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1 PARAMOUNT MINING CORPORATION LIMITED ABN ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

2 CHAIRMAN S REVIEW Dear Fellow Shareholders Development of the Company s Gunung Rosa gold, silver and base metals mine in West Java Province, Indonesia continued during the year, achieving several key milestones during what proved to be exceptionally difficult times for resource companies and equity markets. In August 2012, the Company moved to an effective 72.25% equity interest in the project, through its investment in PT CKP, the holder of the Gunung Rosa mining license. At this time, the Company also assumed management control of the company and finalised the appointment of two of three directors, and three of five commissioners, including the President Director and President Commissioner. The Gunung Rosa Resource base was increased by 77% in September 2012 to 634,000 ounces of gold, with substantial silver and base metals credits. The increased Resource was the result of a successful 17-hole diamond due diligence drilling campaign which started in Q Early in 2013, the Company appointed the Indonesian environmental consulting company, PT Mineralindo, to update the existing AMDAL (environmental impact assessment); we anticipate that the updated AMDAL will be submitted for approval later in 2013, which will permit the commencement of key development engineering activities and mine dewatering. Building on this year s activities, it is expected that mining and plant construction will commence in Q1 2014: this relatively short project time-line is a result of the previous development investment that has already taken place at the mine including two shafts, two adits, a decline and four sublevel drives. Throughout the year, the Company announced successful share placements that raised nearly $1.8 million, despite tough capital-raising conditions worldwide. It was also pleasing to announce the conversion of USD3.45 million of short-term debt into shares in the Company. The debt conversion not only strengthened Paramount s balance sheet, it also demonstrated the very high degree of confidence lenders and shareholders alike have in the exciting Gunung Rosa project. In January 2013, it gave me great pleasure to announce the appointment of Mr Peter Bacchus as a Non-Executive Director. Mr Bacchus has over 20 years of experience as an investment banker and considerable recent senior global experience in mining and metals investment banking. Commensurate with the Company s development, its corporate governance and board oversight processes were strengthened during the year by the establishment of two key board committees: Audit and Risk Management as well as Remuneration and Nomination. The financial report for your Company for the year ended 30 June 2013 is attached. I acknowledge and thank my fellow directors and staff of the Paramount group of companies for their hard work and support during the year, and I look forward to continuing our progress in and beyond. Mo Munshi Chairman 30 September

3 REVIEW OF OPERATIONS Figure 1: Topography of the Gunung Rosa mine-site below which the underground mine development continues with minimal disruption to the regions historic tea plantations INDONESIA Gold / Silver / Base Metals Gunung Rosa Project On 30 July 2012, the Company announced the completion of the Share Subscription Agreement between its 85%-owned Indonesian subsidiary PT Paramindo ( Paramindo ) and PT Cikondang Kancana Prima ( CKP ), to acquire an 85% equity interest in the exciting Gunung Rosa gold, silver and base metals mine in West Java. The Gunung Rosa Mining license, which is held by CKP, was granted in March 2010 and is valid for 20 years of mining activities. In line with the completion of agreement, Paramindo assumed management control of the project. Gunung Rosa is a high grade gold-silver and base metals project located 125 kilometres south of Jakarta. The most prominent mineralised vein zone contained within the licence is a steeply dipping high grade gold, silver and base metal mesothermal vein system in excess of 2.5 kilometres in strike length which remains open along strike and to depth. 2

4 Figure 2: The Gunung Rosa IUP is located in Indonesia s West Java Province, approximately 125km south of Jakarta, and near the major regional centres of Sukabumi and Cianjur. During the period under review, the Company completed a 17-hole due diligence diamond drilling program which improved the understanding of the geological controls and distribution of the mineralisation. The program also highlighted much wider zones of mineralisation than previously determined and enabled assessment of changes in vein and breccia host width, alteration types and grades within the mineralised zone. Cut off Tonnes Average Cu Pb Zn Au oz Ag oz Au Grade tonnes tonnes tonnes No cut off 3,161, ,090 1,137,270 9,250 13,330 45,880 1 g/t 2,793, ,330 1,077,690 8,440 13,180 44, g/t 2,467, ,950 1,045,220 8,230 13,020 43,810 2 g/t 2,165, , ,530 7,830 12,210 40,440 3 g/t 1,978, , ,660 6,710 11,990 40,250 *All figures except Au grade rounded to nearest 10 unit Table 1: Inferred Resource estimation at stated cut off grades for areas below 900m RL* The results from phase I of the metallurgical test-work program conducted by SGS Perth on the 600kg Gunung Rosa underground bulk sample returned the following grades: Gold Silver Zinc Lead Copper 11.4gpt 52gpt 7.08% 2.54% 0.61% Table 2: Head grades from 600kg bulk underground sample taken from development drives Mineralogical analysis of the ore sample noted that >80% of the gold is relatively coarse and resides in the >38 micron fraction rendering it recoverable by standard cyanidation techniques. 3

5 The test-work indicated that grinding the ore to 80% passing 75 microns and applying Carbon-in-Leach leaching followed by sequential flotation, extracted a significant percentage of the gold to bullion and produced several commercially tradable base metal concentrates, with the following overall metallurgical recoveries achieved in the laboratory: Gold Silver Zinc Lead Copper CIL to Bullion 82% 28% Flotation Concentrates 4% 66% 96% 87% 92% Total Recovery 86% 94% 96% 87% 92% The Company completed high resolution ground magnetic surveys along 100 metre spaced east-west survey lines crossing areas of known mineralisation and alteration within the Gunung Rosa mining license. This data complemented the helicopter-borne data previously collected along 100 and 50 metre spaced north-south survey lines. The work was undertaken as part of the company s ongoing detailed exploration of areas away from the main Gunung Rosa vein and mine project development site. The objective of the surveys was to delineate the extent of alteration and breccia zones that host and surround recognised mineralised veins and detect other previously unrecognised vein systems to the east and north of the Gunung Rosa mine under areas of soil cover. The magnetics program was supported by geological mapping of rock types and alteration and sampling of recognised veins. Assay results from the first batch of vein samples were disclosed in the Company s ASX announcement dated 5th November In March 2013 the Company was pleased to announce the appointment of Indonesian environmental consulting company, PT Mineralindo Sukses Mandiri ( Mineralindo ), to conduct the update to the existing Environmental Impact Assessment ( EIA ) for the Gunung Rosa project. The update to the existing EIA, or Analisis Mengenai Dampak Lingkungan ( AMDAL ), is scheduled to be completed later in Also during the first quarter of 2013, field work continued with field mapping and soil geochemistry following on from the aeromagnetic and ground magnetic geophysics work carried out in It is expected that key engineering studies will commence in Q4 2013, mining and plant construction will commence in early 2014 and steady state mining of 100,000 tonnes per annum will be achieved by late Subsequent to period end, the Company announced that progress on the Gunung Rosa AMDAL had taken a key step forward. Following detailed discussions with the local community agreement was reached to start the environmental baseline study. Paramount held its inaugural public participation meeting in September 2013 at the Karyamukti Village Hall, near the Gunung Rosa mine-site. The meeting, chaired by the Mines Authorities from the Cianjur office, welcomed the Company representatives, the Company appointed environmental engineers, Mineralindo, and the members of the Community predominantly representing the four villages closest to the mine. 4

6 Figure 3: The Regional Mines representative, and Chairman, welcomes all stakeholders Paramount and Mineralindo agreed on the following timelines for the start of the study: Submit the AMDAL Terms of Reference to the Mines Authorities by end of September 2013; Complete Base Line Study by end of September 2013; and Complete AMDAL application documentation by end of November 2013 The Company s CEO and MD, Terry Holohan, said, As a result of this development the Gunung Rosa Environmental Impact Assessment, or AMDAL, being managed by our engineers, Mineralindo, is on track to be submitted for approval to the Mines Authorities by December of this year. Also subsequent to period end, the Company advised that it has appointed the DrillCorp Group of Companies ( DrillCorp ) to carry out a 4,000 metre diamond drilling program at the Gunung Rosa high grade gold, silver and base metals project in Indonesia. The aim of the program is to increase the confidence in the existing 634,000 oz gold Resource and to further test the strike and depth extensions of the ore body to the north and south. The drilling program will raise the confidence in the Mineral Resource estimate needed to support the Preliminary and Definitive Feasibility Studies which are scheduled to start in October The exploratory drilling should also demonstrate the scope for increasing the size of the Gunung Rosa project 5

7 Figure 4: Map of total 2,410 ha mining license (IUP) held by the Company s subsidiary PT CKP with proposed drilling on 900m of strike highlighted in the rectangle 6

8 SOUTH AFRICA Peakstar Project Legal issues relating to the Peakstar Project, covering a farm containing diamondiferous fissures in the Free State Province, are ongoing. The South African legal firm Tabacks is handling the matter on behalf of the Company. In November 2007, the Company exercised its option on the Peakstar Diamond Project as per the terms of an Option Agreement, signed with Peakstar Diamonds (Pty) Ltd ( Peakstar Diamonds ) on 20th July Details of operations, tenure and ownership, fissure systems and Paramount s Agreement with Peakstar Diamonds and subsequent events are recorded in previous releases to the ASX which may be accessed through the ASX or Paramount s website, Competent Persons Statement: The corporate activities carried out by Paramount over the last six months on finalising this agreement are of a technical, legal and corporate nature and the information in this Resolution has been reviewed by Mr Terry Holohan in conjunction with previous ASX announcements. Mr Holohan is a Member of the Institute of Materials, Minerals and Mining (UK) and is a Chartered Engineer with the Engineering Council (UK) as well a full time employee of Paramount and thus acts as their internal Competent Person. He has sufficient experience and knowledge relevant to an acquisition of this type as well as understanding the geology in the region and the engineering requirements for the development of such a mine under consideration. This knowledge and experience qualifies him as a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Comments by Mr Holohan incorporated in this Review of Operation, are based upon field inspection of the Gunung Rosa Project area, West Java, including the drill core and results during 2012/13 along with input from his associates who have worked on the property. All of the significant information reported herein was available to and reviewed by Mr Holohan. Mr Holohan has consented to the inclusion in this Review of Operation of the matters based on this information in the form and context in which it appears. CORPORATE MATTERS Appointment of Non-Executive Director In January 2013, the Company announced the appointment of Mr Peter Bacchus as Non-Executive Director. Mr Bacchus has over 20 years investment banking experience. Prior to joining Jefferies in March 2011, he was a Managing Director and Global Head of metals and mining investment banking at Morgan Stanley. Previously he served as a Managing Director at Citigroup where he was Head of Asia-Pacific industrials investment banking and Co-Head of global metals and mining investment banking based in Sydney, Jakarta and London. At the time, Paramount s Chairman, Mr Mo Munshi commented: We are delighted to appoint Mr. Bacchus to the Paramount Board. He has a long association with the resources sector, including in-country experience in Indonesia. 7

9 Share Placements On 19 October 2012, the Company advised the completion of a share placement to International investors. The placement raised $1,500,020 through an issue of 21,428,857 fully paid ordinary shares and another placement on 19 December 2012 which raised $283,500 through the issue of 4,050,000 fully paid ordinary shares, both at an issue price of 7 cents per share. Funds raised were used to support ongoing exploration activities at the Company s Gunung Rosa high grade gold-silver and base metal project in West Java Province, Indonesia. Subsequent to period end, on 27 August 2013, the Company advised that it had secured a $3 million funding facility with existing long-term shareholders and senior management. The terms of equity facility provide that, at the Company s option, the Company can issue shares up to a total value of $3 million by drawdowns of up to $1 million in a calendar month commencing from August Shares issued under the facility will be priced at the lower of 5 cents per share or the VWAP for the 20 trading days immediately prior to the Company s 2013 Annual General Meeting (subject to shareholder approval). Loan Facilities On 9 October 2012, the Company advised that the loan from Resource Global Finance Ltd which fell due on 31 March 2012 was to be extended to 28 February 2013 with a loan extension fee of 3,000,000 fully paid ordinary shares. USD500,000 was subsequently converted into 12,238,105 fully paid ordinary shares on 27 February 2013 at a conversion rate of $0.04 per share. After the period end, in August 2013, the loan balance of USD334,912 was further extended to 30 November 2013 with a loan extension fee of 1,500,000 shares (subject to shareholder approval) A loan from Zurily Resources and Trading Limited which was due on 30 June 2012 was also extended to 28 February 2013 with a loan extension fee of 2,000,000 fully paid ordinary shares on 9 October The loan was repaid in full by converting it into shares on 27 February 2013 at a conversion share price of $0.04 per share for a total of 1,201,839 shares. Loans from Cape Gannet Limited which fell due on 30 September 2012 and 31 October 2012, were both extended to 31 December 2012 with loan extension fees of 4,000,000 fully paid ordinary shares on 9 October On 27 February 2013, part of the loan of USD2,900,000 was converted into 70,981,006 shares at a conversion price of $0.04 per share. The remaining loan balance of USD850,000 has been extended to 30 November 2013 as disclosed to the ASX on 26 August The conversions aided the Company by conserving cash at a critical stage in the Company s development, while demonstrating the very high level of confidence held by lenders and shareholders in the Company s Gunung Rosa project. Meetings The Company s Annual General Meeting was held in Perth on 30 November 2012, where all resolutions were passed unanimously on a show of hands. The shareholders approved prior and new issues of 23,830,000 fully paid ordinary shares. Shareholders also approved a Performance Rights Plan for the Company and the issue of 12,000,000 performance rights to directors. Copies of the Notices of Meeting and Explanatory Statements, and the results of the meetings, may be found at 8

10 CORPORATE GOVERNANCE STATEMENT The Company acknowledges the ASX Corporate Governance Council s Corporate Governance Principles and Recommendations (2 nd Edition) (the Recommendations ). This Corporate Governance Statement provides details of the Company s compliance with those Recommendations, or where appropriate, indicates a departure from the Recommendations with an explanation. A checklist summarising the Company s compliance with the Recommendations is also set out at the end of this statement. Unless disclosed below, all the Recommendations of the ASX Corporate Governance Council have been applied for the entire financial year ended 30 June PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT Board Roles and Responsibilities The board is first and foremost accountable to provide value to its shareholders through delivery of timely and balanced disclosures. The Company s Board Charter has been made publicly available on the Company s website. This document details the adopted practices and processes in relation to matters reserved for the board s consideration and decision-making and specifies the level of authorisation provided to other key management personnel. The board is ultimately responsible for ensuring its actions are in accordance with key corporate governance principles. Performance Evaluation There is no formal process for evaluating the performance of senior executives. Senior executive performance is evaluated by the board on an ongoing basis, including within this reporting period, having regard to Company objectives, and executives roles and responsibilities. There is no formal process for evaluating the performance of the board and individual directors. Board performance is evaluated on an ongoing basis, including within this reporting period, having regard to Company objectives and each director s contribution to board deliberations. PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE Board Composition The Board respects independence of thought and decision making as critical to effective governance, and is satisfied that its Board composition meets these requirements. The Group has accepted the definition of independence in the Recommendations in the above analysis. The majority of the Board are independent directors. The skills, experience and expertise relevant to the position of each director who is in office at the date of the annual report and their term of office are detailed in the directors report. The names of independent directors of the Company are: Mr Guy Anderson Mr John Arbuckle Mr Peter Bacchus When determining whether a non-executive director is independent the director must not fail any of the following materiality thresholds; - less than 10% of company shares are held by the director and any entity or individual directly or indirectly associated with the director; 9

11 CORPORATE GOVERNANCE STATEMENT - no sales are made to or purchases made from any entity or individual directly or indirectly associated with the director; and - none of the directors income or the income of an individual or entity directly or indirectly associated with the director is derived from a contract with any member of the economic entity other than income derived as a director of the company. Independent directors have the right to seek independent professional advice in the furtherance of their duties as directors at the company s expense. Written approval must be obtained from the chair prior to incurring any expense on behalf of the company. Nomination Committee From April 2013, the board established a Remuneration and Nomination Committee comprised of Mr Arbuckle (Chairman), Mr Anderson and Mr Bacchus. Prior to April 2013 processes were in place for the full board to consider issues that would otherwise be considered by a nomination committee. PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING Ethical Standards The board acknowledges and emphasises the importance of all directors and employees maintaining the highest standards of corporate governance practice and ethical conduct. A Corporate Governance Charter has been established requiring directors and employees to: act honestly and in good faith; exercise due care and diligence in fulfilling the functions of office; avoid conflicts and make full disclosure of any possible conflict of interest; comply with the law; encourage the reporting and investigating of unlawful and unethical behaviour; and comply with the share trading policy outlined in the Corporate Governance Charter. Directors are obliged to be independent in judgment and ensure that all reasonable steps are taken to ensure due care is taken by the board in making sound decisions. Trading Policy The company s policy regarding directors and employees trading in its securities is set by the board. The policy restricts directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the securities prices. Diversity Policy Taking into consideration that the Company s permanent staff is four persons only, the board has not established a policy concerning diversity. When assessing the composition of the board, the board as a whole considers the mix of skills and the diversity of board members. The board assesses existing and potential directors skills to ensure they have appropriate industry experience in the Group s operating segments. The board considers the diversity of existing and potential senior executives and directors to ensure they are in line with the geographical and operational segments of the Group. Where considered appropriate, the board seeks to appoint a diverse range of directors who have a range of ages, genders and ethnicity which mirrors the environment in which the Group operates. 10

12 CORPORATE GOVERNANCE STATEMENT Proportion of the total Women employees in the whole organisation 25% Women in senior executive positions 0% Women on the board 0% PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING Audit Committee From April 2013, the board established an Audit and Risk Management Committee comprised of Mr Anderson (Chairman), Mr Arbuckle and Mr Bacchus. Prior to April 2013 processes were in place for the full board to consider issues that would otherwise be considered by an audit committee. PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE The Continuous Disclosure Policy, which is available on the Company s website, sets out the key obligations of the directors and employees in relation to continuous disclosure as well as the Company s obligations under the Listing Rules and the Corporations Act. The Policy also provides procedures for internal notification and external disclosure, as well as procedures for promoting understanding of compliance with the disclosure requirements for monitoring compliance. PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS Shareholder Rights Shareholders are entitled to vote on significant matters impacting on the business, which include the election and remuneration of directors, changes to the constitution and receipt of annual financial statements. Shareholders are strongly encouraged to attend and participate in the Annual General Meetings of Paramount Mining Corporation Limited, to lodge questions to be responded by the board, the CFO or the Auditors, and are able to appoint proxies. PRINCIPLE 7: RECOGNISE AND MANAGE RISK Risk Management The board considers identification and management of key risks associated with the business as vital to maximise shareholder wealth. A yearly assessment of the business s risk profile is undertaken and reviewed by the board, covering all aspects of the business from the operational level through to strategic level risks. The CEO has been delegated the task of implementing internal controls to identify and manage risks for which the board provides oversight. The effectiveness of these controls is monitored and reviewed regularly. The worsening economic environment has emphasised the importance of managing and reassessing its key business risks. The board has received assurance from the Chief Executive Officer and the Chief Financial Officer that the declaration provided in accordance with 295A of the Corporations Act is founded on a sound system of risk management and internal control and the system is operating effectively in all material respects in relation to financial reporting risks. PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY Remuneration Policies All executives receive a base salary. 11

13 CORPORATE GOVERNANCE STATEMENT The amount of remuneration for all key management personnel for the company, including all monetary and non-monetary components, are detailed in the directors report under the heading key management personnel compensation. All remuneration paid to executives is valued at the cost to the company and expensed. Shares given to executives are valued as the difference between the market price of those shares and the amount paid by the executive. Options are valued using the Black-Scholes methodology. Non-executive directors are remunerated by way of fees in the form of cash and options. Non-executive directors do not receive bonus payments, nor are they provided with retirement benefits. Remuneration Committee From April 2013, the board established a Remuneration and Nomination Committee comprised of Mr Arbuckle (Chairman), Mr Anderson and Mr Bacchus. Prior to April 2013 processes were in place for the full board to consider issues that would otherwise be considered by a nomination committee. Other Information The following checklist summarises the Company s compliance with the Recommendations. Explanation regarding compliance with the Principles and Recommendations is disclosed in this Corporate Governance Statement and further information is available on the company s website at Requirement Comply Yes/No Principle 1 Rec 1.1 Rec 1.2 Rec 1.3 Principle 2 Lay solid foundations for management and oversight Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions. Companies should disclose the process for evaluating the performance of senior executives. Companies should provide the information indicated in the Guide to reporting on Principle 1. Structure the board to add value Yes Yes Yes Rec 2.1 A majority of the board should be independent directors. Yes Rec 2.2 The chair should be an independent director. Yes Rec 2.3 The roles of chair and chief executive officer should not be exercised by the same individual. Yes Rec 2.4 The board should establish a nomination committee. Yes Rec 2.5 Rec 2.6 Principle 3 Rec 3.1 Companies should disclose the process for evaluating the performance of the board, its committees and individual directors. Companies should provide the information indicated in the Guide to reporting on Principle 2. Promote ethical and responsible decision-making Companies should establish a code of conduct and disclose the code or a summary of the code as to: the practices necessary to maintain confidence in the company s integrity; Yes Yes Yes 12

14 CORPORATE GOVERNANCE STATEMENT the practices necessary to take into account their legal obligations and the reasonable expectations of their shareholders; the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Rec 3.2 Rec 3.3 Rec 3.4 Rec 3.5 Principle 4 Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include a requirement for the board to establish measurable objectives for gender diversity for the board to assess annually both the objectives and progress towards achieving them. Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. Companies entities should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. Companies should provide the information indicated in the Guide to reporting on Principle 3. Safeguard integrity in financial reporting No No Yes Yes Rec 4.1 The board should establish an audit committee Yes Rec 4.2 The audit committee should be structured so that it: consists only of non-executive directors consists of a majority of independent directors is chaired by an independent chair; who is not chair of the board has at least three members Yes Rec 4.3 The audit committee should have a formal charter. Yes Rec 4.4 Principle 5 Rec 5.1 Rec 5.2 Principle 6 Rec 6.1 Rec 6.2 Companies should provide the information indicated in the Guide to reporting on Principle 4. Make timely and balanced disclosure Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Companies should provide the information indicated in the Guide to reporting on Principle 5. Respect the rights of shareholders Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Companies should provide the information indicated in the Guide to reporting on Principle 6. Yes Yes Yes Yes Yes 13

15 CORPORATE GOVERNANCE STATEMENT Principle 7 Rec 7.1 Rec 7.2 Rec 7.3 Rec 7.4 Principle 8 Recognise and manage risk Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. The board should require management to design and implement the risk management and internal control system to manage the company s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company s management of its material business risks. The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Companies should provide the information indicated in the Guide to reporting on Principle 7. Remunerate fairly and responsibly Yes Yes Yes Yes Rec 8.1 The board should establish a remuneration committee Yes Rec 8.2 Rec 8.3 Rec 8.4 The remuneration committee should be structured so that it: consists of a majority of independent directors; is chaired by an independent chair; has at least three members. Companies should clearly distinguish the structure of non-executive directors remuneration from that of executive directors and senior executives. Companies should provide the information indicated in the Guide to reporting on Principle 8. Yes Yes Yes 14

16 DIRECTORS REPORT Your directors present their report, together with the financial statements of the Group, being the company and its controlled entities, for the financial year ended 30 June Principal Activities and Significant Changes in Nature of Activities The principal activities of the consolidated group during the financial year were: Indonesian precious and base metals project acquisition and development. Operating Results and Review of Operations for the Year Operating Results The auditors have issued an emphasis of matter opinion on the inherent uncertainty regarding the going concern of the Company. As the Company has no internally generated cashflow, the continuity of development and exploration activities will at some stage in the future require access to new funding. The development and exploration activities to be carried out in the future and the Company s planned discretionary expenditure may vary significantly due to a variety of factors. The Company has the ability to substantially reduce or defer actual development and exploration expenditure if required to better match the funds available to the Company at any point in time. The Directors have determined that future equity raisings or debt fnancing arrangements will be required to provide funding for the Group s activities to meet the Group s objectives. There is no certainty that these will be successfully competed to provide adequate working capital for the Company. The Company has projects which the Board believes are very attractive and will support initiatives to raise moneys to fund ongoing operations. The Board is confident that the Group will have sufficient funds to finance its operations in the 2013/2014 financial year. The consolidated loss of the economic entity after providing for income tax amounted to $4,314,195 (2012: loss $5,000,408). Review of Operations The Review of Operations which forms part of this Directors Report may be found on pages 2 to 8. Financial Position The net assets of the consolidated group have increased by $4,664,857 to $4,386,074 in Significant Changes in State of Affairs The following significant changes in the state of affairs of the parent entity occurred during the financial year: i. On 18 July 2012 the company issued 250,000 ordinary shares at $0.08 each; ii. iii. On 13 Sept 2012 the company issued 6,000,000 ordinary shares at $0.04 each; On 19 Oct 2012 the company issued 21,428,857 ordinary shares at $0.07 each; 15

17 DIRECTORS REPORT iv. On 30 Nov 2012 the company issued 23,830,000 ordinary shares, price ranging from $0.065 to $0.073 each. v. On 11 Dec 2012 the company issued 800,000 ordinary shares at $0.07 each. vi. On 19 Dec 2012 the company issued 3,250,000 ordinary shares at $0.07 each. vii. On 28 Dec 12 the company issued 2,000,000 ordinary shares at $0.04 each. viii. On 4 Mar 2013 the company issued 84,420,950 ordinary shares at $0.04 each. ix. On 4 Mar 2013 the company issued 10,000,000 ordinary shares at $0.05 each. Dividends Paid or Recommended No dividends were paid or declared in the financial year. After Balance Date Events In the interests of conserving and applying the Company s cash to the development of the Gunung Rosa Project, all key management personnel, including the Company s CEO and Managing Director, Mr. Terry Holohan, have accepted an adjustment under which 25% of their remuneration will be payable in shares in the Company instead of cash (subject to any necessary approvals), adjusted such that the share-based payment is effective from 1 June On 26 August 2013, the Company announced that the loan facilities from Resource Global Finance Ltd and Cape Gannet Ltd have been extended and are now due for repayment on or before 30 November 2013 at the Lender s option. The combined loan extension fees are 4.5 million shares. Each loan extension from Resource Global Finance Ltd and Cape Gannet Ltd is subject to the following additional terms (subject to shareholder approval): a. If the closing price of the Company s shares is less than 4 cents for a period of 10 consecutive trading days at any time from the date of this announcement to the day prior to the Company s 2013 Annual General Meeting, a once-off grant of 10 million shares; b. If the closing price of the Company s shares is less than 3 cents for a period of 10 consecutive trading days at any time at any time from the date of this announcement to the day prior to the Company s 2013 Annual General Meeting, a further once-off grant of 10 million shares; c. If the closing price of the Company s shares is less than 2 cents for a period of 10 consecutive trading days at any time from the date of this announcement to the day prior to the Company s 2013 Annual General Meeting, a further once-off grant of 10 million shares. On 27 August 2013, the Company advised that it has secured a $3 million funding facility with existing long-term shareholders and senior management. The terms of the equity facility provide that, at the Company s option, the Company can issue shares up to a total value of $3 million by drawdown of up to $1 million in a calendar month, commending from August Shares issued under the facility will be priced at the lower of 5 cents per share or the VWAP for the 20 trading days immediately prior to the Company s 2013 Annual General Meeting (subject to shareholder approval). 16

18 DIRECTORS REPORT Unless noted elsewhere, there are no other significant events after balance date. Future Developments, Prospects and Business Strategies Information on the likely developments in the operations of the economic entity and the expected results of those operations has not been included in this report as the directors believe, on reasonable grounds, that the inclusion of such information would be likely to result in unreasonable prejudice to the economic entity. Environmental Issues The consolidated group s operations are subject to environmental regulations under national and state laws in the countries in which it operates. The group complies with all environmental laws and regulations and operates within global standards for environmental compliance. Information on Directors Mo Munshi - Chairman (Non-executive) Qualifications - BSc(Geol)(Hons), MBA Appointed - September 2008 Interest in Shares and Options - Ordinary shares, fully paid: 11,931,000; Options: 6,000,000; Performance rights: 5,000,000 Directorships held in other listed entities during the three years prior to the current year - Current director of Prosperity Resources Limited Terry Holohan - CEO/Managing Director Qualifications - BSc C Eng Appointed - October 2011 Interest in Shares and Options - Options: 1,000,000, Performance rights: 4,000,000 Dr Guy Anderson - Non-executive director Qualifications - BSc C Eng (Cape Town), PhD (Cape Town), ACA Appointed - September 2008 Interest in Shares and Options - Ordinary shares, fully paid:1,481,000; Options: 1,000,000; performance rights: 1,000,000 Mufti Habriansyah - Non-executive director Qualifications - SH Appointed - December 2010 Interest in Shares and Options - Ordinary shares, fully paid: 2,824,000; Options: 1,000,000; Performance rights: 1,000,000 Directorships held in other listed entities during the three years prior to the current year - Current director of Prosperity Resources Limited 17

19 DIRECTORS REPORT John Arbuckle - Non-executive director Qualifications - B.Bus, CPA Appointed - October 2011 Interest in Shares and Options - Ordinary shares, fully paid: 344,000, Performance rights: 1,000,000 Directorships held in other listed entities during the three years prior to the current year - Current director of Prosperity Resources Limited Previously a director of Alchemy Resources Ltd Peter Bacchus - Non-executive director Qualifications - MA, CA Appointed - January 2013 Interest in Shares and Options - Nil Company Secretaries Garry Taylor EMBA CPA FCIS GAICD held the position of Company Secretary and Chief Financial Officer at the end of the financial year. Mr Taylor has worked for Paramount Mining Corporation Limited since September He was appointed company secretary in October Mr Taylor is also Company Secretary of ASX-listed Prosperity Resources Limited. Lionel Liew B Comm CPA held the position of Company Secretary at the end of the financial year. He was appointed as a company secretary on 6 April He is also the Group Accountant and Company Secretary of ASX-listed Prosperity Resources Limited Meetings of directors During the financial year, 4 full meetings of directors were held. Attendances by each director during the year were as follows: Full meetings of directors Number eligible to attend Number attended Audit & Risk Management Committee Number eligible to attend Number attended Remuneration & Nomination Committee Number attended Mo Munshi Terry Holohan Guy Anderson Mufti Habriansyah John Arbuckle Peter Bacchus Number attended 18

20 Indemnifying Officers DIRECTORS REPORT During the year the Company paid an insurance premium in respect of a contract insuring each of the Directors and Officers of the Company and its controlled entities against liabilities and expenses arising from claims made against them in their capacity as Directors or Officers of the Company, other than conduct involving a wilful breach of duty. The insurance policy conditions preclude the Company from making detailed disclosures. Options At the date of this report, the unissued ordinary shares of Paramount Mining Corporation Limited under option to directors and executives of the Company are: Grant Date Date of Expiry Exercise Price Number under Option 18 Jan Nov 2013 $0.08 4,000, Jan Jun 2014 $0.15 4,000,000 1 Dec Nov 2014 $0.20 1,000, Jan Nov 2014 $0.20 1,000,000 10,000,000 Option holders do not have any rights to participate in any issues of shares or other interests in the company or any other entity. There have been no unissued shares or interests under option of any controlled entity within the Group during or since reporting date. For details of options issued to directors and executives as remuneration, please refer to the Remuneration Report. During the year ended 30 June 2013, 8,250,000 fully paid ordinary shares were issued on the exercise of options granted and 84,420,950 fully paid ordinary shares were issued on loan conversion; In addition to the above 59,308,857 fully paid ordinary shares and 14,500,000 performance rights have been issued. Performance Rights The Performance Rights specified vest subject to the Company s market capitalisation being at or above the Market Capitalisation hurdle for 20 consecutive trading days at any time after the issue of the Performance Rights and before the relevant expiry date. The details of the performance rights condition are as follow: Date of Expiry 30 Nov June Mar 2015 Market capitalisation hurdle $30,000,000 $50,000,000 $60,000,000 Number of Performance Rights 6,750,000 6,750,000 1,000,000 14,500,000 19

21 Proceedings on behalf of the Company DIRECTORS REPORT No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the period. Non-audit services The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act The directors are satisfied that the services disclosed below did not compromise the external auditor s independence for the following reasons: all non-audit services are reviewed and approved by the Board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. No non-audit services were provided by external auditors during the year ended 30 June Auditor s Independence Declaration The lead auditor s independence declaration for the year ended 30 June 2013 has been received and can be found on page 27 of this report. 20

22 Remuneration policy REMUNERATION REPORT (Audited) The Board is responsible for reviewing compensation for the directors, secretary and senior managers. The Board assesses the appropriateness of the nature and amount of emoluments on a periodic basis with reference to relevant employment market conditions, with the objective of maximising shareholder value by the retention of high quality personnel. The Board s policy for determining the nature and amount of compensation of key management for the group is not performance based. The Board s policy for determining the nature and amount of remuneration for key management personnel of the consolidated group is as follows: All key management personnel receive a base salary (which is based on factors such as length of service and experience). Upon retirement, key management personnel are paid employment benefit entitlements accrued to date of retirement. On termination of employment with the Company for any reason, all monies and other entitlements shall be paid, adjusted and calculated as at the date of such termination. In the instance of serious misconduct the Company can terminate employment at any time. The Board s policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. 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 Company has entered into a Consultancy Agreement with Mr. Mo Munshi on 1 January 2011 for 4 years. The Company will pay Mr. Munshi a consulting fee of $25,000 per month in a combination of cash and shares and each party can terminate the agreement by giving three months notice. Key terms of the agreement as shown in note 24. Mr Holohan is employed on a four year contract from 17 October 2011 with a base salary of USD240,000 per annum. The contract may be terminated by either party by the giving of three months notice. The Company agreed to issue to Terry Holohan as a commencement bonus of 5,000,000 unlisted options where the vesting condition was subject to a market capitalisation hurdle. Of the 5 million options, 3,000,000 options have now lapsed as the hurdle was not achieved, leaving 2,000,000 options which have not been vested. The details are shown in note 20. Employment Details of Members of Key Management Personnel and Other Executives The following table provides employment details of person who were, during the financial year, members of key management personnel of the consolidated group, and to the extent different, among the key management personnel or company executives receiving the highest remuneration. The table also illustrates the proportion of remuneration that was performance and non-performance based and the proportion of remuneration received in the form of options. 21

23 REMUNERATION REPORT (Audited) Position held as at 30 June 2013 and any change during the year Contract details (duration and termination) Proportions of elements of remuneration not related to performance Shares Options Fixed Salary/ Fees % % % Group Key Management Personnel M Munshi T Holohan G Anderson M Habriansyah J Arbuckle P Bacchus Chairman (Non-executive) Appointed 19 September 2008 Managing Director and Chief Executive Officer Appointed 17 October 2011 Director (Non-executive) Appointed 19 September 2008 Director (Non-executive) Appointed 1 December 2010 Director (Non-executive) Appointed 18 October 2011 Director (Non-executive) Appointed 2 January 2013 No fixed term No fixed term No fixed term No fixed term 100 No fixed term No fixed term G Taylor Chief Financial Officer and Company Secretary No fixed term. 4 week resignation period Remuneration details for the year ended 30 June 2013 The following table of benefits and payments details, in respect to the financial year, the components of remuneration for each member of the key management personnel of the consolidated group and, to the extent different, the key management personnel receiving the highest remuneration: Group Key Management Personnel Short-term Benefits ($) Post-employment benefits ($) Equity-settled share-based payments ($) Total ($) Value of Options /Perfor mance rights as proporti on of remune ration Salary & fees Nonmonetary Termination Superannuation Shares Options Performance Rigths M Munshi , , , , % , ,000 64, , % T Holohan , , , % , , , % G Anderson , ,925 82, % , ,305-41, % 22

24 REMUNERATION REPORT (Audited) M Habriansyah , , , % , ,000 11, , % J Arbuckle , ,925 82, % , ,129 0% P Bacchus , ,000 0% T Benson , ,834 0% G Taylor , , , , % , ,431-11, , % Total Key Management Personnel , , , ,700 1,514, , , , , ,887 1 Appointed 2 January Appointed 4 August 2011 and retired 18 October 2011 Securities granted as part of remuneration Group Key Management Personnel Remuneration type Grant date Percentage vested/paid during year % Percentage lapsed during year % Percentage remaining as unvested % M Munshi Performance Rights 30 Nov T Holohan Performance Rights 30 Nov G Anderson Performance Rights 30 Nov M Habriansyah Performance Rights 30 Nov J Arbuckle Performance Rights 30 Nov G Taylor Performance Rights 30 Nov