2014 Annual Report 2014 Annual Report 2014 Annual Report Corporate Directory & Contents Corporate Directory Board of Directors Mr Thomas Sanders Mr Mark Edwards Mr Michael Kitney Executive Chairman Non-Executive Director Non-Executive Director Auditors Rothsay Chartered Accountants Level 1, 4 Ventnor Avenue West Perth, Western Australia 6005 Senior Management Mr Alastair Barker Miss Michelle Simson Manager Corporate Exploration Manager Affairs/Company Secretary Solicitors Steinepreis Paganin Level 4, 16 Milligan Street Perth, Western Australia 6000 Principal Place of Business & Registered Office 12 Walker Avenue West Perth, Western Australia 6005 +61 8 9226 3666 +61 8 9226 3668 Tel: Fax: Email: breaker@breakerresources.com.au Website: www.breakerresources.com.au ABN 87 145 011 178 Contents Share Registry Advanced Share Registry Services 110 Stirling Highway Nedlands, Western Australia 6009 Tel: Fax: Website: www.advancedshare.com.au +61 8 9389 8033 +61 8 9262 3723 Securities Exchange Listing Shares, Partly Paid Shares and Listed Options in Breaker Resources NL are quoted on ASX Limited (codes: BRB, BRBCA and BRBO respectively). The Home Exchange is Perth, Western Australia. Chairman’s Letter ____________________________________________________________________________________________ 2 Review of Activities __________________________________________________________________________________________ 3 Tenement Schedule ________________________________________________________________________________________10 Directors’ Report ____________________________________________________________________________________________11 Auditor’s Independence Declaration ______________________________________________________________________22 Statement of Profit or Loss and Other Comprehensive Income ___________________________________________23 Statement of Financial Position _____________________________________________________________________________24 Statement of Changes in Equity ____________________________________________________________________________25 Statement of Cash Flows ___________________________________________________________________________________26 Notes to the Financial Statements __________________________________________________________________________27 Directors’ Declaration ______________________________________________________________________________________45 Independent Audit Report _________________________________________________________________________________46 ASX Additional Information _________________________________________________________________________________48 1 Breaker Resources NL Chairman’s Letter Dear Fellow Shareholder, Breaker Resources NL (Breaker) is targeting large new gold systems in the eastern half of Western Australia’s Eastern Goldfields Superterrane (EGST), one of the world’s premier gold provinces. Breaker’s strategy is based on the use of modern multi-element soil geochemistry to scan large areas near unexplored major crustal shear zones concealed by transported cover. The successful implementation of this strategy has resulted in the identification of large new gold-in-soil anomalies on each of Breaker’s projects, and we are in the process of evaluating these targets. Modern geochemical tools to deal with transported cover are making inroads and Breaker is playing a key role in their development, as reflected in our research and development activities. As a result, Breaker is well positioned for discovery, retaining a large tenement holding (~3,725km2) with newly identified gold-in-soil anomalies on each of its projects. This is uncommon in the EGST and the recent discovery of the 3.8Moz Gruyere gold deposit in the Yamarna Terrane has reinforced our view regarding the largely untapped gold potential of the eastern half of the EGST. Due to the scale of the projects, Breaker’s follow-up drilling has been reconnaissance in nature, even in the northern part of the Dexter Project where most of our work has focused. Our current objective is to accelerate the drill testing of these anomalies and deliver exploration success within a tight capital structure. To do this, we will assess potential joint venture options but in the interim we will undertake short, “high impact” drill campaigns that leave the door open for a material discovery. Reverse circulation (RC) drilling in the course of the year at the Dexter Project encountered wide sulphide-rich zones and mantle-derived syenite rocks within the Dexter Shear, key ingredients for large gold deposits. Although discovery has been elusive, this work has aided our understanding and further drilling to locate the bedrock source is planned. Auger drilling in the southern part of the Dexter Project identified a second regional-scale (12km-long) gold-in-soil anomaly with peak gold values of 35ppb at the Sandshoes Prospect, 20km southwest of the Three Bears-Tallows Prospect. Another potentially significant anomaly, measuring 5km x 2km with a peak value of 32ppb, was also identified at the Dexter West Prospect. Reconnaissance drilling of both targets has recently been completed and assay results are pending. On behalf of the Board I would like to thank shareholders for their support, particularly of the entitlement issue conducted in late-2013, in what has been a challenging year. I would also like to express appreciation to Breaker’s staff and my fellow directors for their continuing hard work and dedication. Yours sincerely Tom Sanders Chairman Front Cover Photo: RC Drilling at Dexter Project 2014 Annual Report 2 Review of Activities Review of Exploration Activities Breaker Resources NL is an Australian explorer focused on the discovery of large new gold systems concealed by transported cover in the emerging and largely unexplored eastern half of Western Australia’s Eastern Goldfields Superterrane. Breaker is one of the largest tenement holders in the EGST with six 100%-owned projects located in the Yamarna and Burtville Terranes covering 3,725km2. Breaker’s exploration strategy is based on the use of wide-spaced (1,600m x 400m), fine fraction multi-element auger soil geochemistry to scan for large gold system signatures near major crustal structures with little or no historical exploration. This strategy has successfully identified large new gold-in-soil anomalies on each of its current projects. Breaker’s projects include approximately 150km of the Yamarna Shear Zone, several previously undrilled greenstone belts at the Dexter, Mt Gill, De La Poer and Duketon Projects and major crustal faults in the Burtville Terrane. Several of Breaker’s projects are situated along strike from significant gold discoveries in the area, including in the Yamarna the Terrane and the Duketon deposits in the Burtville Terrane. Transported cover typically consists of 1m-3m of aeolian sand at the Mt Gill, Duketon North and De La Poer Projects, with thin (10m-15m) Permian cover in the southern part of Attila West, tending thicker at Dexter (0m to 100m) and Kurrajong (~100m). recent Gruyere deposit Breaker’s main focus has been the Dexter Project. The size and magnitude of the Three Bears-Tallows gold-in-soil anomaly in the northern part of Dexter has not previously been documented in a similar area of transported cover in Western Australia (16km-long, up to 0.3g/t gold and 17g/t silver; ASX Release 30 August 2012). Limited RC drilling in 2013/14 encountered wide sulphide-rich zones and mantle-derived syenite rocks within the Dexter Shear, key ingredients for large gold deposits. Whilst early discovery has been elusive, our understanding has increased substantially and further drilling to locate the bedrock gold source is planned. Project Locations During 2013/14, geochemical coverage at the Dexter Project was extended to the south and a second regional-scale gold-in-soil anomaly was identified 20km to the southwest, at which scout aircore drilling commenced in late August 2014. Other activities across the Company’s projects during the reporting period included auger and aircore drilling, soil and rock chip sampling, reconnaissance mapping, heritage surveying, rehabilitation works and extensive data analysis, modelling and interpretation. Several tenement applications were made in the course of the year in response to positive geochemical results, and several tenements were reduced in size or surrendered in the light of new results or excessive thickness of transported cover. Dexter Gold Project The 90km-long Dexter Project straddles the intersection of the Yamarna, Dexter and Sefton Shear Zones in the southern part of the Burtville and Yamarna Terranes, 140km south-southeast of Laverton. The project includes extensive areas of previously unexplored sheared Archean greenstone covered by thin aeolian sand, and variable thicknesses of Permian sediment. 3 Breaker Resources NL Review of Activities Two new exploration licence applications were submitted in the reporting period relating to the Dexter West (E39/1786) and Mt Douglas (E38/2934) areas. As a result, the Dexter Project is now contiguous with the Attila West Project to the north. Following the surrender of areas of deep transported cover in the southeastern part of the project, the overall area is now 1,726km2 (applied and granted). RC Drilling Previous auger soil sampling identified a 16km-long gold-in-soil anomaly in the northern part of the project. Aircore drilling in 2012/13 identified extensive areas of subsurface redox gold enrichment (secondary gold precipitated at fossil water tables) at the Three Bears and Tallows Prospects with grades up to 3m at 7.1g/t gold (ASX Release 29 April 2013). Significantly, the redox gold is located adjacent to two major shear zones intruded by mantle-derived syenite, indicating a mantle/deep crust connection considered favourable for large gold deposits. Initial RC drilling completed in early July 2013 in the vicinity of the redox gold enrichment at the Three Bears Prospect located a 400m-wide zone of alteration and shearing ― the Dexter Shear Zone ― with pyrite and gold pathfinder elements increasing to the south. Breaker recommenced RC drilling on 29 November 2013 to trace anomalous bedrock gold mineralisation further south along the Dexter Shear Zone. The drilling consisted of 12 holes for 2,420m at the Three Bears Prospect and three holes for 594m at the Tallows Prospect. Four of the five angled holes that successfully intersected the Dexter Shear to the south of the Three Bears Prospect encountered a persistent 1m to 3m wide sulphide-rich zone within altered pyrite-bearing amphibolite extending 1km to the south of the Three Bears Prospect. All three RC holes in the northern part of the Three Bears Prospect encountered altered pyrite-bearing amphibolite. Although the RC drilling did not strike any significant high grade gold mineralisation (maximum 4m at 0.2g/t gold; ASX Release 31 January 2014), the higher density of assay data at the Three Bears Prospect suggests that tellurium and molybdenum in the bedrock increase to the north, indicating that the inferred bedrock source may be to the north of the Three Bears Prospect instead of south as previously thought. Further RC drilling to conclusively test this target is planned. The RC drilling will benefit from a $150,000 co-funded drilling grant awarded to Breaker in the December 2013 quarter under the WA Government’s Exploration Incentive Scheme. RC Drilling at Dexter Project Soil Geochemistry Breaker completed a reconnaissance (1,600m x 400m) auger program in late August 2013 to screen for large gold deposit signatures in the previously unexplored southern half of the Dexter Project. This program was successful in identifying a cohesive, 12km-long gold-in-soil anomaly of regional significance, designated the Sandshoes Prospect. The anomaly is in sand cover approximately 20km southwest of the Three Bears Prospect with peak gold values of 35ppb (ASX Release 31 October 2013). 2014 Annual Report 4 Review of Activities intersection of the Sefton Lineament and a The Sandshoes anomaly greenstone/granite contact near the western component of the Dexter Shear Zone. Significantly, the gold-in-soil anomaly appears to leak downslope from a granite/greenstone contact apparent in the aeromagnetic data over a 12km strike length. is situated near the Multi-element soil sampling was undertaken at the Dexter West area in March/April 2014 (E39/1745 and E39/1786) on a sample spacing of 400m on 1,600m-3,200m spaced lines, together with limited rock chip sampling. The assay results identified a significant anomaly measuring approximately 5km x 2km at >9ppb gold, with a maximum value of 31.7ppb (ASX Release 15 July 2014). The anomaly overlies a discrete, high-amplitude, magnetic feature targeted by the soil sampling. The bedrock in the vicinity of the anomaly is estimated to lie beneath 20-30m of Permian cover. A soil and rock chip sampling program was completed in the northern part of the Dexter Project (E38/2934) in July/August 2014, to investigate encouraging aircore drill results from the southeastern area of the Attila West Project (described below). E38/2934 E38/2695 E39/1744 E39/1611 E39/1614 E39/1745 E39/1786 Dexter - Imaged Gold-in-Soil over Aeromagnetic Image Aircore Drilling During 2013/14, reconnaissance aircore drilling of several second-order gold-in-soil anomalies was completed (44 vertical holes for 2,567m). The drilling identified a maximum of 3m at 0.2g/t gold in a bottom-of-hole sample to the east of the Tallows Prospect (ASX Release 31 January 2014). Wide-spaced aircore drilling to assess the Sandshoes and Dexter West Prospects commenced in late- August 2014. Assay results are pending as at the date of this report. 5 Breaker Resources NL Review of Activities Attila West Gold Project The Attila West Project is located 130km east-northeast of Laverton and is contiguous with the Dexter Project to the south. The project targets gold in an area of structural complexity arising from the interaction of the Yamarna Shear Zone, a large domal granite intrusion in the central part of the project, and the Mt Venn and Isolated Hills greenstone belts to the north and south of the granite. An auger program in 2013 identified a series of large, coherent gold-in-soil anomalies that cluster near the margin of the large magnetic granite in the central part of the project (peak values of 73ppb gold; ASX Release 31 July 2013). These anomalies are associated with elevated gold pathfinder elements, including molybdenum, arsenic, bismuth, selenium and tellurium, which enhance their prospectivity. A range of fieldwork was conducted during the reporting period to assess the significance of the anomalies. Rock chip sampling identified a 1,000m wide, east-dipping structural corridor on the eastern margin of the Mt Venn greenstone belt. Samples around the structure were anomalous in cesium, thallium and rubidium, supporting visual observations of strong potassic (sericite) alteration, and widespread gold, arsenic and molybdenum anomalism in Breaker’s 1,600m x 400m auger dataset, suggesting that it was a significant pathway for mineralising fluids. A heritage survey was undertaken in November 2013 in preparation for aircore drilling, which was completed in two areas in April 2014 to assess gold-in-soil anomalies previously identified. Drilling in Area 1 located in the southeastern part of the project consisted of 14 holes. End-of-hole samples in Archean bedrock identified moderate anomalism in a wide range of gold pathfinder elements under 15m- 25m of Permian cover including gold (maximum of 0.14g/t; ASX Release 15 July 2014), arsenic, bismuth, molybdenum, antimony, selenium and tellurium. The results indicate potential for an alteration system extending south along the Yamarna Shear into the recently pegged northern extension of the Dexter Project. is planned to test these extensive geochemical and structural targets. Further drilling Drilling in Area 2 in the far northern part of Attila West comprised three drill traverses. This drilling did not encounter any significant bedrock anomalism in the northern part of the Mt Venn structural corridor but the southern area remains untested and further drilling is planned. Based on results, the far northern part of the project was surrendered in late June 2014, reducing the overall project area from 792km2 to ~627km2. Attila West - Bottom-of-Hole Antimony/Iron Mt Gill Gold Project The Mt Gill Project is located 135km northeast of Laverton, 30km along strike from the Attila-Alaric- Central Bore gold deposits. Breaker completed a large multi-element reconnaissance auger program in 2012/13 to scan for large gold deposits. The program successfully identified multiple gold-in-soil anomalies in two main areas associated with variably anomalous arsenic, copper, silver and antimony (gold up to 63ppb, silver up to 5,729ppb or 5.7g/t; ASX Release 30 October 2012). 2014 Annual Report 6 Review of Activities During the reporting period, reconnaissance mapping and rock chip sampling were completed, focusing on areas of gold anomalism in areas of outcrop in the vicinity of the Yamarna Shear Zone. This field work identified a 1,000m wide, east-dipping zone of strongly deformed and sericitic granitic, mafic and sedimentary rocks, corresponding with the Yamarna Shear Zone along the western margin of the Yamarna greenstone belt. Rock chip samples on the Yamarna Shear Zone were anomalous in arsenic, antimony, selenium, copper, zinc and other gold pathfinder elements indicating a significant fluid pathway favourable for the development of gold deposits. Several structures were also identified in the Yamarna greenstone belt, some closely associated with extensive gold and pathfinder anomalism. to further in early 2014 Infill soil sampling was conducted on an 800m x 200m investigate strongly spacing anomalous soil results along the Yamarna Shear and within the Yamarna greenstone belt. The soil results identified four areas of interest; the most prospective area is a 3,400m x 200m anomaly defined by +2ppb gold with a peak value of 22ppb (ASX Release 15 July 2014) that is open to the south. The anomaly is associated with arsenic anomalism and partially overlapping bismuth and molybdenum anomalism to the north and appears to be on the same trend as the for 86,000oz), Khan North approximately 25km field A identified a inspection of available bedrock exposure discrete, steeply east-dipping, brittle-ductile shear zone with chlorite and sericite alteration and locally developed quartz veining. Mt Gill - Gold-in-Soil on Aeromagnetic Image the south-southeast. (2Mt @ 1.33g/t resource to Breaker plans to undertake drilling to test the prospective targets in 2014/15. Selected areas of E38/2529 deemed unprospective on the basis of geochemical and geophysical results were relinquished in late June 2014, reducing the overall area of the project from 445km2 to ~167km2. Kurrajong Gold Project The Kurrajong Project is located in the Yamarna Terrane 175km east of Laverton and 35km along strike from the Gruyere gold discovery. The project targets the intersection of a domal granite intrusion and a major fault in the southern part of the Dorothy Hills greenstone belt. The geomorphology is dominated by wind-blown sand dunes in an area of Permian cover. Breaker identified a 12km gold-in-soil anomaly in the northwestern part of the Kurrajong Project in early 2013 (peak values of 24ppb gold and 1,574ppb silver with anomalous gold pathfinder elements, including molybdenum, arsenic and selenium; ASX Release 9 April 2013). The soil anomaly is situated near the apex of a domal granite intrusion adjacent to a splay of the Yamarna Shear Zone on the Dorothy Hills greenstone belt. In the June 2014 quarter, Breaker planned to drill up to 2,100m on four wide-spaced aircore traverses to make a preliminary assessment of the anomaly and to assess the regolith in the northwestern part of the project. The scout program commenced in April 2014 and encountered significant Permian cover ranging from 98m to +144m in thickness with all holes drilled failing to reach bedrock and terminating in either Permian siltstone or underlying basal conglomerate. As a result, the drill program was restricted to six holes with at least one hole drilled on each of the planned drill traverses and was inconclusive. 7 Breaker Resources NL Review of Activities Subsequent to the aircore program, Breaker was successful in its bid for a grant of $150,000 for RC drilling under the WA Government’s Exploration Incentive Scheme. The grant will be matched by Breaker on a dollar-for-dollar basis of direct RC drilling costs incurred during 2014/15. Based on a tenement review and a geophysical interpretation which indicates increasing thicknesses of transported cover to the south of the area drilled, the southern project region was surrendered in late June 2014, reducing the overall area from 217km2 to ~54km2. Aircore Drilling at Kurrajong Project Duketon North Gold Project The 627km2 Duketon North Project is located 160km north-northwest of Laverton and 50km north of the 10Moz Moolart Well/Garden Well/Rosemont gold camp. The project targets gold along a 42km strike length of the Hootanui Shear, a major fault zone that separates the Kurnalpi and Burtville Terranes. Breaker undertook a reconnaissance multi-element auger soil sampling program over the entire project in late 2012. This program identified multiple low order gold-in-soil anomalies typical of the area, many with a spatial association with prominent structural features and gold pathfinder elements. This is comparable to soil anomalies associated with the Moolart Well and Garden Well deposits to the south. A program of infill auger sampling was undertaken over four selected areas in late July 2013 (400 x 200m pattern). Results were in line with the wide-spaced sampling albeit with detail. Drilling is planned to assess the soil anomalies in 2014/15. De La Poer Gold Project The De La Poer Project is located in the Terrane, 130km northeast of Burtville Laverton and 50km east of the Moolart Well/Garden Well/Rosemont gold camp. The project targets gold mineralisation spatially associated with the De La Poer Fault (identified in 1999) and the unexplored Deleta greenstone belt. Duketon North & De La Poer - Interpreted Geology Breaker’s reconnaissance auger geochemical activities The De La Poer Project is largely unexplored and is dominated by thin sand cover over Archean identified seven gold-in-soil bedrock. anomalies of potential interest based on tenor, coherence and location with respect to structural features. These anomalies are up to 10km in length with gold values up to 8ppb (ASX Release 30 April 2013) which is comparable to early stage soil results in the area that have led to discovery. Activities during the reporting period consisted of reconnaissance mapping, rock chip sampling, data appraisal and review in preparation for selective aircore drilling or joint venture. A new exploration licence was granted to cover areas where some gold-in-soil anomalies remain open, and one tenement was surrendered following a field inspection which downgraded prospectivity. As at 30 June 2014, the project comprised an area of 310km2. An exploration licence application after this date has increased the overall area to 523km2. Breaker plans to undertake drilling to assess the soil anomalies in 2014/15. 2014 Annual Report 8 Review of Activities Mt Sefton Gold Project The Mt Sefton Project is located 80km east-northeast of Laverton and targets gold mineralisation in a small greenstone belt on the Sefton Lineament. Thin aeolian sands blanket the western and northern part of the tenement. In mid-2013, reconnaissance multi-element auger sampling identified several gold-in-soil anomalies with peak gold and silver values of 14ppb and 3,075ppb respectively and locally anomalous pathfinder elements (ASX Release 31 July 2013). During 2013/14, reconnaissance mapping and rock chip sampling identified localised copper mineralisation up to 0.53% copper, with anomalous silver up to 0.45g/t (ASX Release 31 October 2013). The lack of alteration however downgraded the potential of the soil anomalies, and the project was surrendered in late June 2014 to minimise unnecessary holding costs. Review of Corporate Activities The Company’s Annual General Meeting was held on 20 November 2013. On 22 November 2013, Breaker announced a pro rata renounceable entitlement issue to all eligible shareholders to raise up to $1.58 million (before costs) (Offer). The Offer was conducted on the basis of one new fully paid ordinary share for every four existing shares at an issue price of $0.11 per share. For every two shares issued, subscribers received one free attaching option and one partly paid share. The Offer, which was supported by the Company’s major shareholders and fully underwritten by Patersons Securities Limited, closed on 20 December 2013. The new securities were issued on 27 December 2013 and 31 December 2013 and the table below summarises the Company’s capital structure prior to and following completion of the Offer. Security Pre-Offer Issued via Offer Post-Offer Fully Paid Ordinary Shares (ASX: BRB) 55,100,004 13,775,001 68,875,005 Options (exercise price $0.25; expiry 31/12/14) (ASX: BRBO) Partly Paid Shares (paid to $0.01; fully paid at $0.20; no call for at least 4 years) (ASX: BRBCA) 21,250,000 6,887,498 28,137,498 - 6,887,498 6,887,498 Funds raised were allocated to drilling at the Dexter Project, exploration activities on the Company’s other projects and general working capital. As a result of the conduct of the Offer, the exercise prices of various unlisted options on issue were adjusted and in April 2014, a number of securities were released from escrow. Competent Persons Statement The information in this report that relates to Exploration Targets and Exploration Results is based on information compiled by Tom Sanders and Alastair Barker, Competent Persons, who are Members of The Australasian Institute of Mining and Metallurgy. Mr Sanders and Mr Barker are executives of Breaker Resources NL and their services have been engaged by Breaker on an 80% of full time basis; they are also shareholders in the Company. Mr Sanders and Mr Barker have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Sanders and Mr Barker consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. Exploration results mentioned in the Review of Activities as being reported prior to 1 December 2013 were done so under JORC Code 2004 and there has been no material change to the information since this time. 9 Breaker Resources NL Tenement Schedule Tenement Schedule The following is a summary of tenements held by Breaker Resources NL as at 30 June 2014. Project Attila West De La Poer Dexter Duketon North Kurrajong South Mt Gill Tenement Number E38/2530 E38/2598 E38/2517 E38/2518 E38/2519 E38/2520 E38/2853 E38/2695 E38/2934 E39/1611 E39/1614 E39/1744 E39/1745 E39/1786 E38/2511 E38/2512 E38/2852 E38/2854 E38/2855 E53/1592 E38/2531 E38/2513 E38/2529 Status Granted Granted Granted Granted Granted Granted Granted Granted Application Granted Granted Granted Granted Application Granted Granted Application Application Application Granted Granted Granted Granted Percentage Held/Earning % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Senior Exploration Geologist Mike Outhwaite at Mt Sefton Project 2014 Annual Report 10 Directors’ Report Directors’ Report The directors of Breaker Resources NL herewith submit the financial report for the year ended 30 June 2014. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: Information about Officeholders Directors The names of the directors of the Company during or since the end of the financial year and up to the date of this report are provided below. All of the directors held their positions for the entire financial year period. Mr Thomas Sanders BSc (Geology); MSc (Mineral Economics); MAusIMM; FAICD Executive Chairman (appointed 2 July 2010) Tom Sanders is a geologist with over 35 years’ experience in the Australian mining industry including project generation, exploration, mining and corporate management with a strong emphasis on gold and nickel in Western Australia. Mr Sanders has published works on nickel and gold in WA, in addition to mineralisation studies on the eastern Kimberley region under contract to the Geological Survey of WA. Mr Sanders established a geological consultancy firm in WA’s eastern Goldfields in 1983 following experience in nickel mining and exploration with Metals Exploration Limited. During his time in the Kalgoorlie region (until 2001) he worked with many ASX-listed companies and obtained mining experience on several underground and open pit operations and managed a large number of exploration projects, several of which were progressed into production. Mr Sanders founded Navigator Resources Limited in 1996 and guided that company from initial project acquisition to ASX-listing. He then oversaw the building of a two million ounce gold resource inventory through discovery and acquisition and established the Cummins Range rare earth resource. Mr Sanders founded Breaker in 2010 and was responsible for identifying and acquiring Breaker’s projects and guiding the Company to ASX-listing. During the past three (3) years, Mr Sanders has not served as a director on any other listed company. Mr Mark Edwards BJuris; LLB Non-Executive Director (appointed 2 July 2010) Mark Edwards is a solicitor with over 25 years of experience in resources and corporate law. He has advised a number of ASX-listed companies active in the resources sector and on a range of resources projects in Australia and overseas, including significant nickel, gold and iron ore projects. His professional work has involved him in many facets of the resources industry ranging from ASX listings, exploration and mining joint ventures to project development agreements and project financing. During the past three (3) years, Mr Edwards has not served as a director on any other listed company. Mr Michael Kitney Assoc. Met; Post Grad Dip (Extractive Metallurgy); MSc (Mineral Economics); MAusIMM Non-Executive Director (appointed 2 July 2010) Mike Kitney is a process engineer with over 40 years’ experience in the mining industry. He has participated in the development and construction of projects throughout Australia, Africa, south east Asia and the former Soviet Union. Mr Kitney’s particular strengths are in production and mineral processing, all aspects of environmental management, project evaluation and assessment and leadership of interdisciplinary project teams. He brings to the Company vast project development expertise and practical experience in commissioning new projects. 11 Breaker Resources NL Directors’ Report Mr Kitney has previously held senior technical and project management positions with Alcoa Australia, Minproc Engineers Limited, Property Company of London plc, British Phosphate Commissioners, Nelson Gold Corporation Limited and Avocet Mining plc. He is currently the Chief Operating Officer of ASX- listed Kasbah Resources Limited. During the past three (3) years, Mr Kitney has not served as a director on any other listed company. Company Secretary The name of the company secretary of the Company during or since the end of the financial year and up to the date of this report, and the term of their appointment, are provided below. Miss Michelle Simson EMBA (Dist.) Company Secretary (appointed 22 October 2012) Michelle Simson has 20 years’ administration experience, including the last 11 years in the mining industry working in both exploration and mining companies in the commodities of gold and uranium. She has previously held positions with Agincourt Resources Limited, Nova Energy Limited and Navigator Resources Limited and has completed an Executive Master of Business Administration with Distinction at the University of Western Australia. She is currently undertaking a Graduate Diploma in Applied Corporate Governance. During the past three (3) years, Miss Simson has not served as a director on any other listed company. Board Committee Membership As at the date of this report, the Board has an Audit Committee, Nomination Committee, Remuneration Committee and a Risk Committee. All directors currently comprise membership of each of the committees and the chairmen of the respective committees are: Audit Committee: Mark Edwards; Nomination Committee: Tom Sanders; Remuneration Committee: Mike Kitney; and Risk Committee: Tom Sanders. Directors’ Meetings The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director is as follows: Board of Directors Committee Meetings Audit Nomination Remuneration Risk Director Held Present Held Present Held Present Held Present Held Present Tom Sanders Mark Edwards Mike Kitney 6 6 6 6 6 5 2 2 2 2 2 2 0 0 0 n/a n/a n/a 1 1 1 1 1 1 1 1 1 1 1 1 2014 Annual Report 12 Directors’ Report Directors’ Interests The following table sets out each director’s relevant interest in shares and options in shares of the Company or a related body corporate as at the date of this report. Director Tom Sanders Mark Edwards Mike Kitney Fully paid ordinary shares Partly paid ordinary shares Number 14,439,747 1,180,000 1,191,250 Number 1,309,871 65,000 58,125 Listed share options Number 1,939,871 65,000 70,625 Unlisted share options Number 5,000,000 500,000 500,000 During and since the end of the financial year Nil share options have been granted to directors of the Company as part of their remuneration (2013: Nil). Directors’ and Officers’ Insurance During the financial year, Breaker Resources NL paid a premium to insure the directors and secretary of the Company. Details of the premium are subject to a confidentiality clause under the contract of insurance. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Company and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Corporate Structure Breaker Resources NL is a no liability public company limited by shares, domiciled and incorporated in Australia. Principal Activities During the year the Company carried out exploration activities on its tenements in Western Australia with the objective of identifying gold and other economic mineral deposits. Operational Review Activities Review A review of the activities undertaken during the year is provided on page 3. Financial Review During the year total exploration expenditure incurred by the Company amounted to $2,186,055 (2013: $3,951,995). In line with the Company’s accounting policies, all exploration expenditure is written off as it is incurred. Net administration income amounted to $1,143,233 (2013: expenditure incurred of $645,805). The Company’s operating loss after income tax for the year is $1,042,822 (2013: $4,597,800). At year end the Company held cash or similar reserves of $457,575 (2013: $2,250,187). 13 Breaker Resources NL Operating Results for the Year Summarised operating results are as follows: Directors’ Report Revenues Results $ $ Revenues and profit/(loss) from ordinary activities before income tax expenses 1,841,020 (1,042,822) Shareholder Return Summarised shareholder return is as follows: Basic profit/(loss) per share Dividends 2014 cents 2013 cents (1.68) (8.30) No dividends were paid or declared during the year. No recommendation for payment of dividends has been made. Share Options As at the date of this report, there are 36,537,498 unissued ordinary shares of Breaker Resources NL in respect of which options are outstanding. This number comprises: Type of option Listed (ASX: BRBO) Unlisted Unlisted Unlisted Unlisted Number 28,137,498 3,000,000* 3,000,000* 1,000,000 1,400,000 Exercise price Expiry date $0.25 $0.231^ $0.281^ $0.50 $0.481^ 31 December 2014 30 June 2016 30 June 2016 31 December 2016 31 December 2016 * These options were released from escrow on 20 April 2014. ^ The exercise prices of these options were adjusted in December 2013 as a result of the conduct of a pro-rata entitlement offer. No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate. Share Options Issued The following options were issued by Breaker Resources NL during the financial year: Type of option Number Exercise price Expiry date Comment Listed (ASX: BRBO) 6,887,498 $0.25 31 December 2014 Issued to shareholders through pro-rata entitlements issue Shares Issued on Exercise of Options There were Nil shares issued due to the exercise of options during the financial year. Share Options that Expired/Lapsed There were Nil options that expired or lapsed during the financial year. 2014 Annual Report 14 Directors’ Report Significant Changes in State of Affairs During the financial year there were no significant changes in the state of affairs of the Company other than those referred to in the Financial Statements and notes thereto. Subsequent Events On 8 July 2014 the Company received a tax incentive refund of $1.78million for research and development expenditure incurred during 2012/13. There were no other matters or circumstances arising since the end of the reporting period that have significantly affected, or may significantly affect the operations of the Company and the results of those operations or the state of the affairs of the Company in the financial period subsequent to 30 June 2014. Likely Developments and Expected Results The Company expects to maintain a similar status and level of activities to that at present and hence there are no likely developments in the entity's operations. Environmental Regulations and Performance Breaker is subject to significant environmental regulation in respect to its exploration activities. The Company aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the year under review. Proceedings on Behalf of the Company No persons have applied for leave pursuant to section 237 of the Corporations Act 2001 to bring, or intervene in, proceedings on behalf of Breaker Resources NL. Non-Audit Services There were no non-audit services performed during the year by the auditors for the Company (or by another person or firm on the auditor’s behalf). Auditor’s Independence Declaration The Auditor’s Independence Declaration is included on page 22 and forms part of the Directors’ Report for the financial year ended 30 June 2014. Remuneration Report This Remuneration Report, which forms part of the Directors’ Report, sets out information about the remuneration of Breaker Resources NL’s key management personnel for the financial year ended 30 June 2014. The information provided in this report has been audited as per the requirements of section 308(3C) of the Corporations Act 2001. The report is set out under the following main headings: Key management personnel; Principles used to determine the components and amount of compensation; Details of remuneration; 15 Breaker Resources NL Directors’ Report Details of share-based compensation; and Details of service agreements and employment contracts. Key Management Personnel For the purposes of this report, key management personnel of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly. The key management personnel during the year were: Tom Sanders Mark Edwards Mike Kitney Alastair Barker Michelle Simson Executive Chairman Non-Executive Director Non-Executive Director Exploration Manager Manager Corporate Affairs/Company Secretary Principles Used to Determine the Components and Amount of Compensation Remuneration Committee The role of the Remuneration Committee is to assist the Company in fulfilling its corporate governance responsibilities relating to remuneration by reviewing and making appropriate recommendations on: remuneration packages of executive directors, non-executive directors and officers; employee incentive and equity-based plans including the appropriateness of performance hurdles and total payments proposed; recruitment, retention and termination policies and procedures for senior executives; and superannuation arrangements. Remuneration Policy The remuneration policy of Breaker Resources NL has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Company’s results. The Board of Breaker Resources NL believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the Company. The policy for determining the nature and amount of remuneration for senior executives of the Company is summarised below: The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the Board. The Board reviews executive packages annually by reference to the Company’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and retain the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives are also entitled to participate in the employee option plan. Where applicable, executives receive a superannuation guarantee contribution required by the government, which during the reporting period was 9.25% and since year end has increased to 9.5%. Some individuals may choose to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to key management personnel is valued at the cost to the Company and expensed. Options are valued using the Black-Scholes methodology. 2014 Annual Report 16 Directors’ Report The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive directors and remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. reviews their The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the annual general meeting. The remuneration pool limit is $300,000 and is currently utilised to a level of $64,000 per annum. From 1 April 2014, the base fee paid to non-executive directors is $32,000 per annum. For the period 1 July 2013 to 31 March 2014, the base fee paid to non- executive directors was $40,000 per annum. Fees for non-executive directors are not linked to the performance of the Company however to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the employee option plan, although any allocation must be approved by shareholders in general meeting. There is no retirement benefit plan for directors. Performance Based Remuneration The Company currently has no individual performance based remuneration component built into key management personnel remuneration packages. Company Performance, Shareholder Wealth and Key Management Personnel Remuneration The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and key management personnel performance. Currently, this is facilitated through the issue of options to key management personnel to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth. Use of Remuneration Consultants The Company did not employ the services of any remuneration consultants during the financial year ended 30 June 2014. Details of Remuneration The key management personnel of the Company are disclosed above. Remuneration packages contain the following elements: Short-term employee benefits - cash salary and fees, cash bonuses, non-monetary benefits and other; Post-employment benefits - including superannuation and termination; and Share-based payments - shares and options granted. The remuneration for each director and each of the other key management personnel of the Company during the year was as follows: Key management personnel Tom Sanders 2014 2013 Short-term Post-employment Share-based payments Salary & fees $ 261,374 280,199 Non- monetary Super- annuation Retirement benefits Options $ - - $ - - $ - - $ - - Total $ 261,374 280,199 17 Breaker Resources NL Directors’ Report Short-term Post-employment Share-based payments Non- monetary Super- annuation Retirement benefits Options $ - - - - - - - - $ - - - - - - 24,996 17,926 $ - - - - - - - - $ - - - - - 85,000 Total $ 38,000 40,111 38,000 40,111 212,971 319,487 - 209,000 201,340 358,998 Key management personnel Mark Edwards 2014 2013 Mike Kitney 2014 2013 Alastair Barker Salary & fees $ 38,000 40,111 38,000 40,111 2014 2013 212,971 234,487 Michelle Simson 2014 2013(i) 184,004 139,732 Notes (i) Appointed 22 October 2012 No director or executive appointed during the year received a payment as part of his or her consideration for agreeing to hold the position. Details of Share-Based Compensation Shares Nil shares in the Company were issued to key management personnel as part of their remuneration during the year (2013: Nil). Options Nil options in the Company were issued to key management personnel as part of their remuneration during the year (2013: 2,000,000). There were Nil options exercised, sold or lapsed by key management personnel during the year (2013: Nil). During the year, the following share-based payment arrangements for key management personnel were in existence: Option series Grant date Expiry date 60502 60503 60510 60511 1 August 2011 30 June 2016 1 August 2011 30 June 2016 10 July 2012 31 December 2016 Fair value per option at grant Vesting date cents 2.31 1.90 8.52 5 August 2011 9 August 2011 11 July 2012 20 November 2012 31 December 2016 20.13 27 November 2012 Shareholdings of Key Management Personnel The numbers of ordinary shares in the Company held during the financial year by each director of Breaker Resources NL and other key management personnel of the Company, including their personally related parties, are detailed below. 2014 Annual Report 18 Directors’ Report Key management personnel Tom Sanders 2014 2013 Mark Edwards 2014 2013 Mike Kitney 2014 2013 Alastair Barker 2014 2013 Michelle Simson 2014 2013(i) Fully Paid Ordinary Shares Granted as compen- sation Received on exercise of options Balance at start of year Number Number Number 11,770,004 11,770,004 1,050,000 1,050,000 1,075,000 1,075,000 50,000 50,000 - - - - - - - - - - - - - - - - - - - - - - Notes (i) Commenced 22 October 2012 Other changes Number Balance at year end Number 2,679,743 - 14,449,747 11,770,004 130,000 - 1,180,000 1,050,000 116,250 - 1,191,250 1,075,000 12,500 - - - 62,500 50,000 - - Key management personnel Tom Sanders 2014 2013 Mark Edwards 2014 2013 Mike Kitney 2014 2013 Alastair Barker 2014 2013 Michelle Simson 2014 2013(i) Partly Paid Ordinary Shares Balance at start of year Number Granted as compensation Other changes Number Number Balance at year end Number - - - - - - - - - - - - - - - - - - - - 1,309,871 - 1,309,871 - 65,000 - 58,125 - 65,000 - 58,125 - 6,250 6,250 - - - - - - Notes (i) Commenced 22 October 2012 19 Breaker Resources NL Directors’ Report Option Holdings of Key Management Personnel The numbers of options over ordinary shares in the Company held during the financial year by each director of Breaker Resources NL and other key management personnel of the Company, including their personally related parties, are detailed below: Key management personnel Balance at start of year Granted as compen- sation Exercised Other changes Balance at year end Vested and exercisable Number Number Number Number Number Number Tom Sanders 2014 2013 Mark Edwards 2014 2013 Mike Kitney 2014 2013 Alastair Barker 2014 2013 Michelle Simson 5,635,000 5,635,000 500,000 500,000 512,500 512,500 1,025,000 - - - - - - - 25,000 1,000,000 2014 2013(i) 1,000,000 - - 1,000,000 Notes (i) Commenced 22 October 2012 - - - - - - - - - - 1,309,871 6,944,871 6,944,871 - 5,635,000 635,000 65,000 - 565,000 500,000 565,000 - 58,125 - 570,625 512,500 570,625 12,500 6,250 1,031,250 1,031,250 - - - 1,025,000 1,025,000 1,000,000 1,000,000 1,000,000 1,000,000 As a result of the conduct of the Company’s pro rata entitlement issue, and in accordance with the relevant terms and conditions, the exercise prices of various unlisted options on issue were adjusted, as per the formula provided in ASX Listing Rule 6.22.2, effective 27 December 2013 (the market price of BRB securities at this time was 20 cents). Details of the adjustments made to options held by key management personnel are outlined below. Key management personnel Unlisted options held Number Exercise price at grant Fair value per option at grant Expiry date Fair value pre- adjustment Exercise price post- adjustment Fair value post- adjustment cents cents cents cents Tom Sanders 2,000,000 30/06/16 Tom Sanders 3,000,000 30/06/16 Mark Edwards 500,000 30/06/16 Mike Kitney 500,000 30/06/16 Michelle Simson 1,000,000 31/12/16 25.0 30.0 25.0 25.0 50.0 2.31 1.90 2.31 2.31 20.13 10.78 9.98 10.78 10.78 8.92 23.1 28.1 23.1 23.1 48.1 All other terms and conditions of the unlisted options remained unchanged. cents 11.11 10.26 11.11 11.11 9.11 2014 Annual Report 20 Directors’ Report Details of Service Agreements and Employment Contracts Service agreements are in place between the Company and Executive Chairman Tom Sanders and Exploration Manager Alastair Barker. Manager Corporate Affairs/Company Secretary Michelle Simson is employed via contract. Details of these arrangements as at 30 June 2014 are provided below: Service Agreement: Tom Sanders – Executive Chairman Term of agreement – Initial term of two (2) years and further terms of two (2) years, subject to termination provisions; commenced 18 April 2012 (subject to ASX listing). An annual consultancy fee of $220,104# (inclusive of superannuation, plus GST) is paid to Goldfields Geological Associates, an entity controlled by Mr Sanders, for the provision of services by Mr Sanders on a minimum of 80% of fulltime basis. The agreement continues until terminated by either Goldfields Geological Associates or the Company. Subject to the Corporations Act 2001 and the ASX Listing Rules, Mr Sanders is entitled to a minimum notice period of 12 months and the Company is entitled to a minimum notice period of three (3) months. Goldfields Geological Associates will be reimbursed for expenses incurred on the Company’s behalf. Service Agreement: Alastair Barker – Exploration Manager Term of agreement – Initial term of two (2) years and further terms of one (1) year subject to termination provisions; commenced 18 April 2012 (subject to ASX listing). An annual consultancy fee of $179,344# (inclusive of superannuation, plus GST) is paid to Horizon Resources Pty Ltd, an entity controlled by Mr Barker, for the provision of services by Mr Barker on a minimum of 80% of fulltime basis. The agreement continues until terminated by either Horizon Resources Pty Ltd or the Company. Subject to the Corporations Act 2001 and ASX Listing Rules, Mr Barker is entitled to a minimum notice period of 12 months (or six (6) months after the initial term). The Company is entitled to a minimum notice period of three (3) months. Employment Contract: Michelle Simson – Manager Corporate Affairs/Company Secretary Base salary of $176,000# per annum (inclusive of superannuation). Payment of termination benefit on early termination by the employer, other than for gross misconduct, equals three (3) months’ salary. Notice period of three (3) months. # The figures stated represent the respective fees as at 30 June 2014 and were effective from 1 April 2014. All key management agreed to a 20% fee reduction from this date. Signed in accordance with a resolution of directors made pursuant to section 298(2) of the Corporations Act 2001. On behalf of the directors TOM SANDERS Executive Chairman Perth, 28 August 2014 21 Breaker Resources NL Auditor’s Independence Declaration 2014 Annual Report 22 Statement of Profit or Loss Statement of Profit or Loss and Other Comprehensive Income for the Financial Year ended 30 June 2014 Income Government grant and incentive Interest income Other income Total Income Expenses Administration expenses Depreciation expenses Employee benefits expenses Exploration and evaluation expenses Share-based payment expenses Interest expenses Total Expenses Notes 2014 $ 2013 $ 4 4 4 4 4 4 4 1,811,146 28,016 1,858 120,000 194,418 - 1,841,020 314,418 (395,684) (96,905) (204,145) (357,840) (79,189) (178,803) (2,186,055) (3,951,995) - (1,053) (343,233) (1,158) (2,883,842) (4,912,218) Profit/(Loss) before income tax (1,042,822) (4,597,800) Income tax expense 6 - - Profit/(Loss) for the year (1,042,822) (4,597,800) Other comprehensive income - - Total comprehensive income for the year (1,042,822) (4,597,800) Profit/(Loss) attributable to owners of the Company (1,042,822) (4,597,800) Total comprehensive income attributable to owners of the Company (1,042,822) (4,597,800) Basic and diluted profit/(loss) per share attributable to the ordinary equity holders of the Company (cents per share) 15 (1.68) (8.30) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 23 Breaker Resources NL Statement of Financial Position Statement of Financial Position as at 30 June 2014 Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Plant and equipment Other financial assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Borrowings Total Current Liabilities Non-Current Liabilities Borrowings Total Non-Current Liabilities Total Liabilities Net Assets Equity Contributed equity Reserve Accumulated profit/(loss) Capital and reserves attributable to owners of the Company Notes 2014 $ 2013 $ 7 8 9 10 11 12 12 13 457,575 1,818,885 2,276,460 2,250,187 104,356 2,354,543 189,978 36,410 226,388 285,877 49,410 335,287 2,502,848 2,689,830 308,953 5,335 314,288 857,975 15,211 873,186 - - 5,336 5,336 314,288 878,522 2,188,560 1,811,308 9,743,749 469,533 8,323,675 469,533 (8,024,722) (6,981,900) 2,188,560 1,811,308 Total Equity 2,188,560 1,811,308 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 2014 Annual Report 24 Statement of Changes in Equity Statement of Changes in Equity for the Financial Year ended 30 June 2014 Attributable to owners of the Company Contributed Equity $ Notes Share- based Payments Reserve $ Accumulated Profit/(Losses) $ Total $ Balance at 30 June 2012 8,323,675 126,300 (2,384,100) 6,065,875 Profit/(Loss) for the year Total comprehensive income for the year - - - - (4,597,800) (4,597,800) (4,597,800) (4,597,800) Recognition of share-based payments - 343,233 - 343,233 Balance at 30 June 2013 8,323,675 469,533 (6,981,900) 1,811,308 Profit/(Loss) for the year Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity net of transaction costs - - - (1,042,822) (1,042,822) - (1,042,822) (1,042,822) 13 1,420,074 - - 1,420,074 Balance at 30 June 2014 9,743,749 469,533 (8,024,722) 2,188,560 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 25 Breaker Resources NL Statement of Cash Flows Statement of Cash Flows for the Financial Year ended 30 June 2014 Cash flows from operating activities Payments to suppliers and employees Notes 2014 $ 2013 $ (480,944) (856,603) Payments for exploration and evaluation expenditure (2,787,345) (3,994,621) Government grant received Other income received Interest received Interest paid 30,000 1,858 28,016 (1,053) 120,000 - 194,418 (1,158) Net cash inflow/(outflow) from operating activities 18 (3,209,468) (4,537,964) Cash flows from investing activities Payments for plant and equipment Other financial assets received Net cash inflow/(outflow) from investing activities Cash flows from financing activities Proceeds from issue of ordinary shares Share issue transaction costs Proceeds from borrowings Repayment of borrowings Net cash inflow/(outflow) from financing activities (1,006) 13,000 11,994 (164,595) (49,410) (214,005) 1,584,106 (164,032) - (15,212) 1,404,862 - - 30,250 (9,704) 20,546 Net increase/(decrease) in cash and cash equivalents (1,792,612) (4,731,423) Cash and cash equivalents at the beginning of the period 2,250,187 6,981,610 Cash and cash equivalents at the end of the period 7 457,575 2,250,187 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 2014 Annual Report 26 Notes to the Financial Statements Notes to the Financial Statements for the Year ended 30 June 2014 1. General information Breaker Resources NL is a public company listed on the Australian Securities Exchange, incorporated in Australia and operating in Australia. The Company’s registered office and its principal place of business is 12 Walker Avenue, West Perth WA 6005. Breaker Resources NL’s principal activity is mineral exploration and it is a for-profit entity for the purposes of preparing the Financial Statements. These Financial Statements are for Breaker Resources NL as an individual entity and are presented in the Australian currency. The Financial Statements were authorised for issue by the directors on 28 August 2014. The directors have the power to amend and reissue the Financial Statements. 2. Significant accounting policies The principal accounting policies adopted in the preparation of the Financial Statements are set out below. (a) Basis of preparation These general purpose financial statements have been prepared in accordance with the Corporations Act 2001 (Corporations Act) and Australian Accounting Standards and Interpretations (Standards) issued by the Australian Accounting Standards Board (AASB). The Financial Statements and notes of the Company also comply with International Financial Reporting Standards issued by the International Accounting Standards Board. These Financial Statements have been prepared under the historical cost convention. Historical cost is generally based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. Going concern The Financial Statements have been prepared on the basis of going concern which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The Company has incurred a net loss of $1,042,822 and experienced net cash outflows from operating and investing activities of $3,197,474 for the year ended 30 June 2014. Subsequent to year end, the Company received a tax incentive refund of $1,781,146 for research and development expenditure incurred during 2012/13, resulting in a working capital position of $1,962,172 (see Note 13). The ability of the Company to continue as a going concern is dependent upon funding to provide adequate working capital for a further 12 months from the date of signature of the Financial Statements. The directors intend to access further government grant and incentive funding and are satisfied that the going concern basis of preparation is appropriate. The Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. 27 Breaker Resources NL Notes to the Financial Statements (b) New and revised accounting standards i. Standards affecting amounts reported and/or disclosures in the financial statements The Company has adopted all of the new and revised Standards issued by the AASB that are relevant to its operations and effective for the current year. New and revised Standards and amendments thereof effective for the current year that are relevant to the Company include: AASB 2011-4 ‘Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements’ This standard removes the individual key management personnel disclosure requirements in AASB 124 ‘Related Party Disclosures’. As a result the Company only discloses the key management personnel compensation in total and for each of the categories required in AASB 124. In the current year the individual key management personnel disclosure previously required by AASB 124 (Note 20 in the 30 June 2013 financial statements) is disclosed in the Remuneration Report due to an amendment to Corporations Regulations 2001 issued in June 2013. AASB 119 ‘Employee Benefits (2011)’ and AASB 2011-10 ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011)’ The revised standard has changed the accounting for the Company’s annual leave obligations. As the Company did not have any annual leave balance at the beginning of the year and it expects all annual leave to be taken within 12 months of the respective service being provided, annual leave obligations are classified as short-term employee benefits in their entirety. The application of the amendments does not have any impact on the Financial Statements. AASB 2012-2 ‘Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities’ The Company has applied the amendments to AASB 7 ‘Disclosures – Offsetting Financial Assets and Financial Liabilities’ for the first time in the current year. The amendments require entities to disclose information about rights of offset and related arrangements. The amendments have been applied retrospectively. As the Company does not have any offsetting arrangements in place, the application of the amendments does not have any material impact on the Financial Statements. AASB 2012-5 ‘Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle’ The Annual Improvements to AASBs 2009 – 2011 have made a number of amendments to Standards. The amendments that are relevant to the Company are the amendments to AASB 101 regarding when a Statement of Financial Position as at the beginning of the preceding period (third Statement of Financial Position) and the related notes are required to be presented. The amendments specify that a third Statement of Financial Position is required when: an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financial statements; and the retrospective application, restatement or reclassification has a material effect on the information in the third Statement of Financial Position. The amendments specify that related notes are not required to accompany the third Statement of Financial Position. 2014 Annual Report 28 Notes to the Financial Statements As the Company does not have any retrospective restatement or reclassification there is no impact on the Financial Statements. ii. Standards and Interpretations in issue not yet adopted At the date of authorisation of the Financial Statements, the Standards listed below were in issue but not yet effective. The potential effect of the revised Standards on the Company’s Financial Statements has not yet been determined. AASB 9 ‘Financial Instruments’ and the relevant amending standards, effective for annual reporting periods beginning on or after 1 January 2017. AASB 1031 ‘Materiality (2013)’, effective for annual reporting periods beginning on or after 1 January 2014. AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities’, effective for annual reporting periods beginning on or after 1 January 2014. AASB 2013-3 ‘Amendments to AASB 136 – Recoverable Amount Disclosures for Non- Financial Assets’, effective for annual reporting periods beginning on or after 1 January 2014. AASB 2013-4 ‘Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting’, effective for annual reporting periods beginning on or after 1 January 2014. AASB 2013-5 ‘Amendments to Australian Accounting Standards – Investment Entities’, effective for annual reporting periods beginning on or after 1 January 2014. AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’, effective for annual reporting periods beginning on or after 1 January 2014. INT 21 ‘Levies’, effective for annual reporting periods beginning on or after 1 January 2014. (c) Segment reporting An operating segment is defined as a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Company’s chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. (d) Government grants Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in profit or loss in the period in which they become receivable. 29 Breaker Resources NL Notes to the Financial Statements (e) (f) Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Income tax The income tax expense for the year is the tax payable on the current year’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It creates provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. However, the deferred tax income is not accounted for if it arises from initial recognition of an asset or liability in a transaction that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise these temporary differences and losses. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (g) Impairment of assets At the end of each reporting period, the Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. 2014 Annual Report 30 Notes to the Financial Statements When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (h) Cash and cash equivalents For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of three (3) months or less that are readily convertible to known amounts of cash and which are subject to significant risk of changes in value, and bank overdrafts. (i) (j) Trade and other receivables Receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. Financial assets Classification The Company classifies all of its financial assets as loans and receivables. Management determines the classification of its financial assets at initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinate payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non- current assets. Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value. For the non-current receivables, the fair values are also not significantly different to their carrying amounts. Collectability of loans and receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment) is used where there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables or in an otherwise timely manner. The amount of the impairment allowance is the difference between the asset’s carrying amount and the estimated future cash flows. None of the Company’s loans and receivables has an applicable interest rate hence the cash flows are not discounted. The amount of the impairment loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income within impairment expenses. When a loan or receivable for which an impairment allowance has been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the Statement of Profit or Loss and Other Comprehensive Income. Recognition and derecognition Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all of the risks and rewards of ownership. 31 Breaker Resources NL Notes to the Financial Statements Impairment The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is any evidence of impairment for any of the Company’s financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income. (k) Plant and equipment All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the Statement of Profit or Loss and Other Comprehensive Income during the reporting period in which they are incurred. Depreciation of plant and equipment is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term. All plant and equipment is depreciated at the rate of 25% per annum. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (refer to Note 2(g)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit or Loss and Other Comprehensive Income. (l) Exploration and evaluation costs Exploration and evaluation costs are written off in the year they are incurred. (m) (n) Trade and other payables These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured, non-interest bearing and are paid on normal commercial terms. They are presented as current liabilities unless payment is not due within 12 months after the reporting period. Employee benefits Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, and annual leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The short-term employee benefit obligations are presented as payables. Other long-term employee benefit obligations The liabilities for long service leave and annual leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to 2014 Annual Report 32 Notes to the Financial Statements expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. (o) Share-based payments The Company provides benefits to employees (including directors and contractors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions) (refer to Note 19). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which any performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects: the extent to which the vesting period has expired; and the number of options that, in the opinion of the directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. Options over ordinary shares have also previously been issued as consideration for other services. These options have been treated in the same manner as employee options described above, with the expense being included as part of exploration expenditure. (p) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (q) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. 33 Breaker Resources NL Notes to the Financial Statements Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (r) Critical judgements, estimates and assumptions The preparation of these Financial Statements requires the use of certain critical accounting estimates, which, by definition, will seldom equal the actual results. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are: Environmental issues Balances disclosed in the Financial Statements and notes thereto are not adjusted for any pending or enacted environmental legislation, and the directors’ understanding thereof. At the current stage of the Company’s development and its current environmental impact, the directors believe such treatment is reasonable and appropriate. Taxation Balances disclosed in the Financial Statements and the notes thereto related to taxation are based on the best estimates of the directors. These estimates take into account both the financial performance and position of the Company as they pertain to current income taxation legislation, and the directors’ understanding thereof. No adjustment has been made for pending or future taxation legislation. The current income tax position represents the directors’ best estimate, pending an assessment by the Australian Taxation Office. 3. Financial risk management The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Risk management is carried out by the full Board via the audit and risk committees as the Company believes that it is crucial for all directors to be involved in this process. The Executive Chairman, with the assistance of senior management as required, has responsibility for identifying, assessing, treating and monitoring risks and reporting to the Board on risk management. (a) Market risk Foreign exchange risk As all operations are currently within Australia the Company is not exposed to foreign exchange risk. Commodity price risk Given the current level of operations the Company is not exposed to commodity price risk. Interest rate risk The Company is exposed to movements in market interest rates on cash and cash equivalents. The Company policy is to monitor the interest rate yield curve out to six (6) months to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The entire balance of cash and cash equivalents for the Company of $457,575 (2013: $2,250,187) is subject 2014 Annual Report 34 Notes to the Financial Statements to interest rate risk. The weighted average interest rate received on cash and cash equivalents by the Company was 2.59% (2013: 2.49%). Sensitivity analysis At 30 June 2014, if interest rates had changed by -/+ 100 basis points from the weighted average rate for the year with all other variables held constant, post-tax loss for the Company would have been $13,539 lower/higher (2013: $46,159) as a result of lower/higher interest income from cash and cash equivalents. (b) Credit risk The Company has no significant concentrations of credit risk. The maximum exposure to credit risk at balance date is the carrying amount of those assets as disclosed in the Statement of Financial Position and Notes to the Financial Statements. As the Company does not presently have any debtors, lending, significant stock levels or any other credit risk, a formal credit risk management policy is not maintained. (c) Liquidity risk The Company manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable securities are available to meet the current and future commitments of the Company. Due to the nature of the Company’s activities, being mineral exploration, the Company does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board constantly monitors the state of equity markets in conjunction with the Company’s current and future funding requirements, with a view to initiating appropriate capital raisings as required. The financial liabilities of the Company are generally confined to trade and other payables as disclosed in the Statement of Financial Position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date. (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. All financial assets and financial liabilities of the Company at the balance date are recorded at amounts approximating their carrying amount due to their short term nature. 4. Income and expenses (a) Income from continuing operations includes the following revenue items: Government grant and incentive(i) Interest income Others 2014 $ 1,811,146 28,016 1,858 2013 $ 120,000 194,418 - 1,841,020 314,418 Notes (i) The amount represents $1,781,146 Research and Development tax incentive and $30,000 received from the Department of Mines and Petroleum under the Royalties for Regions Co-funded Government – Industry Drilling Program 2012-2013. There are no unfulfilled conditions or other contingencies attaching to this incentive and grant. The Company did not benefit directly from any other forms of government assistance. 35 Breaker Resources NL Notes to the Financial Statements (b) Loss for the year includes the following specific expenses: Depreciation Exploration and evaluation expenses (c) Employee benefit expenses: Wages and superannuation Directors’ fees Equity-settled share-based payments Annual leave provision Other 5. Operating segments 2014 $ 96,905 2,186,055 2,282,960 2014 $ 113,544 76,000 - 12,729 1,872 204,145 2013 $ 79,189 3,951,995 4,031,184 2013 $ 74,869 80,222 343,233 - 23,712 522,036 For management purposes, the Company has identified only one (1) reportable segment as exploration activities undertaken in Australia. This segment includes activities associated with the determination and assessment of the existence of commercial economic reserves from the Company’s mineral assets in this geographic location. Segment performance is evaluated based on the operating profit and loss and cash flows and is measured in accordance with the Company’s accounting policies. Segment revenue Reconciliation of segment revenue to total revenue before tax: Government grant and incentive Interest revenue Other income Total revenue Segment result Reconciliation of segment result to loss before tax: Depreciation expenses Other corporate and administration income/(expenses), net Net profit/(loss) before tax 2014 $ 2013 $ - - 1,811,146 28,016 1,858 1,841,020 120,000 194,418 - 314,418 (2,186,055) (3,951,995) (96,905) 1,240,138 (79,189) (566,616) (1,042,822) (4,597,800) Segment operating assets 161,336 340,033 Reconciliation of segment operating assets to total assets: Other corporate and administration assets Total assets Total assets includes additions to non-current assets Segment operating liabilities Reconciliation of segment operating liabilities to total liabilities: Other corporate and administration liabilities Total liabilities 2,341,512 2,502,848 1,006 172,396 141,892 314,288 2,349,797 2,689,830 144,747 773,686 104,836 878,522 2014 Annual Report 36 Notes to the Financial Statements 6. Income tax Income tax expense Current tax Deferred tax Numerical reconciliation of income tax expense to prima facie tax payable Profit/(Loss) from continuing operations before income tax expense Prima facie tax benefit at the Australian tax rate of 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Capital raising costs R& D refund Share-based payments Entertainment 2014 $ 2013 $ - - - - (1,042,822) (312,847) (4,597,800) (1,379,340) (8,172) (534,344) 330 102,970 248 (855,033) (1,276,122) Movements in unrecognised temporary differences (27,623) (71,110) Tax effect of current year tax losses for which no deferred tax asset has been recognised Income tax expense 882,656 1,347,232 - - Unrecognised temporary differences Deferred tax assets (at 30%) on income tax account Accruals Provisions Capital raising costs Carry forward tax losses 7,500 3,819 122,777 1,769,307 1,903,403 8,700 - 133,168 2,116,027 2,257,895 Deferred tax liabilities (30%) - - Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. The Company’s ability to use losses in the future is subject to the Company satisfying the relevant tax authority’s criteria for using these losses. 7. Cash and cash equivalents Cash at bank and in hand Cash and cash equivalents as shown in the Statement of Financial Position and the Statement of Cash Flows 37 Breaker Resources NL 2014 $ 2013 $ 457,575 2,250,187 457,575 2,250,187 Notes to the Financial Statements Short-term deposits are made for varying periods of between one (1) day and three (3) months depending on the immediate cash requirements of the Company and earn interest at the respective short-term deposit rates. 8. Trade and other receivables Prepayments Research & development tax incentive GST receivable 9. Plant and equipment 2014 $ 31,747 1,781,146 5,992 1,818,885 2013 $ 20,480 - 83,876 104,356 2014 2013 Furniture & office equipment $ Exploration equipment $ Motor vehicles $ Total $ Furniture & office equipment $ Exploration equipment $ Motor vehicles $ Total $ Cost 54,831 108,717 213,838 377,386 54,831 107,711 213,838 376,380 Accumulated depreciation (26,189) (52,309) (108,910) (187,408) (12,111) (24,369) (54,023) (90,503) Net book amount 28,642 56,408 104,928 189,978 42,720 83,342 159,815 285,877 Opening net book amount 42,720 83,342 159,815 285,877 Additions - 1,006 - 1,006 33,346 19,849 49,146 117,979 200,471 55,000 89,746 164,595 Depreciation charge (14,078) (27,940) (54,887) (96,905) (10,475) (20,804) (47,910) (79,189) Closing net book amount 28,642 56,408 104,928 189,978 42,720 83,342 159,815 285,877 10. Other financial assets Long-term deposits 11. Trade and other payables Trade creditors Payroll tax Other payables and accruals 2014 $ 2013 $ 36,410 49,410 2014 $ 250,254 20,953 37,746 308,953 2013 $ 807,107 20,845 30,023 857,975 Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature. 2014 Annual Report 38 Notes to the Financial Statements 12. Borrowings Current Non-current 2014 $ 5,335 - 5,335 2013 $ 15,211 5,336 20,547 The fair value of the loan is not materially different to its carrying amount, since the interest payable on the loan is close to current market rate and the borrowing is of a short-term nature. 13. Contributed equity (a) Share capital 2014 2013 Notes Number $ Number $ Ordinary shares fully paid (b),(d) 68,875,005 9,674,874 55,100,004 8,323,675 Ordinary shares partly paid (b),(d) 6,887,498 68,875 - - Total issued capital 75,762,503 9,743,749 55,100,004 8,323,675 (b) Movements in ordinary share capital Beginning of the year Issued during the year: 2014 2013 Number $ Number $ 55,100,004 8,323,675 55,100,004 8,323,675 Fully paid shares via entitlement issue 13,775,001 1,515,231 Partly paid shares via entitlement issue Transaction costs 6,887,498 68,875 - (164,032) - - - - - - End of the year 75,762,503 9,743,749 55,100,004 8,323,675 (c) Movements in options on issue Beginning of the year 2014 Number 2013 Number 29,650,000 27,250,000 Issued via entitlement issue, exercisable at 25 cents on or before 31 December 2014 6,887,498 - Lapsed End of the year Issued, exercisable at 50 cents on or before 31 December 2016 - - 2,500,000 (100,000) 36,537,498 29,650,000 All options on issue are exercisable on a 1:1 basis for the Company’s ordinary shares and carry no rights to dividends and no voting rights. The options are exercisable at prices between $0.231 and $0.50 and expire between 31 December 2014 and 31 December 2016. 39 Breaker Resources NL Notes to the Financial Statements (d) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one (1) vote, and upon a poll each share is entitled to one (1) vote, in proportion to the number of and amounts paid on the shares held. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. The partly paid ordinary shares have a total issue price of $0.20 and are paid up to $0.01. The balance is payable by calls made by the Company no earlier than four (4) years after the date of issue. Upon becoming fully paid, each partly paid share will rank equally in all respects with the other issued fully paid shares in the Company. (e) Capital risk management The Company’s objective when managing capital is to safeguard its ability to carry on as a going concern, so that it may continue to provide returns for shareholders and benefits for other stakeholders. Due to the nature of the Company’s activities, being mineral exploration, the Company does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of capital risk management is the current working capital position against the requirements of the Company to meet exploration programs and corporate overheads. The Company’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Company at 30 June 2014 and 30 June 2013 is as follows: Cash and cash equivalents Trade and other receivables Trade and other payables Borrowings Working capital position 14. Dividends 2014 $ 457,575 1,818,885 (308,953) (5,335) 2013 $ 2,250,187 104,356 (857,975) (15,211) 1,962,172 1,481,357 No dividends were paid during the financial year. No recommendation for payment of dividends has been made. 15. Loss per share (a) Reconciliation of earnings used in calculating profit/(loss) per share Profit/(Loss) attributable to the owners of the Company used in calculating basic and diluted profit/(loss) per share (1,042,822) (4,597,800) 2014 $ 2013 $ 2014 Annual Report 40 Notes to the Financial Statements (b) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share 62,195,073 55,100,004 2014 Number 2013 Number (c) Information on classification of options As the Company has made a loss for the year ended 30 June 2014, all options on issue are considered antidilutive and have not been included in the calculation of diluted earnings per share. These options could potentially dilute basic earnings per share in the future. 16. Commitments (a) Exploration Commitments The Company must maintain current rights of tenure to tenements, which requires outlays of expenditure in 2014/15. Under certain circumstances these commitments are subject to the possibility of adjustment to the amount and/or timing of such obligations however they are expected to be fulfilled in the normal course of operations. Estimated expenditure on mining, exploration and prospecting leases for 2014/15: 2014 $ 2013 $ 1,287,334 1,712,000 (b) Capital Commitments There are no capital expenditure commitments for the Company as at 30 June 2014. (c) Lease Commitments: Company as Lessee The Company leases its office under a non-cancellable operating lease expiring within two (2) years. The lease contains options to renew terms up to three (3) years commencing on the expiry date. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one (1) year Later than one (1) year but not later than five (5) years 2014 $ 76,601 65,422 142,023 2013 $ 74,000 129,500 203,500 17. Contingencies Pursuant to a mineral exploration and land access agreement (MELA Agreement) with the Cosmo Newberry (Aboriginal Corporation) and Yilka Native Title Group (WAD297/08) (together the Indigenous Party), as amended on 20 June 2014, the Company, whilst it holds certain tenement licences, must pay to the Indigenous Party an annual fee. The fee is payable within seven (7) days of each anniversary of the date of the MELA Agreement and comprises an amount of $200,000 indexed for CPI (All Groups) pro rata to the proportion of land held at the anniversary date compared to that held at the commencement date of the MELA Agreement. 41 Breaker Resources NL Notes to the Financial Statements In addition to the above, within 28 days of the Company filing exploration expenditure reports with the Department of Mines and Petroleum, the Company must pay the Indigenous Party 15% of its overall exploration expenditure in relation to the area the subject of the MELA Agreement for the previous year less the relevant annual fee payable for that year, where 15% of its overall exploration expenditure for the previous year is greater than the relevant annual fee payable for that year. 18. Reconciliation of loss after income tax to net cash outflow from operating activities Reconciliation of net loss after income tax to net cash flow from operating activities Net profit/(loss) for the year Non-cash items Depreciation of non-current assets Share-based payments expense Change in operating assets and liabilities (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables 2014 $ 2013 $ (1,042,822) (4,597,800) 96,905 - (1,714,529) (549,022) 79,189 343,233 60,254 (422,840) Net cash inflow/(outflow) from operating activities (3,209,468) (4,537,964) 19. Share-based payments (a) Employee share options The Company provides benefits to employees (including directors) and contractors of the Company in the form of share-based payment transactions, whereby employees render services in exchange for options to acquire ordinary shares. Options are granted under the plan for no consideration. The table below summarises the share-based payment options granted by Breaker Resources NL: 2014 2013 Weighted average exercise price cents Weighted average exercise price cents Number Number 8,400,000 34.5 6,000,000 - - 8,400,000 8,400,000 - - 32.3 32.3 2,500,000 (100,000) 8,400,000 (i)2,400,000 27.5 50.00 50.00 34.5 34.5 Outstanding at the beginning of the year Granted Forfeited/cancelled Outstanding at year end Exercisable at year end Notes (i) 6,000,000 options held by directors escrowed until 20 April 2014. No options were exercised or expired during the year ended 30 June 2014. 2014 Annual Report 42 Notes to the Financial Statements The weighted average remaining contractual life of share options outstanding at the end of the financial year was 2.0 years (2013: 3.0 years) and the exercise prices ranged from 23.1 cents to 50 cents (2013: 25 cents to 50 cents). The weighted average fair value of the options granted during the year was Nil (2013: 14.4 cents). The Company changed the exercise prices of some options during the year. The impact on the fair value of the options immediately before and after the modification was insignificant. (b) Expenses arising from share-based payment transactions Total expenses arising from shared-based payment transactions recognised during the year were as follows: Share-based payment expenses recognised for options granted Share-based payment expenses reversed for options lapsed 2014 $ 2013 $ - - - 363,367 (20,134) 343,233 20. Key management personnel transactions The aggregate compensation made to directors and other members of key management personnel of the Company is set out below: Short term benefits Post-employment benefits Share-based payments 2014 $ 734,348 24,996 - 2013 $ 734,640 17,926 286,340 759,344 1,038,906 There were no loans to/from key management personnel during the year. Detailed remuneration disclosures are provided in the Remuneration Report on page 15. 21. Related party transactions The Company had no transactions with related parties during the year except for payments to the key management personnel disclosed in the Remuneration Report on page 15. There were no guarantees provided to related parties during the year. 22. Remuneration of auditor During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms: 43 Breaker Resources NL Notes to the Financial Statements (a) Audit services Rothsay Chartered Accountants – audit and review of financial reports Total remuneration for audit services 2014 $ 2013 $ 20,500 20,500 20,500 20,500 (b) Non-audit services There were Nil non-audit services provided by the auditor of the Company, Rothsay Chartered Accountants, during the year (2013: Nil). 23. Subsequent events On 8 July 2014 the Company received a tax incentive refund of $1.78million for research and development expenditure incurred during 2012/13. There were no other matters or circumstances arising since the end of the reporting period that have significantly affected, or may significantly affect the operations of the Company and the results of those operations or the state of the affairs of the Company in the financial period subsequent to 30 June 2014. 2014 Annual Report 44 Directors’ Declaration Directors’ Declaration The directors declare that: the Financial Statements comprising the Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and accompanying notes set out on pages 27 to 44 are in accordance with the Corporations Act 2001, including: i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and ii. giving a true and fair view of the Company’s financial position as at 30 June 2014 and of its performance for the financial year ended on that date; there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; a statement that the attached financial statements are in compliance with International Financial Reporting Standards has been included in the Notes to the Financial Statements; and the directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001. On behalf of the directors TOM SANDERS Executive Chairman Perth, 28 August 2014 45 Breaker Resources NL Independent Audit Report 2014 Annual Report 46 Independent Audit Report 47 Breaker Resources NL ASX Additional Information ASX Additional Information Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is provided below. The information is current as at 30 September 2014. Corporate Governance Statement The 2014 Corporate Governance Statement of Breaker Resources NL is available on the Company’s website at http://www.breakerresources.com.au/company/corporate-governance. Distribution of Equity Securities Analysis of numbers of equity security holders by size of holding: Fully paid ordinary shares Partly paid shares Listed options Number of holders Number of shares Number of holders Number of shares Number of holders Number of options 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001 and over 4 17 41 78 61,297 388,995 134 5,075,949 43 63,348,686 10 47 14 32 10 4,625 127,895 99,055 1,181,998 5,473,925 12 106 37 112 4,631 496,382 289,649 3,115,960 25 24,230,876 239 68,875,005 113 6,887,498 292 28,137,498 Unmarketable Parcel There are 26 holders of unmarketable parcels of fully paid ordinary shares, based on the closing market price of $0.079 on 30 September 2014. Restricted Securities There are no restricted securities on issue. Voting Rights All fully paid ordinary shares carry one (1) vote per share without restriction. Holders of partly paid shares are entitled to a fraction of one (1) vote which is equivalent to the proportion which the amount paid bears to the total issue price. Listed and unlisted options carry no attaching voting rights. Substantial Shareholders The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act, and the details of their holding at the time of notification, are: Shareholder Voting interest Number Voting power % 1 2 3 4 5 Mr Thomas Stephen Sanders & Mrs Helen Sanders Geologic Resource Fund CQS Asset Management Limited HSBC Custody Nominees Limited (Altus Resource Capital Limited) Konwave AG 11,750,004 8,583,665 5,000,000 5,000,000 4,375,000 21.36 12.40 9.07 9.07 6.35 2014 Annual Report 48 ASX Additional Information Top 20 Shareholders The names of the 20 largest holders of quoted fully paid ordinary shares (ASX: BRB) are: Shareholder Ordinary shares Number Equity held % HSBC Custody Nominees (Australia) Limited Mr Thomas Stephen Sanders & Mrs Helen Sanders Kurraba Investments Pty Ltd JP Morgan Nominees Australia Limited Mr Thomas Stephen Sanders & Mrs Helen Sanders National Nominees Limited Colbern Fiduciary Nominees Pty Ltd Mark Robert Edwards Michael John Kitney & Dale Jayne Kitney T T Nicholls Pty Ltd 1 2 3 4 5 6 7 8 9 10 11 Mr Wilhelm Schroder 12 13 14 15 16 17 18 Mr Michael Frank Manford Future Super Pty Ltd 19 Jemaya Pty Ltd 20 Jasper Hill Resources Pty Ltd Leet Investments Pty Ltd Southern Terrain Pty Ltd The Constantine Family Foundation Pty Ltd Alderhaus Pty Ltd Tecca Pty Ltd 22,630,825 10,295,922 5,000,000 4,760,649 4,169,588 3,125,000 1,260,382 1,180,000 1,160,000 1,139,537 888,715 784,941 580,060 474,000 473,022 462,588 430,178 397,269 386,338 300,000 59,899,014 32.858 14.949 7.260 6.912 6.054 4.537 1.830 1.713 1.684 1.655 1.290 1.140 0.842 0.688 0.687 0.672 0.625 0.577 0.561 0.436 86.968 The names of the 20 largest holders of quoted partly paid shares (ASX: BRBCA) are: Shareholder Ordinary shares Number Equity held % HSBC Custody Nominees (Australia) Limited Mr Thomas Stephen Sanders & Mrs Helen Sanders National Nominees Limited Jetosea Pty Ltd Mr Murray Leslie Siviour T T Nicholls Pty Ltd Colbern Fiduciary Nominees Pty Ltd Jasper Hill Resources Pty Ltd The Constantine Family Foundation Pty Ltd Southern Terrain Pty Ltd Future Super Pty Ltd 1 2 3 4 5 6 7 8 9 10 11 12 Westcap Pty Ltd 13 Tecca Pty Ltd 14 Mark Robert Edwards 15 Mr Luke Patrick Thomas Sanders 16 Michael John Kitney & Dale Jayne Kitney 17 18 19 20 Jetosea Pty Ltd Skink Resources Pty Ltd Cheetah Holdings Pty Ltd Kahala Holdings Pty Ltd 49 Breaker Resources NL 2,760,412 1,309,871 312,500 250,000 248,171 219,768 150,181 136,221 111,511 87,000 75,669 69,140 65,217 65,000 65,000 55,000 52,907 50,000 46,294 46,294 40.079 19.018 4.537 3.630 3.603 3.191 2.180 1.978 1.619 1.263 1.099 1.004 0.947 0.944 0.944 0.799 0.768 0.726 0.672 0.672 6,176,156 89.672 ASX Additional Information Top 20 Optionholders The names of the 20 largest holders of quoted options are: Optionholder Listed options Number Equity held % HSBC Custody Nominees (Australia) Limited 1 JP Morgan Nominees Australia Limited 2 Kurraba Investments Pty Ltd 3 Mr Thomas Stephen Sanders & Mrs Helen Sanders 4 National Nominees Limited 5 Talex Investments Pty Ltd 6 Mr Wilhelm Schroder 7 T T Nicholls Pty Ltd 8 9 M & K Korkidas Pty Ltd 10 Mr Murray Leslie Siviour 11 12 13 West Trade Enterprises Pty Ltd 14 Mrs Jennifer Ann Jones & Mr Kevin Michael Jones 15 16 17 18 19 20 McAlister Pty Ltd Tecca Pty Ltd The Constantine Family Foundation Pty Ltd Future Super Pty Ltd Colbern Fiduciary Nominees Pty Ltd Kahala Holdings Pty Ltd Jasper Hill Resources Pty Ltd Jetosea Pty Ltd Unquoted Securities Details of unquoted securities on issue are: Class Unlisted 23.1 cent options, exercisable on or before 30 June 2016 Unlisted 28.1 cent options, exercisable on or before 30 June 2016 10,885,412 2,800,000 2,500,000 1,934,871 1,562,500 664,657 490,000 419,768 393,510 344,000 267,471 250,000 235,000 207,043 190,217 161,511 155,669 150,180 126,294 125,000 23,863,103 Securities Number 3,000,000 3,000,000 Unlisted 48.1 cent options, exercisable on or before 31 December 2016 1,400,000 Unlisted 50 cent options, exercisable on or before 31 December 2016 1,000,000 Holders of 20% or more of the class Details of holders of 20% or more of a class of unquoted securities are: 38.686 9.951 8.885 6.876 5.553 2.362 1.741 1.492 1.399 1.223 0.951 0.888 0.835 0.736 0.676 0.574 0.553 0.534 0.449 0.444 84.809 Holders Number 3 1 3 1 Class Holder Securities Number Held % Unlisted 23.1 cent options, exercisable on or before 30 June 2016 Mr Thomas Stephen Sanders & Mrs Helen Sanders 2,000,000 67 Unlisted 28.1 cent options, exercisable on or before 30 June 2016 Mr Thomas Stephen Sanders & Mrs Helen Sanders 3,000,000 100 Unlisted 50 cent options, exercisable on or before 31 December 2016 Mr Alastair Barker 1,000,000 100 On-market Buy-back There is no current on-market buy-back. 2014 Annual Report 50 ABN: 87 145 011 178 12 Walker Avenue, West Perth, Western Australia 6005 Tel: +61 8 9226 3666 | Fax: +61 8 9226 3668 Email: breaker@breakerresources.com.au www.breakerresources.com.au