AVIRA RESOURCES LTD — Annual Report 2014

Sep 28, 2014

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2014 FINANCIAL REPORT

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CORPORATE DIRECTORY 2014

CORPORATE DIRECTORY 2014

DIRECTORS

SHARE REGISTRY

Jonathan Back Executive Chairman and Managing Director Gary Kuo Executive Director and Chief Operating Officer Robert Vagnoni Independent Non-executive Director Li Hai Jun Non-executive Director

Computershare Investor Services Pty Ltd GPO Box 52, Melbourne, Victoria 3001 Telephone: 1300 552 270 (within Australia) +61 3 9415 4000 (outside Australia)

COMPANY SECRETARY

BANKERS

Alexander Moody (resigned on 14 August 2014) Jacqueline Butler (appointed on 14 August 2014)

Westpac Banking Corporation

NOTICE OF ANNUAL GENERAL MEETING

SOLICITORS TO THE COMPANY

The Annual General Meeting of MGT Resources Limited will be held at: MGT Resources Limited 2.05B, 68 York Street Sydney, NSW Time: To be confirmed Date: To be confirmed

HWL Ebsworth Lawyers Level 14, Australia Square 264-278 George Street Sydney NSW 2000

PRINCIPAL REGISTERED OFFICE

AUDITORS

MGT Resources Limited 2.05B, 68 York Street Sydney, NSW 2000 Telephone: +61 2 9262 1122 Facsimile: +61 2 9299 5175 Email: info@mgt.net.au Web: www.mgt.net.au

Duncan Dovico Risk & Assurance Pty Limited Level 12, 90 Arthur Street North Sydney, NSW 2060

STOCK EXCHANGE LISTING

CORPORATE GOVERNANCE STATEMENT

MGT Resources Limited is listed on the Australian Securities Exchange Limited (ASX) under the code MGS.

The Corporate Governance Statement for MGT Resources Limited can be found at the ‘About Us’, Corporate Governance tab at http://www.mgt.net.au/about-us/corporategovernance/

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CONTENTS

CONTENTS

FINANCIAL REPORT 2014
DIRECTOR’S REPORT	3
AUDITOR’S INDEPENDENCE DECLARATION	13
CONSOLIDATED FINANCIAL STATEMENTS	14
DIRECTORS DECLARATION	54
AUDITOR’S REPORT	55

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DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

DIRECTORS’ REPORT

The Directors of MGT Resources Limited submit herewith the annual financial report of the company for the financial year ended 30 June 2014. In order to comply with the provisions of the Corporations Act 2001, the directors reports as follows:

DIRECTORS

The names of the Directors in office at any time during or since the end of the financial year are:

Name	Particulars
Jonathan Back	Executive Chairman and Managing Director, appointed 1 February
	2010,Director appointed 4 September 2008
Gary Kuo	Director, appointed7January2011
Robert Vagnoni	Non-Executive Director,appointed 1 February2011
Li Hai Jun	Non-Executive Director,appointed 14 April 2009

The above named directors held office during the whole of the financial year and since the end of the financial year.

PRINCIPAL ACTIVITIES

The principal activities of the company and its consolidated entities during the financial year included exploration and evaluation activities. There were no significant changes in the nature of the principal activities during the year.

DIVIDENDS

There were no dividends paid or declared by the consolidated entity during the financial year.

REVIEW OF OPERATIONS

The following key activities were undertaken during the financial year ended 30 June 2014:

• The 2013 Dalcouth drilling program was completed in Q1 2014 with encouraging results. The company is currently working on data collation in order to submit the 2013 Dalcouth drill results for an updated resource estimate.

• In May 2014 the company commenced the first drilling program for 2014. This programme was targeting Summer Hill, Viking and various other prospects that have potential for bulk tonnage with moderate to high grade mineralisation. The results from Summer Hill were very encouraging and planning for a follow-up programme is currently underway.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

MGT Resources Limited issued 6,000,000 8% convertible notes for $6 million with a term of 3 years, during the year which may be redeemed or converted into 54,545,454 ordinary shares in the parent entity if the share price is 11 cents per share or less at maturity.

The net cash received from the issue of the convertible notes was used principally to continue to explore and prove up resources, prior to the decision to upgrade the mill.

During the year ML 4349 Mt Veteran Mill and ML 20547 Summer Hill were transferred from the wholly owned subsidiary, Garimperos Pty Limited, to MGT Mining Limited along with the accompanying assets and liabilities. Following this, Garimperos Pty Limited, undertook an equal access buy back of shares in the capital of Garimperos Pty Limited held by MGT Mining Limited (see Note 21)

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DIRECTORS’ REPORT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Alexander Moody resigned as Company Secretary and Jacqueline Butler was appointed as Company Secretary on 14 August 2014. Jacqueline Butler also retains her role as Chief Financial Officer.

There has not been any other matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

LIKELY FUTURE DEVELOPMENTS

Disclosure of information regarding the likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report.

ENVIRONMENTAL REGULATIONS

The operations and proposed activities of the consolidated entity are subject to laws and regulations concerning the environment. As with most exploration projects and mining operations, the consolidated entity’s activities are expected to have an impact on the environment. It is the consolidated entity’s intention to conduct its activities to the highest standard of environmental obligation, including compliance with all applicable environmental laws. Mining operations may have previously been conducted on some of the Company’s project areas and old workings including tailings dumps may remain from these operations. There may be a liability to rehabilitate these areas, details in relation to the abandonment and restoration obligation are included in Note 1 (q) of the Notes to the financial statements.

INDEMNIFICATION OF OFFICERS AND AUDITORS

The company has insured all the Directors MGT Resources and its controlled entities against liabilities incurred while performing duties as Directors or Officers to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits the disclosure of the nature of the liabilities covered and amount the amount of the premium paid. The consolidated entity has not indemnified its auditor.

INFORMATION ON DIRECTORS AND SENIOR MANAGEMENT:

Mr Jonathan Paul Back (LLB, BCL) – Executive Chairman and Managing Director

Mr Jonathan Back is a qualified solicitor in England and Wales. Prior to working as a lawyer, Jonathan graduated from Oxford University and was awarded the Vinerian Scholarship for the best performance in the Bachelor of Civil Laws degree.

Jonathan has over 18 years of experience in law and finance internationally, having spent significant periods in Europe, Hong Kong and Australia.

Jonathan first worked as a lawyer for the leading UK firm Linklaters for 4 years, specialising in large project finance transactions. This included the acquisition of the Gladstone Power Station in Queensland by a consortium expanding the Boyne Island aluminium smelter. Jonathan then worked for Schroders in the UK and in Hong Kong where he also focused on large infrastructure and energy projects including large power station projects in Portugal and the UK as well as port and energy projects across Australia and Asia.

Following this Jonathan worked with Goldman Sachs in Hong Kong focusing on raising equity capital for telecoms and technology companies. Jonathan was then recruited by JPMorgan to join their equity team in Hong Kong, which he ran until 2007. During this time he worked on numerous transactions across different industries.

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

DIRECTORS’ REPORT

Mr Gary Kuo – Executive Director and Chief Operating Officer

With more than 10 years’ experience in international import & exporting, Mr Gary Kuo has extensive experience in commodities trading, international business development and strategic alliance planning.

Having bases in both Australia and China, Gary specialises in dealing with corporations in the mining & producing sector. Gary works closely with his wide network of corporate and governmental contacts in countries such as China, Taiwan, Hong Kong, Singapore, Malaysia and Indonesia.

Mr Robert Vagnoni – Non-Executive Director

Mr Robert Vagnoni is a mechanical engineer with 28 years in the global mining and construction industry and has extensive experience in corporate, project development and implementation of a diverse range of projects in Australia and overseas.

He has held senior executive roles with major mining companies and engineering consultants specializing in project development and management, feasibilities, plant design and commissioning.

Robert was a co-founder of publically listed mining companies, Murchison Metals and Extract Resources.

Mr Li Hai Jun – Non- Executive Director

Mr Li Hai Jun holds a Bachelor of Mechanical Engineering degree from the Beijing Architecture Engineering University, China. He has worked for one of the biggest state owned companies which has imported plant and equipment for more than 280 projects for the nation in the iron & steel sector and other industrial sectors. Since 1989 Hai Jun has worked for a subsidiary company under Thyssen in Germany and then moved to Singapore to work as the Managing Director of Golden Mall Enterprise until 1999.

Hai Jun has rich experience in connecting foreign companies with Chinese enterprises and ever been involved in more than 30 big projects with success. At present Hai Jun is the Managing Director of Unico Development Limited in Beijing providing consulting services to clients globally. In recent years Hai Jun has assisted Australian resources companies in establishing relationship with customers in China leading to a number of successful projects.

Mr Dohn Taylor– Managing Director of MGT Mining Limited

Mr Dohn Taylor has over 20 years of management experience in the manufacturing and resources sectors. He has worked with businesses at all stages of development, with extensive involvement in the incubation of strong, sustainable enterprises. Most recently, this includes the management of a start-up engineering company in the Oil and Gas industry in the Middle East, and assisting in the establishment of a clean technology company in Australia. Dohn has an MBA (Finance) has recently received a post-graduate degree in Corporate Governance. He is an Associate Fellow of the Australian Institute of Management, and a Member of the Australian Institute of Company Directors.

Mr Dohn Taylor resigned on 12 July 2014.

Ms Jacqueline Butler – Chief Financial Officer

Ms Jacqueline Butler qualified as a Chartered Accountant with the Institute of Chartered Accountant, England and Wales (ICAEW) whilst working and training at Arthur Andersen in London. Prior to that Jacqueline graduated from the University of Exeter, UK with a Bachelor of Arts in Economics and Geography.

Jacqueline has worked within the UK and Europe in various financial roles before coming to Australia in 2005. Prior to joining MGT, Jacqueline was an Associate Director at Chartered Accounting firm, Azure Group Pty Ltd, in Sydney where she acted as CFO for a variety of clients including those in the resource sector.

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DIRECTORS’ REPORT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Mr Alexander Moody – Company Secretary

Mr Alexander Moody has ten years of management and administrative experience in the small business sector. He has held company secretary roles at a number of Australian public resources companies.

Alexander holds a Bachelor of International Relations from Bond University, Queensland, and is currently completing an MBA at the Australian Graduate School of Management, University of New South Wales.

Alexander Moody resigned as company secretary and Jacqueline Butler was appointed as Company Secretary on 14 August 2014. Jacqueline Butler also retains her role as Chief Financial Officer.

DIRECTORS’ MEETINGS

The following table sets out the number of directors’ meetings held during the financial year and the number of meetings attended by each director (while they were a director).

Directors	Directors’ meetings	Attended
	eligible to attend
Jonathan Paul Back	7	7
Gary Kuo	7	7
Robert Vagnoni	7	7
Hai Jun Li	7	5

REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL

Information about the remuneration of directors and key management personnel are set out in the following tables.

Details of key management personnel

The directors and other members of key management personnel of the Group during the year were:

Name

Position

Date

Jonathan Back Chairman and Executive Director Appointed 1 Feb 2010 Non-Executive Director Appointed 4 Sep 2008 Gary Kuo Executive Director Appointed 7 Jan 2011 Chief Operating Officer Appointed 7 Jan 2011 Hai Jun Li Non-Executive Director Appointed 14 Apr 2009 Robert Vagnoni Non-Executive Director Appointed 1 Feb 2011 Dohn Taylor Managing Director – MGT Mining Ltd Appointed 14 Mar 2012 Resigned 12 Jul 2014 Jacqueline Butler Chief Financial Officer Appointed 1 Aug 2011 Company Secretary Appointed 14 Aug 2014 Alexander Moody Company Secretary Resigned 14 Aug 2014

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

DIRECTORS’ REPORT

(a) Key management personnel compensation

2014 Non-Executive Directors Robert Vagnoni Hai Jun Li Executive Directors Jonathan Back Gary Kuo Other key management personnel Dohn Taylor Jacqueline Butler Alexander Moody Total	Short-term employee benefit Post- employment benefit Long-term benefits Share- based payments Cash salary and fees Superannuation Long Service Leave Options Total $ $ $ $ $
	28,333 - - 11,520 39,853 25,000 - - 11,520 36,520
	53,333 - - 23,040 76,373
	120,000 - - 100,800 220,800 134,400 11,100 - 72,000 217,500
	254,400 11,100 - 172,800 438,300
	180,000 16,650 - - 196,650 176,485 16,325 - 1,539 194,349 86,900 - - -* 86,900
	443,385 32,975 - 1,539 477,899
	751,118 44,075 197,379 992,572

‘* Share options granted to Dohn Taylor of $8,640 during the year, were cancelled subsequent to year end as vesting conditions were not met.

‘** Share options granted to Alexander Moody of $5,040 during the year, were cancelled subsequent to year end as vesting conditions were not met.

2013 Non-executive directors Robert Vagnoni Hai Jun Li Executive Directors Jonathan Back Gary Kuo Other key management personnel Dohn Taylor Jacqueline Butler Alexander Moody Total	Short-term employee benefit Post- employment benefit Long-term benefits Share- based payments Cash salary and fees Superannuation Long Service Leave Equity Settled Total $ $ $ $ $
	25,000 - - - 25,000 25,000 - - - 25,000
	50,000 - - - 50,000
	120,000 - - - 120,000 134,400 10,800 - - 145,200
	254,400 10,800 - - 265,200
	171,923 15,473 - - 187,396 121,372 10,924 - - 132,296 62,263 - - - 62,263
	355,559 26,397 - - 381,955
	659,959 37,197 - - 697,155

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

DIRECTORS’ REPORT

(b) Share-based compensation

(i) Issue of shares

There were no shares issued as part of compensation during the year ended 30 June 2014.

(ii) Issue of options

Unissued ordinary shares of MGT Resources Limited under option at the date of this report are as follows:

follows:
Grant date Vesting date and exercisable date Expiry date Exercise price Fair value per option at grant date 17 October 2011 17 October 2011 17 October 2014 $0.30 $0.1109 25 November 2011 25 November 2011 25 November 2014 $0.20 $0.1262 25 November 2011 25 November 2011 25 November 2014 $0.30 $0.1102 7 November 2013 7 November 2013 7 November 2016 $0.15 $0.0288 17 December 2013 17 December 2015 17 December 2016 $0.15 $0.0288	Number under option 300,000 1,200,000 2,250,000 6,800,000 1,975,000
	12,525,000

No ordinary shares of MGT Resources Limited were issued during the year end 30 June 2014 on the exercise of options granted under the MGT Resources Limited Employee Option Plan. No further shares have been issued since that date.

The number of options over ordinary shares granted to and vested by directors and key management personnel as part of compensation during the year ended 30 June 2014 are set out below:

	Number of options	Number of options	Number of options vested	Number of options vested	% of
	granted during the year		during the year		compensation
					for the year
					consisting of
					options
	2014	2013	2014	2013
Jonathan Back	3,500,000	-	3,500,000	-	45.7%
Gary Kuo	2,500,000	-	2,500,000	-	33.1%
Hai Jun Li	400,000	-	400,000	-	31.5%
Robert Vagnoni	400,000	-	400,000	-	31.5%
Dohn Taylor	500,000	-	-	-	4.2%
Jacqueline Butler	400,000	-	-	-	2.9%
Alexander Moody	350,000	-	-	-	5.5%

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

DIRECTORS’ REPORT

Values of options over ordinary shares granted, exercised and lapsed for directors and key management personnel as part of compensation during the year ended 30 June 2014 are set out below:

	Value of options	Value of options	Value of options
	granted at the grant	exercised at the	lapsed at the date of
	date (i)	exercise date	lapse
	$	$	$
Jonathan Back	100,800	-	-
Gary Kuo	72,000	-	-
Hai Jun Li	11,520	-	-
Robert Vagnoni	11,520	-	-
Dohn Taylor	8,640	-	-
Jacqueline Butler	5,760	-	-
Alexander Moody	5,040	-	-

• (i) The value of options granted during the financial year is calculated as at the grant date using the Black Scholes pricing model. This grant date value is allocated to remuneration of key management personnel on a straight-line basis over the period from grant date to vesting date.

(c) Key management personnel equity holdings

Fully paid ordinary shares of MGT Resources Ltd

2014	Balance at	Received	Granted as	Net other	Balance at the
	the start of	during the	compensation	change	end of the year
	the year	year on	No.	No.	No.
	No.	exercise of
		options
		No.
Jonathan Back (Direct)	79,029,727	-	-	-	79,029,727
Gary Kuo	27,208,000	-	-	-	27,208,000
Hai Jun Li	22,800,000	-	-	-	22,800,000
Robert Vagnoni	8,443,000	-	-	-	8,443,000
Dohn Taylor	50,000	-	-	(50,000)	-
Jacqueline Butler	-	-	-	-	-
Alexander Moody	322,986	-	-	-	322,986
2013	Balance at	Received	Granted as	Net other	Balance at the
	the start of	during the	compensation	change	end of the year
	the year	year on	No.	No.	No.
	No.	exercise of
		options
		No.
Jonathan Back (Direct)	79,029,727	-	-	-	79,029,727
Gary Kuo	27,208,000	-	-	-	27,208,000
Hai Jun Li	22,800,000	-	-	-	22,800,000
Robert Vagnoni	8,443,000	-	-	-	8,443,000
Dohn Taylor	50,000	-	-	-	50,000
Jacqueline Butler	-	-	-	-	-
Alexander Moody	21,875	-	-	301,111	322,986

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

DIRECTORS’ REPORT

Share options of MGT Resources Ltd

	Balance at	Received	Option	Options	Balance at the end
	the start of	during the year	exercised	expired	of the year
	the year	No.	during the	during the	No.
	No.		year	year
			No.	No.
2014
Jonathan Back	750,000	3,500,000	-	-	4,250,000
Gary Kuo	750,000	2,500,000	-	-	3,250,000
Hai Jun Li	250,000	400,000	-	-	650,000
Robert Vagnoni	1,450,000	400,000	-	-	1,850,000
Dohn Taylor	-	500,000	-	-	500,000
Jacqueline Butler	150,000	400,000	-	-	550,000
Alexander Moody	150,000	350,000	-	-	500,000
	Balance at	Received	Option	Options	Balance at the
	the start of	during the year	exercised	expired	end of the year
	the year	No.	during the year	during the	No.
	No.		No.	year No.
2013
Jonathan Back	3,150,000	-	-	(2,400,000)	750,000
Gary Kuo	2,750,000	-	-	(2,000,000)	750,000
Hai Jun Li	250,000	-	-	-	250,000
Robert Vagnoni	1,450,000	-	-	-	1,450,000
Dohn Taylor	-	-	-	-	-
Jacqueline Butler	150,000	-	-	-	150,000
Alexander Moody	150,000	-	-	-	150,000

TRADING IN THE COMPANY’S SECURITIES BY DIRECTORS, OFFICERS AND STAFF

Upon listing on the ASX, the Board adopted a share trading policy which applies to all directors, officers and employees of MGT and its subsidiary companies. The policy was set up in order to avoid ‘insider trading.’ The trading policy restricts employees, directors and officers from trading in MGT securities during certain ‘prohibited periods.’ A full copy of the policy can be found at www.mgt.net.au.

NON-AUDIT SERVICES

During the year, $16,250 (exc GST) of fees were earned by the auditors for non-audit services in relation to taxation and other advisory work.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the consolidated entity or intervene in any proceedings to which the consolidated entity is a party for the purpose of taking responsibility on behalf of the consolidated entity for all or any part of these proceedings. The consolidated entity was not part to any such proceedings during the year.

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DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration is included on page 13 of the financial report.

This directors’ report has been made and signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the Directors

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Gary Kuo Executive Director Dated: 29 September 2014

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 June 2014

Revenue Cost of sales Gross loss Investment income Other gains and losses Employee benefits expense Depreciation and amortisation expense Impairment losses Interest expense Administration expense Exploration and evaluation expenditure written off Other expenses Loss before tax Income tax expense/(benefit) Loss for the period Loss for the year is attributable to: Owners of the parent Non-controlling interest Loss per share Basis (cents per share) Diluted (cents per share)	Note 3 5 6 12 11 7 8 19 19	Consolidated 2014 $ - - - 123,624 11,182	Consolidated 2013 $
			172,461 (173,580)
			(1,119) 79,818 63,428 (904,012) (347,093) - (264,032) (323,284) (241,245) (646,580)
		(1,052,488)
		(357,226) (1,336,116) (719,754) (352,213) (70,158) (682,951) (4,436,100) - (4,436,100) (4,056,967) (379,133) (4,436,100) (1.41) (0.91)
			(2,584,119) -
			(2,584,119)
			(2,287,765) (296,354)
			(2,584,119)
			(0.79) (0.66)

The above consolidated income statement should be read in conjunction with the accompanying notes.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 June 2014

Loss for the period Other comprehensive income Items that may be reclassified to profit and loss Changes in the fair value of available-for-sale financial assets Total comprehensive income for the period Total comprehensive income for the year is attributable to: Owners of the parent Non-controlling interest	Consolidated 2014 $ (4,436,100) (2,454) (4,438,554) (4,059,163) (379,391) (4,438,554)	Consolidated 2013 $
		(2,584,119) (6,000)
		(2,590,119)
		(2,292,954) (297,165)
		(2,590,119)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 June 2014

Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Trade and other receivables Other financial assets Exploration and evaluation expenditure Plant & equipment Total non-current assets Total assets Total liabilities Trade and other payables Borrowings Provisions Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings/(losses) Non-controlling interest Total equity	Note 22(a) 9 9 10 11 12 13 14 15 14 15 16(a) 17 18	Consolidated 2014 $ 2,318,454 140,005 38,166 2,496,625 - 1,910 8,278,021 2,136,704 10,416,635 12,913,260 934,214 1,488,124 40,839 2,463,177 7,357,499 116,016 7,473,515 9,936,692 2,976,568 12,917,947 850,921 (11,216,725) 424,425 2,976,568	Consolidated 2013 $
			1,104,967 142,647 31,581
			1,279,195 - 4,364 5,845,931 3,721,158
			9,571,453
			10,850,648
			670,910 1,494,948 77,907
			2,243,765
			1,475,343 104,747
			1,580,090
			3,823,855
			7,026,793
			12,919,634 1,202,062 (7,426,907) 332,004
			7,026,793

The above consolidated statement of financial position should be read in conjunction with the accompanying notes

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 June 2014

Consolidated

Consolidated
Balance at 1 July 2013 (Loss) for the period Other comprehensive income Share options issued Share options expired Contributions of equity, net of transaction costs and tax Equity derivative issued Equity derivative expired Transactions with non- controlling interest Balance at 30 June 2014 Balance at 1 July 2012 (Loss) for the period Reallocation of equity (note 1c) Other comprehensive income Transfer to retained earnings Contributions of equity, net of transaction costs and tax Transactions with non- controlling interest Balance at 30 June 2013	Fully paid ordinary shares Retained earnings/ (losses) Reserves Non-controlling interest Total $ $ $ $ $
	12,919,634 (7,426,907) 1,202,062 332,004 7,026,793 - (4,056,967) - (379,133) (4,436,100) - - (2,196) (258) (2,454) - - 200,167 - 200,167 712,321 (712,321) - - (1,687) - - - (1,687) - - 189,847 - 189,847 - 26,387 (26,387) - - - (471,559) (251) 471,812 2
	12,917,947 (11,216,725) 850,921 424,425 2,976,568
	Fully paid ordinary shares Retained earnings Reserves Non-controlling interest Total $ $ $ $ $
	9,831,962 (4,881,246) 1,942,503 (246,976) 6,646,243 - (2,287,765) - (296,354) (2,584,119) - (448,885) - 448,885 - - - (5,189) (811) (6,000) - 733,169 (733,169) - - 3,087,672 - - - 3,087,672 - (542,180) (2,083) 427,260 (117,003)
	12,919,634 (7,426,907) 1,202,062 332,004 7,026,793

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE FINANCIAL YEAR ENDED 30 June 2014

Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Other revenue Net cash provided by/(used in) operating activities Cash flows from investing activities Payment for property, plant and equipment Cash received from disposal of property, plant and equipment Payments for exploration costs Net cash provided by/(used in) investing activities Cash flows from financing activities Proceeds from issues of equity securities Proceeds from borrowings Interest paid Lease payments Net cash provided by/(used in) financing activities Net (decrease)/increase in cash and cash equivalents Cash at the beginning of the financial year Cash at the end of the financial year	Note 22(b) 22(a)	Consolidated 2014 $ - (1,953,917) 117,926 14,434 (1,821,557) (117,957) 9,069 (2,376,068) (2,484,956) - 6,000,000 (480,000) - 5,520,000 1,213,487 1,104,967 2,318,454	Consolidated 2013 $
			172,461 (2,166,250) 85,695 64,602
			(1,843,492)
			(195,633) - (1,235,130)
			(1,430,763)
			1,455,361 - (240,049) (21,932)
			1,193,380
			(2,080,875) 3,185,842
			1,104,967

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

1. Summary of significant accounting policies

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the financial statements and notes of the group comply with international financial reporting standards.

(a) Basis of preparation

The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

Critical accounting estimates and judgements

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are:

Exploration and evaluation assets

The Group’s accounting policy for exploration and evaluation expenditure is set out below. The application of this policy necessarily required management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves are found. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under our policy, we conclude that we are unlikely to recover the expenditure by future exploitation or sale, then the relevant capitalised amount will be written off to the income statement.

Estimated useful lives of assets

The estimation of the useful lives of assets has been based on historical experience as well as manufacturers’ warranties. In addition, the condition of assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Basis of preparation (continued)

Provision for rehabilitation

The Group’s accounting policy for the recognition of closure and rehabilitation provisions requires significant estimates and assumptions such as: requirements of the relevant legal and regulatory framework; the magnitude of possible contamination; and the timing, extent and costs of required closure and rehabilitation activity. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for operating sites are recognised in the balance sheet by adjusting both the closure and rehabilitation asset and provision.

Impairment of mine infrastructure

During the year, circumstances indicated that an impairment of the mine infrastructure may have been incurred and accordingly a valuation took place. As a result the Group’s mine infrastructure is stated at its recoverable amounts, being fair value less cost to sell and an impairment loss has been recognised. Refer to Note 12.1.

Convertible Notes

During the year additional convertible notes were issued. Management and the Directors have assessed the terms and conditions of the convertible notes and have determined the conversion options are equity derivatives. Refer to Note 1 (i).

(b) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of MGT Resources Limited (‘’company’’ or ‘’parent entity’’) as at 30 June 2014 and entities controlled by the company for the year then ended. MGT Resources Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group. Disposals to non-controlling interests result in gains and losses for the Group that are recorded in the statement of comprehensive income. Purchases from non-controlling interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of changes in equity and statement of financial position respectively. Investments in subsidiaries are accounted for at cost in the individual financial statements of MGT Resources Limited.

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20

DUNCAN DOVICO

Auditors’ Independence Declaration

In accordance with section 307C of the Corporations Act 2001, I declare that, to the best of my knowledge and belief, during the year ended 30 June 2014 there has been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

• (ii) no contraventions of any applicable code of professional conduct in relation to the audit.

• This declaration is in respect of MGT Recourses Limited and its controlled entities during the year.

DUNCAN DOVICO RISK & ASSURANCE PTY LIMITED

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Paul Dovico

Director

Sydney, 29 September 2014.

LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 PO BOX 1994 , NORTH SYDNEY NSW 2059 T: (02) 9922 1166 F: (02) 9922 2044 E: email@duncandovico.com.au ABN: 39 151 805 275 Liability limited by a scheme approved under the Professional Standards Legislation

DUNCAN DOVICO RISK & ASSURANCE PTY LIMITED

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

(c) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minorities proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of MGT Resources Limited.

When the group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities.

This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

A reallocation of retained earnings between the non-controlling interest and the group was completed during the prior financial year to reflect the simultaneous equity issue at the time of initial acquisition.

(d) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Revenue recognition (continued)

Revenue is recognised for the major business activities as follows:

Commodity sales

Revenue from the sale of goods and disposal of other assets is recognised when persuasive evidence (usually in the form of an executed sales agreement) of an arrangement exists and:

• there has been a transfer of risks and rewards to the customer;

• no further work or processing is required by the Group;

• the quantity and quality of the goods has been determined with reasonable accuracy;

• the price is fixed or determinable;

• collectability is reasonably assured.

Revenue is therefore generally recognised when title passes. In the majority of sales for most commodities, sales agreements specify that title passes on the bill of lading date, which is the date the commodity is delivered to the shipping agent. For these sales, revenue is recognised on the bill of lading date. For certain sales, title passes and revenue is recognised when the goods have been delivered.

In cases where the terms of the executed sales agreement allow for an adjustment to the sales price based on a survey of the goods by the customer (for instance an assay for mineral content), recognition of the sales revenue is based on the most recently determined estimate of product specifications. The sales price is determined on a provisional basis at the date of sale; adjustments to the sales price subsequently occurs based on movements in quoted market or contractual prices up to the date of final pricing. The period between provisional invoicing and final pricing is typically between 30 and 60 days. Revenue on provisionally priced sales is recognised based on the estimated fair value of the total consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales arrangements has the character of a commodity derivative. Accordingly, the fair value of the final sales price adjustment is re-estimated continuously and changes in fair value are recognised as an adjustment to revenue.

Interest income

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

(e) Foreign currencies

The consolidated financial statements are expressed in Australian dollars (‘$’), which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the date of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit and loss in the period in which they arise.

For the purpose of presenting consolidated financial statements, assets and liabilities are translated in Australian dollars using the exchange rate prevailing at the end of the reporting period. Income and expense items are translated at the exchange rates at the dates of the transaction.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

(f) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

(g) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and have a maturity of three months or less at the date of acquisition.

(h) Financial assets

Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.

Subsequent to initial recognition, investments in subsidiaries are measured at cost in the company financial statements.

Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-maturity investments’, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Financial assets (continued)

Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are nonderivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term.

Loans and receivables

Trade receivables, loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets.

Measurement

At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Loans and receivables are subsequently carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.

Impairment of financial assets

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

Assets carried at amortised cost

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Financial assets (continued)

Assets classified as available-for-sale

If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period. If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

(i) Financial liabilities

Compound instruments

The component parts of compound instruments (convertible notes) issued by the Group 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. Management and the Directors have assessed the terms and conditions of the convertible notes and have determined the conversion options are equity derivatives.

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 extinguished upon conversion or at the instrument’s maturity date. (Refer to Note 14).

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 remain in equity until the conversion option is exercised, in which case, the balance recognised in equity will be transferred to share capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance recognised in equity will be transferred to retained earnings. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option.

(j) Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate their cost or re-valued amounts, net of their residual values, over their estimated useful lives. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, which the effect of any changes recognised on a prospective basis.

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25

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Property, plant and equipment (continued)

The following useful lives are used in the calculation of depreciation:

• Office equipment 3 – 10 years - Mine infrastructure 20 years - Motor Vehicle 5 – 8 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

(k) Leases

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Finance leased assets are amortised on a straight-line basis over the estimated useful life of the asset.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

(l) Impairment of tangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When 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. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Impairment of tangible assets other than goodwill (continued)

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. (Refer to Note 12.1)

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(m) Exploration and evaluation of assets

Exploration and evaluation expenditure in relation to each separate area of interest are recognised as an exploration asset in the year in which they are incurred where the following conditions are satisfied:

• (i) The rights to tenure of the area of interest are current; and

• (ii) At least one of the following conditions is also met:

• (a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; and

• (b) Exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the areas of interest are continuing.

Exploration and evaluation assets are initially measured at cost and include acquisition rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource. General and administrative costs are allocated to, and included in, the cost of an exploration and evaluation asset, but only to the extent that those costs can be related directly to operational activities in the area of interest to which the exploration and evaluation asset relates.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation of asset may exceed its recoverable amount.

(n) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

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27

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

(o) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(p) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

(q) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

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28

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Provisions (continued)

Site Restoration

A provision for restoration and rehabilitation is recognised when there is a present obligation as a result of exploration and development activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The Group records the estimated cost of legal and constructive obligations to restore operating locations in the period in which the obligation is incurred. The nature of restoration activities includes dismantling and removing structures, dismantling operating facilities, closure of plant and restoration, reclamation and revegetation of affected areas.

Additional disturbances or changes in rehabilitation costs will be recognised as additions or changes to the corresponding asset and rehabilitation liability when incurred.

The provision for future restoration costs is the best estimate of the expenditure required to settle the restoration obligation at the reporting date based on current legal and other requirements and technology. When the liability is initially recorded, the estimated cost is capitalised by increasing the carrying amount of the related mining assets. The carrying amount capitalised is amortised over the life of the related asset.

(r) Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

Termination benefit

A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.

(s) Share-based payments arrangements

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 25.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

(t) Contributed equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

If the entity reacquires its own equity instruments, for example as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

(u) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

• (i) Where the amount of GST incurred is not recoverable from the taxation authority. It is recognised as part of the cost of acquisition of an asset or as part of an item of expense. Or

• (ii) For receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

All cash outflows in respect of GST, including payments to suppliers and employees, payments for exploration and evaluation, property, plant and equipment, and payments for exploration inventory are included in payments to suppliers and employees from operation activities.

All cash inflows in respect of GST, including receipts from customers and receipts of GST paid by the company and subsequently refunded by taxation authorities are included in receipts from customers from operating activities.

All cash flows from investing activities and from financing activities are net of GST as all associated GST cash flows are included in operating activities.

(v) New accounting standards and interpretations

In the current year, the Group has applied a number of new and revised AASBs issued by the Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2013.

AASB 2011-4 ‘Amendments to This standard removes the individual key management Australian Accounting Standards personnel disclosure requirements in AASB 124 ‘Related Party to Remove Individual Key Disclosures’ As a result the Group only discloses the key Management Personnel management personnel compensation in total and for each of Disclosure Requirements’ the categories required in AASB 124.

In the current year the individual key management personnel disclosure previously required by AASB 124 is now disclosed in the remuneration report due to an amendment to Corporations Regulations 2001 issued in June 2013.

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30

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

AASB 10 ‘Consolidated Financial Statements’ and AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’

AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with consolidated financial statements and Interpretation 112 ‘Consolidation – Special Purpose Entities’. AASB 10 changes the definition of control such that an investor controls an investee when a) it has power over an investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee, and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The application of AASB 10 has had no change on the assessment of whether MGT Resources Limited has control over MGT Mining Limited. MGT Resources Limited continues to have control over MGT Mining Limited and MGT Mining Limited continues to be a subsidiary of MGT Resources Limited. Garimperos Pty Limited continues to be 100% owned by MGT Mining Limited and hence Garimperos Pty Limited continues to be a subsidiary of MGT Mining Limited. MGT Resources Limited, MGT Mining Limited and Garimperos Pty Limited continue to form part of the consolidated MGT Resources Limited Group.

AASB 13 ‘Fair Value Measurement’ and AASB 20118 ‘Amendments to Australian Accounting Standards arising from AASB 13’

The Group has applied AASB 13 for the first time in the current year. AASB 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of AASB 13 is broad; the fair value measurement requirements of AASB 13 apply to both financial instrument items and non-financial instrument items for which other AASBs require or permit fair value measurements and disclosures about fair value measurements, except for share based payment transactions that are within the scope of AASB 2 ‘Share-based Payment’, leasing transactions that are within the scope of AASB 117 ‘Leases’, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes).

AASB 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under AASB 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, AASB 13 includes extensive disclosure requirements.

AASB 13 requires prospective application from 1 July 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these transitional provisions, the Group has not made any new disclosures required by AASB 13 for the 2013 comparative period.

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31

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Other than the additional disclosures, the application of AASB 13 does not have any material impact on the amounts recognised in the consolidated financial statements.

There are no other new and revised Standards and Interpretations adopted in these financial statements affecting the reporting results or financial position.

(w) New accounting standards and interpretations issued but not yet effective

At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective.

Standard/Interpretation	Standard/Interpretation	Effective for annual	Expected to be initially
		reporting periods	applied in the financial
		beginning on or after	year ending
AASB 9	‘Financial	1 January 2017	30 June 2018
Instruments’, and the relevant
amending standards
AASB 1031	‘Materiality’	1 January 2014	30 June 2015
(2013)
AASB 2012-3	‘Amendments	1 January 2014	30 June 2015
to Australian	Accounting
Standards –	Offsetting
Financial Assets and
Financial Liabilities’
AASB 2013-3	‘Amendments	1 January 2014	30 June 2015
to AASB 135 –	Recoverable
Amount Disclosures for Non-
Financial Assets’
AASB 2013-4	‘Amendments	1 January 2014	30 June 2015
to Australian	Accounting
Standards –	Novation of
Derivatives and	Continuation
of Hedge Accounting’
AASB 2013-5	‘Amendments	1 January 2014	30 June 2015
to Australian	Accounting
Standards –	Investment
Entities’
AASB 2013-9	‘Amendments	1 January 2014	30 June 2015
to Australian	Accounting
Standards –	Conceptual
Framework, Materiality and
Financial Instruments’

The new standards, interpretations and amendments are not expected to have a significant impact on the financial statements.

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32

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

(x) Going concern

The financial statements are prepared on a going concern basis, which contemplates the continuation of normal business activity and the realisation of assets and liabilities in the normal course of business.

As at 30 June 2014 the consolidated entity incurred a net loss after tax of $4,436,100 and cash outflows from operating and investing activities of $4,306,513. Furthermore, convertible notes of $1,500,000 will expire and are due for repayment in May 2015 if the share price of MGT Resources Limited is less than 20 cents per share. The ability of the company to continue as a going concern and to pay their debts as and when they fall due is dependent on the consolidated entity’s ability to raise additional funds through either debt financing or capital raising arrangement. Further, the Directors have the ability to reduce discretionary expenditure such that the impact on cash outflows is minimised whilst maintaining key operational activities.

Having regard to the above, the Directors have a reasonable expectation that the entity will have adequate resources to continue operating for the foreseeable future. For this reason they continue to adopt the going concern basis in preparation of the accounts. The company may be unable to realise its assets or discharge its liabilities in the normal course of the business and at the amounts stated in the financial report should the company not continue as a going concern.

2. Financial risk management

The consolidated group’s activities expose it to a variety of financial risks: market risk, credit risk, currency risk and liquidity risk. The consolidated group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effect on the financial performance of the Group.

The Group hold the following financial instruments:

Financial assets Cash and cash equivalents Trade and other receivables Available-for-sale financial asset Financial liabilities Trade and other payable Interest bearing liabilities	Consolidated Consolidated 2014 $ 2013 $
	2,318,454 1,104,967 140,005 142,647 1,910 4,364
	2,460,369 1,251,978
	934,214 670,910 8,845,623 2,970,291
	9,779,837 3,641,201

(a) Market risk

i. Foreign exchange risk

Consolidated group sensitivity – foreign exchange risk

The consolidated entity has no foreign currency exposure risk as at reporting date.

ii. Price risk The consolidated group is exposed to equity securities price risk. This arises from investments held by the Group and classified on the balance sheet either as available-for-sale or at fair value through profit or loss. The consolidated group is not exposed to commodity price risk as at reporting date.

The majority of the group’s equity investments are publicly traded on the Australian ASX and the Canadian stock exchange.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Financial risk management (continued)

The table below summarises the impact of increase/decrease of these two indexes on the Group’s post-tax loss for the year and on equity. The analysis is based on the assumption that the equity indexes had increased/decreased by 10% with all other variables held constant and all the Group’s equity instruments moved according to historical correlation with the index.

Index	Impact on	post-tax loss	Impact on other	components of equity
	Consolidated	Consolidated	Consolidated	Consolidated
	2014	2013	2014	2013
	$	$	$	$
Increase 10%	-	-	191	436
Decrease 10%	-	-	(191)	(436)

iii Interest rate risk

The consolidated group’s exposure to interest rate risk is summarised in the table below:

	Weighted average effective interest rate	Non interest bearing	Floating interest	Fixed interest rate	Total
	2014 %	2014 $	2014 $	2014 $	2014 $
Financial assets
Bank	5.23%	51,867	1,190,455	1,076,132	2,318,454
Financial liabilities
Borrowings	9.0%	-	-	9,000,000	9,000,000
	Weighted average effective interest rate	Non interest bearing	Floating interest	Fixed interest rate	Total
	2013 %	2013 $	2013 $	2013 $	2013 $
Financial assets
Bank	7.21%	47,039	1,057,928	-	1,104,967
Financial liabilities
Borrowings	9.0%	-	-	3,000,000	3,000,000

Consolidated group sensitivity – interest rate risk

The following sensitivity analysis has been based on the interest rate risk exposures in existence at 30 June 2014, had the variable interest rate on cash balances increased by 100 basis points and decreased by 50 basis points. The effect is calculated on year end balances and the impact on pretax loss is outlined below.

Consolidated	30 June 2014 $	30 June 2013 $
+ 1% (100 basis points)	22,666	10,579
-0.5 %(50 basispoints)	(11,333)	(5,290)

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34

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Financial risk management (continued)

(b) Credit risk

Credit risk is managed on a group basis and reviewed regularly. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, including outstanding receivables and committed transactions.

As at 30 June 2014 there were no trade receivable balances.

Credit risk from balances with banks and financial institutions is regularly monitored and reviewed by The Board. No material exposure is considered to exist as the consolidated group’s policy is to invest its cash and cash equivalents with financial institutions having a credit rating of at least AAA.

Cash at bank and short-term bank deposits	Consolidated 2014 $ 2,318,454	Consolidated 2013 $
		1,104,967

(c) Foreign currency risk

During the prior period, the Group sold its first consignment of tin. The sales price of tin is arrived at using the London Metal Exchange’s spot price of tin, denominated in US Dollars. Payment is made in US Dollars into a US Dollar denominated bank account. All US Dollar amounts were converted to Australian Dollars during the period such that no conversion of foreign currencies were required at period end.

Until more regular tin consignments are underway, Management intends to monitor the US/Australian Dollar exchange rate and evaluate appropriate times to convert any US dollar receivables to Australian Dollars that occur in the future. When more regular tin consignments occur, Management will revisit hedging options.

(d) Liquidity risk

Liquidity risk arises from the possibility that there will be sufficient funds available to make payment as and when required. The consolidated group manages liquidity risk by continuously monitoring forecast and actual cash flows.

The Group is party to a convertible note agreement which expires in the third quarter of the 2015 financial year. The ability of the company to continue as a going concern and to pay their debts as and when they fall due is dependent on the consolidated entity’s ability to raise additional funds through either debt financing or capital raising arrangements. The Directors are actively pursuing all options in relation to raising funds in order to continue as a going concern.

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35

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Maturities of financial liabilities

The tables below analyses the consolidated Group’s and the parent entity’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

30 June 2014	Less than 6 months $	6-12 months $	Between 1 & 2 years $	Between 2 & 5 years $	Over 5 years $	Total $
Non interest bearing
Accounts and otherpayables	115,402	-	-	-	-	115,402
Fixed rate
Borrowings	-	1,500,000	7,500,000	-	-	9,000,000

30 June 2013	Less than 6 months $	6-12 months $	Between 1 & 2 years $	Between 2 & 5 years $	Over 5 years $	Total $
Non interest bearing
Accounts payables	125,187	-	-	-	-	125,187
Fixed rate
Borrowings	1,500,000	-	1,500,000	-	-	3,000,000

(e) Fair value of financial instruments

The directors have determined the fair value of its available-for-sale equity securities held using quoted prices on an active market. The fair value of available-for-sale equity securities is therefore classified as Level 1 under the accounting standards.

The fair value of convertible notes is classified as Level 3 under the accounting standards due to there being one or more unobservable inputs (see Note 14)

3. Revenue An analysis of the Group’s revenue for the year is as follows: Sale of tin concentrate	Consolidated 2014 $ - -	Consolidated 2013 $
		172,461 172,461

The tin concentrate sold consisted of approximately 50% purchased from local hobby tin miners and 50% from MGT Mining Limited’s existing stock and mill trial runs since MGT Resources Limited purchased MGT Mining Limited in 2009.

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36

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

4. Segment information

The Group operates predominantly in one business segment and one geographical segment being the mining industry in Australia. The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

(a) Revenue from major products

An analysis of the Group’s revenue from continuing operations from its major products.

Tin concentrate	- -	172,461
		172,461

(b) Geographical information

An analysis of the Group’s revenue from continuing operations from external customers by location.

(b) Geographical information An analysis of the Group’s revenue from continuing operations from external customers by location.
Taiwan	- -	172,461
		172,461

(c ) Information about major customers

MGT Resources Limited entered into an off-take agreement with Taimetco International Co, Limited on 5 August 2012 agreeing to MGT Resources Limited selling a minimum of 20% of its annual production of tin metal or in the event that 20% of tin production is less than 50 tonnes of tin metal, 100% of its tin production to Taimetco International Co, Limited.

During the prior year, all of the revenues arising from sales of tin concentrate were revenues to Taimetco International Co, Limited.

5. Investment income Interest revenue 6. Other gains and losses Loss for the year has been arrived at after crediting the following gains and losses: Net foreign exchange gains/(losses) Fuel tax rebate Other	Consolidated 2014 $ 123,624 123,624 - 14,433 (3,251) 11,182	Consolidated 2013 $
		79,818
		79,818
		7,603 49,589 6,236
		63,428

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37

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

7. Other expenses Vehicle and freight costs Repairs and maintenance costs Travel expense Legal and professional expense Insurance Directors fees Other expenses	Consolidated 2014 $ 46,765 19,957 54,031 225,099 92,652 174,163 70,284 682,951	Consolidated 2013 $
		62,383 23,508 63,827 171,855 99,837 201,250 23,920
		646,580

8. Income taxes

8. Income taxes
Tax expense/(income) comprises:
Current tax expense/(income) in respect of
the current year	-	-
(a) The prima facie income tax expense on pre-tax accounting profit from operations reconciles to
the income tax expense in the financial statements	as follows:
Loss before income tax	(4,436,100)	(2,584,119)
Income tax expense calculated at 30%	(1,330,830)	(775,235)
Effect of amounts that are not deductible
(taxable) in determining taxable profit:
Non-deductible/(taxable) items	121,796	(369,977)
	(1,209,034)	(1,145,212)
Tax losses and temporary difference not
recognised	1,209,034	1,145,212
	-	-
(b) Unused tax losses for which no deferred tax
assets has been recognised	21,640,517	14,796,145
Potential tax benefit at 30%	6,492,155	2,717,919

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38

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

	NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014
9. 10.	Consolidated 2014 $ Trade and other receivables Current Prepayments 35,603 Other receivables 8,061 GST refund 60,233 Rental bond 36,108 140,005 Other financial assets Available for sale investments carried at fair value: Non-Current Quoted shares 1,910 1,910	Consolidated 2013 $
		52,257 12,812 41,470 36,108
		142,647
		4,364 4,364

11.Exploration and evaluation expenditure

Costs carried forward in respect of areas of interest in the exploration and evaluation phase:

Balance at the beginning of the year Tenement abandonment Expenditure incurred during the year Balance at the end of the year	5,845,931 (70,158) 2,502,248 8,278,021	4,719,367 (241,245) 1,367,809
		5,845,931

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation of asset may exceed its recoverable amount. The ultimate recoverability of exploration and evaluation expenditure is dependent upon the successful development or sale.

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39

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 June 2014

12. Plant and equipment

At 30 June 2014 Cost Accumulated depreciation and impairment Net book value Year ended 30 June 2014 Balance at the beginning of the financial year: Additions Disposals Impairment loss recognised in profit and loss Depreciation expense Balance at the end of the financial year At 30 June 2013 Cost Accumulated depreciation Net book value Year ended 30 June 2013 Balance at the beginning of the financial year: Additions Depreciation expense Balance at the end of the financial year	Office equipment $ Mine infrastructure $ Motor vehicle $ Total $ 542,637 3,785,344 311,674 4,639,655 (313,747) (1,985,058) (204,146) (2,502,951)
	228,890 1,800,286 107,528 2,136,704
	285,996 3,269,409 165,753 3,721,158 28,535 86,300 3,123 117,958 - - (9,069) (9,069) - (1,336,116) - (1,336,116) (85,641) (219,307) (52,279) (357,227)
	228,890 1,800,286 107,528 2,136,704
	Office equipment $ Mine infrastructure $ Motor vehicle $ Total $ 514,102 3,699,045 317,621 4,530,768 (228,106) (429,636) (151,868) (809,610)
	285,996 3,269,409 165,753 3,721,158
	349,722 3,418,878 88,018 3,856,618 23,249 57,562 130,822 211,633 (86,975) (207,031) (53,087) (347,093)
	285,996 3,269,409 165,753 3,721,158

12.1 Impairment loss recognised in the year

The Group’s mine infrastructure is stated at its recoverable amounts, being the fair value less cost for sale (not expected to be material) at the date of revaluation. This is due to the fact that the infrastructure has been mostly idle during the year except for period when trial production runs were conducted. The fair value measurements of the Group’s mine infrastructure as at 30 June 2014 were performed by Andrew Nock Pty Limited, independent valuers not related to the Group and determined to be $1,784,283. The value falls within level 3 of the fair value hierarchy due to one or more significant inputs being not based on observable market data. Andrew Nock Pty Limited are members of the Auctioneers and Valuers Association of the Institute of Australia.

The review led to the recognition of an impairment loss of $1,336,116 in the statement of profit or loss.

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40

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Impairment loss recognised in the year (continued)

The fair value of the mine infrastructure was determined based the depreciated replacement cost approach with reference to unobservable inputs in the table below:

approach with reference to unobservable inputs in the table below:
Valuation technique Significant unobservable inputs Range of unobservable inputs	Consolidated 2013 $ Relationship to fair value Greater consumption of economic benefit or increased obsolescence lowers fair value Higher replacement cost increases fair value
Consolidated 2014 $ 13.Trade and other payables Trade and other payables 115,402 Accrued expenses 818,812 934,214 Depreciated replacement cost Consumed economic benefit/obsolescence of asset Depreciation rate/useful life Estimate of current replacement costs, reliance upon historic cost Replacement cost component of depreciated replacement cost
	183,842 487,068
	670,910

Included within accrued expenses is an accrual of $397,000 (2013: $325,000) for compensations due under the terms of the native title agreement. The Directors believe that the accrual will not affect MGT Mining Limited’s exploration rights and activities related to those tenements.

14. Borrowings

Current Convertible note (ii) Non-current Convertible note (iii) Convertible note (iv) Convertible note (v)	1,488,124 1,488,124 1,469,393 2,944,053 2,944,053 7,357,499	(i)1,494,948
		1,494,948
		(ii) 1,475,343 - -
		1,475,343

• (i) The parent entity MGT Resources Limited issued convertible notes to Armstrong Industries HK Limited on 11 November 2011 with a principal sum of $1,500,000 and a term of 2 years. Interest on the convertible notes is payable at the rate of 8% per annum. The convertible note was extended and rolled into a new convertible note (iii) below for a further term of 3 years.

• (ii) The parent entity MGT Resources Limited issued convertible notes to Armstrong Industries HK Limited on 11 May 2012 with a principal sum of $1,500,000 and a term of 3 years. Interest on the convertible notes is payable at the rate of 8% per annum payable six monthly in arrears. The convertible note may be redeemed or converted into 7,500,000 ordinary shares in the parent entity if the share price is 20 cents per share or less at maturity.

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41

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Borrowings (continued)

• (iii) The parent entity MGT Resources Limited issued convertible notes to Armstrong Industries HK Limited on 11 November 2013 with a principal sum of $1,500,000 and a term of 3 years. Interest on the convertible notes is payable at the rate of 8% per annum payable six monthly in arrears. The convertible note may be redeemed or converted into 17,142,857 ordinary shares in the parent entity if the share price is 8.75 cents per share or less at maturity.

• (iv) The parent entity, MGT Resources Limited issued convertible notes to Cloud Adventurer Limited on 19 August 2013 with a principal sum of $3,000,000 and a term of 3 years. Interest on the convertible note is payable at the rate of 8% per annum. The convertible notes may be redeemed or converted into 27,272,727 ordinary shares in the parent entity if the share price is 11 cents per share or less at maturity.

• (v) The parent entity, MGT Resources Limited issued convertible notes to Marvel Network Limited on 19 August 2013 with a principal sum of $3,000,000 and a term of 3 years. Interest on the convertible note is payable at the rate of 8% per annum. The convertible notes may be redeemed or converted into 27,272,727 ordinary shares in the parent entity if the share price is 11 cents per share or less at maturity.

The net proceeds received from the issue of the convertible notes have been split between the financial liability element and an equity component, representing the residual attributable to the option to convert the financial liability into equity of MGT Resources Limited. The following table is a summary of the information for all the convertible notes issued by MGT Resources Limited.

Proceeds of issue Equity component – value of conversion rights Liability component at the date of issue Interest expense* Interest paid Total Rolled over into new note (iii) Current liability Non- current liability	Convertible note (i) Convertible note (ii) Convertible note (iii) Convertible note (iv) Convertible note (v) $ $ $ $ $ 1,500,000 1,500,000 1,500,000 3,000,000 3,000,000 (26,387) (37,969) (37,969) (75,939) (75,939) 1,473,613 1,462,031 1,462,031 2,924,061 2,924,061 266,387 266,093 67,362 139,992 139,992 (240,000) (240,000) (60,000) (120,000) (120,000)	Total $ 10,500,000 (254,203) 10,245,797 879,827 (780,000)
	1,500,000 1,488,124 1,469,393 2,944,053 2,944,053 (1,500,000) - - - -	10,345,623 (1,500,000)
	- 1,488,124 1,469,393 2,944,053 2,944,053	8,845,623
		1,488,124 7,357,499
		8,845,623

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42

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

14.1 Fair value measurement of the Group’s borrowings

The initial fair value of the liability portion of the convertible notes was determined using an estimated market interest rate of 9% which was determined to be an estimate of the benchmark rate for a similar organisation. The liability is subsequently recognised on an amortised cost basis until extinguished on conversion or maturity of the convertible notes. The difference between the principle and the present value component was taken to equity as an equity derivative and not subsequently remeasured.

The fair value of current and non-current convertible notes are based on discounted cash flows using the 9% rate described above. Convertible notes are classified as level 3 (If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3) fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

15.	Provisions Current Employee benefits (i) Rental provision (ii) Non–current Employee benefits (i) Mine rehabilitation and restoration (iii) Disclosed in the financial statements as: Current provisions Non-current provisions	Consolidated 2014 $ 40,839 - 40,839 39,884 76,132 116,016 40,839 116,016 156,855	Consolidated 2013 $
			65,088 12,819
			77,907 28,615 76,132
			104,747 77,907 104,747
			182,654

(i) Employee benefits

Represents annual leave and long service leave.

(ii) Rental provision

Represents obligations owing on the head office rental agreement.

(iii) Mine rehabilitation and restoration

The Group recognises that it has an obligation to restore its mine sites to their original condition at the end of the life of the mine. Mine rehabilitation costs are provided for and based on estimated future expenditure when the liability is incurred. Although the ultimate cost to be incurred is uncertain, the Group has estimated it using current restoration standards and techniques.

When this liability is recognised, a corresponding asset is also recognised as part of the development costs of the mine and is amortised across the same useful life. To date, no amortisation of such cost has been recognised due to the amount being immaterial.

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43

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

16. Issued capital (a) Share capital 288,157,040 fully paid ordinary shares (2013: 288,157,040) Capital raising costs Issued capital (continued) (b) Movements in ordinary share capital Opening balance October 2012 issue of shares December 2012 issue of shares Total	Consolidated 2014 $ 13,646,142 (728,195) 12,917,947 Consolidated 2014 No. of shares Issue price 288,157,040 - 0.160 - 0.200 288,157,040	Consolidated 2013 $
		13,646,142 (726,508)
		12,919,634
		Consolidated 2013
		No. of shares 268,635,040 13,212,000 6,310,000
		288,157,040

Capital risk management

The group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistently with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘borrowings’ and ‘trade and other payables’ as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the balance sheet (including non –controlling interests) plus net debt.

During 2014, the group’s gearing ratio increased following the establishment of $6m additional convertible loan notes (See Note 14). Whilst the group strategy remains to maintain a lower gearing ratio, tight financial markets did not assist with raising debt free capital and in order to continue to carry out strategic objectives, convertible notes were entered into. The gearing ratios at 30 June 2014 and 30 June 2013 were as follows:

Total borrowings Less: Cash and cash equivalents Net debt Total equity Total capital Net debt to equity ratio	Consolidated 2014 $ 9,779,838 (2,318,454) 7,461,384 2,976,568 10,437,952 71%	Consolidated 2013 $
		3,641,200 (1,104,967)
		2,536,233 7,026,793
		9,563,026 27%

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44

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

17. Reserves (a) Revaluation reserves Balance at beginning of financial year Revaluation increments/(decrements) Transactions with non-controlling interest Balance at end of financial year (b) Share option reserves Balance at beginning of financial year Options expired during the year Share option issued Balance at end of financial year (c) Equity derivative Balance at beginning of financial year Equity derivative derecognised on expiry of convertible note Equity derivative created on issue of convertible loan Balance at end of financial year Balance at end of financial year 18. Retained earnings Balance at beginning of financial year Reallocation of equity (note 1c) Transfer to retained earnings Transactions with non-controlling interest Net loss attributable to members of the parent entity Balance at end of financial year	Consolidated 2014 $ (7,272) (2,454) 6 (9,720) 1,144,978 (712,321) 200,167 632,825 64,356 (26,387) 189,847 227,816 850,921 (7,426,907) - 738,708 (471,559) (4,056,967) (11,216,725)	Consolidated 2013 $
		- (6,000) (1,272)
		(7,272) 1,878,147 (733,169) -
		1,144,978 64,356 - -
		64,356
		1,202,062
		(4,881,246) (448,885) 733,169 (542,180) (2,287,765)
		(7,426,907)

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45

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

19. Earnings per share Basis earning per share Diluted earnings per share Basis earning per share The earning and weighted average number of ordinary shares used in the calculation of basis earning per share are as follows: Net loss Earning used in the calculation of basic EPS from continuing operations Weighted average number of ordinary shares for the purpose of basic earnings per share Diluted earnings per share The earning and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows: Net loss Earning used in the calculation of diluted EPS from continuing operations Weighted average number of ordinary shares for the purpose of diluted earnings per share	Cents per share (1.41) (0.91) $ (4,056,967) (4,056,967) No. 288,157,038 $ (3,337,213) (3,337,213) No. 367,345,349	Cents per share (0.79) (0.66) $ (2,287,765)
		(2,287,765) No. 288,157,038 $ (2,023,733)
		(2,023,733) No. 307,657,038

Options attached to converting financial instruments were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.

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46

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

20. Commitments

(a) Future exploration

MGT Mining Limited has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations.

The commitments to be undertaken are as follows:

Payable: No later than 1 year Later than 1 year and not later than 5 years Later than five years	Consolidated 2014 $ 735,269 725,531 - 1,460,800	Consolidated 2013 $
		830,034 786,344 -
		1,616,378

To keep tenements in good standing, work programs should meet certain minimum expenditure requirements. If the minimum expenditure requirements are not met, MGT Mining Limited has the option to negotiate new terms or relinquish the tenements. MGT Mining Limited also has the ability to meet expenditure requirements by joint venture or farm-in agreements.

(b)Non-cancellable operating leases Operating leases related to office rented with an option to extend. No later than 1 year Later than 1 year and not later than 5 years Later than five years	- - - -	65,717 - -
		65,717

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47

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

21. Subsidiaries

Details of the Group’s subsidiaries at the end of the reporting period are as follows:

		Proportion of ownership
		Interest and voting power held
		by the Group
	Country of	2014 2013
Name of subSDFG,nbsidiary	incorporation	% %
MGT Mining Limited	Australia	89.48%(ii) 86.48%
Garimperos Pty Limited (i)	Australia	100.00% 100.00%

• (i) Garimperos Pty Limited is 100% owned by MGT Mining Limited.

• (ii) During the financial year, MGT Resources Limited acquired an additional 3% of the issued shares of MGT Mining Limited for a purchase consideration of $5,158,318 paid via conversion of intercompany loan balances.

• (iii) A deed of assumption was signed on 18[th] September 2013 between Garimperos Pty Limited and MGT Mining Limited in respect of the transfer of tenements (ML 4349 Mt Veteran Mill and ML 20547 Summer Hill) from Garimperos Pty Limited to MGT Mining Limited. Following notification from the Office of State Revenue that the transfer of mining leases between wholly owned entities would be exempt from stamp duty, final approval was received from the Department of Natural Resources and Mines on 11[th] November 2013, confirming the transfer of tenements. In due course, the assets and liabilities of Garimperos Pty Limited were transferred to MGT Mining Limited. On 13[th] January 2014, Garimperos Pty Limited, undertook an equal access buy back of 3,807,080 shares in the capital of Garimperos Pty Limited held by MGT Mining Limited.

21.1 Non-controlling interests (NCI)

Set out below is summarised financial information for MGT Mining Limited that has noncontrolling interests that are material to the group. The amounts disclosed for MGT Mining Limited are before inter-company eliminations.

MGT Mining Limited

Summarised balance sheet Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Accumulated NCI	2014 $ 227,024 10,188,629 10,415,653 5,956,898 92,502 6,049,400 4,366,253 424,425	2013 $
		5,808,726 3,735,631
		9,544,357
		775,248 6,156,120
		6,931,368
		2,612,989
		332,004

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48

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Summarised statement of comprehensive income Loss for the year Other comprehensive income Total comprehensive income Loss allocated to NCI Summarised cash flows Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net increase/(decrease) in cash and cash equivalents	2014 $ (3,605,168) (2,454) (3,607,622) (379,133) (975,094) (2,426,681) 3,475,620 73,845	2013 $
		(2,287,822) (6,000) (2,293,822) (296,354)
		(958,425) (1,189,655) 1,993,361
		(154,719)

22. Notes to the cash flow statement

(a) Reconciliation of cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents included cash on hand and in bank. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:

Cash and cash equivalents

2,318,454 2,318,454	1,104,967
	1,104,967

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49

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Notes to the cash flow statement (continued)

(b) Reconciliation of loss for the period to net cash flows from operating activities

Loss for the year Interest expense Non-cash flow items Accrued interest expenses Tenement impairment Impairment loss recognised on mine infrastructure Depreciation expense Issue of share options Difference arising in equity Interest adjustment on borrowings Decrease/(Increase) in current receivables Increase in inventory Increase in other current assets Increase in non-current assets Decrease in other current liabilities Increase/(Decrease) in trade creditors Increase in Provisions Net cash from operating activities	Consolidated 2014 $ (4,436,100) 480,000 (4,633) 70,158 1,336,116 357,226 200,168 - 239,754 - (6,585) 5,590 - 30,988 (68,440) (25,799) (1,821,557)	Consolidated 2013 $
		(2,584,119) 240,049 5,877 241,245 - 347,093 - (123,002) 23,983 (28,085) 37,090 10,680 42,108 5,304 (86,270) 24,555
		(1,843,492)

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50

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

23. Parent entity disclosure

(a) Financial position

24.	Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued equity Retained earnings Reserves Total equity (b) Financial performance Loss for the year Other comprehensive income Total comprehensive income Auditors remuneration Audit services Audit and review of financial reports		2014 $ 7,581,310 11,698,508 19,279,818 1,817,987 7,381,013 9,199,000 12,917,946 (3,697,770) 860,641 10,080,817 2014 $ (1,271,265) - (1,271,265) Consolidated 2014 $ 60,250		2013 $ 7,642,814 6,528,780
					14,171,594
					1,691,017 1,489,959
					3,180,976
					12,919,633 (3,138,349) 1,209,334
					10,990,618
					2013 $ (392,150) - (392,150) Consolidated 2013 $ 64,271

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51

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

25. Share-based payments

(a) Employee share option plan

The Group has an ownership-based compensation scheme for executives and senior employees. In accordance with the terms of the plan, as approved by shareholders at a previous annual general meeting, executives and senior employees may be granted options to purchase ordinary shares at various exercise prices.

Each employee share option converts into one ordinary share of MGT Resources Ltd on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

The following share-based payment arrangements were in existence during the current and prior reporting periods:

Option series

No. of options Grant date Expiry date Exercise price $ Fair value at grant date $ Vesting date

A 300,000 17 Oct 2011 17 Oct 2014 0.30 0.1109 Vests at the date of grant B 1,200,000 25 Nov 2011 25 Nov 2014 0.20 0.1262 Vests at the date of grant C 2,250,000 25 Nov 2011 25 Nov 2014 0.30 0.1102 Vests at the date of grant D 6,800,000 7 Nov 2013 7 Nov 2016 0.15 0.0288 Vests at the date of grant E 1,975,000 12,525,000 17 Dec 2013 17 Dec 2016 0.15 0.0288 Vests 17 Dec 2015 and provided that the eligible recipient is employed by the group on that date

Fair value of share options granted in the year

The weighted average fair value of the share options granted during the financial year is $0.0288 (2013: Nil). Options were priced using a Black Scholes option pricing model.

Inputs into the model

Grant date share price Exercise price Expected volatility Option life Risk-free interest rate	Option Series
	Series A Series B Series C Series D Series E $0.20 $0.20 $0.20 $0.063 $0.063 $0.30 $0.20 $0.30 $0.15 $0.15 103.42% 100.70% 100.70% 98.57% 98.57% 2.8 years 2.9 years 2.9 years 3 years 3 years 3.93% 3.93% 3.93% 4.43% 4.43%

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2014

Movements in share options during the year

The following reconciles the share options outstanding at the beginning and end of the year:

Balance at beginning of year Granted during the year Exercised during the year Expired during the year Balance at end of the year Exercisable at end of year		2014 2013
		No. of options Weighted average exercise price $ No. of options Weighted average exercise price $ 6,000,000 0.2613 17,400,000 0.1518 8,800,000 0.1500 - - - - - - (2,275,000) 0.0841 (11,400,000) 0.1750 12,525,000 0.1853 6,000,000 0.2613 10,550,000 6,000,000

26. Key management personnel compensation

The aggregate compensation made to directors and key management personnel of the company and the Group is set out below:

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payment	Consolidated 2014 $ 751,118 44,075 - - 197,379 992,572	Consolidated 2013 $
		659,959 37,197 - - -
		697,155

27. Related Party Transactions

Jonathan Back, provided services to MGT Resources Limited in his capacity as Executive Chairman and Managing Director through his company, Ocean Central Limited for a total value of $120,000 during the period to 30 June 2014 (2013: $120,000).

Li Hai Jun, has accrued fees from MGT Resources Limited in his capacity as Non-Executive Director of $25,000 through his company Parkridge Capital Inc during the period to 30 June 2014 (2013: $25,000).

Robert Vagnoni, has accrued fees of $14,583 from MGT Resources Limited for his role as NonExecutive Director during the period to 30 June 2014. Total fees earned for the period to 30 June 2014 for his role as Non –Executive Director were $28,333 (2013: $25,000 exc GST).

28. Events occurring after the reporting period

Alexander Moody resigned as Company Secretary and Jacqueline Butler was appointed as Company Secretary on 14 August 2014. Jacqueline Butler also retains her role as Chief Financial Officer.

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53

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES DIRECTOR’S DECLARATION FOR THE YEAR ENDED 30 June 2014

The directors declare that:

• (a) 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;

• (b) In the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and the consolidated entity;

• (c) In the directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board; and

• (d) The directors’ have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

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Gary Kuo Executive Director Dated: 29 September 2014

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54

DUNCAN

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DOVICO

Independent Auditor’s Report to the members of MGT Resources Limited

Report on the Financial Report

We have audited the accompanying financial report of MGT Recourses Limited (the company) and its controlled entities which comprises the consolidated statement of financial position as at 30 June 2014, and the consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year ended on that date, a summary of significant accounting policies, other explanatory notes 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 ended 30 June 2014.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretation) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the consolidated financial statements and notes, complies 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 judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

DUNCAN DOVICO RISK & ASSURANCE PTY LIMITED

LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 PO BOX 1994 , NORTH SYDNEY NSW 2059

T: (02) 9922 1166 F: (02) 9922 2044 E: email@duncandovico.com.au ABN: 39 151 805 275

Liability limited by a scheme approved under the Professional Standards Legislation

DUNCAN DOVICO

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with independence requirements of the Corporations Act 2001 .

Auditor’s Opinion

In our opinion:

• a) the financial report of MGT Resources Limited and its controlled entity is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; and

• b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Material Uncertainty Regarding Continuation as a Going Concern

Without qualifying our opinion, we draw attention to note 1(x) in the financial report. Note 1(x) comments on the potential consequence of not undertaking additional fund to continue its operation and pay its debt which will be due. These conditions, along with other matters set forth in note 1(x) indicate the existence of a material uncertainty that may cast significant doubt about the company's ability to continue as a going concern and therefore the company may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report.

Non-payment of Native Title compensation

Without qualifying our opinion, we draw attention to note 13 in the financial report. An accrued amount of $397,000 for compensation under the terms of native title agreement was due and hasn't been paid. The directors believe that the non-payment of the amount will not affect MGT Mining Limited’s exploration rights and activities related to those tenements.

DUNCAN DOVICO RISK & ASSURANCE PTY LIMITED

LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 PO BOX 1994 , NORTH SYDNEY NSW 2059

T: (02) 9922 1166 F: (02) 9922 2044 E: email@duncandovico.com.au ABN: 39 151 805 275 Liability limited by a scheme approved under the Professional Standards Legislation

DUNCAN

DOVICO

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Report on the Remuneration Report

We have audited the Remuneration Report of MGT Resources Limited for the year ended 30 June 2014. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of MGT Resources Limited for the year ended 30 June 2014, complies with section 300A of the Corporations Act 2001 .

DUNCAN DOVICO RISK & ASSURANCE PTY LIMITED

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Paul Dovico Director

Sydney, 29 September 2014

DUNCAN DOVICO RISK & ASSURANCE PTY LIMITED

LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 PO BOX 1994 , NORTH SYDNEY NSW 2059

T: (02) 9922 1166 F: (02) 9922 2044 E: email@duncandovico.com.au ABN: 39 151 805 275 Liability limited by a scheme approved under the Professional Standards Legislation