends paid to the shareholders. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance38 Notes to the Financial Statements for the year ended 30 September 2013 20. Financial instruments At 30 September 2013, the Group’s and Company’s financial assets consisted of available for sale investments, trade receivables and cash and cash equivalents. At the same date, the Group and Company had no financial liabilities other than trade and other payables due within one year and had no agreed borrowing facilities as at this date. There is no material difference between the carrying and fair values of the Group and Company’s financial assets and liabilities. The carrying amounts for each category of financial instruments held at 30 September 2013, as defined in IAS 39, are as follows: Loans & receivables Available for sale investments Financial liabilities at amortised cost Financial liabilities at fair value through profit and loss Group 2013 £ 1,613,949 230,251 223,365 102,381 Company 2013 £ 1,521,927 230,251 61,752 102,381 Group 2012 £ 891,254 355,375 123,530 – Company 2012 £ 853,760 355,375 68,391 – Risk management The principal risks faced by the Group and Company resulting from financial instruments are liquidity risk, foreign currency risk and, to a lesser extent, interest rate risk and credit risk. The directors review and agree policies for managing each of these risks as summarised below. The policies have remained unchanged from previous periods as these risks remain unchanged. Liquidity risk The Group currently holds cash balances in Sterling, US Dollars, Swedish Kronor, Euros, Canadian Dollars and Saudi Riyals to provide funding for exploration and evaluation activity, whilst the Company holds cash balances in Sterling and US Dollars. The Group and Company are dependent on equity fundraising through private placings which the directors regard as the most cost- effective method of fundraising. The directors monitor cash flow in the context of their expectations for the business to ensure sufficient liquidity is available to meet foreseeable needs. Currency risk The Group’s financial risk management objective is broadly to seek to make neither profit nor loss from exposure to currency risks. The Group is exposed to transactional foreign exchange risk and takes profits and losses as they arise, as in the opinion of the directors, the cost of hedging against fluctuations would be greater than the related benefit from doing so. Where a material order is made in a different currency, funds are converted to that currency at prevailing rates and held on short term treasury deposits at prevailing fixed interest rates pending payment. Bank and cash balances, including the Group’s share of funds in the Ghurayyah joint arrangement, were held in the following denominations: United Kingdom Sterling United States Dollar Swedish Krona European Euro Canadian Dollar Saudi Riyal Group 2013 £ 1,064,527 113,509 7,730 1,791 49 6 1,187,612 Group 2012 £ 806,808 23,055 11,198 179 53 6 841,299 Company 2013 £ 1,062,153 48,739 – – – – 1,110,892 Company 2012 £ 805,135 – – – – – 805,135 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201339 20. Financial instruments — continued Surplus funds in all currencies are placed with NatWest bank on a number of short term treasury deposits at varying fixed rates of interest, but the Group held only one US Dollar treasury deposit at 30 September 2013. The Company and the Group are exposed to changes in the US Dollar/UK Sterling exchange rate mainly in the Sterling value of US Dollar denominated financial assets and any profit or loss arising from such changes reports to equity. Sensitivity analysis shows that the Sterling value of its US Dollar denominated financial assets at 30 September 2013 would increase or decrease by £5,675 for each 5% increase or decrease in the value of Sterling against the Dollar. Neither the Company nor the Group is exposed to material transactional currency risk. Interest rate risk The Group and Company finance their operations through equity fundraising and therefore do not carry borrowings. Fluctuating interest rates have the potential to affect the loss and equity of the Group and the Company insofar as they affect the interest paid on financial instruments held for the benefit of the Group. The directors do not consider the effects to be material to the reported loss or equity of the Group or the Company presented in the financial statements. Credit risk The Company has exposure to credit risk through receivables such as VAT refunds, invoices issued to related parties and its joint arrangements for management charges. The amounts outstanding from time to time are not material other than for VAT refunds which are considered by the directors to be low risk. The Company has exposure to credit risk in respect of its cash deposits with NatWest bank and this exposure is considered by the directors to be low. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance40 Notice of Annual General Meeting Tertiary Minerals plc Company Number 03821411 Notice is hereby given that the Annual General Meeting of Tertiary Minerals plc will be held in the Fourth Floor Council Room at Arundel House, 13–15 Arundel Street, Temple Place, London, WC2R 3DX on Wednesday 19 February 2014, at 2.30 p.m. for the following purposes: Ordinary Business 1. To receive the Accounts and Reports of the Directors and of the Auditor for the year ended 30 September 2013. 2. To re-elect Mr D Whitehead who is retiring as a director of the Company. 3. To re-elect Mr D A R McAlister who is retiring as a director of the Company. 4. To reappoint BDO LLP (formerly PKF (UK) LLP) as Auditor of the Company and to authorise the directors to fix their remuneration. Special Business Ordinary Resolution 5. That, in accordance with section 551 of the Companies Act 2006, the Directors be generally and unconditionally authorised to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company (“Rights”) up to an aggregate nominal amount of £1,000,000 (consisting of 100,000,000 ordinary shares of 1p each) provided that this authority shall, unless renewed, varied or revoked by the Company, expire at the end of the next Annual General Meeting of the Company to be held after the date on which this resolution is passed, save that the Company may, before such expiry, make an offer or agreement which would or might require shares to be allotted or Rights to be granted and the directors may allot shares or grant Rights in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This authority is in substitution for all previous authorities conferred on the directors in accordance with section 551 of the 2006 Act. Special Resolution 6. That subject to the passing of resolution 5, the directors be given the general power to allot equity securities (as defined by section 560 of the 2006 Act) for cash, either pursuant to the authority conferred by resolution 5 or by way of a sale of treasury shares, as if section 561(1) of the 2006 Act did not apply to any such allotment, provided that this power shall be limited to: a) the allotment of equity securities in connection with an offer by way of a rights issue to the holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings but subject to such exclusions or other arrangements as the Board may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws of any territory or the requirements of any regulatory body or stock exchange; and b) the allotment (otherwise than pursuant to paragraph (a) above) of equity securities up to an aggregate nominal amount of £1,000,000 (consisting of 100,000,000 ordinary shares of 1 pence each). The power granted by this resolution will expire on the conclusion of the Company’s next Annual General Meeting (unless renewed, varied or revoked by the Company prior to or on such date) save that the Company may, before such expiry make offers or agreements which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired. This resolution revokes and replaces all unexercised powers previously granted to the directors to allot equity securities as if section 561(1) of the 2006 Act did not apply but without prejudice to any allotment of equity securities already made or agreed to be made pursuant to such authorities. As a member of the Company you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at a general meeting of the Company. Please refer to the Notes on page 44. By order of the Board C D T Fitch Company Secretary 12 December 2013 Registered Office: Sunrise House, Hulley Road, Macclesfield, Cheshire, SK10 2LP, United Kingdom 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 2013 41 Annual General Meeting Explanatory Notes The Annual General Meeting of Tertiary Minerals plc will be held on at 2.30 p.m. on Wednesday 19 February 2014 in the Fourth Floor Council Room at Arundel House, 13–15 Arundel Street, Temple Place, London, WC2R 3DX. The business of the meeting is as follows: ORDINARY BUSINESS Resolution 1 The Board is required to present to the meeting for approval the Accounts and the Reports of Directors and the Auditor for the year ended 30 September 2013 which can be found on pages 5 to 22. Resolutions 2 and 3 The two non-executive directors, Mr D Whitehead and Mr D A R McAlister, have both served the Company for more than ten years and under the terms of the UK Corporate Governance Code cannot now be regarded as independent. It is proposed that they seek annual re-election rather than re-election by rotation. The Company has been fortunate enough to secure the services of these two non-executive directors during their period of office and both continue to provide valuable advice based on their long experience of the mining industry. Biographical details of the directors can be found on page 14. Resolution 4 The Company’s Auditor BDO LLP (formerly PKF (UK) LLP) is offering itself for reappointment and if elected will hold office until the conclusion of the next Annual General Meeting at which accounts are laid before shareholders. This resolution will also allow the directors to fix the remuneration of the Auditor. SPECIAL BUSINESS Resolution 5 This resolution is to give the directors authority to issue shares. The last such authority was put in place by a meeting of shareholders held on 19 February 2013 but it will expire at the coming Annual General Meeting. Section 551 of the Companies Act 2006 requires that directors be authorised by shareholders before any share capital can be issued. At this stage in its development the Company relies on raising funds from the equity markets, through the issue of shares, from time to time and unless this resolution is put in place the Company will not be in a position to continue to raise funds to continue its activities. If given, this authority will expire at the conclusion of the Annual General Meeting in 2015. Resolution 6 This resolution will be proposed as a Special Resolution in the event that Resolution 5 is passed by shareholders. Resolution 6 is proposed to give the directors authority to issue shares other than by way of rights issues which are, for regulatory reasons, complex, expensive, time consuming and impractical for a company the size of Tertiary Minerals plc. A similar authority granted at last year’s Annual General Meeting is due to expire at the coming Annual General Meeting. The resolution will, if passed, authorise directors to allot shares or grant rights over shares of the Company where they propose to do so for cash and otherwise than to existing shareholders pro rata to their holdings, for example through a placement of shares. If given, this authority will expire at the conclusion of the Annual General Meeting in 2015. 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance42 Shareholder Notes 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 201343 Form of Proxy Tertiary Minerals plc Company No. 03821411 I/We (Block capitals please) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . being a member/members of Tertiary Minerals plc hereby appoint the Chairman of the Meeting (see Note 3 on page 44) or the proxy named below as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on Wednesday 19 February 2014 in the Fourth Floor Council Room at Arundel House, 13–15 Arundel Street, Temple Place, London WC2R 3DX at 2.30 p.m. and at any adjournment thereof. I/We wish this proxy to be used in connection with those of the Resolutions to be proposed at the Annual General Meeting which are listed below, in the manner set out below, and in connection with any other ordinary business transacted at the meeting. Name of proxy Number of shares appointed over I wish to appoint Multiple proxies (see Note 4) Please tick Signed or sealed (see Notes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Please indicate with an “X” in the spaces below how you wish the proxy to vote. Unless otherwise instructed the proxy will at his discretion vote as he thinks fit or abstain from voting in relation to all business of the meeting. For Against Vote Withheld Ordinary Business 1. 2. 3. 4. Ordinary Resolution to receive the Accounts and Reports of the Directors and of the Auditor for the year ended 30 September 2013. Ordinary Resolution to re-elect Mr D Whitehead who is retiring as a director of the Company. Ordinary Resolution to re-elect Mr D A R McAlister who is retiring as a director of the Company. Ordinary Resolution to reappoint BDO LLP (formerly PKF (UK) LLP) as Auditor of the Company and authorise the directors to fix their remuneration. Special Business 5. Ordinary Resolution to authorise the directors to allot shares. 6. Special Resolution to empower the directors to disapply the pre-emption rights for certain allotments of shares. Please see Notes on page 44 Please return this Proxy Form in the enclosed envelope, or in accordance with Note 6 overleaf. $ 22975.02 13 January 2014 12:12 PM proof 6 www.tertiaryminerals.com Stock code: TYMOur FinancialsOur GovernanceOur Performance44 Proxy Form Notes and Instructions 1. As a member of the Company you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at a general meeting of the Company. You can only appoint a proxy using the procedures set out in these Notes. 2. Appointment of a proxy does not preclude you from attending the meeting and voting in person. If you have appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated. 3. A proxy does not need to be a member of the Company but must attend the meeting to represent you. To appoint as your proxy a person other than the Chairman of the meeting, insert their full name in the relevant box on the Proxy Form. If you sign and return the Proxy Form with no name inserted in the box, the Chairman of the meeting will be deemed to be your proxy. Where you appoint as the proxy someone other than the Chairman, you are responsible for ensuring that they attend the meeting and are aware of your voting intentions. If you wish your proxy to make any comments on your behalf, you will need to appoint someone other than the Chairman and give them the relevant instructions directly. 4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, you may photocopy the Proxy Form. Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy, which in aggregate should not exceed the number of shares held by you. Please also tick the box to indicate that there are multiple proxies. All forms must be signed and should be returned as set out in Note 6. 5. To direct your proxy how to vote on the resolutions mark the appropriate box with an ‘X’. To abstain from voting on a resolution, select the relevant “Vote Withheld” box. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting. 6. To appoint a proxy, the Proxy Form must be: • completed and signed; • sent or delivered to Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU; and received by Capita Asset Services no later than 2.30 p.m. on Monday 17 February 2014. 7. In the case of a member which is a company, the Proxy Form or any notice of revocation of a proxy must be executed under its common seal or signed on its behalf by an officer of the Company or an attorney for the Company. 8. Any power of attorney or any other authority under which the Proxy Form is signed (or a duly certified copy of such power or authority) must be included with the Proxy Form. 9. In the case of joint holders, where more than one of the joint holders purports to appoint or revoke a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior). 10. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. 11. If you wish to change your proxy instructions simply submit a new proxy appointment according to these instructions. If you need another hard-copy Proxy Form please contact the Company. The last date for receipt of a new proxy instruction is set out in Note 6 above. 12. To revoke a proxy instruction you will need to send notice clearly stating your intention to revoke your proxy appointment to: Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU. 13. Entitlement to attend and vote at the meeting and the number of votes which may be cast thereat will be determined by reference to the Register of Members of the Company at 6.00 p.m. on Monday 17 February 2014. Changes to entries on the Register of Members after that time shall be disregarded in determining the rights of any person to attend and vote at the meeting. 22975.02 13 January 2014 12:12 PM proof 6 Tertiary Minerals plc Annual Report 2013Company Information Tertiary Minerals plc (AIM – EPIC: TYM) Company No. 03821411 Head Office Silk Point Queens Avenue Macclesfield Cheshire SK10 2BB United Kingdom Tel: +44 (0)845 868 4580 Fax: +44 (0)1625 838 559 Auditor BDO LLP 3 Hardman Street Spinningfields Manchester M3 3AT United Kingdom Broker & Nominated Adviser Cantor Fitzgerald One Churchill Place Level 20 Canary Wharf London E14 5RB United Kingdom Registrars Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU United Kingdom Registered Office Sunrise House Hulley Road Macclesfield Cheshire SK10 2LP United Kingdom Company website: www.tertiaryminerals.com Bankers National Westminster Bank plc 2 Spring Gardens Buxton Derbyshire SK17 6DG United Kingdom Joint Broker Beaufort Securities Limited 131 Finsbury Pavement London EC2A 1NT United Kingdom Solicitors Gowlings (UK) LLP 15th Floor 125 Old Broad Street London EC2N 1AR United Kingdom www.tertiaryminerals.com Stock code: TYMTertiary Minerals plc Silk Point Queens Avenue Macclesfield Cheshire SK10 2BB United Kingdom Tel: +44 (0) 845 868 4580 Fax: +44 (0) 1625 838 559 www.tertiaryminerals.com 22975.02 13 January 2014 12:12 PM proof 6 

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