For personal use only DRAKE RESOURCES LIMITED ABN

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1 ANNUAL REPORT 30 JUNE 2016

2 CORPORATE DIRECTORY Directors Brett Fraser Jay Stephenson Robert Beeson Non-executive Chairman Non-executive Director Non-executive Director Company Secretary Jay Stephenson Registered Office Street: Suite 12, Level 1/11 Ventnor Avenue West Perth WA 6005 Postal: PO Box 52 West Perth WA 6872 Telephone: +61 (0) Facsimile: +61 (0) Website: Auditor Bentleys Audit & Corporate (WA) Pty Ltd London House Level 3, 216 St Georges Terrace Perth WA 6000 Share Registry Computershare Registry Services Level 11 / 172 St Georges Terrace Perth WA 6000 Securities Exchange Australian Securities Exchange Page 2

3 CONTENTS Activities Report 4 Corporate Governance Statement 11 Directors Report 19 Remuneration Report 22 Auditor s Independence Declaration 27 Financial Statements 28 Directors Declaration 66 Independent Auditor s Report 67 Additional Information for Listed Public Companies 69 Tenement Report 71 Page 3

4 ACTIVITIES REPORT GENOME TRANSACTION UPDATE AND CURRENT PROJECTS UPDATE Drake Resources Limited was advised by ASX it has determined that the Genome company structure and operations post completion of the Genome Technologies Ltd ( Genome ) acquisition (the Transaction ) will not be suitable for a listed entity under Listing Rule 1.1 Condition 1. The Company advises that as a result, the Transaction will not proceed. The Company has been working diligently to prepare Genome for a listing on ASX. The transaction to acquire Genome was first announced on 11 March 2016 setting out the specific details of the Genome business On the same day the Transaction was announced, Drake undertook a non-renounceable entitlement issue to raise 447,992 before costs. On 24 April 2016, the Company announced that it had completed a very detailed and comprehensive Due Diligence process. Drake also announced that it held discussions with representatives of an Australian State government and agencies supporting these governments with regard to the commercial development of Genome s human cyber-risk governance solution. The discussions confirmed that the Genome cyber-risk solution satisfied an unresolved need. On 30 June 2016, the Company announced that the CEO of Genome had visited Australia to meet with potential investors, regulators and representatives of various State governments and agencies. On 16 September the Company announced that the Prospectus was on target to be available on or around the date of the shareholder meeting. It further advised that the Notice of Meeting was seeking approval of the Transaction and was expected to be circulated to shareholders by the start of October for a shareholders meeting in early November. EXISTING DRAKE PROJECTS Drake continues to hold its exploration assets and rights to exploration licenses across the Nordic region. There has been in excess of 2.4 million spent on these projects by the Company and its previous joint venture partners. The Company has spent over 500,000 on the projects in the last 12 months. Throughout the Genome Transaction process, Drake has maintained the projects and identified the next exploration steps for each of its Projects detailed below. Drake will undertake the next exploration steps subject to available funding. Joma and Gjersvik Joma Copper/Zinc surface float grab sample result 2.73% Copper, 0.04% Zinc and 41 g/t Ag Drake holds the licences for Gjersvik and holds the rights to acquire 100% of the Joma assets via a JV arrangement with Joma Nearingspark (JN) via the JN Joint Venture (JNJV). Drake returned to Joma in July 2015 and used the opportunity to scope out potential drill rig access issues related to various geophysics targets previously announced 1. A single grab float sample collected in a swampy area above the eastern edge of anomaly 10, returned 2.75% copper (table 1). Sample Weight Pb Ag East North Sample Type Cu (%) Zn (%) Number Kg (%) ppm JOMA EM Grab sample of surface float Table 1: A single surface sample was collected while scoping site access options at Anomaly 10, Joma. Anomaly 10 and nearby anomaly 11 (fig 1) were identified from geophysics programs conducted in Anomaly 10 is a conductor that suggests the possibility of shallow sulphide mineralisation of size. The most prospective target is Target 1, an EM conductor associated with a particularly large magnetic anomaly less than 1km from the Joma Mine entrance. Whilst target 1 was also scoped, it lies within a swamp area and no surface samples were collected. Page 4

5 . Figure 1: Joma Geophysical targets on aeromagnetic image and location of surface float grab sample (white star) Note 1: See Drake announcement 05/09/13 Sulitjelma Sulitjelma 2015 field program reports up to 0.76% Cu and 0.32% Zn from outcrop and individual mine dump grab sample results of up to 4.4% Cu; 1.7% Zn; >10% Pb and, 645g/t Ag Drake holds a number of licences in the Sulitjelma Copper fields in Northern Norway. The area has been a centre of copper concentrate production in the past. A field checking program was conducted during the 3 rd quarter 2015 to appraise VTEM anomalism not tested by ground EM and to further appraise specific targets generated from the completed VTEM and ground Fixed Loop EM surveys. The objective of the program was to also assess the limits and grades of sulphide outcrop as preparatory work for drilling. Selected grab samples (table 2) were also collected from mine dumps of the now closed Bursi, Ny Sulitjelma and Jakobsbakken Mines to support other field observations and characterise the elemental signature associated with regional mineralisation. All samples contained Cu/Zn mineralisation and most results support general assumptions regarding copper/zinc distribution and previous production at the Sulitjelma ore field with the exception being sample SJV0016 which recorded >10%Lead and 645g/t Silver (Ag). The anomalous lead/silver result is very unusual for the geology of the immediate area; however silver ore was historically mined from an area ~ 7kms to the south. Drake will consider this result in the context of its regional land holding and strategy. Sample Weight Pb Ag East North Sample Type Cu (%) Zn (%) Number Kg (%) ppm SJV Outcrop grab SJV Outcrop grab SJV Outcrop grab SJV Mine dump grab SJV Mine dump grab Page 5

6 Sample Number Weight Pb Ag East North Sample Type Cu (%) Zn (%) Kg (%) ppm SJV Mine dump grab SJV Mine dump grab > SJV Mine dump grab SJV Mine dump grab SJV Mine dump grab Table 2: Details of samples collected at Sulitjelma sites Granmuren Target geology has strong similarities to Granmuren discovery Granmuren is a nickel sulphide deposit extending from surface to +300m Through several drilling programs, Drake has identified the Granmuren nickel prospect. Granmuren is the first material nickel discovery in Bergslagen Sweden but the geology suggests other occurrences are possible. Drake conducted ground EM over sites at 4 claims within the Bergslagen region in 2015 near its near-surface Granmuren greenfield nickel sulphide discovery. Two survey lines, 150m apart, over the southern quadrant of the Korsheden licence area (fig 2) identified a conductor associated with a 1.4km long airborne magnetic anomaly identified from government data. The Ni-Cu target is in an area of gabbro intruded into metasediments and as such has strong similarities with Drake s Granmuren Ni-Cu prospect 50km to the South East. The Uvbergsgruven small open pit occurs over the target area and was mined for sulphides in the 1600 s. At this stage the conductor could have several explanations but the fact that it appears to be in the right units with historic anomalous Ni/Cu surface results and positive airborne magnetic results is an encouraging start. The next steps are likely to involve a surface gravity and magnetic survey. Korsheden was one of five areas identified as high priority targets for Granmuren type mineralisation in a regional targeting report by Dr Grguric 2 commissioned by Drake in The report goes on to suggest Bergslagen is of the right age, mineralisation and structural setting to potentially host substantial nickel discoveries. Drake s Granmuren nickel discovery is a substantial intrusion of massive and disseminated sulphides, mainly pyrrhotite, pentlandite and chalcopyrite hosted in gabbros and norites. Mineralisation occurs from near surface, and has been tracked down to about 330m, and remains open at depth. Note 2: See Drake announcement 17/03/14 Page 6

7 Figure 2: Recent EM modelled conductor plates (small coloured rectangles) at Korsheden laid over coincident historic government funded airborne magnetic survey results. The two EM lines are presented as parallel solid blue lines and are 150m apart. Competent Persons Statement The information in this report that relates to 2015 exploration results is based on, and fairly represents, information and supporting documentation compiled by Dr Bob Beeson. Dr Beeson is a member of the Australasian Institute of Geoscientists, and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration 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 (JORC Code). Dr Beeson consents to the inclusion in this report of the matters based on his information in the form and context in which they appear. Caution Regarding Forward Looking Information. This document contains forward looking statements concerning Drake. Forward-looking statements are not statements of historical fact and actual events and results may differ materially from those described in the forward looking statements as a result of a variety of risks, uncertainties and other factors. Forward-looking statements are inherently subject to business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause the Company s actual results to differ materially from those expressed or implied in any forward-looking information provided by the Company, or on behalf of, the Company. Such factors include, among other things, risks relating to additional funding requirements, metal prices, exploration, development and operating risks, competition, production risks, regulatory restrictions, including environmental regulation and liability and potential title disputes. Forward looking statements in this document are based on Drake s beliefs, opinions and estimates of Drake as of the dates the forward looking statements are made, and no obligation is assumed to update forward looking statements if these beliefs, opinions and estimates should change or to reflect other future development. Page 7

8 APPENDIX 1 - JORC Code, 2012 Edition Table 1 report template July 2015 Bergslagen Geophysics Program Section 1 Sampling Techniques and Data (Criteria in this section apply to all succeeding sections.) Criteria JORC Code explanation Commentary Sampling techniques Nature and quality of sampling (eg cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc). These examples should not be taken as limiting the broad meaning of sampling. Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used. Aspects of the determination of mineralisation that are Material to the Public Report. In cases where industry standard work has been done this would be relatively simple (eg reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay ). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (eg submarine nodules) may warrant disclosure of detailed information. Drilling techniques Drill type (eg core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (eg core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc). Drill sample recovery Method of recording and assessing core and chip sample recoveries and results assessed. Measures taken to maximise sample recovery and ensure representative nature of the samples. Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material. Logging Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies. Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc) photography. The total length and percentage of the relevant intersections logged. Sub-sampling techniques and sample preparation Quality of assay data and laboratory tests If core, whether cut or sawn and whether quarter, half or all core taken. If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or dry. For all sample types, the nature, quality and appropriateness of the sample preparation technique. Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples. Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling. Whether sample sizes are appropriate to the grain size of the material being sampled. The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total. For geophysical tools, spectrometers, handheld XRF instruments, etc, the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc. Nature of quality control procedures adopted (eg standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (ie lack of bias) and precision have been established. Ground TEM surveys using SMARTfluxgate and SMARTem24 receiver and a GTE-4M or Geonics TEM 67 transmitter consisting of 6 fixed loops and 14 lines with 50m station spacing. Where more than one line was conducted at a site the line spacing was between 150m and 200m. Line length, station spacing and line spacing were adjusted when impeded by power lines, roads, fences etc. Not applicable Not applicable Not applicable Not applicable Not applicable TEM surveys using SMARTfluxgate and SMARTem24 receiver and a GTE-4M or Geonics TEM 67 transmitter consisting of 6 fixed loops and 14 lines with 50m station spacing. Where more than one line was conducted at a site the line spacing was between 150m and 200m. Line length, station spacing and line spacing were adjusted when impeded by power lines, roads, fences etc. Page 8

9 Criteria JORC Code explanation Commentary Verification of sampling and assaying Location of data points Data spacing and distribution Orientation of data in relation to geological structure The verification of significant intersections by either independent or alternative company personnel. The use of twinned holes. Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols. Discuss any adjustment to assay data. Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation. Specification of the grid system used. Quality and adequacy of topographic control. Data spacing for reporting of Exploration Results. Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied. Whether sample compositing has been applied. Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type. If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material. Primary data output was interpreted on site by DrillCon SMOY experts. Outputs and summary comments were then sent to Drake s Geophysics Consultant daily for validation, confirmation and discussion with SMOY and Drake s Geologist.. locations are surveyed in Universal Transverse Mercator (UTM) coordinates, WGS84 UTM Zone 33N using a Garmin hand held field GPS with accuracy of 4-5m. TEM surveys using 50m station spacing. Where more than one line was conducted at a site the line spacing was between 150m and 200m. Line length, station spacing and line spacing were adjusted when impeded by power lines, roads, fences etc. Where historical results allowed, survey lines were conducted across or perpendicular to the surface expression of possible geological structures or regional geophysics anomalies Sample security The measures taken to ensure sample security. No measures were specifically taken to ensure sample security. Audits or reviews The results of any audits or reviews of sampling techniques and data. No audits or reviews have been conducted at this stage. Section 2 Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section.) Criteria JORC Code explanation Commentary Mineral tenement and land tenure status Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings. The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area. The areas surveyed -Korsheden, Ekedal, Prasthytten and Vitmyran are claims held by Drake Resources Ltd. The claims expire at various dates between August and October. Drake will apply for renewal of the Korsheden claim in September Ekedal and Prasthytten were allowed to expire without renewal. Exploration done Acknowledgment and appraisal of exploration by other parties. Government funded Airborne magnetic by other parties surveys were completed in Regional geological maps were also sourced from public sources. Geology Deposit type, geological setting and style of mineralisation. The Ni-Cu target is in an area of gabbro intruded into metasediments Drill hole Information Data aggregation methods A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes: o easting and northing of the drill hole collar o elevation or RL (Reduced Level elevation above sea level in metres) of the drill hole collar o dip and azimuth of the hole o down hole length and interception depth o hole length. If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case. In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (eg cutting of high grades) and cut-off grades are usually Material and should be stated. Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for Not applicable. Not applicable Page 9

10 Criteria JORC Code explanation Commentary Relationship between mineralisation widths and intercept lengths such aggregation should be stated and some typical examples of such aggregations should be shown in detail. The assumptions used for any reporting of metal equivalent values should be clearly stated. These relationships are particularly important in the reporting of Exploration Results. If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported. If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (eg down hole length, true width not known ). Diagrams Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views. Balanced reporting Other substantive exploration data Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results. Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances. Further work The nature and scale of planned further work (eg tests for lateral extensions or depth extensions or large-scale step-out drilling). Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive. Not applicable. Refer to figure in body of text 4 claims were surveyed with Korsheden south generating noteworthy results Government funded Airborne magnetic surveys were completed in There has been limited geological investigations in recent decades. The next steps are likely to involve a surface gravity and magnetic survey.. Page 10

11 CORPORATE GOVERNANCE STATEMENT This Corporate Governance summary discloses the extent to which the Company will follow the recommendations set by the ASX Corporate Governance Council in its publication Corporate Governance Principles and Recommendations (3 rd Edition) (Recommendations). The Recommendations are not mandatory, however, the Recommendations that will not be followed have been identified and reasons have been provided for not following them. The Company s Corporate Governance Plan has been posted on the Company s website at PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO) EXPLANATION Principle 1: Lay solid foundations for management and oversight Recommendation 1.1 A listed entity should have and disclose a charter which: (a) sets out the respective roles and responsibilities of the board, the chair and management; and (b) includes a description of those matters expressly reserved to the board and those delegated to management. Recommendation 1.2 A listed entity should: (a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and (b) provide security holders with all material information relevant to a decision on whether or not to elect or re-elect a director. Recommendation 1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. YES YES YES The Company has adopted a Board Charter. The Board Charter sets out the specific responsibilities of the Board, requirements as to the Boards composition, the roles and responsibilities of the Chairman and Company Secretary, the establishment, operation and management of Board Committees, Directors access to company records and information, details of the Board s relationship with management, details of the Board s performance review and details of the Board s disclosure policy. A copy of the Company s Board Charter is stated in Schedule 1 of the Corporate Governance Plan which is available on the Company s website. (a) The Company has detailed guidelines for the appointment and selection of the Board. The Company s Corporate Governance Plan requires the Board to undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director. (b) Material information relevant to any decision on whether or not to elect or re-elect a Director will be provided to security holders in the notice of meeting holding the resolution to elect or re-elect the Director. The Company s Corporate Governance Plan requires the Board to ensure that each Director and senior executive is a party to a written agreement with the Company which sets out the terms of that Director s or senior executive s appointment. Recommendation 1.4 The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. YES The Board Charter outlines the roles, responsibility and accountability of the Company Secretary. The Company Secretary is accountable directly to the Board, through the chair, on all matters to do with the proper functioning of the Board. Page 11

12 CORPORATE GOVERNANCE STATEMENT (CONTINUED) PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO) EXPLANATION Recommendation 1.5 A listed entity should: (a) have a diversity policy which includes requirements for the board: (i) to set measurable objectives for achieving gender diversity; and (ii) to assess annually both the objectives and the entity s progress in achieving them; (b) disclose that policy or a summary or it; and (c) disclose as at the end of each reporting period: (i) the measurable objectives for achieving gender diversity set by the board in accordance with the entity s diversity policy and its progress towards achieving them; and (ii) either: (A) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined senior executive for these purposes); or (B) the entity s Gender Equality Indicators, as defined in the Workplace Gender Equality Act Recommendation 1.6 A listed entity should: (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. YES (a) The Company has adopted a Diversity Policy. (i) The Diversity Policy provides a framework for the Company to achieve a list of 6 measurable objectives that encompass gender equality. (ii) The Diversity Policy provides for the monitoring and evaluation of the scope and currency of the Diversity Policy. The company is responsible for implementing, monitoring and reporting on the measurable objectives. (b) The Diversity Policy is stated in Schedule 9 of the Corporate Governance Plan which is available on the company website. (c) (i) The measurable objectives set by the Board will be included in the annual key performance indicators for the CEO, MD and senior executives. In addition the Board will review progress against the objectives in its annual performance assessment. (ii) The Board will include in the annual report each year, the measurable objectives, progress against the objectives, and the proportion of male and female employees in the whole organisation, at senior management level and at Board Level. YES (a) The Board is responsible for evaluating the performance of the Board and individual directors on an annual basis. It may do so with the aid of an independent advisor. The process for this can be found in Schedule 6 of the Company s Corporate Governance Plan.. (b) The Company s Corporate Governance Plan requires the Board to disclosure whether or not performance evaluations were conducted during the relevant reporting period. Details of the performance evaluations conducted will be provided in the Company s Annual Reports. (a) The Board is responsible for evaluating the performance of senior executives. The Board is to arrange an annual performance evaluation of the senior executives. (b) The Company s Corporate Governance Plan requires the Board to conduct annual performance of the senior executives. Schedule 6 Performance Evaluation requires the Board to disclose whether or not performance evaluations were conducted during the relevant reporting period. Details of the performance evaluations conducted will be provided in the Company s Annual Report. Recommendation 1.7 A listed entity should: (a) have and disclose a process for periodically evaluating the performance of its senior executives; and (b) disclose in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. YES Principle 2: Structure the board to add value Page 12

13 CORPORATE GOVERNANCE STATEMENT (CONTINUED) PRINCIPLES AND RECOMMENDATIONS Recommendation 2.1 The board of a listed entity should: (a) have a nomination committee which: (i) has at least three members, a majority of whom are independent directors; and (ii) is chaired by an independent director, and disclose: (iii) the charter of the committee; (iv) the members of the committee; and (v) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, experience, independence and knowledge of the entity to enable it to discharge its duties and responsibilities effectively. Recommendation 2.2 A listed entity should have and disclose a board skill matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. COMPLY (YES/NO) NO YES EXPLANATION (a) Due to the size and nature of the existing Board and the magnitude of the Company s operations the Company currently has no Nomination Committee. Pursuant to clause 4(h) of the Company s Board Charter, the full Board carries out the duties that would ordinarily be assigned to the Nomination Committee under the written terms of reference for that committee. The duties of the Nomination Committee are outlined in Schedule 5 of the Company s Corporate Governance Plan available online on the Company s website. The Board devotes time at board meetings to discuss board succession issues. All members of the Board are involved in the Company s nomination process, to the maximum extent permitted under the Corporations Act and ASX Listing Rules. The Board regularly updates the Company s board skills matrix (in accordance with recommendation 2.2) to assess the appropriate balance of skills, experience, independence and knowledge of the entity. Board Skills Matrix Number of Directors that Meet the Skill Executive & Non- Executive 3 experience Industry experience & knowledge 3 Leadership 3 Corporate governance & risk 2 management Strategic thinking 3 Desired behavioural competencies 3 Geographic experience 2 Capital Markets experience 3 Subject matter expertise: - accounting 2 - capital management 3 - corporate financing 2 - industry taxation risk management 3 - legal 2 - IT expertise 2 0 (1) Skill gap noticed however an external taxation firm is emplo4yed to maintain taxation requirements. (2) Skill gap noticed however an external IT firm is employed on an adhoc basis to maintain IT requirements. Page 13

14 CORPORATE GOVERNANCE STATEMENT (CONTINUED) PRINCIPLES AND RECOMMENDATIONS Recommendation 2.3 A listed entity should disclose: (a) the names of the directors considered by the board to be independent directors; (b) if a director has an interest, position, association or relationship of the type described in Box 2.3 of the ASX Corporate Governance Principles and Recommendation (3rd Edition), but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and (c) the length of service of each director Recommendation 2.4 A majority of the board of a listed entity should be independent directors. Recommendation 2.5 The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. Recommendation 2.6 A listed entity should have a program for inducting new directors and providing appropriate professional development opportunities for continuing directors to develop and maintain the skills and knowledge needed to perform their role as a director effectively. Recommendation 3.1 A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it. COMPLY (YES/NO) YES YES YES YES Principle 3: Act ethically and responsibly YES Principle 4: Safeguard integrity in financial reporting EXPLANATION (a) The Board Charter provides for the disclosure of the names of Directors considered by the Board to be independent. These details are provided in the Annual Reports and Company website. (b) The Board Charter requires Directors to disclose their interest, positions, associations and relationships and requires that the independence of Directors is regularly assessed by the Board in light of the interests disclosed by Directors. Details of the Directors interests, positions associations and relationships are provided in the Annual Reports and Company website. (c) The Board Charter provides for the determination of the Directors terms and requires the length of service of each Director to be disclosed. The length of service of each Director is provided in the Annual Reports and Company website. The Board Charter requires that where practical the majority of the Board will be independent. Details of each Director s independence are provided in the Annual Reports and Company website. The Board Charter provides that where practical, the Chairman of the Board will be a non-executive director. If the Chairman ceases to be independent then the Board will consider appointing a lead independent Director. The Board Charter states that a specific responsibility of the Board is to procure appropriate professional development opportunities for Directors. The Board is responsible for the approval and review of induction and continuing professional development programs and procedures for Directors to ensure that they can effectively discharge their responsibilities. (a) The Corporate Code of Conduct applies to the Company s directors, senior executives and employees. (b) The Company s Corporate Code of Conduct is in Schedule 2 of the Corporate Governance Plan which is on the Company s website. Page 14

15 CORPORATE GOVERNANCE STATEMENT (CONTINUED) PRINCIPLES AND RECOMMENDATIONS Recommendation 4.1 The board of a listed entity should: (a) have an audit committee which: (i) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and (ii) is chaired by an independent director, who is not the chair of the board, and disclose: (iii) the charter of the committee; (iv) the relevant qualifications and experience of the members of the committee; and (v) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its financial reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. Recommendation 4.2 The board of a listed entity should, before it approves the entity s financial statements for a financial period, receive from its CEO and CFO a declaration that the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. Recommendation 4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. COMPLY (YES/NO) NO YES YES EXPLANATION (a) Due to the size and nature of the existing Board and the magnitude of the Company s operations the Company currently has no Audit and Risk Committee. Pursuant to Clause 4(h) of the Company s Board Charter, the full Board carries out the duties that would ordinarily be assigned to the Audit and Risk Committee under the written terms of reference for that committee. The role and responsibilities of the Audit and Risk Committee are outlined in Schedule 3 of the Company s Corporate Governance Plan available online on the Company s website. The Board devote time at annual board meetings to fulfilling the roles and responsibilities associated with maintaining the Company s internal audit function and arrangements with external auditors. All members of the Board are involved in the Company s audit function to ensure the proper maintenance of the entity and the integrity of all financial reporting. The Company s Corporate Governance Plan states that a duty and responsibility of the Board is to ensure that before approving the entity s financial statements for a financial period, the CEO and CFO have declared that in their opinion the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. The Company s Corporate Governance Plan provides that the Board must ensure the Company s external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Principle 5: Make timely and balanced disclosure Recommendation 5.1 A listed entity should: (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it. YES (a) The Board Charter provides details of the Company s disclosure policy. In addition, Schedule 7 of the Corporate Governance Plan is entitled Disclosure Continuous Disclosure and details the Company s disclosure requirements as required by the ASX Listing Rules and other relevant legislation. (b) The Board Charter and Schedule 7 of the Corporate Governance Plan are available on the Company website. Page 15

16 CORPORATE GOVERNANCE STATEMENT (CONTINUED) PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO) EXPLANATION Principle 6: Respect the rights of security holders Recommendation 6.1 A listed entity should provide information about itself and its governance to investors via its website. Recommendation 6.2 A listed entity should design and implement an investor relations program to facilitate effective twoway communication with investors. Recommendation 6.3 A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. Recommendation 6.4 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. YES YES YES YES Information about the Company and its governance is available in the Corporate Governance Plan which can be found on the Company website. The Company has adopted a Shareholder Communications Strategy which aims to promote and facilitate effective two-way communication with investors. The Shareholder Communications Strategy outlines a range of ways in which information is communicated to shareholders. The Shareholder Communication Strategy is at Schedule 10 of the Corporate Governance Plan are available on the Company website. The Shareholder Communications Strategy states that as a part of the Company s developing investor relations program, Shareholders can register with the Company Secretary to receive notifications of when an announcement is made by the Company to the ASX, including the release of the Annual Report, half yearly reports and quarterly reports. Links are made available to the Company s website on which all information provided to the ASX is immediately posted. Shareholders are encouraged to participate at all EGMs and AGMs of the Company. Upon the despatch of any notice of meeting to Shareholders, the Company Secretary shall send out material with that notice of meeting stating that all Shareholders are encouraged to participate at the meeting. Security holders can register with the Company to receive notifications when an announcement is made by the Company to the ASX. Shareholders queries should be referred to the Company Secretary at first instance. Principle 7: Recognise and manage risk Recommendation 7.1 The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: (i) has at least three members, a majority of whom are independent directors; and (ii) is chaired by an independent director, and disclose: (iii) the charter of the committee; (iv) the members of the committee; and (v) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the process it employs for overseeing the entity s risk management framework. NO (a) Due to the size and nature of the existing Board and the magnitude of the Company s operations the Company currently has no Audit and Risk Committee. Pursuant to Clause 4(h) of the Company s Board Charter, the full Board currently carries out the duties that would ordinarily be assigned to the Audit and Risk Committee under the written terms of reference for that committee. The role and responsibilities of the Audit and Risk Committee are outlined in Schedule 3 of the Company s Corporate Governance Plan available online on the Company s website. The Board devote time at annual board meeting to fulfilling the roles and responsibilities associated with overseeing risk and maintaining the entity s risk management framework and associated internal compliance and control procedures. Page 16

17 CORPORATE GOVERNANCE STATEMENT (CONTINUED) PRINCIPLES AND RECOMMENDATIONS Recommendation 7.2 The board or a committee of the board should: (a) review the entity s risk management framework with management at least annually to satisfy itself that it continues to be sound, to determine whether there have been any changes in the material business risks the entity faces and to ensure that they remain within the risk appetite set by the board; and (b) disclose in relation to each reporting period, whether such a review has taken place. Recommendation 7.3 A listed entity should disclose: (a) if it has an internal audit function, how the function is structured and what role it performs; or (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. Recommendation 7.4 A listed entity should disclose whether, and if so how, it has regard to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. COMPLY (YES/NO) YES YES YES (a) (b) EXPLANATION The Company process for risk management and internal compliance includes a requirement to identify and measure risk, monitor the environment for emerging factors and trends that affect these risks, formulate risk management strategies and monitor the performance of risk management systems. Schedule 8 of the Corporate Governance Plan is entitled Disclosure Risk Management and details the Company s disclosure requirements with respect to the risk management review procedure and internal compliance and controls. The Board Charter requires the Board to disclose the number of times the Board met throughout the relevant reporting period, and the individual attendances of the members at those meetings. Details of the meetings will be provided in the Company s Annual Report. Schedule 3 of the Company s Corporate Plan provides for the internal audit function of the Company. The Board Charter outlines the monitoring, review and assessment of a range of internal audit functions and procedures. Schedule 3 of the Company s Corporate Plan details the Company s risk management systems which assist in identifying and managing potential or apparent business, economic, environmental and social sustainability risks (if appropriate). Review of the Company s risk management framework is conducted at least annually and reports are continually created by management on the efficiency and effectiveness of the Company s risk management framework and associated internal compliance and control procedures. Page 17

18 CORPORATE GOVERNANCE STATEMENT (CONTINUED) PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO) EXPLANATION Principle 8: Remunerate fairly and responsibly Recommendation 8.1 The board of a listed entity should: (a) have a remuneration committee which: (i) has at least three members, a majority of whom are independent directors; and (ii) is chaired by an independent director, and disclose: (iii) the charter of the committee; (iv) the members of the committee; and (v) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. Recommendation 8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of nonexecutive directors and the remuneration of executive directors and other senior executives and ensure that the different roles and responsibilities of non-executive directors compared to executive directors and other senior executives are reflected in the level and composition of their remuneration. Recommendation 8.3 A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it. NO YES YES Due to the size and nature of the existing board and the magnitude of the Company s operations the Company currently has no Remuneration Committee. Pursuant to clause 4(h) of the Company s Board Charter, the full Board currently carries out the duties that would ordinarily be assigned to the Remuneration Committee under the written terms of reference for that committee. The role and responsibilities of the Remuneration Committee are outlined in Schedule 4 of the Company s Corporate Governance Plan available online on the Company s website. The Board devote time at annual board meetings to fulfilling the roles and responsibilities associated with setting the level and composition of remuneration for Directors and senior executives and ensuring that such remuneration is appropriate and not excessive. The Company s Corporate Governance Plan requires the Board to disclose its policies and practices regarding the remuneration of non-executive, executive and other senior directors. (a) Company s Corporate Governance Plan states that the Board is required to review, manage and disclose the policy (if any) on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme. The Board must review and approve any equity based plans. (b) A copy of the Company s Corporate Governance Plan is available on the Company s website. Page 18

19 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 Directors The names of Directors in office at any time during or since the end of the year are: Mr Brett Fraser Mr Jay Stephenson Dr Robert Beeson Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Company Secretary The following person held the position of Company Secretary at the end of the financial year: Mr Jay Richard Stephenson Fellow of Certified Practicing Accountants; Certified Management Accountant; Member of Australian Institute of Company Directors; Master of Business Administration; Fellow of Institute of Chartered Secretaries Australia. Mr Stephenson is also a non-executive director and performs the role of Chief Financial Officer for the Company. Principal Activities The principal activities of the Group during the financial year were the exploration and evaluation of its projects in Scandinavia, Africa, and Australia. Operating Results The consolidated loss for the year amounted to 6,361,958 (2015: 4,964,570). Dividends Paid or Recommended There were no dividends paid or recommended during the financial year ended 30 June Review of Operations A detailed review of the Group s exploration activities is set out in the section titled Activities Report in this annual report. Financial Position The net assets of the Group are 1,114,462 at 30 June 2016 (2015: 6,295,887). Significant Changes in State of Affairs On March the Company announced the intention to acquire 100% of the shares in Genome Technologies Ltd. As disclosed in the note following this transaction is not proceeding and the Company is remaining as a mineral explorer. There were no other significant changes to the state of affairs of the Group during the financial year. After Balance Date Events Genome : Subsequent to balance date the Company was advised by ASX that the Genome company structure and operations post completion of the Genome Technologies Ltd ( Genome ) acquisition will not be suitable for a listed entity under Listing Rule 1.1 Condition 1. As a result, the Transaction will not proceed and accordingly the Company has impaired the acquisition prepayment to Genome Technologies Ltd to the amount of 142,426 as at 30th June On 18 November 2016, the Company signed a term sheet to raise up to 1,150,000 via the issue of a convertible loan with a term of 2 years convertible at the lower of and 85% of the average three daily VWAP during the 20 days preceding the issue of shares. There are no other significant subsequent events to report. Likely Developments Likely developments, future prospects and business strategies of the operations of the Group and the expected results of those operations have not been included in this report as the directors believe that the inclusion of such information would be likely to result in unreasonable prejudice to the Group. Page 19

20 DIRECTORS REPORT Information on Directors Mr Brett Fraser Qualifications Chairman (Non-Executive). Experience Board member since 30 March Interest in Shares and Options Special Responsibilities Directorships held in other listed entities Fellow of Certified Practicing Accountants; Fellow of the Financial Services Institute of Australasia; Graduate Diploma of Finance, Securities Institute of Australia; Bachelor of Business (Accounting); International Marketing Institute - AGSM Sydney. 30,160,199 ordinary shares in Drake Resources Limited and options to acquire a further 10,012,427 ordinary shares. Member of the Audit Committee and Remuneration Committee. Current Non-Executive director of Aura Energy Limited since August 2005, and Blina Minerals NL since September Past Non-Executive Director of Doray Minerals Limited from October 2009 until November 2011 and past Chairman of Aura Energy Limited from August 2005 to July No other directorships in the past three years. Mr Jay Stephenson Qualifications Director (Non-Executive); Company Secretary. Experience Board member since 30 March Interest in Shares and Options Special Responsibilities Directorships held in other listed entities Fellow of Certified Practicing Accountants; Certified Management Accountant; Member Australian Institute of Company Directors; Master of Business Administration; Fellow of the Institute of Chartered Secretaries Australia. 15,270,705 ordinary shares in Drake Resources Limited and options to acquire a further 2,550,723 ordinary shares. Member of the Audit Committee, Due Diligence Committee, and Remuneration Committee. Non-Executive Director of Strategic Minerals Corporation NL since July 2009, Doray Mining Limited since August 2009 and Nickelore Limited since July Chairman, Non-Executive Director of Yonder and Beyond Group Limited (Quintessential Resources Limited) since February 2011 and Non-Executive Director of Parmelia Resources Limited (Sentosa Mining Limited) since May Past Non-Executive Director of Aura Energy Limited - August 2005 to July 2013, Bulletproof Limited (Spencer Resources Limited) July 2011 to January and Parker Resources Limited - January 2011 to December No other directorships in the past three years. Dr Robert Beeson Qualifications Experience Interest in Shares and Options Directorships held in other listed entities Director (Non-Executive) since February 2013; Previously Managing Director - November 2004 to January Bachelor of Science with Honours; PhD; Member of the Australian Institute of Geoscientists. Board member since 17 November Geologist with over 30 years of global experience in base and precious metal exploration and development. 18,195,986 ordinary shares in Drake Resources Limited and options to acquire a further 1,907,598 ordinary shares. Current Non-executive Director of Aura Energy Limited since March No other directorships in the past three years. Meetings of Directors BOARD MEETINGS Number eligible to attend DIRECTORS MEETINGS Number Attended REMUNERATION COMMITTEE Number eligible to attend COMMITTEE MEETINGS Number Attended AUDIT COMMITTEE Number Number eligible to attend Attended Brett Fraser Jay Stephenson Robert Beeson Page 20

21 DIRECTORS REPORT Indemnifying Officers or Auditor During or since the end of the financial year the Company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums as follows: The Company has entered into agreements to indemnify all Directors and provide access to documents, against any liability arising from a claim brought by a third party against the Company. The agreement provides for the company to pay all damages and costs which may be awarded against the Directors. The Company has paid premiums to insure each of the directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium in 2016 was 9,993 (2015: 7,375). No indemnity has been paid to auditors. Options At the date of this report, the un-issued ordinary shares of Drake Resources Limited under option (listed and unlisted) are as follows: Grant Date Date of Expiry Exercise Price Number under Option 10 March August ,047, ,047,882 No person entitled to exercise the option has or has any right by virtue of the option to participate in any share issue of any other body corporate. Environmental Regulations In the normal course of business, there are no environmental regulations or requirements that the Company is subject to. The Directors have considered the enacted National Greenhouse and Energy Reporting Act 2007 (the NGER Act) which introduced a single national reporting framework for the reporting and dissemination of information about the greenhouse gas emissions, greenhouse gas projects, and energy use and production of corporations. At the current stage of development, the Directors have determined that the NGER Act has no effect on the Company for the current, nor subsequent, financial year. The Directors will reassess this position as and when the need arises. Non-Audit Services During the year ended 30 June 2016, taxation consulting services were provided to the Company by a party related to the auditors. These services amounted to 2,500 in 2016 (2015: nil). The directors are satisfied that the provision of non-audit services during the year by the auditor (or by another person or firm on the auditor s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth). Proceedings on Behalf of Company 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 year. Auditor s Independence Declaration The lead auditor s independence declaration for the year ended 30 June 2016 has been received and can be found on page.27 of the annual report. Page 21

22 DIRECTORS REPORT REMUNERATION REPORT (AUDITED) A. Remuneration Policy The remuneration policy of Drake Resources Limited has been designed to align director and management 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 Group s financial results. The Board of Drake Resources Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best management and directors to run and manage the Group, as well as create goal congruence between directors, executives and shareholders. The Board s policy for determining the nature and amount of remuneration for Board members and senior executives of the Group is as follows: The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the Remuneration Committee and approved by the Board. All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, options and performance incentives. The Remuneration Committee reviews executive packages annually by reference to the Group s performance, executive performance, and comparable information from industry sectors and other listed companies in similar industries. Executives are also entitled to participate in the employee share and option arrangements. The Non-Executive Directors and Executives receive a superannuation guarantee contribution required by the government, which is currently 9.5%, and do not receive any other retirement benefits. All remuneration paid to Directors and executives is valued at the cost to the Company and expensed. Options given to Directors and employees are valued using the Black-Scholes methodology. The Board s policy is to remunerate Non-Executive Directors at the lower end of market rates for comparable companies for time, commitment, and responsibilities. The Non-Executive Directors have been provided with options that are meant to incentivise the Non-Executive Directors. The Remuneration Committee determines payments to the Non-Executive Directors and reviews their remuneration annually based on market practice, duties, and accountability. Independent external advice is sought when required. 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. Fees for Non-Executive Directors are not linked to the performance of the Group. However, to align Directors interests with shareholder interests, the Directors are encouraged to hold shares in the Company. The remuneration policy has been tailored to increase the direct positive relationship between shareholders investment objectives and directors and executives performance. Currently, this is facilitated through the issue of options to the majority of directors and executives to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth. B. Remuneration Details for the Year Ended 30 June 2016 There were no cash bonuses paid during the year and there are no set performance criteria for achieving cash bonuses. 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 Group: The term Key Management Personnel refers to those persons having authority and responsibility for planning, directing and controlling the activities of the group directly or indirectly including any Director (whether executive or otherwise) of the Group. Page 22

23 DIRECTORS REPORT REMUNERATION REPORT (AUDITED) 2016 Group Key Management Personnel Directors Short-term benefits Post-employment benefits Equity-settled share-based payments Total Brett Fraser 1 43, ,400 4, ,850 Jay Stephenson 1 38, ,200 3, ,175 Robert Beeson 38, ,642 Other Key Management Personnel ,975 Jason Stirbinskis 2 196, ,494 14,087 55,304 18, , , ,094 25,487 55,304 18, , Group Key Management Personnel Directors Short-term benefits Post-employment benefits Equity-settled share-based payments Salary, fees Profit share Nonmonetary Other Super- Termination Equity Options Total and leave and bonuses annuation Benefits Salary, fees Profit share Nonmonetary Other Super- Termination Equity Options Total and leave and bonuses annuation Benefits Total Brett Fraser 1 60, ,200 5, ,900 Jay Stephenson 1 55, ,200 5, ,425 Robert Beeson 55, , ,225 Other Key Management Personnel Jason Stirbinskis 2 191, ,400 18,783-30, , , ,800 34,933-30, ,949 1 Wolfstar Group Pty Ltd, a company controlled by Messrs Fraser and Stephenson, provides financial services and Company Secretarial services to Drake Resources Limited. These services are not provided directly by Messrs Fraser and Stephenson and have therefore not been included as remuneration. Please refer to Note 24, Related Party Transactions and section E of this remuneration report for further details. 2 Effective from 1 April 2014, and as part of the Group s operating cost reduction strategy, Mr Stirbinskis reduced his annual salary by 20%. In addition, 25% of his remaining net monthly remuneration after tax was paid in Ordinary Shares of Drake Resources Limited until 31 December Termination Benefits amounts displayed in the report represent the termination payment to Mr. Stirbinskis from his role as CEO of Drake Resources Limited. Directors Fees Accrued A summary of Directors fees accrued is as follows: Year ended 30 June 2016 Opening Balance Accrued Accrued Fees Paid Accrued Fees Paid Closing Balance (Cash) (Equity) 1 Brett Fraser 17,710 43,334 - (52,293) 8,751 Jay Stephenson 16,043 38,333 - (43,119) 11,257 Robert Beeson 18,334 38,333 - (47,482) 9,185 James Merrillees 10, ,946 John Hoon 6, ,569 69, ,000 - (142,894) 46,708 Page 23

24 DIRECTORS REPORT REMUNERATION REPORT (AUDITED) Year ended 30 June 2015 Opening Balance Accrued Accrued Fees Paid Accrued Fees Paid Closing Balance (Cash) (Equity) 1 Brett Fraser 35,368 60,000 - (77,658) 17,710 Jay Stephenson 31,201 55,000 - (70,158) 16,043 Robert Beeson 53,193 55,000 - (89,859) 18,334 James Merrillees 10, ,946 John Hoon 6, , , ,000 - (237,675) 69,602 1 Amounts in Accrued Fees Paid (Equity) column represent accrued director s fees which have been paid to each Director and pledged by each Director to be re-invested as equity. C. Service Agreements Mr Jason Stirbinskis Chief Executive Officer Mr Stirbinskis was employed under a contract of employment. The employment contract commenced 7 February 2013 and stipulated a term of 17 months from the commencement date (7 July 2014) which was subsequently extended to 31 December As part of changes in the Company during the year, Mr Jason Stirbinskis is no longer CEO of the Company. D. Share-based compensation Director and Key Management Personnel share options No Options were granted during the period. Director and Key Management Personnel ordinary shares On 1 April 2014, the Company modified the terms of Mr Stirbinskis deed of employment as per (C) Service Agreements, above. 7,794,965 ordinary shares were granted to Mr Stirbinskis during the year ended 30 June Share-based Payments - Options There were no options granted as remuneration to Directors and Key Management Personnel during the year. D. Share-based compensation (Continued) Description of Options Issued as Remuneration There are no options granted or on issue in respect to remuneration Share-based payments Directors agreement to take up Rights Entitlement Issue shares Directors fees have been accrued as unpaid since March During the year ended 30 June 2016, a portion of accrued director s fees were paid to each Director on the condition that the funds were immediately re-invested as equity through the each of the two Rights Entitlement Issues which occurred during the year (Refer Note 17 for further information regarding shares issued throughout the period). A summary of Directors fees accrued is included in the Remuneration Report which forms part of this Directors Report. As a result of this arrangement, the following ordinary shares and share options were issued to each Director: Accrued Fees Paid via Rights Issue () Number of Ordinary Shares Issued at Number of Ordinary Shares Issued at per Share per Share 2 December April 2016 Brett Fraser 52,293 5,433,208 5,128,590 Jay Stephenson 43,119 5,008,368 3,016,546 Robert Beeson 47,482 5,300,160 4,325, ,894 15,741,736 12,470,466 Page 24

25 DIRECTORS REPORT REMUNERATION REPORT (AUDITED) E. Equity holdings of Key Management Personnel (i) Option holdings The number of options over ordinary shares held by each KMP of the Group at the end of the financial year is as follows: 30 June 2016 Balance at start of year Granted as remuneration during the year Expired during the year Exercised during the year Other changes during the year Balance at end of year Vested and exercisable Directors of Drake Resources Limited Brett Fraser 10,346, , ,012,427 10,012,427 Jay Stephenson 2,684, , ,550,723 2,550,723 Robert Beeson 1,975,510-67, ,907,598 1,907,598 Other KMP of Drake Resources Limited Jason Stirbinskis 2,866,015-37, ,828,978 2,828,978 17,872, , ,299,726 17,299, June 2015 Balance at start of year Granted Expired during as the year remuneration during the year Exercised during the year Other changes during the year Balance at end of year Vested and exercisable Directors of Drake Resources Limited Brett Fraser 817, ,159-10,012,427 10,346,873 10,346,873 Jay Stephenson 376, ,315-2,550,723 2,684,056 2,684,056 Robert Beeson 280, ,500-1,907,598 1,975,510 1,975,510 Other KMP of Drake Resources Limited Jason Stirbinskis 1,203,702-1,166,665-2,828,978 2,866,015 2,866,015 2,678,367-2,105,639-17,299,726 17,872,454 17,872,454 E. Equity holdings of Key Management Personnel (Continued) (ii) Shareholdings (Continued) The number of ordinary shares in Drake Resources Limited held by each KMP of the Group during the financial year is as follows: 30 June 2016 Balance at start of year Received as compensation during the year Received on exercise of options during the year Other changes during the year Balance at end of year Directors of Drake Resources Limited Brett Fraser 17,545, ,614,208 30,160,199 Jay Stephenson 6,626, ,644,252 15,270,705 Robert Beeson 8,565, ,630,157 18,195,986 Other KMP of Drake Resources Limited Jason Stirbinskis 1 4,714, ,794,965 12,509,928 37,453, ,683,582 76,136,818 Page 25

26 DIRECTORS REPORT REMUNERATION REPORT (AUDITED) 30 June 2015 Balance at start of year Directors of Drake Resources Limited Received as compensation during the year Received on exercise of options during the year Other changes during the year Balance at end of year Brett Fraser 6,627, ,918,340 17,545,991 Jay Stephenson 3,544, ,082,325 6,626,453 Robert Beeson 1,519, ,045,895 8,565,829 Other KMP of Drake Resources Limited Jason Stirbinskis 1 565, ,149,903 4,714,963 12,256, ,196,463 37,453,236 Other changes during the year relate to shares purchased/(sold) on market. During the year ended 30 June 2016, unpaid and accrued directors fees were settled through the issue of shares in the company. F. Other Transactions with Key Management Personnel Wolfstar Group Pty Ltd Mr Fraser and Mr Stephenson, Non-executive Directors of the Company, are Directors and Shareholders of Wolfstar Group Pty Ltd. Mr Stephenson provided Company Secretarial, Chief Financial Officer and due diligence services to the Group. (161,633) (117,000) Wolfstar Group Pty Ltd rents office space from Drake Resources Limited and the companies share a variety of office expenses on commercial terms. 54, ,247 Note: Positive amounts represent a net reimbursement to Drake Resources from Wolfstar Group Pty Ltd. Amounts due to and from Related Parties: Amounts due (to) Wolfstar Group Pty Ltd (42,696) (269) Amounts due from Wolfstar Group Pty Ltd 3,390 16, END OF REMUNERATION REPORT This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors made pursuant to s.298(2) of the Corporation Act JAY STEPHENSON Director Dated this 18 th Day of November 2016 Page 26

27 To The Board of Directors Auditor s Independence Declaration under Section 307C of the Corporations Act 2001 As lead audit director for the audit of the financial statements of Drake Resources Limited for the financial year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Yours faithfully BENTLEYS Chartered Accountants DOUG BELL CA Director Dated at Perth this 18 th day of November 2016

28 Consolidated Statement of Profit or Loss and Other Comprehensive Income For The Year Ended 30 June Note Revenue 2 18,060 98,168 Accounting and audit fees (79,457) (85,149) Computers and software (37,289) (18,678) Contractors and consultants (20,299) (2,165) Directors fees (120,000) (170,000) Employee benefits (325,572) (347,372) Depreciation (23,517) (37,650) Insurance (32,146) (28,208) Legal fees (56,510) (6,288) Due diligence fees (486,137) - Acquisition costs (518,551) - Public relations and advertising (12,813) (15,879) Registry and ASX fees (43,567) (24,210) Rent & utility expense (49,054) (277,671) Travel and accommodation (19,527) (14,798) Unrealised Gain/(Loss) on listed shares (29,899) (22,421) Impairment of exploration and evaluation assets 3 (1,187,119) (200,889) Exploration costs written off (30,700) - Impairment of acquisition prepayment to Genome Technologies 3 (142,426) - Doubtful debt expenses (10,692) (141,436) Other expenses (46,231) (49,577) Profit/(Loss) before income tax 3 (3,253,446) (1,344,223) Income tax benefit Loss for the period from continuing operations after tax 3 (3,253,446) (1,344,223) Loss for the period from discontinued operations after tax 11 (3,108,512) (3,620,347) Loss for the period (6,361,958) (4,964,570) Other comprehensive income, net of income tax Items that will not be reclassified subsequently to profit or loss: - - Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations 4,079 8,362 Other comprehensive income for the year, net of income tax 4,079 8,362 Total comprehensive income attributable to members of the parent entity (6,357,879) (4,956,208) Basic and diluted (loss) per share from continuing and discontinued operations (cents per share) Basic and diluted (loss) from continuing operations (cents per share) 7 (0.89) (1.61) 7 (0.45) (0.44) The accompanying notes form part of these financial statements. Page 28

29 Consolidated Statement of Financial Position As at 30 June 2016 CURRENT ASSETS Note Cash and cash equivalents 8 127,460 1,101,169 Financial assets 9 119, ,477 Trade and other receivables , ,172 TOTAL CURRENT ASSETS 418,567 1,524,818 NON-CURRENT ASSETS Plant and equipment ,871 Exploration and evaluation assets 13 1,300,000 5,203,420 TOTAL NON-CURRENT ASSETS 1,300,018 5,228,291 TOTAL ASSETS 1,718,585 6,753,109 CURRENT LIABILITIES Trade and other payables , ,306 Financial liabilities ,000 - Short-term provisions 16-55,916 TOTAL CURRENT LIABILITIES 604, ,222 TOTAL LIABILITIES 604, ,222 NET ASSETS 1,114,462 6,295,887 EQUITY Issued capital 17 25,677,207 25,020,505 Reserves , ,165 Accumulated losses (25,091,596) (18,828,783) TOTAL EQUITY 1,114,462 6,295,887 The accompanying notes form part of these financial statements. Page 29

30 Consolidated Statement of Changes in Equity For The Year Ended 30 June 2016 Issued Capital Accumulated Losses Options Reserve Share Based Payments Reserve Foreign Exchange Translation Reserve Total Balance at 1 July ,995,085 (13,900,241) 135,173 35,053 (9,534) 9,255,536 Loss for the year - (4,964,570) (4,964,570) Other comprehensive income for the year - 8,362 8,362 Total comprehensive income for the year - (4,964,570) - - 8,362 (4,956,208) Transaction with owners, directly in equity Shares issued during the year 2,190, (35,053) - 2,155,521 Transaction costs (165,154) (165,154) Share-based payments not yet issued ,192-6,192 Options vested during the year Options expired during the year - 36,028 (36,028) Balance at 30 June ,020,505 (18,828,783) 99,145 6,192 (1,172) 6,295,887 Balance at 1 July ,020,505 (18,828,783) 99,145 6,192 (1,172) 6,295,887 Loss for the year - (6,361,958) (6,361,958) Other comprehensive income for the year ,079 4,079 Total comprehensive income for the year - (6,361,958) - - 4,079 (6,357,879) Transaction with owners, directly in equity Shares issued during the year 719, (6,192) - 712,959 Transaction costs (62,449) (62,449) Share-based payments not yet issued , ,944 Options vested during the year Options expired during the year - 99,145 (99,145) Balance at 30 June ,677,207 (25,091,596) - 525,944 2,907 1,114,462 The accompanying notes form part of these financial statements. Page 30

31 Consolidated Statement of Cash Flows For The Year Ended 30 June 2016 Note CASH FLOWS FROM OPERATING ACTIVITIES Interest received 5,119 26,506 Payments to suppliers and employees (1,120,477) (790,661) Payments for exploration expenditure (422,909) (1,339,815) Net cash used in operating activities 21 (1,538,267) (2,103,970) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment - (641) Payments for joint exploration (27,944) (906,452) Receipts of joint exploration funding 83 1,024,533 Deposits for Acquisition of Genome Technologies Limited (142,426) - Proceeds on disposal of financial assets 100,005 - Net cash used in investing activities (70,282) 117,440 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 543,208 1,909,333 Proceeds from issue of convertible notes 150,000 - Capital raising costs (62,447) (165,154) Net cash provided by financing activities 630,761 1,744,179 Net increase/(decrease) in cash held (977,788) (242,351) Cash at the beginning of the period 1,101,169 1,349,734 Effect of exchange rates on cash holdings in foreign currencies 4,079 (6,214) Cash at the end of the period 8 127,460 1,101,169 The accompanying notes form part of these financial statements. Page 31

32 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES These are the consolidated financial statements and notes of Drake Resources Limited and controlled entities ( Group ). Drake Resources Limited is a company limited by shares, domiciled and incorporated in Australia. The separate financial statements of the parent entity, Drake Resources Limited, have not been presented with this financial report as permitted by the Corporations Act Statement of Compliance The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below. They have been consistently applied unless otherwise stated. The financial statements were authorised for issue on 18 November 2016 by the directors of the Company. Page 32

33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. All amounts are presented in Australian Dollars unless otherwise noted. Going Concern The financial report has been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. The Consolidated Group incurred a loss for the year of 6,361,958 (2015: 4,964,570) and net cash outflows from operating activities of 1,538,267 (2015: 2,103,970). Included in the loss for the year were losses from discontinued operations of 3,108,512 (refer to note 11). As at year end the Company had a working capital deficiency of 185,556 (2015: surplus 1,067,596). These conditions indicate a material uncertainty that may cast significant doubt about the ability of the Consolidated Group to continue as a going concern. The ability of the Consolidated Group to continue as a going concern is principally dependent upon the ability of the Company to secure funds by raising capital from debt or equity markets and managing cash flow in line with available funds. On 18 November 2016, the Company signed a term sheet to raise up to 1,150,000 via the issue of a convertible loan with a term of 2 years convertible at the lower of and 85% of the average three daily VWAP during the 20 days preceding the issue of shares. The directors have prepared a cash flow forecast, which indicates that the Consolidated Group will have sufficient cash flows to meet all commitments and working capital requirements for the 12 month period from the date of signing this financial report. Included in this forecast is reduced exploration activities as a result of the discontinuation of the Group s African operations, as well as fund raising from the issue of convertible loans. Based on the cash flow forecast and other factors referred to above, the directors are satisfied that the going concern basis of preparation is appropriate. In particular, given the Company s history of raising capital to date, the directors are confident of the Company s ability to raise additional funds as and when they are required. Should the Consolidated Group be unable to continue as a going concern it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or to the amount and classification of liabilities that might result should the Consolidated Group be unable to continue as a going concern and meet its debts as and when they fall due. (a) Principles of Consolidation A controlled entity is any entity over which Drake Resources Limited has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered. A list of controlled entities is contained in Note 28 of the financial statements. All inter-group balances and transactions between entities in the Consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity. As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (left) the Consolidated Group during the year, their operating results have been included (excluded) from the date control was obtained (ceased). Page 33

34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (b) Exploration and Development Expenditure Exploration, evaluation, and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest will be amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area of interest. Costs of site restoration are provided over the life of the project, when such costs are incurred or the Group becomes liable for, from when exploration commences and are included in the costs of that stage. Site restoration costs will include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. (c) Income Tax Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items recognised outside profit or loss. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Page 34

35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Where the Group receives the Australian Government's Research and Development Tax incentive, The Group accounts for the refundable tax offset under AASB 112. Funds are received as a rebate through the parent company s income tax return and disclosed as such in Note 4 Income Tax. (d) Plant and Equipment Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the amount recoverable from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts. Depreciation The depreciable amount of all fixed assets including is depreciated on a straight line basis over their useful lives to the Consolidated Group commencing from the time that the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are as follows: Plant and equipment Computers 25-50% 33-50% The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of profit or loss and other comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. (e) Employee Benefits Provision is made for the Company s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. (f) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within shortterm borrowings in current liabilities on the Consolidated Statement of Financial Position. Page 35

36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (g) Revenue and Other Income Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Management fees are recognised on a portion of completion basis. Gain on disposal of tenements, and revenue from equipment chargebacks, are recognised on receipt of compensation. All revenue is stated net of the amount of goods and services tax (GST). (h) Goods and Services Tax (GST) Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the Consolidated Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (i) Leases Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. (j) Financial Instruments Initial recognition and measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. Convertible notes The component parts of convertible notes issued by the Consolidated Entity are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Conversion options that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company s own equity instruments is an equity instrument. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recognised as a liability on an amortised cost basis using the effective interest method until extinguishment upon conversion or at the instrument s maturity date. The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will be transferred to share premium. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance recognised in equity will be transferred to retained profits. No gain or loss is recognised in the profit or loss upon conversion or expiration of the conversion option. Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognised directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortised over the lives of the convertible notes using the effective interest method. Page 36

37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Classification and Subsequent Measurement Financial assets at fair value through profit and loss Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm s length transactions, reference to similar instruments and option pricing models. Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether any impairment has arisen. Impairment losses are recognised in the profit or loss. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point. Derecognition Financial assets are derecognised where the contractual rights to cash flow expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. (k) Earnings Per Share Basic earnings per share is determined by dividing the loss from continuing operations, excluding any costs of service equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (l) Impairment of Assets At the end of each reporting period, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have become impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset s fair value less costs to sell and value in use, is compared to the asset s carrying value. Any excess of the asset s carrying value over its recoverable amount is recognised immediately to profit or loss. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (m) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will results and that outflow can be reliably measured. Page 37

38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (n) Equity-settled compensation The Group operates an employee share ownership scheme. Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. (o) Comparative Figures Where required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (p) Foreign Currency Transactions and Balances Functional and presentation currency The functional currency of each of the Group s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the profit or loss except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the gain or loss is directly recognised in other comprehensive income, otherwise the exchange difference is recognised in the profit or loss. Group companies The financial results and position of foreign operations whose functional currency is different from the Group s presentation currency are translated as follows: Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; Income and expenses are translated at average exchange rates for the period; and; Retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are transferred directly to the Group s foreign currency translation reserve in the statement of financial position. These differences are recognised in the profit or loss in the period in which the operation is disposed. (q) Critical Accounting Estimates and Judgments The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Page 38

39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Key Judgments Exploration and evaluation expenditure Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. These costs are carried forward in respect of an area that has not at reporting date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, refer to the accounting policy stated in note 1(b). The carrying value of capitalised expenditure at reporting date is 1,300,000 (2015: 5,203,420). During the financial year, the Group undertook assessment of its tenement assets, as a result of this assessment, the Group decided to impair some of its exploration assets. Refer Note 13. Key Judgments 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 Group s development and its current environmental impact, the directors believe such treatment is reasonable and appropriate. Key Estimate Taxation Balances disclosed in the financial statements and the notes thereto, related to taxation, are based on the best estimates of 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 tax authorities in relevant jurisdictions. Refer Note 4. Key Estimate Impairment The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Key Estimate Share-based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of options is determined by an internal valuation using a Black-Scholes option pricing model, using the assumptions detailed in Note 22. (r) Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant's ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity's own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. Page 39

40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability, The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 - Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 - Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 - Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa. When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. Page 40

41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (s) Interests in joint operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation: its assets, including its share of any assets held jointly; its liabilities, including its share of any liabilities incurred jointly; its revenue from the sale of its share of the output arising from the joint operation; its share of the revenue from the sale of the output by the joint operation; and its expenses, including its share of any expenses incurred jointly. The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the AASBs applicable to the particular assets, liabilities, revenues and expenses. When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group's consolidated financial statements only to the extent of other parties' interests in the joint operation. When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party. (t) New Accounting Standards and Interpretation Adopted by the Group The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. (u) New Accounting Standards and Interpretation not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below AASB 9 Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January The standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI'). Page 41

42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The consolidated entity will adopt this standard from 1 July 2018 but the impact of its adoption is yet to be assessed by the consolidated entity AASB 15 Revenue from Contracts with Customer This standard is applicable to annual reporting periods beginning on or after 1 January The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this standard from 1 July 2017 but the impact of its adoption is yet to be assessed by the consolidated entity. AASB 16 Leases This standard is applicable to annual reporting periods beginning on or after 1 January The standard replaces AASB 117 Leases and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a right-of-use asset will be capitalised in the statement of financial position, measured as the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choices exists whereby either a right-of-use asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in operating costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) result will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The group will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the group. Page 42

43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 2 REVENUE AND OTHER INCOME Revenue Interest received 11,267 16,848 Management fees 83 86,238 Total Revenue 11, ,086 Other Income Realised foreign exchange gain/(loss) 6,710 (4,918) Total Other Income 6,710 (4,918) NOTE 3 LOSS BEFORE INCOME TAX 2016 The following significant expense items are relevant in explaining the financial performance: Loss from discontinued operations 3,108,512 3,620,347 Impairment of exploration and evaluation assets 1,187, ,889 Depreciation of property, plant & equipment 23,517 37,650 Rent & utilities expense 49, ,671 Doubtful debt expense 10, ,436 Employee benefits 325, ,372 Due diligence 486,137 - Impairment of acquisition prepayment to Genome Technologies 1 142, During the year the Company made payments of 142,426 (US100,000) to Genome Technologies as part of consideration to the company for a proposed acquisition. The acquisition is not proceeding subsequent to year end and prepaid consideration amounts of 142,426 were impaired. Page 43

44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 4 INCOME TAX Note (a) Income tax expense / (benefit) Current tax - - Deferred tax Deferred income tax expense included in income tax expense comprises: Increase / (decrease) in deferred tax assets 4(c) 2,448 9,319 (Increase) / decrease in deferred tax liabilities 4(d) (2,448) (9,319) - - (b) Reconciliation of income tax expense to prima facie tax payable The prima facie tax payable / (benefit) on loss from ordinary activities before income tax is reconciled to the income tax expense as follows: Prima facie tax on operating loss at 30% (2015: 30%) (1,908,587) (1,489,371) Add / (Less) Tax effect of: Due-Diligence costs 145,841 - Other non-allowable items 1,205,389 1,287,806 Capital raising costs deductible (146,776) (45,802) Under provision in prior years (14,705) 21,313 Movement in unrecognised temporary differences 718, ,054 Income tax expense / (benefit) attributable to operating loss - - Less rebates: Tax effect of: Non-Assessable Income - - Income tax expense / (benefit) - - The applicable weighted average effective tax rates attributable to operating profit are as follows nil% nil% Balance of franking account at year end nil nil Page 44

45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 4 INCOME TAX Note (c) Deferred tax assets Tax losses 2,526,971 1,959,035 Provisions and accruals 26, ,597 Other 630, ,101 3,184,623 2,528,733 Set-off deferred tax liabilities 4(d) (3,661) (6,109) Net deferred tax assets 3,180,962 2,522,624 Less deferred tax assets not recognised (3,180,962) (2,522,624) Net tax assets - - (d) Deferred tax liabilities Exploration expenditure - - Other 3,661 6,109 3,661 6,109 Set-off deferred tax assets 4(c) (3,661) (6,109) Net deferred tax liabilities - - (e) Tax losses Unused tax losses for which no deferred tax asset has been recognised, that may be utilised to offset tax liabilities: 8,423,235 6,530,116 8,423,235 6,530,116 Potential deferred tax assets attributable to tax losses and exploration expenditure carried forward have not been brought to account at 30 June 2016 because the directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this point in time. These benefits will only be obtained if: i. the company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the loss and exploration expenditure to be realised; ii. the company continues to comply with conditions for deductibility imposed by law; and iii. no changes in tax legislation adversely affect the company in realising the benefit from the deductions for the loss and exploration expenditure. Page 45

46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 5 KEY MANAGEMENT PERSONNEL COMPENSATION (a) Key management personnel ("KMP") compensation The aggregate compensation made to directors and other key management personnel of the Group is set out below: Short-term employee benefits 321, ,952 Post-employment benefits 25,487 34,933 Termination benefits 55,304 - Share based payments 18,039 30,064 Other long term benefits - - Total 420, ,949 NOTE 6 AUDITOR S REMUNERATION Remuneration of the auditor of the Group for: - Auditing and reviewing the financial reports 17,500 34,250 - Taxation and advisory services provided by a related practice of the auditor 2,500-20,000 34,250 NOTE 7 EARNINGS PER SHARE (a) (b) (c) Reconciliation of earnings to net profit or loss Loss from continuing operations used in the calculation of basic EPS (3,253,446) (1,344,223) Loss from discontinued operations used in the calculation of basic EPS (3,108,512) (3,620,347) Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS 718,226, ,441,117 Earnings per share From continuing operations (0.45) (0.44) From discontinued operations (0.44) (1.17) Total basic and diluted earnings per share (0.89) (1.61) Page 46

47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 8 CASH AND CASH EQUIVALENTS Cash at bank 127,460 1,101,169 Cash and cash equivalents 127,460 1,101,169 The effective interest rate on short term bank deposits was 2.27% (2015: 2.31%). These deposits have an average maturity of 0 days (2015: 0 days). NOTE 9 FINANCIAL ASSETS CURRENT Financial assets held for trading: Securities in ASX listed entity 119, ,472 Term deposit - 100,005 Net carrying value 119, ,477 The Securities in ASX listed entity are classed as level 1 of the fair value hierarchy. The fair values of these financial assets have been based on the closing quoted bid prices at reporting date, excluding transaction costs. NOTE 10 TRADE AND OTHER RECEIVABLES CURRENT Expenditure recoverable from JV Partners (106) 495 GST and MOMS receivable 63,839 56,302 Amount receivable from related parties - 16,235 Other receivables & prepayments 107, ,576 (Provision doubtful debts) - (141,436) 171, ,172 Page 47

48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 11 DISCONTINUED OPERATIONS During the year, management decided to discontinue its exploration activities in Guinea and Mauritania. Consequently, all African tenements were relinquished and related assets were impaired. Operating loss on the discontinued operations is summarised as follows; Revenue - - Impairment of African assets (3,108,512) (3,620,347) Loss of the year from discontinued operations (3,108,512) (3,620,347) Cash flows from discontinued operations Net cash flows from operating activities (229,429) (1,168,730) Net cash flows from investing activities - - Net cash flows from financing activities - - Cash flow from discontinued operations (229,429) (1,168,730) NOTE 12 PLANT AND EQUIPMENT Note Plant and equipment at cost 324, ,300 Accumulated depreciation (324,946) (301,429) Total plant and equipment 18 24,871 Movements in Carrying Amounts Carrying amount at the beginning of the year 24,871 61,879 Additions 642 Disposals (1,336) - Depreciation expense (23,517) (37,650) Carrying amount at the end of the year 18 24,871 Page 48

49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 13 EXPLORATION AND EVALUATION ASSETS Note NON CURRENT Exploration expenditure capitalised: - Exploration and evaluation phases at cost 1,300,000 5,203,420 Total exploration expenditure capitalised 1,300,000 5,203,420 Movements in Carrying Amounts Carrying amount at the beginning of the year 5,203,420 7,684,841 Exploration expenditure 392,211 1,339,815 Impairment of discontinued operations 11 (3,108,512) (3,620,347) Impairment of exploration assets from continuing operations (1,187,119) (200,889) Carrying amount at the end of the year 1,300,000 5,203,420 During the year the Company engaged Al Maynard and Associates to prepare an independent valuation of its Scandinavian exploration assets, who determined a value of 1,300,000, consequently this resulted in an impairment loss of 1,187,119 being recognised. NOTE 14 TRADE AND OTHER PAYABLES Note CURRENT Unsecured liabilities Trade payables 274, ,235 Employee benefits payable 49,321 74,769 Accrued expenses 39, ,329 GST, MOMS and PAYG payable 91,067 8, , ,306 Trade payables are non-interest bearing, and are usually settled within 45 days. NOTE 15 FINANCIAL LIABILITIES Note Convertible Notes 150, ,000 - During the year, as part of acquisition of Genome Technologies Ltd, the Group has issued convertible notes with value of 150,000. The proceeds of the subscription of the Convertible Notes were applied by the Group towards the deposit of US100,000 for the proposed acquisition by the Group of 100% shareholding interest in Genome Technologies Ltd. Interest to 30 June 2016 amounted to 2,625 and of this nil have been paid at year end. The terms and conditions of the Convertible Notes are set out below: - The Convertible Note will be converted or otherwise redeemed within 12 months of the issue; - Each Convertible Note will be convertible into Shares at a conversion price equal to a 25% discount to the issue price of Shares offered under capital raising; - Interest is payable on the principal amount at the rate of 7% per annum, calculated monthly and payable quarterly in arrears. Page 49

50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 16 SHORT TERM PROVISIONS Note Employee Benefits 1-43,454 Provision for Mauritanian Withholding Tax - 12,462-55,916 1 The number of employees with accrued benefits at year end was 1 (2015: 4). NOTE 17 ISSUED CAPITAL Note The company has issued fully paid ordinary shares amounting to 940,637,062 (2015: 608,532,546) 18 (a) No. No. 940,637, ,532,546 25,677,207 25,020,505 (a) Ordinary Shares At the beginning of the reporting period 608,532, ,201,792 25,020,505 22,995, July 2013 at 3c August 2013 at 3c September 2013 at 3c May 2014 at 2.5c May 2014 at 2.5c May 2014 at 2.51c June 2014 at 2.5c June 2014 at 2.5c September 2014 at 3c 966,593 28,998 1 September 2014 at 3.1c 1,092,141 33,856 1 September 2014 at 2.4c 126,144 3,027 1 September 2014 at 2.9c 103,680 3,027 1 September 2014 at 3.3c 90,284 3,006 1 September 2014 at 5c November 2014 at 1.8c 163,393 3,006 5 November 2014 at 1.3c 231,264 3,006 5 November 2014 at 1.0c 286,327 3,006 5 November 2014 at 1.2c 6,843,329 82,123 8 December 2014 at 0.7c 18,188, ,320 8 December 2014 at 0.9c 319,833 3, December 2014 at 1.1c 6,242,479 68, March 2015 at 0.5c 205,397,614 1,026, May 2015 at 0.5c 160,011, , May 2015 at 5.0c May 2015 at 3.0c 5, June 2015 at 0.3c 262,500 1,313 Page 50

51 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 17 ISSUED CAPITAL (Continued) Note 2016 No No July 2015 at 0.3c 969,816 3,006 2 July 2015 at 0.3c 6, November 2015 at 0.2c 55,555, ,333 3 December 2015 at 0.4c 15,741,736 62,967 2 March 2015 at 0.2c 35,870,203 71,741 6 April 2015 at 0.2c 223,961, ,922 Transaction costs relating to share issues (62,447) (165,154) At reporting date 940,637, ,532,546 25,677,207 25,020,505 Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has a vote on a show of hands. (b) Options For information relating to the Drake Resources Limited employee options scheme, including details of options issued, issued and lapsed during the financial year, and the options outstanding at balance date, refer to Note 23, Share-based Payments. (c) Capital Management The Directors objectives when managing capital are to ensure that the Group can fund its operations and continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders. Due to the nature of the Group s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group s capital risk management is the current working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. The Group 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 Group was as follows: Working Capital: Cash and cash equivalents 127,460 1,101,169 Trade and other receivables 171, ,172 Financial assets 119, ,477 Trade and other payables (454,123) (401,306) Financial liability (150,000) - Short term provisions - (55,916) (185,556) 1,067,596 Page 51

52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 18 RESERVES Note Options reserve - 99,145 Foreign exchange reserve 2,907 (1,172) Share-based payments reserve 525,944 6, , ,165 Options Reserve The options reserve records items recognised as expenses on valuations of employee and consultant share options. Foreign Exchange Reserve The foreign exchange reserve records exchange differences arising on translation of foreign controlled subsidiary. Share-based payments reserve The share-based payments reserve records shares which have been granted as share-based payments at year end but are as yet unissued. Please refer Note 22 for further information. NOTE 19 CONTROLLED ENTITIES Percentage Owned Controlled Entities Country of incorporation Class of shares Drake Resources Sweden AB Sweden Ordinary 100% 100% Drake Resources UK Limited United Kingdom Ordinary 100% 100% Investments in controlled entities are accounted for at cost and eliminated on consolidation. Page 52

53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 20 OPERATING SEGMENTS Identification of reportable segments The Group operates predominantly in the mining industry. This comprises exploration and evaluation of nickel, gold, silver and base metals projects. Inter-segment transactions are priced at cost to the Consolidated Group. The Group has identified its operating segments based on the internal reports that are provided to the Board of Directors on a monthly basis. Management has identified the operating segments based on the three principal locations of its projects; Australia, Scandinavia and Africa. Corporate expenses include administration and regulatory expenses arising from operating an ASX listed entity. Segment assets include the costs to acquire tenements and the capitalised exploration costs of those tenements. Financial assets including cash and cash equivalents, and investments in financial assets, are reported in the Treasury segment. For the year ended 30 June 2016 Australian Exploration Scandinavian Exploration African Exploration Treasury Total Segment Revenue ,977 18,060 Segment Expenses - (1,217,819) - (29,899) (1,247,718) Segment Results - (1,217,736) - (11,922) (1,229,658) Amounts not included in segment results but reviewed by the Board: Corporate charges (2,000,271) Depreciation (23,517) Share-based payment expense - Loss before income tax from continuing operations (3,253,446) As at 30 June 2016 Segment assets - 1,300, ,033 1,547,033 Unallocated assets Trade and other receivables 171,534 Plant and equipment 18 Assets relating to exploration (now discontinued) - Total assets 1,718,585 Segment asset movements for the period: Impairment of exploration assets - (1,217,819) (3,108,512) - Unrealised gain/(loss) on listed shares (29,899) Other movements - 191, ,429 (1,105,360) Net movement in segment assets - (1,025,832) (2,879,083) (1,135,259) Segment liabilities (150,000) (150,000) Unallocated liabilities Trade and other payables and provisions (446,831) Liabilities relating to exploration (now discontinued) (7,292) Total Liabilities (604,123) Page 53

54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 20 OPERATING SEGMENTS (Continued) For the year ended 30 June 2015 Australian Exploration Scandinavian Exploration African Exploration Treasury Total Segment revenue - 86,238-11,930 98,168 Segment expenses - (201,722) (3,620,347) (22,421) (3,844,490) Segment Results - (115,484) (3,620,347) (10,491) (3,746,322) Amounts not included in segment results but reviewed by the Board: Corporate charges (1,180,598) Depreciation (37,650) Share-based payment expense - Loss before income tax (4,964,570) As at 30 June 2015 Segment assets - 2,325,832 2,879,083 1,382,292 6,587,207 Unallocated assets Trade and other receivables 141,031 Plant and equipment 24,871 Total assets 6,753,109 Segment asset increases for the period: Impairment of exploration assets (200,889) (3,620,347) Unrealised gain/(loss) on listed shares (22,421) Other movements - 140,233 1,168,730 (215,743) Net movement in segment assets - (60,656) (2,451,617) (238,164) Segment liabilities - (16,548) (103,152) - (119,700) Unallocated liabilities Trade and other payables (337,522) Total Liabilities (457,222) Basis of accounting for purposes of reporting by operating segments a. Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors, being the chief decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group. b. Inter-segment transactions An internally determined transfer price is set for all inter-segment sales. This price is reset quarterly and is based on what would be realised in the event the sale was made to an external party at arm s length. All such transactions are eliminated on consolidation of the Group s financial statements. Corporate charges are allocated to reporting segments based on the segments overall proportion of revenue generation within the Group. The Board of Directors believes this is representative of likely consumption of head office expenditure that should be used in assessing segment performance and cost recoveries. Page 54

55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 20 OPERATING SEGMENTS (Continued) Inter-segment loans payable and receivable are initially recognised at the consideration received/to be received net of transaction costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates. This policy represents a departure from that applied to the statutory financial statements c. Segment assets Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. d. Segment liabilities Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. e. Unallocated items The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: Impairment of assets and other non-recurring items of revenue or expense Income tax expense Deferred tax assets and liabilities Current tax liabilities Other financial liabilities NOTE 21 CASH FLOW INFORMATION Reconciliation of cash flow from operations with (loss) for the period (Loss) for the period (6,361,958) (4,964,570) Cash flows excluded from (loss) attributable to operating activities Non-cash flows in (loss) from operating activities Depreciation 23,517 37,650 Impairment of exploration and evaluation assets 4,326,248 3,821,236 Impairment of prepayment to Genome Technologies 142,426 Unrealised (gain)/loss from listed equities 29,899 22,421 Share-based payments 177, ,774 Doubtful debts 10, ,436 Acquisition cost of Genome Technologies 518,551 - Changes in assets and liabilities: (Increase)/decrease in receivables 14,896 12,748 Increase/(decrease) in payables 59, ,619 Increase/(decrease) in provisions (56,010) 2,770 Capitalised exploration expenditure included in cash flows from operations (422,909) (1,339,815) Cash flow from operations (1,538,267) (2,017,731) Credit standby facilities The company had no standby credit facilities as at 30 June Non-cash investing and financing activities There were no non-cash investing or financing activities in the current or previous financial year. Page 55

56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 22 SHARE-BASED PAYMENTS The following share-based payment arrangements existed at 30 June 2016: Share-based payments Share options On 23 December 2009 under the Drake Resources Limited Incentive Option Scheme, 400,000 share options were granted to employees and consultants to take up34, ordinary shares at an exercise price of 0.30 each. The options are exercisable on or before 23 December The options hold no voting or dividend rights, and are not transferable. At grant date, the fair value of these share options was 48,400 and all share options were fully vested. As at balance date, these share options had expired. On 31 March 2011 under the Drake Resources Limited Incentive Option Scheme, 670,000 share options were granted to employees and consultants to take up ordinary shares at an exercise price of 0.72 each. The options are exercisable on or before 31 March The options hold no voting or dividend rights, and are not transferable. At grant date, the fair value of these share options was 143,070 and all share options were fully vested. As at balance date, 175,000 of these share options had expired due to employees and consultants ceasing their employment since grant date. Since balance date, no employee or consultant has ceased their employment. At balance date, these share option had expired. On 7 February 2013 the following unlisted share options were issued under the Drake Resources Limited Incentive Option Scheme: 500,000 unlisted share options issued to an employee at an exercise price of 0.20 each, exercisable on or before 31 March These share options vested on 7 May 2013 and expired on 31 March 2014 having not been exercised. The fair value of these share options at grant date was 12,042. As at balance date, these share options had expired. 500,000 unlisted share options issued to an employee at an exercise price of 0.40 each, exercisable on or before 31 December These share options vested on 7 August 2013 and the fair value of these share options at grant date was 10,212. As at balance date, these share options had expired. 500,000 unlisted share options issued to an employee at an exercise price of 0.60 each, exercisable on or before 31 March These share options vested on 7 August 2013 and the fair value of these share options at grant date was 7,667. As at balance date, these share options had expired. On 12 September 2013 the company concluded a rights entitlement issue which included 26,010,153 free-attaching share options at an exercise price of 0.07 each, exercisable on or before 1 August As at balance dated, these share option had expired. On 23 June 2014 the company concluded a rights entitlement issue which included 17,340,162 free-attaching share options at an exercise price of 0.05 each, exercisable on or before 1 August As at balance date these share option had expired. On 10 March 2015 the company concluded a rights entitlement issue which included 205,392,612 free-attaching share options at an exercise price of 0.03 each, exercisable on or before 1 August At balance date, 10,002 share options have been exercised. On 25 May 2015 the company placed shortfall in the rights entitlement issue which included 158,886,270 free-attaching share options at an exercise price of 0.03 each, exercisable on or before 1 August At balance date, no share options have been exercised. On 30 June 2015 the company finalised the shortfall in the rights entitlement issue which included 1,775,000 free-attaching share options at an exercise price of 0.03 each, exercisable on or before 1 August At balance date, no share options have been exercised. Share options issued during the period There were no options issued during the period. The company s share options hold no voting or dividend rights, and are not transferable. At balance date, 6,000 options has been exercised. During the year, 17,339,785 share options expired. All options granted are for ordinary shares in Drake Resources Limited, which confer a right to one ordinary share for every option held. All options have vested as at balance date. Page 56

57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 22 SHARE-BASED PAYMENTS (Continued) A summary of all share options on issue at balance date is included below: Number of options Weighted average exercise price Number of options Weighted average exercise price Outstanding at the beginning of the year 383,788, ,895, Granted ,058, Exercised (6,000) Expired (17,734,785) (26,165,532) Outstanding at year-end 366,047, ,788, Exercisable at year-end 366,047, ,788, The weighted average remaining contractual life of options outstanding at year end was years (2015: years). The exercise price of outstanding shares at the end of the reporting period was (2015: ). The fair value of the options granted to employees is deemed to represent the value of the employee services received over the vesting period. Share-based payments - Ordinary shares On 1 April 2014, the Company modified the terms of Mr Stirbinskis deed of employment as per (C) Service Agreements, above. 7,794,965 ordinary shares were granted to Mr Stirbinskis during the year ended 30 June During the year, in relation to the acquisition of Genome Technologies, the Company entered into corporate advisory agreement with Trinity Corporate Pty. The Company agreed to pay Trinity a consultancy fee of 110,000 inclusive GST in which 71,741 was paid in the form of ordinary shares in the Company at an issue price of ,870,203 ordinary shares were granted as payment to Trinity Corporate. As part of the agreement with Trinity, the Company has to satisfy the introduction fee by the issues of 25,927,534 shares in the Company on a post consolidation basis which is no less that AUD 0.02 which value at 518,551. Share-based payments Directors agreement to take up Rights Entitlement Issue shares Directors fees have been accrued as unpaid since March During the year ended 30 June 2016, a portion of accrued director s fees were paid to each Director on the condition that the funds were immediately re-invested as equity through the each of the two Rights Entitlement Issues which occurred during the year (Refer Note 17 for further information regarding shares issued throughout the period). A summary of Directors fees accrued is included in the Remuneration Report which forms part of this Directors Report. As a result of this arrangement, the following ordinary shares and share options were issued to each Director: Accrued Fees Paid via Rights Issue () Number of Ordinary Shares Issued at per Share Number of Ordinary Shares Issued at per Share 2 December April 2016 Brett Fraser 52,293 5,433,208 5,128,590 Jay Stephenson 43,119 5,008,368 3,016,546 Robert Beeson 47,482 5,300,160 4,325, ,894 15,741,736 12,470,466 Page 57

58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 23 EVENTS SUBSEQUENT TO REPORTING DATE Subsequent to balance date the Company was advised by ASX that the Genome company structure and operations post completion of the Genome Technologies Ltd ( Genome ) acquisition will not be suitable for a listed entity under Listing Rule 1.1 Condition 1. As a result, the Transaction will not proceed and accordingly the Company has impaired the acquisition prepayment to Genome Technologies Ltd to the amount of 142,426 as at 30 th June On 18 November 2016, the Company signed a term sheet to raise up to 1,150,000 via the issue of a convertible loan with a term of 2 years convertible at the lower of and 85% of the average three daily VWAP during the 20 days preceding the issue of shares. There are no other significant subsequent events to report. NOTE 24 RELATED PARTY TRANSACTIONS Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with Key Management Personnel: Wolfstar Group Pty Ltd Mr Fraser and Mr Stephenson, Non-executive Directors of the Company, are Directors and Shareholders of Wolfstar Group Pty Ltd. Mr Stephenson provides Company Secretarial and Chief Financial Officer and due diligence services to the Group. (161,633) (117,000) Wolfstar Group Pty Ltd rents office space from Drake Resources Limited and the companies share a variety of office expenses on commercial terms. 54, ,248 Note: Positive amounts represent a net reimbursement to Drake Resources from Wolfstar Group Pty Ltd. Amounts due to and from Related Parties: Amounts due (to) Wolfstar Group Pty Ltd (42,696) (269) Amounts due from Wolfstar Group Pty Ltd 3,390 16,235 Balances and transactions between Drake Resources Limited and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not discussed in this note. Details of transactions between the Group and other related parties are disclosed above. Details of Key Management Personnel remuneration are disclosed in Note 5. Page 58

59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 25 COMMITMENTS 2016 Exploration expenditure commitments: Exploration expenditure committed to: 2015 Exploration tenement minimum expenditure requirements 11,375 12,413 Payable: Not longer than 1 year 11,375 12,413 Longer than 1 year but not longer than 5 years - - Longer than 5 years ,375 12,413 Operating lease commitments: Operating leases contracted for but not capitalised in the financial statements 1 55, ,000 Payable: Not longer than 1 year 50,000 43,750 Longer than 1 year but not longer than 5 years 5,874 56,250 Longer than 5 years 55, ,000 1 The Group shares premises with a number of other tenants. Balances stated represent the maximum gross contractual commitment, after reimbursement from other tenants. Page 59

60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 26 CONTINGENT LIABILITIES As part of the acquisition of Genome Technologies Ltd, the Group entered into corporate advisory agreement with Trinity Corporate Pty Ltd to manage the capital raising and any other capital raising associated with the acquisition. As the acquisition of Genome Technologies Ltd is not proceeding the Company is to satisfy the introduction Fee with the issue of 25,927,534 ordinary shares in the Company on a post-consolidation basis at 0.02 per share. NOTE 27 FINANCIAL RISK MANAGEMENT The Group s financial instruments consist mainly of deposits with banks, short-term investments, and accounts receivable and payable. The main purpose of non-derivative financial instruments is to raise finance for Group operations. The Group does not speculate in the trading of derivative instruments. A summary of the Group s financial assets and liabilities is shown on the following page. Financial Assets Floating Interest Rate Fixed Interest Rate Noninterest bearing 2016 Total Floating Interest Rate Noninterest bearing Cash and cash equivalents 127, ,460 1,101,169-1,101,169 Trade and other receivables Financial assets at fair value through profit or loss: Total 171, , , ,172 Held for trading , , , ,472 Other financial assets , ,005 Total Financial assets 127, , ,567 1,101, ,649 1,524,818 Financial Liabilities Financial liabilities at amortised cost: Trade and other payables , , , ,306 Other financial liabilities - 150, ,000 Total Financial Liabilities - 150, , , , ,306 Net Financial Assets 127,460 (150,000) (163,016) (185,556) 1,101,169 22,343 1,123,512 All financial assets and liabilities of the Group mature within 3 months of the reporting date except the Other financial liabilities which is convertible notes issued by the Group during the year to cover the costs associated with the Group s review and assessment of the proposed acquisition of Genome Technologies Ltd (refer to note 15). Page 60

61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 27 FINANCIAL RISK MANAGEMENT (Continued) Specific Financial Risk Exposures and Management The main risk the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate, foreign currency risk and equity price risk. a. Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. The Group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the Group. Credit risk exposures The maximum exposure to credit risk is that to its alliance partners and that is limited to the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. Credit risk related to balances with banks and other financial institutions is managed by the Group in accordance with approved Board policy. Such policy requires that surplus funds are only invested with counterparties with a Standard and Poor s rating of at least AA-. The following table provides information regarding the credit risk relating to cash and money market securities based on Standard and Poor s counterparty credit ratings. Note b. Liquidity risk Cash and cash equivalents AA Rated 127,460 1,101,169 Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group 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 Group. Due to the nature of the Group s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board of Directors constantly monitor the state of equity markets in conjunction with the Group s current and future funding requirements, with a view to initiating appropriate capital raisings as required. Any surplus funds are invested with major financial institutions. The financial liabilities of the Group are 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 30 days of the reporting date. c. Market risk The Board meets on a regular basis to analyse currency and interest rate exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. i. Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group is also exposed to earnings volatility on floating rate instruments. Interest rate risk is not material to the Group as no debt arrangements have been entered into. ii. Foreign exchange risk Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. With instruments being held by overseas operations, fluctuations in foreign currencies may impact on the Group s financial results. The Group s exposure to foreign exchange risk is minimal, however the Board continues to review this exposure regularly. Page 61

62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 27 FINANCIAL RISK MANAGEMENT (Continued) iii. Price risk Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group is exposed to securities price risk on investments held for trading or for medium to longer terms. The investment in listed equities has been valued at the market price prevailing at balance date. Management of this investment s price risk is by ongoing monitoring of the value with respect to any impairment. Sensitivity Analysis The following table illustrates sensitivities to the Group s exposures to changes in interest rates. The table indicates the impact on how profit and equity values reported at balance sheet date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. Net Fair Values Fair value estimation Year ended 30 June 2016 Consolidated Group Profit Equity +/- 1% in interest rates +/- 1,275 +/- 1,275 Year ended 30 June /- 1% in interest rates +/- 11,012 +/- 11,012 The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying values as presented in the statement of financial position. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. Page 62

63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 27 FINANCIAL RISK MANAGEMENT (Continued) Financial Assets Carrying Amount Net Fair Value Carrying Amount Net Fair Value Cash and cash equivalents 127, ,460 1,101,169 1,101,169 Trade and other receivables 171, , , ,172 Financial assets at fair value through profit or loss: Investments held for trading 119, , , ,472 Other financial assets , ,005 Total Financial Assets 418, ,567 1,524,818 1,524,818 Financial Liabilities Trade and other liabilities 454, , , ,306 Other financial liabilities 150, , Total Financial Liabilities 604, , , ,306 The fair values disclosed in the above table have been determined based on the following methodologies: i. Cash and cash equivalents, trade and other receivables, and trade and other payables are short-term investments in nature whose carrying value is equivalent to fair value. ii. For held for trading financial assets, closing bid prices at the end of the reporting period are used. iii. For other financial liabilities or Convertible notes, the face value of the convertible notes being it s fair value are used. Financial Instruments Measured at Fair Value The Group only holds level 1 financial instrument recognised at fair value in the statement of financial position. The carrying value at 30 June 2016 is 119,573 (2015: 149,472). Page 63

64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 28 PARENT ENTITIY DISCLOSURE (a) Financial Position of Drake Resources Limited CURRENT ASSETS Note Cash and cash equivalents 117,783 1,068,878 Financial assets 28(b) 119, ,477 Trade and other receivables 149, ,301 TOTAL CURRENT ASSETS 387,342 1,468,658 NON-CURRENT ASSETS Plant and equipment 18 24,871 Financial assets 28(b) 21,829 55,913 Exploration and evaluation assets 1,300,000 5,203,217 TOTAL NON-CURRENT ASSETS 1,321,847 5,284,001 TOTAL ASSETS 1,709,189 6,752,659 CURRENT LIABILITIES Trade and other payables 444, ,856 Short-term provisions (94) 55,916 Financial liabilities 150,000 - TOTAL CURRENT LIABILITIES 594, ,772 TOTAL LIABILITIES 594, ,772 NET ASSETS 1,114,462 6,295,887 EQUITY Issued capital 25,677,207 25,020,505 Reserves 527, ,338 Accumulated losses (25,090,640) (18,829,956) TOTAL EQUITY 1,114,462 6,295,887 (b) Financial Assets Shares in listed entities held for trading at fair value 119, ,472 Loans to subsidiaries 288, ,847 Less: provision for diminution (267,018) (232,934) Deposits not classified as cash - 100,005 Shares in controlled entities at cost 141, ,337 Less: provision for diminution (141,337) (141,337) Net carrying value of financial assets 141, ,390 Loans are provided by the parent entity to its controlled entities to fund their activities. The eventual recovery of loans and investments will be dependent upon the successful commercial application of these projects or their sale to third parties. Page 64

65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 NOTE 28 PARENT ENTITY DISCLOSURES (Continued) Percentage Owned Controlled Entities Country of incorporation Class of shares Drake Resources Sweden AB Sweden Ordinary 100% 100% Drake Resources UK Limited United Kingdom Ordinary 100% 100% (c) Financial Performance of Drake Resources Limited Profit/(Loss) for the year (6,260,684) (4,905,480) Other comprehensive income - - Total comprehensive income (6,260,684) (4,905,480) (d) Financial Performance of Drake Resources Limited There are no guarantees entered into by Drake Resources Limited for the debts of its subsidiaries as at 30 June 2016 (2015: none). (e) Contingent liabilities of Drake Resources Limited As part of the acquisition of Genome Technologies Ltd, the Group entered into corporate advisory agreement with Trinity Corporate Pty Ltd to manage the capital raising and any other capital raising associated with the acquisition. As the acquisition of Genome Technologies Ltd is not proceeding the Company is to satisfy the introduction Fee with the issue of 25,927,534 ordinary shares in the Company on a post-consolidation basis at 0.02 per share. (e) Commitments of Drake Resources Limited The amounts applicable for both Drake Resources Limited (the parent) and the Consolidated Group can be found in Note 25. NOTE 29 COMPANY DETAILS The principal and registered office of the company is: Street Address: Drake Resources Limited Suite 12, Level 1/11 Ventnor Avenue West Perth, Western Australia 6005 Postal Address: Drake Resources Limited PO Box 52 West Perth, Western Australia 6872 The principal places of business of the company are: Street Address: Drake Resources Limited Suite 12, Level 1/11 Ventnor Avenue West Perth, Western Australia 6005 Page 65

66 DIRECTORS DECLARATION The directors of the Company declare that: 1. The financial statements and notes, as set out on pages 28-65, are in accordance with the Corporations Act 2001 and: (a) (b) (c) comply with Accounting Standards; are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in Note 1 to the financial statements; and give a true and fair view of the financial position as at 30 June 2016 and of the performance for the year ended on that date of the Company and Consolidated Group. 2. The Chief Executive Officer and Chief Finance Officer have each declared under s295a of the Corporations Act 2001 that: (a) (b) (c) the financial records of the Company for the financial year have been properly maintained in accordance with s286 of the Corporations Act 2001; the financial statements and notes for the financial year comply with the Accounting Standards; and the financial statements and notes for the financial year give a true and fair view. 3. In the directors opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors made pursuant to s.298(2) of the Corporation Act JAY STEPHENSON Director Dated this 18 th Day of November 2016 Page 66

67 Independent Auditor's Report To the Members of Drake Resources Limited We have audited the accompanying financial report of Drake Resources Limited ( the Company ) and Controlled Entities ( the Consolidated Entity ), which comprises the statement of financial position as at 30 June 2016, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors declaration of the Consolidated Entity, comprising the Company and the entities it controlled at the year s end or from time to time during the financial year. Directors Responsibility for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standards AASB 101: Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

68 Independent Auditor s Report To the Members of Drake Resources Limited (Continued) Independence In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act Opinion In our opinion: a. The financial report of Drake Resources Limited is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Consolidated Entity s financial position as at 30 June 2016 and of its performance for the year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; b. The financial statements also comply with International Financial Reporting Standards as disclosed in Note 1. Emphasis of Matter Without qualifying our opinion, we draw attention to the financial report which indicates that the Consolidated Entity incurred a net loss of 6,361,958 during the year ended 30 June This condition, along with other matters as set forth in note 1, indicate the existence of a material uncertainty which may cast significant doubt about the ability of the Consolidated Entity to continue as a going concern and whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. Report on the Remuneration Report We have audited the Remuneration Report included in the directors report for the year ended 30 June The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Drake Resources Limited for the year ended 30 June 2016, complies with section 300A of the Corporations Act BENTLEYS Chartered Accountants DOUG BELL CA Director Dated at Perth this 18 th day of November 2016

69 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES The following additional information is required by the Australian Securities Exchange in respect of listed public companies only. 1 Shareholding as as at 29 September (a) Distribution of Shareholders Category (size of holding) Total holders Number Ordinary % of Issued Capital 1 1,000 2, ,001 5, , ,001 10, , , ,000 18,728, ,001 and over 589,617, ,508,362 1, (b) The number of shareholdings held in less than marketable parcels is 235. (c) Voting Rights The voting rights attached to each class of equity security are as follows: Ordinary shares Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. (d) 20 Largest Shareholders Ordinary Shares as at 29 September Name Number of Ordinary Fully Paid Shares Held % Held of Issued Ordinary Capital 1 GILMONT VENDING SERVICES PTY LTD <MONTGOMERY FAMILY A/C> 10,898, MS TAMEKA RUTH MATSON <TR MATSON FAMILY A/C> 9,102, MR HENRY PETER PUCHALA <PUCHALA FAMILY A/C> 8,798, MR GEOFFREY COLLIN ROWE + MRS LAURELLE DOROTHY ROWE <ROWE FAMILY A/C> 6,649, HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 5,553, MR MARK ANDREW TKOCZ 5,094, AVERNA PTY LTD 4,020, MR KIMLEY WATTERS 4,000, PINEWOOD ASSET PTY LTD <THE FRASER FAMILY A/C> 3,251, SOCIETE MINIERE DE MANDIANA 3,100, JONENDERBEE INVESTMENTS PTY LTD <STARLOTTERS STAFF PROV A/C> 2,353, MR CHARLES JOSEPH MORRONE + MS JANE TERESA MORRONE <MORRONE SUPER FUND A/C> 2,205, MRS KYLIE ROSS 2,200, DR ROBERT BEESON + MRS PATRICIA ANN BEESON <BEESON SUPER FUND A/C> 2,058, LEET INVESTMENTS PTY LIMITED 2,000, MINING AND GEOLOGY CONSULT 2,000, MR DUNG PHAM 2,000, SETTLE AUSTRALIA PTY LTD 1,800, TYLER STREET HOLDINGS PTY LTD <ROSEBRETT SUPER FUND A/C> 1,600, BILL BROOKS PTY LTD <BILL BROOKS SUPER FUND A/C> 1,600, TOTAL 275,614, Page 69

70 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES (Continued) 2 The name of the Company Secretary is Jay Richard Stephenson. 3 The address of the principal registered office in Australia is Suite 12, Level 1/11 Ventnor Avenue, West Perth Telephone (08) Registers of securities are held at the following addresses Western Australia Computershare Registry Services Level 11 / 172 St Georges Terrace Perth WA Stock Exchange Listing Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the Australian Securities Exchange Limited. 6 Unquoted Securities Options over Unissued Shares A total of 366,047,882 options are on issue. 7 Use of Funds The Company has used its funds in accordance with its initial business objectives. Page 70

71 TENEMENT REPORT As at 30 June 2016 Norway Joma/Gjersvik Area Grong % Panoramic Alliance Sulitjelma 100% Sweden Granmuren Project Other Swedish Exploration Permits Tullsta nr : % Gruvsjön nr : % Tullsta nr :78 100% Gaddebo nr :91 100% Gamla Jutbo nr : % Korsheden nr : % Royal Falcon Joint Venture Lainejaur nr :90 100% Falun nr : % Orsen 2010: % Prästhyttan nr : % Page 71

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