AVIRA RESOURCES LTD — Interim / Quarterly Report 2014

Mar 3, 2014

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MGT RESOURCES LIMITED

- HALF YEAR FINANCIAL REPORT 31 DECEMBER 2013

ACN 131 715 645

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Table of Contents

	PAGE NO.
Directors’ Report	3-4
Auditor’s Independence Declaration	5
Directors’ Declaration	6
Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income	7
Condensed Consolidated Statement of Financial Position	8
Condensed Consolidated Statement of Cash Flows	9
Condensed Consolidated Statement of Changes in Equity	10
Notes to the Half-Year Financial Statements	11-16
Independent Review Report to the Members of MGT Resources Limited	17

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Directors’ Report

Your directors submit their report for the half-year ended 31 December 2013.

Directors

The directors of MGT Resources Limited and its controlled entities (the “Group”) in office during the half year, and until the date of this Report are set out below. Directors were in office for this entire period unless otherwise stated.

Name Particulars Jonathan Paul Back Director, appointed 4[th] September 2008 and appointed as Chairman 1[st] February 2010 Gary Kuo Director, appointed 7[th] January 2011 Hai Jun Li Non-Executive Director, appointed 14[th] April 2009 Robert Vagnoni Non-Executive Director, appointed 1[st] February 2011

Principal activities

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

Operating and Financial Review

(a) Review of Operations

The consolidated net loss for the half-year after providing for income tax was $1,595,641 (2012: loss of $1,354,855).

The Group has continued to invest further funds in drilling programs and it continues to pursue its objective of seeking further investment opportunities in the resource sector.

(b) Exploration and Evaluation Activities

The focus during the six months to 31 December 2013 has been on the company’s flagship Mt Garnet Project, 3 hours west of Cairns in Queensland. Exploration focused on the Summer Hills Mining Lease (ML 20547), and specifically the Dalcouth prospect which lies within that lease. The Summer Hills Mining Lease surrounds the Mt Veteran Tin Processing Plant.

Four phases of drilling were undertaken at Dalcouth in order to improve the size and confidence of the existing JORC resource.

MGT Mining Limited, is currently seeking joint venture partners for its gold projects, the Pyramid Project (including EPM 12887) and the Southern Queensland Projects (including EPM 8402, EPM 12834 and EPM 15426).

Subsequent events

On 13[th] January 2014, it was resolved that Garimperos Pty Limited, the 100% subsidiary of MGT Mining Limited, the 89.48% subsidiary of MGT Resources Limited, undertake an equal access buy back of 3,807,080 shares in the capital of Garimperos Pty Limited held by MGT Mining Limited.

There has not been any other matter or circumstance apart from the above, occurring subsequent to the end of the financial period 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 Group in future financial years.

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Directors’ Report

Auditor’s independence declaration

The auditor’s independence declaration is included on page 5 of the financial report.

This directors’ report has been made and signed in accordance with a resolution of the directors made pursuant to s.306(3) of the Corporations Act 2001.

On behalf of the Director

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Gary Kuo Director Dated: 4[th] March 2014

DUNCAN DOVICO

Auditors’ Independence Declaration

In relation to our review of the financial report of MGT Resources Limited and its controlled entity for the half-year ended 31 December 2013, to the best of my knowledge and belief, there have been:

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

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

This declaration is in respect of MGT Resources Limited and its controlled entity during the half-year ended 31 December 2013.

DUNCAN DOVICO CHARTERED ACCOUNTANTS

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Paul Dovico Partner

Dated in Sydney, this 4[th] March 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 19 173 326 199 Liability limited by a scheme approved under Professional Standards Legislation

D U N C A N D O V I C O C H A R T E R E D A C C O U N T A N T S

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Directors’ Declaration

The directors of MGT Resources Limited and its controlled entities declare that:

• (a) The financial statements and notes of MGT Resources Limited and its controlled entities for the half-year ended 31 December 2013 are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2013 and of its performance for the half-year ended on that date; and

• (ii) complying with Accounting Standards ASRE 134 Interim Financial Reporting.

• (b) There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors made pursuant to s.303(5) of the Corporations Act 2001 .

On behalf of the Directors

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Gary Kuo Director Sydney Dated: 4[th] March 2014

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income

For The Half-Year Ended 31 December 2013

Revenues Other Revenue Expenses Other gains and losses Employee benefits expense Depreciation and amortisation expense Interest expense Administration expense Other expense Loss before tax Income tax (expense) benefit Loss after tax Loss for the year is attributable to: Owners of the parent Non-controlling interest Other comprehensive income Available-for-sale financial assets Total comprehensive income for the half-year Total comprehensive income attributable to: Owners of the parent Non-controlling interest Earnings per share (cents per share) Basic EPS for the half-year Diluted EPS for the half-year	Notes		Consolidated 31/12/2013 31/12/2012 $ $ 70,103 60,667 4,239 - (655,616) (615,280) (185,205) (183,802) (327,578) (132,668) (170,250) (176,659) (331,334) (307,113) (1,595,641) (1,354,855) - - (1,595,641) (1,354,855) (1,503,641) (1,152,422) (92,000) (202,433) (1,595,641) (1,354,855) (1,955) - (1,597,596) (1,354,855) (1,505,390) (1,152,422) (92,206) (202,433) (1,597,596) (1,354,855) (0.50) (0.42) (0.32) (0.43)	Consolidated 31/12/2013 31/12/2012 $ $ 70,103 60,667 4,239 - (655,616) (615,280) (185,205) (183,802) (327,578) (132,668) (170,250) (176,659) (331,334) (307,113) (1,595,641) (1,354,855) - - (1,595,641) (1,354,855) (1,503,641) (1,152,422) (92,000) (202,433) (1,595,641) (1,354,855) (1,955) - (1,597,596) (1,354,855) (1,505,390) (1,152,422) (92,206) (202,433) (1,597,596) (1,354,855) (0.50) (0.42) (0.32) (0.43)
	9 9			60,667 - (615,280) (183,802) (132,668) (176,659) (307,113)
				(1,354,855) -
				(1,354,855)
				(1,152,422) (202,433)
				(1,354,855)
				-
				(1,354,855)
				(1,152,422) (202,433)
				(1,354,855)
				(0.42) (0.43)

The above condensed consolidated statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes.

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Condensed Consolidated Statement of Financial Position As at 31 December 2013

ASSETS Current Assets Cash and cash equivalents Trade and other receivables Inventories Total Current Assets Non-current Assets Exploration and evaluation expenditure Other financial asset Plant and equipment Total Non-current Assets TOTAL ASSETS LIABILITIES Current 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 Non-controlling interest TOTAL EQUITY	Notes		Consolidated 31/12/2013 30/6/2013 $ $ 4,474,228 1,104,967 266,229 142,647 38,166 31,581 4,778,623 1,279,195 7,282,980 5,845,931 2,411 4,364 3,603,296 3,721,158 10,888,687 9,571,453 15,667,310 10,850,648 836,833 670,910 - 1,494,948 63,367 77,907 900,200 2,243,765 8,810,488 1,475,343 111,259 104,747 8,921,747 1,580,090 9,821,947 3,823,855 5,845,363 7,026,793 12,918,790 12,919,634 905,225 1,202,062 (8,687,436) (7,426,907) 708,784 332,004 5,845,363 7,026,793	Consolidated 31/12/2013 30/6/2013 $ $ 4,474,228 1,104,967 266,229 142,647 38,166 31,581 4,778,623 1,279,195 7,282,980 5,845,931 2,411 4,364 3,603,296 3,721,158 10,888,687 9,571,453 15,667,310 10,850,648 836,833 670,910 - 1,494,948 63,367 77,907 900,200 2,243,765 8,810,488 1,475,343 111,259 104,747 8,921,747 1,580,090 9,821,947 3,823,855 5,845,363 7,026,793 12,918,790 12,919,634 905,225 1,202,062 (8,687,436) (7,426,907) 708,784 332,004 5,845,363 7,026,793
	7 4 12 8			1,104,967 142,647 31,581
				1,279,195
				5,845,931 4,364 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

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Condensed Consolidated Statement of Cash Flow For The Half-Year Ended 31 December 2013

Cash flows from operating activities Payments to suppliers and employees Interest received Interest paid Other Net cash flows from (used in) operating activities Cash flows from investing activities Payment for property, plant & equipment Payments for exploration costs Net cash flow from (used in) investing activities Cash flows from financing activities Proceeds from issues of equity securities Proceeds from borrowings Payment for lease liabilities Net cash flow from (used in) financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period		Consolidated 31/12/2013 31/12/2012 $ $ (1,079,953) (1,346,138) 29,413 60,615 (120,000) (120,048) 7,490 1,580 (1,163,050) (1,403,991) (113,093) (149,144) (1,354,596) (549,782) (1,467,689) (698,926) - 1,538,785 6,000,000 - - (21,931) 6,000,000 1,516,854 3,369,261 (586,063) 1,104,967 3,185,842 4,474,228 2,599,779	Consolidated 31/12/2013 31/12/2012 $ $ (1,079,953) (1,346,138) 29,413 60,615 (120,000) (120,048) 7,490 1,580 (1,163,050) (1,403,991) (113,093) (149,144) (1,354,596) (549,782) (1,467,689) (698,926) - 1,538,785 6,000,000 - - (21,931) 6,000,000 1,516,854 3,369,261 (586,063) 1,104,967 3,185,842 4,474,228 2,599,779
			(1,346,138) 60,615 (120,048) 1,580
			(1,403,991)
			(149,144) (549,782)
			(698,926)
			1,538,785 - (21,931)
			1,516,854
			(586,063) 3,185,842
			2,599,779

The above condensed consolidated statement of cash flow should be read in conjunction with the accompanying notes

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Condensed Consolidated Statement of Changes in Equity For The Half-Year Ended 31 December 2013

CONSOLIDATED At 1 July 2013 (Loss) for the period Other comprehensive income Transfer to retained earnings Share based payment transaction Embedded derivative Transactions with Owners in their capacity as owners: Contributions of equity, net of transaction costs Transactions with non- controlling interests At 31 December 2013 At 1 July 2012 (Loss) for the period Transactions with Owners in their capacity as owners: Contributions of equity, net of transaction costs Business combination At 31 December 2012	Attributable to equity holders of the parent
	Fully paid ordinary shares Retained Earnings Reserves Non- controlling interests Total equity $ $ $ $ $
	12,919,634 (7,426,907) 1,202,062 332,004 7,026,793 - (1,503,641) - (92,000) (1,595,641) - - (1,749) (206) (1,955) - 711,843 (711,843) - - - - 227,160 - 227,160 - - 189,847 - 189,847 (844) - - - (844) - (468,731) (252) 468,986 3
	12,918,790 (8,687,436) 905,225 708,784 5,845,363
	9,831,962 (4,881,246) 1,942,503 (246,976) 6,646,243 - (1,152,422) - (202,433) (1,354,855) 3,160,414 - - - 3,160,414 (97,002) (97,002)
	12,992,376 (6,130,670) 1,942,503 (449,409) 8,354,800

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

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Notes to the Financial Statements

For The Half-Year Ended 31 December 2013

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

(a) Basis of Preparation

This general purpose condensed financial report for the half-year ended 31 December 2013 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001 .Compliance with AASB 134 Interim Financial Reporting ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting.

The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

It is recommended that the half-year financial report be read in conjunction with the annual report for the year ended 30 June 2013 and considered together with any public announcements made by MGT Resources Limited during the half-year ended 31 December 2013 in accordance with the continuous disclosure obligations of the ASX listing rules.

The same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial statements.

(b) Changes in Accounting Policies

The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current reporting period.

There are no new and revised standards and amendments or Interpretations effective for the current reporting period that are relevant to the Group.

The Group has not elected to early adopt any of the new standards or amendments that are issued but not yet effective.

2. GOING CONCERN

The half-year 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 31 December 2013 the consolidated entity incurred a net loss after tax of $1,595,641 and cash outflows from operating and investing activities of $2,630,739. The ability of the Group 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. 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.

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Notes to the Financial Statements

For The Half-Year Ended 31 December 2013

3. DIVIDENDS PAID OR PROPOSED

No dividends have been provided for or paid at the reporting date (30 June 2013: Nil).

4. EXPLORATION AND EVALUATION OF ASSETS

Balances at the beginning of the period Tenement abandonment Expenditure incurred during the year Balances at the end of the period	Half-year ended 31/12/2013 $ 5,845,931 - 1,437,049 7,282,980	Full year ended 30/6/2013 $ 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 asset may exceed its recoverable amount. The ultimate recoverability of exploration and evaluation expenditure is dependent upon the successful development and exploitation of the area of interest, or alternatively, by its sale.

5. SUBSEQUENT EVENTS

On 13[th] January 2014, it was resolved that Garimperos Pty Limited, the 100% subsidiary of MGT Mining Limited, the 89.48% subsidiary of MGT Resources Limited, undertake an equal access buy back of 3,807,080 shares in the capital of Garimperos Pty Limited held by MGT Mining Limited.

There has not been any other matter or circumstance apart from the above, occurring subsequent to the end of the financial period 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 Group in future financial years.

6. SEGMENT INFORMATION

MGT Resources Limited (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.

No revenue from this activity was earned in the six months to 31 December 2013 or the prior period, as the Group was still in the exploration and evaluation stage.

7. CASH AND CASH EQUIVALENTS

For the purposes of the Condensed Cash Flow Statement, cash and cash equivalents comprise the following at 31 December 2013:

Cash and cash equivalents	Half-year ended 31/12/2013	Full year ended 30/6/2013
	$ 4,474,228 4,474,228	$ 2,599,779
		2,599,779

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Notes to the Financial Statements

For The Half-Year Ended 31 December 2013

8. ISSUED SHARE CAPITAL

Issue of ordinary shares during the half-year

Share capital as at beginning of period October 2012 Issues of shares December 2012 Issues of shares Share capital as at the end of period Balance as at beginning of period Shares issued Capital raising costs Share capital as at the end of period 9. EARNINGS PER SHARE Basis earning per share Diluted earnings per share Basis earning per share The earning and weighted average number of ordinary share 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 share used in the calculation of diluted earning per share are as follows: Net loss Interest expense for the current year relating to the liability component of the convertible bonds 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	Half-year ended 31/12/2013 No of shares 288,157,040 - - 288,157,040 31/12/2013 $ 12,919,634 - (844) 12,918,790 Half-year ended 31/12/2013 Cents per share (0.50) (0.32) $ (1,434,094) (1,434,094) No. 288,157,040 $ (1,434,094) 327,578 (1,106,516) No. 340,579,328	Full year ended 30/6/2013 No of shares 268,635,040 13,212,000 6,310,000
		288,157,040
		31/6/2013 $ 9,831,962 3,375,920 (288,248)
		12,919,634
		Half-year ended 31/12/2012 Cents per share (0.42) (0.43) $ (1,152,422)
		(1,152,422) No. 275,003,420 $ (1,152,422) (132,619)
		(1,285,041) No. 297,503,420

MGT R ESOURCES L IMITED – H ALF -YEAR F INANCIAL R EPORT

Notes to the Financial Statements For The Half-Year Ended 31 December 2013

10. RELATED PARTY TRANSACTIONS

The following table provides the total amount of transactions which have been entered into with related parties during the six month period ending 31 December 2013 and 30 June 2013 as well as balances with related parties as of 31 December 2013 and 30 June 2013:

(a) Subsidiaries

(a) Subsidiaries
		Ownership	Ownership
		interest	interest
	Country of	31/12/2013	30/6/2013
Name of subsidiary	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 3.00% of the issued shares of MGT Mining Limited for a purchase consideration of $5,158,317.

• 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. Subsequent to year end it was resolved to undertake an equal access buy back of 3,807,080 shares in the capital of Garimperos Pty Limited. See Subsequent event note.

(b) Transactions with related parties

• (i) During the period to 31 December 2013, 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 $60,000.

• (ii) Li Hai Jun has accrued fees of $12,500 from MGT Resources Limited for his role as NonExecutive Director during the period to 31 December 2013 and has total accrued fees owing of $18,749.

• (iii) Robert Vagnoni has accrued fees of $12,500 from MGT Resources Limited for his role as Non-Executive Director during the period to 31 December 2013 and has total accrued fees owing of $47,915.

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Notes to the Financial Statements

For The Half-Year Ended 31 December 2013

11. SHARE-BASED PAYMENT

As at 31 December 2013, the Group has 12,800,000 share options outstanding to senior executives, directors and other parties. 8,800,000 share options were issued during the six month period ending 31 December 2013. The following share-based payment arrangements were in existence during the current and prior reporting periods:

Option	No. of	Grant date	Expiry date	Vesting	Exercise	Fair value at
series	options			Date	price	grant date ($)
					($)
A	250,000	14 June 2011	14 June 2014	Vest at date of	0.25	0.1075
				grant
B	300,000	17 October	17 October	Vest at date of	0.30	0.1109
		2011	2014	grant
C	1,200,000	25 November	25 November	Vest at date of	0.20	0.1262
		2011	2014	grant
D	2,250,000	25 November	25 November	Vest at date of	0.30	0.1102
		2011	2014	grant
E	6,800,000	7 November	7 November	Vest at date of	0.15	0.0288
		2013	2016	grant
F	2,000,000	17 December	17 December	Vest 2 years after	0.15	0.0288
		2013	2016	grant date

Movements in share options during the year

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

	31/12/2013	31/12/2013		30/6/2013	30/6/2013
	No. of options	Weighted		No. of options	Weighted
			average			average
		exercise				exercise
			price			price
			$			$
Balance at beginning of	6,000,000		0.2613	17,400,000		0.2366
year
Granted during the year	8,800,000		0.1500		-	-
Forfeited during the year		-	-		-	-
Exercised during the year		-	-		-	-
Expired during the year	(2,000,000)		0.0625	(11,400,000)		0.1750
Balance at end of the year	12,800,000		0.1977	6,000,000		0.2613
Exercisable at end of year		-	-		-	-

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Notes to the Financial Statements

For The Half-Year Ended 31 December 2013

12. BORROWINGS

12. BORROWINGS
Current Convertible note (i) Non-current Convertible note (ii) Convertible note (iii) Convertible note (iv) Convertible note (v)	Half-year ended 31/12/2013 $ - - 1,481,707 1,463,649 2,932,566 2,932,566 8,810,488	Full year ended 30/6/2013 $ 1,494,948
		1,494,948
		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 amount of $1,500,000 and a term of 2 years. Interest on the convertible note is payable at the rate of 8% per annum. The convertible notes may be redeemed or converted into 10,000,000 ordinary shares in the parent entity if the share price is 15 cents per share or less at maturity. The convertible note expired on 11 November 2013 and was rolled into a new convertible note (iii) below.

• (ii) The parent entity, MGT Resources Limited issued convertible notes to Armstrong Industries HK Limited on 11 May 2012 with a principal amount of $1,500,000 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 7,500,000 ordinary shares in the parent entity if the share price is 20 cents per share or less at maturity.

• (iii) The parent entity, MGT Resources Limited issued convertible notes to Armstrong Industries HK Limited on 11 November 2013 with a principal amount of $1,500,000 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 17,142,857 ordinary shares at a conversion price of $0.0875 per share.

• (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 convertible notes have been accounted for in accordance with AASB 139: Financial Instruments: Recognition and Measurement. Both a liability and an equity instrument have been recognised as at 31 December 2013.

DUNCAN DOVICO

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

Report on the Condensed Half-year Financial Report

We have reviewed the accompanying half-year financial report of MGT Resources Limited and its controlled entity, which comprises the statement of financial position as at 31 December 2013 and statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, other selected explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year ended 31 December 2013.

Directors’ responsibility for the half-year financial report

The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes: establishing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that it 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.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of Interim and Other Financial Reports Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2013 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of MGT Resources Limited and its controlled entities during the half-year ended 31 December 2013, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

D U N C A N D O V I C O C H A R T E R E D A C C O U N T A N T S 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 19 173 326 199 Liability limited by a scheme approved under Professional Standards Legislation

DUNCAN DOVICO

Independence

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

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of MGT Resources Limited and its controlled entities is not in accordance with the Corporations Act 2001, including :

• (i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2013 and of its performance for the half-year ended on that date; and

• (ii) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

Material uncertainty regarding continuation as a going concern

Without qualification to the opinion expressed above, we draw attention to the financial report which indicates that the Company incurred a net loss of $1,595,641 during the year ended 31 December 2013 and had net operating and investing cash outflows of $2,630,739 over the same period.

As disclosed in note 2 the financial statements have been prepared on a going concern basis. Notwithstanding this, the ability of the Company to continue as a going concern is dependent on the ability of the Company to raise additional capital or establish sufficient revenue streams. Should additional capital not be raised or revenue streams generated then there is a material uncertainty which may cast significant doubt as to 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.

DUNCAN DOVICO CHARTERED ACCOUNTANTS

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Paul Dovico Partner

Dated in Sydney, this 4[th] March 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 19 173 326 199 Liability limited by a scheme approved under Professional Standards Legislation

D U N C A N D O V I C O C H A R T E R E D A C C O U N T A N T S