Celsius Resources Limited — Annual Report 2013

Sep 26, 2013

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ANNUAL REPORT

2013

CORPORATE DIRECTORY

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DIRECTORS

Alexander Molyneux (Executive Chairman) Alistair Muir (Technical Director) William Oliver (Non-Executive Director) Ranko Matic (Non-Executive Director)

COMPANY SECRETARY

Ranko Matic

REGISTERED OFFICE & CONTACTS

Level 1 12 Kings Park Road WEST PERTH WA 6005 Ph: +61 8 9226 4500 Fax: +61 8 9226 4300 Web: www.celsiuscoal.com.au Stock Exchange Listing - ASX Code: CLA

SOLICITORS

Steinepreis Paganin

Level 4 The Read Buildings 16 Milligan Street PERTH WA 6000 Ph: +61 8 9321 4000 Fax: +61 8 9321 4333

AUDITORS

RSM Bird Cameron Partners 8 St Georges Terrace PERTH WA 6000 Ph: +61 8 9261 9100 Fax: +61 8 9261 9101

SHARE REGISTRY

Automic Registry Services Suite 1A, Level 1 7 Ventnor Avenue WEST PERTH WA 6005 Telephone: +61 8 9324 2099

DIRECTORS’ REPORT

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Your directors present their report, together with the financial statements on the consolidated entity, consisting of Celsius Coal Limited and the entities it controlled at the end of, or during, the year ended 30 June 2013.

DIRECTORS

The names of directors in office at any time during or since the end of the year are listed below. Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

NAME OF PERSON POSITION DATE APPOINTED / RESIGNED Mr Alexander Molyneux Executive Chairman Appointed 1 December 2012 Mr Peter O’Malley Non-Executive Chairman Resigned 5 November 2012 Mr Grant Thomas Managing Director Resigned 30 April 2013 Mr William Oliver Non-Executive Director Mr Ranko Matic Non-Executive Director Appointed 5 November 2012 Mr Alistair Muir Technical Director Appointed 1 May 2013

COMPANY SECRETARY

Mr Ranko Matic held the position of company secretary during and at the end of the financial year.

OPERATING RESULTS

The consolidated loss of the consolidated entity amounted to $6,794,262 (2012: profit $642,397) after providing for income tax and eliminating non-controlling equity interests.

CORPORATE

In May 2013 the Company announced changes to its Board and management team.

Grant Thomas, the Company’s Managing Director, informed Celsius of his resignation as an Executive Director of Celsius to pursue other interests, but has agreed to remain a consultant to the Company.

Alistair Muir, previously Celsius’ Country Manager in Kyrgyz Republic has been promoted to the position of Technical and Operations Director. In that capacity he has joined the Company’s Board and is responsible for managing the Company’s technical development.

The Company also appointed Matthew O’Kane as Chief Financial Officer. Before joining Celsius, Mr. O’Kane was Chief Financial Officer of SouthGobi Resources Ltd. (TSX: SGQ, HKEX: 1878), a coal development and production company that was a leading supplier of coking coal to China.

Executive Director of Celsius’ Kyrgyz subsidiary, Asia Pacific Resources LLC, Nazariy Terlyga was promoted to the broader role of General Manager, Kyrgyz Operations for the Company.

At the end of the year, Celsius had cash of $2.3 million, and access to a further $5.0 million pursuant to a convertible note with its major shareholder. Importantly, the convertible note can be converted to equity at Celsius’ election 12 months after draw-down with a floor price of 2.5 cents (see ASX announcement 7 Feb 2013 - Celsius Secures A$10m in Strategic Funding from Blumont).

DIVIDENDS

No dividends were paid or declared since the start of the financial year. No dividend has been recommended.

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DIRECTORS’ REPORT

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PRINCIPAL ACTIVITIES

During the year the principal continuing activities of the consolidated entity consisted of mineral exploration and mineral extraction via joint venture arrangements.

On 18 June 2012, Celsius Coal announced it had entered into an agreement to acquire the interests in three prospective coking coal tenements (Tuyuk-Kargasha, Kokkia and Min-Teke tenements) located in the Uzgen coal basin in Kyrgyzstan. The agreement has Celsius Coal acquiring 80% of the issued shares of Kokkia Coal Limited (an entity incorporated in Hong Kong). Kokkia holds a 100% interest in the three tenements, through two incorporated wholly owned subsidiaries. The transaction was completed on 25 October 2012.

There were no other significant changes in the nature of the activities of the group during the year.

REVIEW OF OPERATIONS

Kyrgyz Republic Coal Projects

Uzgen Basin:

During the year the Company completed its maiden drill programme at its Uzgen Basin Coking Coal Project located in Central Kyrgyzstan. The Company completed seven drill holes at Tuyuk Kargasha for 3,230.5 metres and three at Min Teke for 560.4 metres. All holes successfully intersected coal seams and these intercepts have been confirmed by laboratory analysis. Based on results from the programme, as well as extensive compilation and validation of historical Soviet drilling, the Company announced its maiden Inferred JORC (2004) resource of 255Mt.

Table 1: Inferred JORC (2004) Code Resources at Uzgen Basin Coking Coal Project

				Volatile
	Inferred	Ash	Inherent	Matter	Total Sulphur
Project Area	Resource Mt	% (ad)	Moisture %	% (ad)	% (db)
Kargasha**	230	12.7	1.3	31.6	0.64
Kokkia**	25	9.9	1.2	29.5	0.65
Total	255	12.4	1.3	31.4	0.64

** Note: For Kargasha, 50Mt of the estimated Resource, and the total estimated Resource for Kokkia, are derived from areas outside the last points of observation but have been included in the Resource Statement because of the strong evidence of geological continuity based on adits and trenching.

The Inferred Resource of 230 million tonnes at Kargasha is contained in 11 seams across the tenement and is based on the seven fully cored drill holes completed by Celsius in 2012, 60 Soviet era drill holes (approximately 29,000m) SV001060 completed 1945-1954 and circa 164 adits developed between 1945-1954.

The Resource estimate at Kokkia is based on extrapolation of the Kargasha Resource model and circa 16 adits / trenches developed between 1942-1954.

For further details on the Company’s JORC resource please refer to the ASX announcement made on March 15th, 2013.

Following completion of the resource estimation the Company initiated a number of studies to assess the economic

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DIRECTORS’ REPORT

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viability of its Uzgen Basin Projects, including a mining study, a marketing study and an assessment of potential transport options.

The mining study initiated is a high level concept study to help define target start-up areas and mining methods. This study is still in progress. In brief the study is considering a combination of open-cut, underground and auger mining methods. The goal of this study is to consider the relative costs and recoveries of different mining methods and to highlight areas of the resource that could be expected to provide the best return for mining operations.

The marketing study undertaken by Bryanston confirmed that the coking coal market in the Chinese province neighbouring the Kyrgyz Republic of Xinjiang is poised for strong growth. This growth is being driven by rapid growth in steel making capacity and a lack of local coking coal resources. Evidencing this Bryanston identified that a demandsupply gap had already emerged and was going to widen significantly as new steel making capacity was commissioned. These fundamentals are already driving price increases for coking coals in Xinjiang and Bryanston’s forecast is that this will continue regardless of price movements in the seaborne market. For further details of the marketing study please refer to the ASX announcement made on June 11[th] , 2013.

The Company commenced its 2013 drilling programme in July 2013. This program will be more extensive than Celsius’ maiden drill program in 2012 and will involve more work focused to support a mining license application and subsequent production. A number of larger diameter PQ core holes will be drilled to procure samples that will be used to more accurately determine certain coking coal specifications, particularly coke strength after reaction (CSR). Additionally, environmental base line and geotechnical data will be collected for mining studies.

Celsius remains fully funded for all of this work. For further details regarding the Company’s current exploration works please refer to the ASX announcement made on July 9[th] 2013. Figure 1 below shows the locations where the drilling will be undertaken for the 2013 program, as well as historical drill hole locations.

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DIRECTORS’ REPORT

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Figure1: Project area - Planned drill holes for 2013 as well as historical drilling locations

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Alai Ranges:

During the past year the company commenced mining operations at the Sary Mogul deposit. Efforts to secure sales contracts at positive cash margins however were not successful and as a result management made a decision to suspend mining operations pending an internal review. This review determined that there was currently insufficient demand for the coal products from Sary Mogul, which in turn created a negative cash margin for coal sales. As management were unable to determine a future period where this market environment may change to produce a positive economic outcome for Sary Mogul a decision has been made to place the site on care and maintenance and to impair the assets associated with this license.

In June of 2013 the company applied to renew the license held for the Bel Alma coal deposit. The Kyrgyz government did not approve the extension of the license, and as of July 27[th] 2013 the current license for this deposit has expired. Due to the fact that the company no longer holds a valid license for this deposit the Company has acted in accordance with IFRS accounting principles and has impaired the assets associated with this deposit.

The Company is still holding discussions with the Kyrgyz government regarding extension of the license for Bel Alma and is considering options for action internally and with legal counsel. We will provide an update on progress as information becomes available.

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DIRECTORS’ REPORT

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Infrastructure

Celsius continues to monitor the progress of the Trans-Asia Railway, which is currently anticipated to be completed by the end of 2016. The current mapped route comes within 10 kilometers of Celsius’ Uzgen Basin Coking Coal Project (Figure 2) and will connect to the existing Chinese railway network at Kashgar (Kashi) in Xinjiang.

Celsius plans to undertake a more detailed study of the existing transport options to facilitate coal export prior to completion of the Trans-Asia Railway. For the Uzgen Basin coking coal projects, the Company has identified a route for export to China via Osh and then the Irkeshtam border crossing between the Kyrgyz Republic and China which uses generally paved and rehabilitated roads (Figure 2). This route is approximately 385km in length and the Company has estimated a transport cost of approximately $10 per tonne to the Kyrgyz Republic-China border utilizing this route. A more detailed transport study will provide more exact costings and identify potential bottlenecks on the route.

Figure 2 – Location of Celsius’ projects and export routes including the proposed Trans-Asia Railway

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Carnilya Hill Joint Venture

Celsius (through View Nickel Pty Ltd) owns a 30% joint venture interest in the Carnilya Hill Joint Venture in Western Australia with Mincor Resources NL ( Joint Venture ). Mincor Resources NL ( Mincor , ASX:MCR) is the operator of the Carnilya Hill JV. The tenements covered by the Camilya Hill Joint Venture (JV) include Mining Licences M26/47, M26/48, M26/49 and M26/453.

During the year the Carnilya Hill site remained on care and maintenance. The Joint Venture incurs nominal running costs to ensure the site is kept secure, safe and well maintained. Exploration continues on the tenements comprising the Joint Venture, and is managed by Mincor as the Operator of the Joint Venture. Results from exploration programmes will be released as they become available.

West Australian Regional Nickel Exploration

Over the year the Company continued to compile all data relevant to E39/1641 and E39/1684 in the Eastern Goldfields region of Western Australia. The tenements are located near to Minara Resources’ Murrin Murrin mine and the NiWest operation currently under development by GME Resources Ltd and are believed to have potential for both nickel laterite and nickel sulphide mineralisation. In due course, the Company may consider divesting its nickel interests, either through a partial or outright sale, or by spinning out the assets into a new public vehicle.

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DIRECTORS’ REPORT

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Competent Person’s Statement

The information in this announcement that relates to resource estimates initially reported to the ASX on 15[th] March 2013 (Celsius Establishes Maiden JORC Resource at Uzgen Basin) and is based on information compiled by Dr Gavin Springbett, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy. Dr Springbett is acting as a consultant to Celsius Coal Limited and is an employee of G&S Resources. Dr Springbett has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Springbett consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

Further the company confirms it is not aware of any new information, or data which materially affects the original announcement and that all material assumptions and technical parameters underpinning the resource estimates are unchanged. In addition the company confirms that the form and context in which the CP’s findings are presented have not been materially modified.

FINANCIAL POSITION

The net assets of the consolidated group have increased to $20,213,804 as at 30 June 2013, an increase of $12,539,146 from net assets of $7,674,658 at 30 June 2012.

The consolidated group’s net working capital, being current assets less current liabilities is $2,466,484 (2012: $2,450,167).

EVENTS AFTER THE REPORTING PERIOD

The Group applied to renew the license it held for the Bel Alma coal deposit in June 2013, however the Kyrgyz government did not approve the extension of the license, and as a result as of July 27[th] 2013 the current license for this deposit has expired. Due to the fact that the company no longer holds a valid license for this deposit the Company has acted in accordance with IFRS accounting principles and has impaired the assets associated with this deposit. The Company continues to hold discussions with the Kyrgyz government regarding extension of the license for Bel Alma and is considering options for action internally and with legal counsel.

On 7th August 2013 and 6[th] September 2013, a total of 10,000,000 options at $0.01 each were exercised providing the company with $100,000.00 in funds and resulting in the issuing of 10,000,000 shares.

On 1 July 2013, the Convertible Note Facility, provided by Blumont became available. The Convertible Note Facility was advised to the market on ASX release dated 7 February 2013 and advised that the Company would be able to draw between $3 million and $5 million (at the Company’s option) after 30 June 2013. The Convertible Notes will carry the interest rate of 12.5% per annum payable half-yearly. The Convertible Notes will be convertible into ordinary shares of Celsius Coal based on the 20-day volume weighted average share price prior to conversion and subject to a floor price of $0.025 per share and a cap of $0.030 per share. Blumont will have the right to call conversion anytime after issuance and the Company will have the right to call conversion anytime from 12-months after issuance, with any conversion subject to the condition that it does not result in a voting interest exceeding 19.90% of Celsius Coal.

On 25th September 2013, the Company made its first drawing under the Convertible Note Facility for $2 million with funds to be utilised in covering the costs of the exploration program and administrative overheads of the Company.

Other than the above, the directors are not aware of any other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years.

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DIRECTORS’ REPORT

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LIKELY DEVELOPMENTS

The Directors believe, on reasonable grounds, that to include in this report particular information regarding likely developments in the operations of the Company and the expected results of those operations in future financial years would be speculative and likely to result in unreasonable prejudice to the Company. Accordingly, this information has not been included in this report.

ENVIRONMENTAL REGULATION

The Company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory.

The directors have considered the enacted National Greenhouse and Energy Reporting Act 2007 (the NGER Act) which introduces a single national reporting framework for the reporting and dissemination of information about the greenhouse gas emissions, greenhouse gas projects, and energy use and production of corporations. At the current stage of development, the directors have determined that the NGER Act will have no effect on the Company for the current or subsequent financial year. The directors will reassess this position as and when the need arises.

INFORMATION ON DIRECTORS

Mr Alexander Molyneux	Executive Chairman
Qualifications	Bachelor degree in Economics, Monash University in Australia
	Member of the Canadian Institute of Corporate Directors
Experience	Mr. Molyneux serves as Chairman of Azarga Resources Limited, which acquired the
	largest known uranium deposit in Kyrgyz Republic. He also serves as a Non-Executive
	Director of Ivanhoe Energy Inc. since mid-2010. From 2009 to 2012, Mr. Molyneux was
	President, Chief Executive Officer and a Director of SouthGobi Resources Limited (TSX:
	SGQ, HKEX: 1878). Under his leadership, this company became the largest foreign
	operator in Mongolia's coal sector. The company also completed a sovereign wealth
	fund financing and main board listings on the Toronto Stock Exchange and then
	subsequently Hong Kong Stock Exchange. Mr. Molyneux departed his position at
	SouthGobi pursuant to the acquisition of control by Rio Tinto.
	Prior to joining SouthGobi Mr. Molyneux was Managing Director, Head of Metals &
	Mining Investment Banking, Asia Pacific, with Citigroup. In his position as a specialist
	resources investment banker he spent approximately 10 years providing advice and
	investment banking services to mining and industrial corporations. Mr. Molyneux has
	advised on public offerings, mergers and acquisitions, bond and debt offerings totalling
	several billion dollars. He joined Citigroup from UBS in early-2007 where he had held a
	similar position.
Interest in Shares and Options	12,750,000 fully paid ordinary shares 25,000,000 Performance Rights – Class A
	20,000,000 Class C Unlisted Options, exercisable at $0.02 and expiring 21/02/2015
Directorships held in other	Non Executive Director of Ivanhoe Energy Inc. (TSX)
listed entities	Non Executive Director of Goldrock Mines Corp..(TSX-V)
Mr Alistair Muir	Technical & Operations Director
Qualifications	Bachelor of Applied Science in Geology, University of South Australia Graduate Diploma
	in Management, University of South Australia, Member of AusIMM
Experience	Mr Muir has over 20 years experience in senior geological roles and leading major
	exploration and development projects. These have primarily been in the bulk commodity
	areas of steaming/coking coal and iron ore but with some significant experience in the

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DIRECTORS’ REPORT

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sedimentary hosted uranium environment.

Mr Muir’s coal experience extends over some 15 years initially working with major steaming coal development projects at the feasibility and operation level and later in a consulting capacity looking at a number of eastern seaboard steaming and coking coal projects both open pit and underground. His experience extends to all aspects of mine evaluation including optimisation of mining method, environmental, geotechnical, hydrogeological and financial evaluation. Mr. Muir is well versed in managing the regulatory environment including occupational health and safety. He has a strong track record in effective community engagement with a major focus on environmental sustainability.

Mr Muir has considerable experience in the building and management of a multidiscipline team in overseas environments. With recent MBA studies he has some of the latest thinking on organisational culture and team development. He has experience in both Kyrgyzstan and Eastern Africa.

He is a member of AusIMM and is appropriately experience and credentialed to be recognized as being a competent person for JORC purposes.

Interest in Shares and 635,000 Ordinary Shares Options 2,000,000 Unlisted employee options exercisable at $0.02 and expiring on 21/02/2016 Directorships held in other Nil listed entities

Mr William Oliver Director (Non-executive) Qualifications BSc (Hons), GDipAppFin (FINSA), MAIG, MAusIMM. Experience Mr Oliver was appointed to the position of director on 23 December 2011. Mr Oliver has 12 years’ experience in the international resources industry working for both major and junior companies. He holds an honours degree in Geology from the University of Western Australia as well as a post-graduate diploma in finance and investment from FINSIA.

Mr Oliver has led large scale resource definition projects for Rio Tinto and previously worked in near mine exploration/resource definition roles for New Hampton Goldfields and Harmony Gold. He managed exploration in Portugal for Iberian Resources Limited including target generation and grassroots exploration across a range of commodities.

More recent roles include Exploration Manager for Bellamel Mining and BC Iron and he is currently Managing Director of Signature Metals (ASX:SBL). He has wide-ranging exploration experience including expertise in near-mine exploration/resource extension and resource definition as well as significant experience in the technical and economic evaluation of resources projects. Interest in Shares and 4,000,000 ordinary shares Options 5,000,000 Unlisted Class A options exercisable at $0.02 and expiring on 31/10/2014

Directorships held in other Non-Executive Director of Signature Metals Ltd (1 October 2008 to 4 October 2012). listed entities

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DIRECTORS’ REPORT

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Mr Ranko Matic

Non-Executive Director and Company Secretary

Qualifications B.Bus, CA

Experience Over 20 years experience in the areas of financial and executive management, accounting, audit, business and corporate advisory. Ranko has considerable experience in a range of industries with particular exposure to public listed companies and large private enterprises. He is a Director of a Chartered Accounting firm and a Corporate Advisory company based in Perth, Western Australia and has specialist expertise and exposure in the areas of audit, corporate services, due diligence, mergers and acquisitions, and valuations. Through these positions Mr Matic has been involved in an advisory capacity in over 40 initial public offerings on the ASX in the last 10 years, as well as several recapitalisations of public listed companies.

Interest in Shares and 3,000,000 ordinary shares. Options Directorships held in other Non-Executive Director of East Energy Resources Ltd (since 13 July 2007). listed entities Non-Executive Director of Core Services Group Limited (since 6 Feb 2012)

MEETING OF DIRECTORS

Name	**Number of meetings **	Number eligible to attend	Number attended
Alexander Molyneux	2	2	2
Alistair Muir	3	0	0
Bill Oliver	3	3	3
Grant Thomas	3	3	3
Peter O’Malley	3	1	1
Ranko Matic	3	3	3

There were 3 directors meetings held during the financial year, however many board matters were dealt with via circular resolutions. The Consolidated Entity does not have a formally constituted audit committee or remuneration committee as the board considers that the Consolidated Entity’s size and type of operation do not warrant such committees.

NON-AUDIT SERVICES

An amount of $nil (2012: $28,254) was paid to RSM Bird Cameron for corporate advisory services. Further details are set out in Note 15 of the financial statements.

The board of directors is satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of nonaudit services by the auditor, as set out in Note 15 of the financial statements, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the auditor;

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants .

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DIRECTORS’ REPORT

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INSURANCE OF OFFICERS

For the year ended 30 June 2013, all directors and the specified executives of the consolidated group were insured by the Company. The insurance covers legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. The premiums for the directors amounted $10,175 including GST (2012: $13,467).

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.

AUDITORS’ INDEPENDENCE DECLARATION

A copy of the auditors’ Independence declaration as required under section 307C of the Corporations Act 2001 is included within this financial report.

AUDITOR

RSM Bird Cameron were appointed as the Group’s auditors at the 2011 Annual General Meeting and continues in office in accordance with section 327 of the Corporations Act 2001.

SHARES UNDER OPTION

At the date of this report there are 282,000,000 unissued ordinary shares in respect of which options are outstanding.

Expiry date	Grant Date	Exercise price	Number of options
31 March 2014	23 February 2011	$0.01	160,000,000
31 October 2014	31 October 2012	$0.02	30,000,000
21 February 2015	23 January 2013	$0.02	20,000,000
21 February 2016	17 February 2013	$0.02	2,000,000
10 April 2016	17 May 2013	$0.025	25,000,000
20 May 2016*	20 May 2013	$0.02	15,000,000
20 May 2016*	20 May 2013	$0.035	15,000,000
20 May 2016*	20 May 2013	$0.05	15,000,000
Total number of options outsta	nding at the date of this report		282,000,000

Total number of options outstanding at the date of this report

• These options are yet to achieve vesting conditions.

Subsequent to 30 June 2013, 10,000,000 options with grant date 23 February 2011 and expiry date 31 March 2014 with exercise price of $0.01 were exercised, raising $100,000.

No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate. There were no shares issued on the exercise of options during the year.

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DIRECTORS’ REPORT

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REMUNERATION REPORT (Audited)

This report details the nature and amount of the remuneration for each key management person of Celsius Coal Limited and for the executives receiving the highest remuneration for 30 June 2013.

The remuneration report is set out under the following headings:

• A Principles used to determine the nature and amount of remuneration

• B Details of remuneration

• C Service agreements D Share-based compensation

The information provided under headings A-D includes remuneration disclosures that are required under accounting Standard AASB 124 Related Party Disclosures. These disclosures have been transferred from the financial report and have been audited.

A. Principles used to determine the nature and amount of remuneration (audited)

In determining competitive remuneration rates, the Board, acting in its capacity as the remuneration committee, seeks independent advice on local and international trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes benefit plans and share plans. Independent advice may be obtained to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive reward practices.

The Board recognises that Celsius Coal Limited operates in a global environment. To prosper in this environment we must attract, motivate and retain key executive staff.

Market Comparisons

Consistent with attracting and retaining talented executives, the board endorses the use of incentive and bonus payments. The board will continue to seek external advice to ensure reasonableness in remuneration scale and structure, and to compare the Company’s position with the external market. The impact and high cost of replacing senior employees and the competition for talented executives requires the committee to reward key employees when they deliver consistently high performance.

Board Remuneration

Shareholders approve the maximum aggregate remuneration for non-executive directors, which currently stands at $300,000 per annum, as approved by shareholders at the Annual General Meeting on 21 November 2006. The Board determines actual payments to directors and reviews their remuneration annually based on independent external advice with regard to market practice, relativities, and the duties and accountabilities of directors. A review of directors’ remuneration is conducted annually to benchmark overall remuneration including retirement benefits.

Performance-based Remuneration

The Company has established a Performance Rights Plan (PRP) to provide ongoing incentives to Directors, Executives and Employees of the company.

The objective of the PRP is to provide the Company with a remuneration mechanism, through the issue of securities in the capital of the Company, to motivate and reward the performance of the Directors and employees in achieving specified performance milestones within a specified performance period. The Board will ensure that the performance

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DIRECTORS’ REPORT

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milestones attached to the securities issued pursuant to the PRP are aligned with the successful growth of the Company’s business activities.

The Directors and employees of the Company have been, and will continue to be, instrumental in the growth of the Company. The Directors consider that the PRP is an appropriate method to:

• (a) reward Directors and employees for their past performance;

• (b) provide long term incentives for participation in the Company’s future growth;

• (c) motivate Directors and generate loyalty from senior employees; and

• (d) assist to retain the services of valuable Directors and employees.

Group Performance, Shareholder Wealth and Directors and Executives Remuneration

The remuneration policy has been tailored to increase the direct positive relationship between shareholders investment objectives and director’s and executive’s performance. Currently, directors and executives are encouraged to hold shares in the Company to ensure the alignment of personal and shareholder interests. The Group provides performance based remuneration via their Performance Rights Plan. Currently only 25,000,000 Performance Rights under this plan have been issued, to Alexander Molyneux in February 2013.

The following summarises the performance of the Group over the last 5 financial years:

	2009	2010	2011	2012	2013
Revenue ($)	272,771	362,329	149,904	560,844	256,016
Net profit/(loss) after income tax ($)	(5,659,139)	6,865,934	38,347,749	642,397	(6,794,262)
Share price at year end (cents/share)	Suspended	Suspended	0.014	0.024	0.015
Dividends paid (cents/share)	-	-	-	-	-

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DIRECTORS’ REPORT

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B. Details of remuneration (audited)

Amounts of remuneration

The remuneration for each director and each executive officer of the Company receiving the highest remuneration during the year was as follows:

2013

Key Management Person Mr G Thomas (1) Mr P O’Malley (2) Mr A Molyneux Mr A Muir Mr W Oliver Mr R Matic (3) Mr M O’Kane (4)

Short-term Benefits Post- employment Benefits Other Long Term Benefits Share based Payments Cash, salary & Commissions Cash profit Share Non-Cash Benefit Other Super- annuation Other Equity (Shares & Performan ce Rights) Options Total Performance Related Remuneration Consisting of Options $ $ $ $ $ $ $ $ $ % % 309,904 - - - 28,875 - - 235,833 574,612 - 41.04% 25,000 - - - - - - - 25,000 - - 204,167 - - - - - 337,850 201,000 743,017 45.47% 27.05% 199,135 - - - 17,827 - - 21,251 238,213 - 8.92% 60,000 - - - - - - 47,167 107,167 - 44.01% 24,500 - - - - - - - 24,500 - - 43,996 - - - - - - - 43,996 - -

866,702 - - - 46,702 - 337,850 505,251 1,756,505

1 Mr Thomas resigned 30 April 2013, thus although KMP during the year, he was not KMP at year end. 2 The above are solely Director Fees. Cash from other activities paid to Mr O’Malley are paid to Kenosis Capital Partners, a company with which Mr O’Malley is a founding partner. The payments are for advisory services on the global natural resource sector. Note: Mr O’Malley resigned 5 November 2012, thus although KMP during the year he was not KMP at year end. Payments to Kenosis Capital Partners are disclosed in Note 14 (d) of these financial statements.

3 The above are solely Director Fees. Cash from other activities paid to Mr Matic are paid to Bentleys (WA) Pty Ltd and Capital and Corporate Advisors Pty Ltd, company with which Mr Matic is a shareholder and director. The payments are for the provision of tax advisory services, corporate secretarial and accounting services and disclosed in Note 14 (d) of these financial statements. Mr Matic was reappointed on 5 November 2012. 4 Mr O’Kane was appointed as the Group Chief Financial Officer on 1 May 2013

2012

Key Management Person Mr G Thomas Mr P O’Malley(1) Mr W Oliver(2) Mr R Matic(3) Mr S Mackinnon(4)

Short-term Benefits Post- employment Benefits Other Long-term Benefits Share based Payment Cash, salary & Commissions Cash Profit Share Non-Cash Benefit Other Super- annuation Other Equity Options Total Performance Related Remuneration Consisting of Options $ $ $ $ $ $ $ $ $ % % 78,360 - - - 7,052 - - - 85,412 - - 18,750 - - - - - - - 18,750 - - 42,000 - - - - - - - 42,000 - - 31,500 - - - - - - - 31,500 - - 31,500 - - - - - - - 31,500 - -

202,110 - - - 7,052 - - - 209,162

1 The above are solely Director Fees. Cash from other activities paid to Mr O’Malley are paid to Kenosis Capital Partners, a company with which Mr O’Malley is a founding partner. The payments are for advisory services on the global natural resource sector. 2 The above are solely Director Fees. Cash from other activities paid to Mr Oliver are paid to Billandbry Consulting Pty Ltd a company with which Mr Oliver is a shareholder and director. The payments are for the provision of geological consulting services and disclosed in Note 14 (d) of these financial statements. 3 The above are solely Director Fees. Cash from other activities paid to Mr Matic are paid to Bentleys (WA) Pty Ltd and Capital and Corporate Advisors Pty Ltd, company’s with which Mr Matic is a shareholder and director. The payments are for the provision of tax advisory services, corporate secretarial and accounting services and disclosed in Note 14 (d) of these financial statements. Note: Mr Matic resigned 1 April 2012, thus although KMP during the year he was not KMP at year end. 4 Mr Mackinnon resigned 1 April 2012, thus although KMP during the year he was not KMP at year end.

15

DIRECTORS’ REPORT

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C Service agreements (audited)

There were no key management personnel that have or had service agreements for the year ended 30 June 2013, other than as disclosed below.

Employment Contracts Of Directors and Executives

Each member of the Company’s executive management team are employed on open ended employment contracts between the individual employee and the Company.

Non Executive Directors Mr Matic and Mr Oliver are not employed on a formal contract.

The below is as at the date of the financial report.

Key Management Person	Appointment	Term of Agreement	Base Salary (excludes GST) $ p.a.	Termination Benefit
Alex Molyneux	Executive Chairman	No fixed term	350,000	3 months
Alistair Muir	Technical Director	No fixed term	275,000	6 months
Willam Oliver	Non-Executive Director	No fixed term	60,000	Nil
Ranko Matic	Non-Executive Director	No fixed term	42,000	Nil
Matthew O’Kane	Chief Financial Officer	No fixed term	250,000(USD)	6 months

D Share-based compensation (audited)

Options

The following options were granted and share based compensation provided during the financial year affecting remuneration in this or future reporting periods.

Date	Item	KMP	Amount	Expiry	Terms
31/10/2012	Options	Grant Thomas	25,000,000	31/10/14	Exercisable at $0.02
31/10/2012	Options	Bill Oliver	5,000,000	31/10/14	Exercisable at $0.02
23/01/2013	Options	Alex Molyneux	20,000,000	21/02/15	Exercisable at $0.02
17/02/2013	Options	Alistair Muir	2,000,000	21/02/16	Exercisable at $0.02
23/01/2013	Performance	Alex Molyneux	25,000,000	n/a	As detailed in Notice of Meeting dated
	Rights				21/12/12

As part of his employment agreement, Mr Matthew O’Kane is to be issued 10,000,000 options exercisable at $0.02 and expiring in 3 years. These options have yet to be issued.

As part of his employment agreement, Mr Alistair Muir is to be issued 10,000,000 options, exercisable at $0.02 and expiring in 3 years. These are to be issued pending shareholder approval to be sought at the Company’s Annual General Meeting in November 2013

The Board has agreed to issue Mr Ranko Matic with 2,500,000 options, exercisable at $0.02 and expiring in 3 years. These are to be issued pending shareholder approval to be sought at the Company’s Annual General Meeting in November 2013.

END OF REMUNERATION REPORT

16

DIRECTORS’ REPORT

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This directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors.

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Alexander Molyneux Executive Chairman

Dated this 27[th] day of September 2013

17

CORPORATE GOVERNANCE STATEMENT

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CORPORATE GOVERNANCE STATEMENT

The Board has reviewed its current practices in light of the revised ASX Corporate Governance Principles and Recommendations with a view to making amendments where applicable after considering the Company's size and the resources it has available.

As the Company's activities develop in size, nature and scope, the size of the Board and the implementation of any additional formal corporate governance committees will be given further consideration.

The Board sets out below its “if not why not” report in relation to those matters of corporate governance where the Company’s practices depart from the Recommendations.

	**RECOMMENDATION **	COMMENT
1.	Lay solid foundations for management and oversight
1.1	Formalise and disclose the functions reserved to the board and those delegated to management.	Adopted. The Company’s Corporate Governance Policy includes a Board Charter, which discloses the specific responsibilities of the board.
1.2	Companies should disclose the process for evaluating the performance of senior executives.	Adopted. The board will monitor the performance of senior management, including measuring actual performance of senior management against planned performance. The board has adopted a policy to assist in evaluating Board performance under section 9 of its Corporate Governance Policies (Performance Evaluation Practices).
1.3	Companies should provide the information indicated in the_Guide to reporting on Principle_ 1.	Adopted. Board Charter available at the Company’s website
2.	Structure the board to add value
2.1	A majority of the board should be independent directors.	Adopted. The Company has 2 independent Directors from a total of four Directors.
2.2	The chairperson should be an independent director.	Not Adopted. The Chairman is Mr Alexander Molyneux who is an executive chairman and therefore cannot be declared independent. However with 50% of the board being independent, it provides a healthy balance when it comes to the composition of the board and the decisions it makes.
2.3	The roles of chairperson and chief executive officer should not be exercised by the same individual.	Not Adopted. The Company has appointed Mr Alex Molyneux as the Executive Chairman. The Company is too small to warrant these two positions being conducted by two separate individuals. Mr Molyneux has a significant amount of expertise and experience for Celsius Coal to benefit from, which would belostif hewasinanon-executiverole.
2.4	The board should establish a nomination committee.	Not Adopted. The Board has not established a nomination committee. Given the present size of the Company, the Board has decided that a nomination committee is not appropriate. The functions ofthenominationcommittee are carried out by thefull Board.
2.5	Companies should disclose the process for evaluating the performance of the board, its committees and individual directors	Adopted. The chairman will review the composition of the Board and the performance of each Director to ensure that it continues to have a mix of skills and experience necessary for the conduct of the company’s activities. Any new directors will receive an inductionappropriatefor his/herexperience.
2.6	Provide the information indicated in_Guide to_ Reporting on Principle 2.	Adopted. The following material is in the Company’s Corporate Governance Policies which is available on the Company’s website:  A description of the procedure for the selection and appointment of new directors and the re-election of incumbent directors;  The charter of the nomination committee; and  The board’s policyforthenominationofdirectors.

18

CORPORATE GOVERNANCE STATEMENT

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3.	Promote ethical and responsible decision- making
3.1	Establish a code of conduct and disclose the code or a summary as to the code as to: (a) the practices necessary to maintain confidence in the company’s integrity; (b) the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and (c) The responsibility and accountability of individuals for reporting and investigating reports of unethical practices.	Adopted. The Board has adopted a written code of conduct which is included in the Corporate Governance Policies and is posted on the company’s website. This will provide a framework for decisions and actions in relation to ethical conduct in employment.
3.2	Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them	Not Adopted. Currently, due to its size and operations the Board has yet to establish a diversity policy. This is an area which will continue to be reviewed, with a policy to be established, as soon as appropriate.
3.3	Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them.	Not Adopted. Due to the size of the company, there have been no measurable objectives set.
3.4	Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.	Adopted. There are currently 4 permanent employees at Celsius Coal, including two executive directors. There are also two non executive directors. None of these positions are held by women.
3.5	Provide the information indicated in_Guide to_ Reporting on Principle 3.	Adopted. The information is provided as above with the Company’s Code of Conduct publicly available in the Corporate Governance Policies posted on the company’s website. When the Company adopts a diversity policy, it will be publicly available in the Corporate Governance Policies posted on the company’s website.
4.	Safeguard integrity in financial reporting
4.1	The board should establish an audit committee.	Not adopted. The Board has not established a separate audit committee. Given the present size of the Company, the Board has decided that an audit committee is not appropriate. The functions of the audit committee are carried out by the full Board.
4.2	Structure the audit committee so that it consists of: (a) only non-executive directors; (b) a majority of independent directors; (c) an independent chairperson, who is not chairperson of the board; and (d) at least three members.	Not adopted. The Board has not established a separate audit committee. Given the present size of the Company, the Board has decided that an audit committee is not appropriate. The functions of the audit committee are carried out by the full Board.
4.3	The audit committee should have a formal charter.	Adopted. The Audit Committee Charter is publicly available in the Corporate Governance Policies that are posted on the company’s website. Although the company does not have a separate audit committee with the Board fulfilling that role, the charter is utilised by theBoard as appropriate.

19

CORPORATE GOVERNANCE STATEMENT

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4.4	Provide the information indicated in_Guide to_ Reporting on Principle 4.	Adopted. The required information has been provided above. The following material is publicly available in the Corporate Governance Policies posted on the company’s website:  the Audit Committee Charter, which includes information on procedures for the selection and appointment of the external auditor, and for the rotationofexternalaudit engagement partners.
**5. **	Make timely and balanced disclosure
5.1	Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance.	Adopted. The Company has adopted a Continuous Disclosure Policy applicable to all Directors of the Company and senior management.
5.2	Provide the information indicated in_Guide to_ Reporting on Principle 5.	Adopted. The Company’s Continuous Disclosure Policy is publicly available in the Corporate Governance Policies posted on the company’swebsite.
**6. **	Respect the rights of shareholders
6.1	Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings.	Adopted. The Company places a high priority on communication with Shareholders and is aware of the obligations it has under the Corporations Act and the Listing Rules to keep the market fully informed of information which is not generally available and which may have a material effect on the price or value of the Company’s securities. The Company has adopted a Shareholders Communication Policy which is publicly available in the Corporate Governance Policies posted on the company’s website, which states that information is communicated to shareholders through:  continuous disclosure to ASX of all material information;  periodic disclosure through the annual report (or concise annual report), half year financial report and quarterly reporting of exploration, production and corporate activities (if required);  notices of meetings and explanatory material;  the annual general meeting; and  the Company’s website.
6.2	Provide the information indicated in_Guide to_ Reporting on Principle 6.	Adopted. The Company’s Shareholders Communication Policy is publicly available in the Corporate Governance Policies posted on the company’s website.
7.	Recognise and manage risk
7.1	The board or appropriate board committee should establish policies on risk oversight and management.	Adopted. The Company has adopted a Risk Management and Internal Compliance and Control Policy.
7.2	The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its business risks.	Adopted. The Board has and will continue to design and implement risk management and internal control systems and provide reports at the relevant time.

20

CORPORATE GOVERNANCE STATEMENT

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7.3	The chief executive officer (or equivalent) and the chief financial officer (or equivalent) should state to the board in writing that: (a) the statement given in accordance with Recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board; and (b) the company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.	Adopted. The Board has received a Section 295A declaration
7.4	Provide the information indicated in_Guide to_ Reporting on Principle 7.	Adopted. The Company’s risk Management and Internal Compliance and Control Policy is publicly available in the Corporate GovernancePolicies posted onthe company’swebsite.
**8. **	Remunerate fairly and responsibly
8.1	The board should establish a remuneration committee.	Not adopted. The Board has not established a separate remuneration committee. Given the present size of the Company, the Board has decided that a remuneration committee is not appropriate. The functions of the remuneration committee are carried out by thefull Board.
8.2	Structure the remuneration committee so that it consists of: (a) a majority of independent directors; (b) an independent chairperson; and (c) at least three members.	Not adopted. The Board has not established a separate remuneration committee. Given the present size of the Company, the Board has decided that a remuneration committee is not appropriate. The functions of the remuneration committee are carried out by the full Board.
8.3	Clearly distinguish the structure of non- executive directors’ remuneration from that of executives.	Adopted.
8.4	Provide the information indicated in_Guide to_ Reporting on Principle 9.	Adopted. The information required has been reported as per above. The Company’s Remuneration Committee Charter and the Company’s Security’s Trading Policy are publicly available in the Corporate Governance Policies posted on the company’s website.

21

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2013

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Notes Revenue 2 Share of net profits of associate 9 Impairment charges/ write-back Depreciation expense Directors and employee benefits expense Share based payment Legal and other professional fees Travel and accommodation Corporate advisory Other expenses (Loss)/profit before income tax Income tax expense 3 (Loss)/profit for the year Other comprehensive income Items that may be reclassified subsequently to operating result Exchange differences on translating foreign controlled entities Other comprehensive income/(loss) for the year Total comprehensive (loss)/income for the year Net (loss)/profit attributable to: Members of parent entity Non-controlling interest Total comprehensive (loss)/income attributable to: Members of the parent entity Non-controlling interest Earnings per share from continuing and discontinued operations Basic earnings per share 20 Diluted earnings per share 20	Consolidated 2013 2012 $ $ 129,654 226,566 126,362 334,278 (2,732,859) 1,135,535 (92,874) (3,037) (1,542,574) (209,162) (843,101) - (458,413) (457,403) (408,096) (18,676) (174,685) (20,378) (897,654) (345,326)
	(6,894,240) 642,397
	- -
	(6,894,240) 642,397
	411,920 (13,255)
	411,920 (13,255)
	(6,482,320) 629,142
	(6,794,262) 642,397 (99,978) -
	(6,894,240) 642,397
	(6,382,342) 629,142 (99,978) -
	(6,482,320) 629,142
	Cents Cents (0.42) 0.07 (0.42) 0.06

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

22

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013

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Notes ASSETS Current assets Cash and cash equivalents 4 Trade and other receivables 5 Other assets 6 Total current assets Non-current assets Other non-current assets 6 Deferred exploration expenditure 7 Plant and equipment 8 Investment accounted for using the equity method 9 Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables 10 Total current liabilities Total liabilities Net assets EQUITY Issued capital 11 Reserves (Accumulated losses)/Retained earnings Parent entity interest Non-Controlling Interest Total equity	Consolidated 2013 2012 $ $ 2,339,971 2,494,580 297,477 86,877 619,565 42,813
	3,257,013 2,624,270
	- 2,519,907 17,151,936 2,435,632 595,384 75,734 - 193,218
	17,747,320 5,224,491
	21,004,333 7,848,761
	790,529 174,103
	790,529 174,103
	790,529 174,103
	20,213,804 7,674,658
	23,303,437 5,336,645 1,433,471 26,821 (4,483,070) 2,311,192
	20,253,838 7,674,658 (40,034) -
	20,213,804 7,674,658

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

23

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2013

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Balance at 1 July 2011 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners, directly in equity Issue of share capital Capital raising costs Share based payment Balance at 30 June 2012 Balance at 1 July 2012 Profit for the year Other Comprehensive Income: Foreign Currency translation of Subsidiaries Total comprehensive (loss) / income for the year Transactions with owners, directly in equity Issue of share capital Capital Raising Costs Share based payments/Option fees Recognition of Non-Controlling Interest on acquisition of subsidiaries Balance at 30 June 2013	Issued Capital Retained Earnings/ (Accumulat ed Losses) Foreign Currency Translation Reserve Other Reserves Non Controlling Interest Total 3,948,683 1,668,795 - 40,076 - 5,657,554 - 642,397 - - - 642,397 - - (13,255) - - (13,255)
	- 642,397 (13,255) - - 629,142
	- - - 1,500,000 - - - - 1,500,000 (112,038) - - - - (112,038) - - - - - -
	5,336,645 2,311,192 (13,255) 40,076 - 7,674,658
	5,336,645 2,311,192 (13,255) 40,076 - 7,674,658 - (6,794,262) - (99,978) (6,894,240) - - 424,548 - (12,628) 411,920
	- (6,794,262) 424,548 - (112,606) (6,482,320)
	19,415,000 - - - - 19,415,000 (1,448,208) - - - - (1,448,208) - - - 982,102 - 982,102 - - - - 72,572 72,572
	23,303,437 (4,483,070) 411,293 1,022,178 (40,034) 20,213,804

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

24

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2013

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Notes Cash flows from operating activities Other receipts Expenditure on mining interests Payments to suppliers and employees Interest received Net cash outflow from operating activities 21 Cash flows from investing activities Purchase of property, plant and equipment Net proceeds from associates Net cash (outflow) / inflow from investing activities Cash flows from financing activities Proceeds from issue of shares Payment of capital raising costs Net cash inflow from financing activities Net decrease in cash held Cash at the beginning of the financial year Cash at the end of the financial year 4	Consolidated 2013 2012 $ $ 26,581 - (4,780,853) (5,056,090) (3,093,585) (1,383,715) 61,665 208,972
	(7,786,192) (6,230,833)
	(793,788) (78,771) 319,580 2,733,656
	(474,208) 2,654,885
	9,000,000 1,500,000 (894,209) (112,037)
	8,105,791 1,387,963
	(154,609) (2,187,985) 2,494,580 4,682,565
	2,339,971 2,494,580

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

25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013

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These consolidated financial statements and notes represent those of Celsius Coal Limited and its controlled entities (the “consolidated entity” or “group”).

The separate financial statements of the parent entity, Celsius Coal Limited have not been presented within this financial report as permitted by the Corporations Act 2001.

The financial statements were authorised for issue on 27[th] September 2013 by the directors of the company

1. Summary of significant accounting policies

Basis of Preparation

The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated entity is a for-profit entity for financial reporting purposes under Australian Accounting Standards.

In the year ended 30 June 2013, the company has reviewed all of the new and revised Australian Accounting Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. It has been determined by the company that there is no impact, material or otherwise, of the new Standards and Interpretations on its business and therefore, no changes are required to its accounting policies.

Australian Accounting Standards set out in accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. The financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless otherwise stated.

These financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

a) Comparatives

When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

b) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Celsius Coal Limited at the end of the reporting period. A controlled entity is any entity over which Celsius Coal has the power to govern the financial and operating policies so as to obtain benefits from the entity’s activities. Control will generally exist where the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are also considered.

Where controlled entities have entered or left the Group during the year, the financial performance of those entities are included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 18 to the financial statements.

In preparing the consolidated financial statements, all inter-group balances and transactions between entities in the consolidated entity have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity.

Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are shown separately within the Equity section of the consolidated statement of financial position and statement of comprehensive income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date.

26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

c) Business Combinations

Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated financial statements, and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured.

The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree.

The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Consideration may comprise the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree and the equity interests issued by the acquirer.

Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss.

Included in the measurement of consideration transferred is any asset or liability resulting from a contingent consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously paid are recognised as a receivable. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or a liability is remeasured each reporting period to fair value through the statement of comprehensive income unless the change in value can be identified as existing at acquisition date.

All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive income.

d) Income tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be

27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Tax consolidation

Celsius Coal Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation legislation. Each entity in the Group recognises its own current and deferred tax liabilities, except for any deferred tax liabilities resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The group notified the Australian Tax Office that it had formed an income tax consolidated group to apply from 12 August 2003. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group.

e) Foreign Currency Transactions and Balances

Functional and Presentation Currency

The functional currency of each of the entities in the consolidated entity is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transactions and Balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Nonmonetary items measured at historical cost continue to be carried at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised directly in the statement of comprehensive income except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in statement of comprehensive income.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

Group companies

The financial results and position of foreign operations whose functional currency is different from the presentation currency are translated as follows:

• assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

• income and expenses are translated at average exchange rates for the period; and

• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. These differences are recognised in profit or loss in the period in which the operation is disposed.

f) Trade receivables

All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 120 days from the date of recognition.

Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists and in any event when the debt is more than 60 days overdue.

g) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits and financial assets that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.

h) Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

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. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

The depreciable amount of all plant and equipment is depreciated on a straight-line basis over their useful lives to the economic entity commencing from the time the asset is held ready for use.

The expected useful lives are as follows:

• Plant and equipment 3-5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income.

i) Impairment of assets

At the end of each reporting period, the consolidated entity assesses whether there is any indication that an asset is impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of preacquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is recognised immediately in the profit or loss, unless the asset is carried at a revalued amount in accordance with another standard (e.g. in accordance with the revaluation model in AASB 116). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other standard.

Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

j) Investments in Associates

Associate companies are companies in which the consolidated entity has significant influence through holding, directly or indirectly, 20% or more of the voting power of the company. Investments in associates are accounted for in the financial statements by applying the equity method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the consolidated entity’s share of net assets of the associate company. In addition the consolidated entity’s share of the profit or loss of the associate company is included in the consolidated entity’s profit or loss.

The carrying amount of the investment includes goodwill relating to the associate. Any excess of the consolidated entity’s share of the net fair value of the associate's identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the investor's share of the associate's profit or loss in the period in which the investment is acquired.

Profits and losses resulting from transactions between the consolidated entity and the associate are eliminated to the extent of the relation to the consolidated entity’s investment in the associate.

When the consolidated entity’s share of losses in an associate equals or exceeds its interest in the associate, the consolidated entity discontinues recognising its share of further losses unless it has incurred legal or constructive obligations or made payments on behalf of the associate. When the associate subsequently makes profits, the consolidated entity will resume the recognition of its share of those profits once its share of the profits equals the share of the losses not recognised.

k) Trade and other payables

Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the consolidated entity during the reporting period which remains unpaid. The balance is recognised as a current liability with the amount being normally paid within 30 days of recognition of the liability.

l) Borrowings

Loans and debentures are carried at their principal amounts which represent the present value of future cash flows associated with servicing the debt. Interest is accrued over the period it becomes due and is recorded as part of other creditors.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

On issue of convertible notes, the fair value of the liability component, being the obligation to make future payments of principal and interest to noteholders, is calculated using a market interest rate for an equivalent nonconvertible note. The residual amount, representing the fair value of the conversion option, is included in equity as other equity securities with no recognition of any change in the value of the option in subsequent periods. The liability is included in borrowings and carried on an amortised cost basis with interest on the notes recognised as borrowing costs on an effective yield basis until the liability is extinguished on conversion or maturity of the notes.

m) Exploration and evaluation expenditure

Exploration and evaluation expenditures are written off as incurred, except when such costs are expected to be recouped through successful development and exploitation, or sale, of an area of interest. In addition, exploration assets recognised on acquisition of an entity are carried forward provided that exploration and/or evaluation activities in the area have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing.

The expenditure carried forward when recovery is expected represents an accumulation of direct net exploration and evaluation costs incurred by or on behalf of the consolidated entity and applicable indirect costs, in relation to separate areas of interest for which rights of tenure are current.

The successful commercial exploitation of all exploration and evaluation expenditure is dependent upon the Company raising adequate debt and equity funding, which is dependent upon continued investor support.

If it is established subsequently that economically recoverable reserves exist in a particular area of interest, resulting in the decision to develop a commercial mining operation, then in that year the accumulated expenditure attributable to that area, to the extent that it does not exceed the recoverable amount for the area concerned, will be transferred to mine development. As such it will be subsequently amortised against production from that area. Any excess of accumulated expenditure over recoverable amounts will be written off to the statement of comprehensive income.

n) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with short periods to maturity and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position.

o) Revenue and Other Income

Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue.

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.

Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument.

p) Employee benefits

Provision is made for the consolidated entity’s liability for employee benefits arising from services rendered by employees to the reporting date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wages increases and the probability that the employee may satisfy vesting requirements. Those cash outflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash flows.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

Equity-settled compensation

The consolidated entity operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account.

Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the good or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is shown in the option reserve.

The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black–Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

q) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office (“ATO”). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

r) Earnings per share

(i) Basic earnings per share

Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

s) Segment reporting

A business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when products or services are provided within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

t) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

u) Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurement

Finance instruments are subsequently measured at either of fair value, amortised cost using the effective interest rate method, or cost.

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Amortised cost is calculated as:

• a. the amount at which the financial asset or financial liability is measured at initial recognition;

• b. less principal repayments;

• c. plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method ; and

• d. less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.

The consolidated entity does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments.

• i. Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

u)

Financial instruments (continued)

Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. (All other loans and receivables are classified as non-current assets.)

• ii. Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.

Impairment

At the end of each reporting period, the consolidated entity assesses whether there is objective evidence that a financial instrument has been impaired.

Financial guarantees

Where material, financial guarantees issued, which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition.

The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118.

The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on:

• the likelihood of the guaranteed party defaulting in a year period;

• the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and

• the maximum loss exposed if the guaranteed party were to default.

De-recognition

Financial assets are de-recognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are de-recognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

v) New accounting standards and interpretations

At the date of this financial report the following accounting standards, which may impact the consolidated entity in the period of initial application, have been issued but are not yet effective:

Reference	Title	Summary	Application date (financial years beginning)
AASB 9	Financial Instruments	Replaces the requirements of AASB 139 for the classification and measurement of financial assets. This is the result of the first part of Phase 1 of the IASB’s project to replace IAS 39.	1 January 2015
AASB 10	Consolidated Financial Statements	Replaces the requirements of AASB 127 and Interpretation 112 pertaining to the principles to be applied in the preparation and presentation of consolidated financial statements.	1 January 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

v) New accounting standards and interpretations (continued)

AASB 11	Joint Arrangements	Replaces the requirements of AASB 131 pertaining to the principles to be applied for financial reporting by entities that have an interest in arrangements that are jointly controlled.	1 January 2013
AASB 12	Disclosure of Interests in Other Entities	Replaces the disclosure requirements of AASB 127 and AASB 131 pertaining to interests in other entities.	1 January 2013
AASB 127	Separate Financial Statements	Prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements.	1 January 2013
AASB 128	Investments in Associates and Joint Ventures	Prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.	1 January 2013
AASB 13	Fair Value Measurement	Provides a clear definition of fair value, a framework for measuring fair value and requires enhanced disclosures about fair value measurement.	1 January 2013
AASB 119	Employee Benefits	Prescribes the accounting and disclosure for employee benefits.	1 January 2013
IFRIC Interpretation 20	Stripping Costs in the Production Phase of a Surface Mine	This Interpretation clarifies the requirements for accounting for stripping costs in the production phase of a surface mine, such as when such costs can be recognised as an asset and how that asset should be measured, both initially and subsequently.	1 January 2013

The entity has decided against early adoption of these standards and interpretations. Furthermore, these changes in standards and interpretations are not expected to have a material impact on the consolidated entity in the current or future reporting periods and on foreseeable future transactions.

w) Critical accounting judgments, estimates and assumptions

The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the consolidated entity.

There have been no judgements, apart from those involving estimation, in applying accounting policies that have a significant effect on the amounts recognised in these financial statements.

Following is a summary of the key assumptions concerning the future and other key sources of estimation at reporting date that have not been disclosed elsewhere in these financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1. Summary of significant accounting policies (continued)

Exploration and evaluation expenditure

The Board of Directors determines when an area of interest should be abandoned. When a decision is made that an area of interest is not commercially viable, all costs that have been capitalised in respect of that area of interest are written off. The Directors’ decision is made after considering the likelihood of finding commercially viable reserves.

The Board of Directors regularly review each project, which includes an assessment of possible impairment, taking into consideration economic viability of operations and validity of licences and permits.

Environmental Issues

Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation, and the directors understanding thereof. At the current stage of the company’s development and its current environmental impact the directors believe such treatment is reasonable and appropriate.

Taxation

Balances disclosed in the financial statements and the notes thereto, related to taxation, are based on the best estimates of directors. These estimates take into account both the financial performance and position of the Company as they pertain to current income taxation legislation, and the directors’ understanding thereof.

No adjustment has been made for pending or future taxation legislation. The current income tax position represents that directors’ best estimate, pending an assessment by the Australian Taxation Office.

Share based payment transactions

The company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model.

Impairment

The consolidated entity assesses impairment at the end of each reporting period by evaluating conditions and events specific to the consolidated entity that may be indicative of impairment triggers. Validity of licences and permits, economic viability of current operations and economic viability for future operations are all elements that are considered. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions.

Segment Information

The consolidated entity operates within two geographical segments within mineral exploration and extraction being Australia and Kyrgyzstan. The segment information provided to the chief operating decision maker is as follows:

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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1 Summary of significant accounting policies (continued)

Segment information – continued

2013 Sales to external customers Other revenue Total segment revenue Segment result before income tax Profit before income tax Segment assets Total assets Segment liabilities Total Liabilities Share of netprofit of associate	Exploration activities AUSTRALIA Exploration Activities KYRGYZSTAN Total $ $ $ - - - 169,991 86,025 256,016	Consolidated $ - 256,016
	169,991 86,025 256,016	256,016
	(3,085,970) (3,708,292) (6,794,262)	(6,794,262)
	13,301,714 7,702,619 21,004,333	(6,794,262)
		21,004,333
	13,301,714 7,702,619 21,004,333 261,646 528,883 790,529	21,004,333
		790,529
	261,646 528,883 790,529 - - 126,362	790,529
		126,362

2012 Sales to external customers Other revenue Total segment revenue Segment result before income tax Profit before income tax Segment assets Total assets Segment liabilities Total Liabilities Impairment of non-current assets Share of netprofit of associate	Exploration activities AUSTRALIA Exploration activities KYRGYZSTAN Total $ $ $ 226,566 - 226,566	Consolidated $ 226,566
	226,566 - 226,566	226,566
	772,128 (129,731) 642,397	642,397
	7,396,666 452,095 7,848,761	642,397
		7,848,761
	7,396,666 452,095 7,848,761 137,310 36,793 174,103	7,858,761
		174,103
	137,310 36,793 174,103 (1,135,535) - (1,135,535)	174,103
		(1,135,535)
	334,278 - 334,278	334,278

2. Other income Interest Other Income DOCA liability write-offs	Consolidated 2013 2012 $ $ 43,629 86,025 - 227,007 - (441)
	129,654 226,566

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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3. Income tax expense (Loss)/profit before income tax expense Tax at the Australian tax rate of 30% (2012: 30%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Deferred tax assets not brought to account Income tax expense Tax benefit at 30% not recognised	Consolidated 2013 2012 $ $ (6,894,240) 642,397 (2,068,272) 192,719 1,321,349 (192,719) 746,923 - - - 27,634,954 26,888,031	Consolidated 2013 2012 $ $ (6,894,240) 642,397 (2,068,272) 192,719 1,321,349 (192,719) 746,923 - - - 27,634,954 26,888,031
		192,719 (192,719) -
		-
		26,888,031

The deferred tax asset attributable to carried forward income tax losses and temporary differences has not been recognised as an asset as the company has not commenced trading and the availability of future profits to recoup these losses is not considered probable at the date of this report.

4. Cash and cash equivalents Cash at bank and in hand 5. Trade and other receivables CURRENT Trade receivables Other receivables	Consolidated 2013 2012 $ $ 2,339,971 2,494,580
	84,008 35,428 213,469 51,449
	297,477 86,877

There are no balances within trade and other receivables that contain assets that are impaired and are past due. It is expected these balances will be received when due. Impaired assets are provided for in full.

6. Other assets CURRENT Prepayments Accrued Income Inventories (+) Other NON-CURRENT Loan to Kokkia Coal Ltd (+) net of impairment charge of $40,125 7. Deferred exploration expenditure Expenditure brought forward Tenements acquired from acquisition of subsidiary Expenditure incurred during the year Impairment of exploration expenditure Expenditure carried forward	378,455 23,968 - 18,036 180,511 - 60,599 809
	619,565 42,813
	- 2,519,907
	2,435,632 13,139 12,519,907 2,131,803 4,786,537 290,690 (2,590,140) -
	17,151,936 2,435,632

Recoverability of the carrying amount of exploration assets is dependent on the successful exploration and sale of the mineral resource.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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8. Plant and equipment

8. Plant and equipment
Plant and equipment Less: accumulated depreciation Total plant and equipment	Consolidated 2013 2012 $ $ 748,167 78,771 (152,783) (3,037)
	595,384 75,734
	595,384 75,734

Reconciliations

Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the current financial year are set out below.

Consolidated Carrying amount at 1 July 2011 Additions through acquisition of subsidiaries Depreciation expense Carrying amount at 30 June 2012 Additions through acquisition of subsidiaries Additions Depreciation expense Depreciation expense capitalised Impairment Disposal Translation difference Carrying amount at 30 June 2013	Motor Vehicles $ Office Equipment $ Plant & Equipment $ Total $ - - - - 50,444 26,045 2,282 78,771 (2,092) (30) (915) (3,037)
	48,352 26,015 1,367 75,734
	40,946 14,337 195,066 250,349 444,856 57,911 44,497 547,264 (46,678) (16,826) (29,370) (92,874) (47,295) - - (47,295) (102,594) - - (102,594) (31,375) - - (31,375) (1,135) 243 (2,933) (3,825)
	305,077 81,680 208,627 595,384

9. Investments accounted for using the equity method

Investment in Carnilya Joint Venture (a) Movements in carrying amount Carrying amount at the beginning of the year Net cash receipts from investment during the year Reversal of Impairment Share of profit from associate	Consolidated 2013 2012 $ $ - 193,218
	- 193,218
	193,218 1,457,061 (319,580) (2,733,656) - 1,135,535 126,362 334,278
	- 193,218

The 30% interest in Carnilya ceased production in 2012 and the site was placed in care and maintenance in 2013. The interest in the joint venture is controlled by Mincor Resources NL.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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9. Investments accounted for using the equity method (continued)

(b) Summarised financial information of associates

Group’s Share of:

Group’s Share of:
	Assets	Liabilities	Revenues	Profit/(Loss)
	$	$	$	$
2013
Mincor Carnilya Hill (30% Interest in	-	-	-	-
Unincorporated JV)
2012
Mincor Carnilya Hill (30% Interest in	396,188	202,970	3,232,600	334,278
Unincorporated JV)
The share of contingent liabilities of associate
is $Nil (2012: $Nil)
			Consolidated
			2013	2012
			$	$
10. Trade and other payables
Trade creditors			172,296	84,379
Accrued expenses			48,370	46,189
Other creditors			569,863	43,535
			790,529	174,103
11. Issued Capital
1,979,976,397 (2012: 1,031,953,670) Ordinary shares – Fully paid			25,015,000	5,600,000
Capital raising costs			(1,711,563)	(263,355)
Reduction of capital against losses, net of capital raising costs			-	-
			23,303,437	5,336,645
a) Ordinary Shares			No. of shares	No. of shares
At the beginning of the reporting period:			1,031,953,670	881,953,670
Shares issued during the year
 13 September 2012			95,000,000	-
 19 October 2012			105,000,000	-
 25 October 2012			500,000,000	-
 31 December 2012			15,000,000	-
 21 February 2013			5,750,000	-
 11 March 2013			227,272,727	-
 16 March 2012			-	150,000,000
At the end of the reporting period			1,979,976,397	1,031,953,670

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll, each share is entitled to one vote.

b) Options

• i. For details of options issued, exercised and lapsed during the financial year and the options outstanding at year-end, refer to Note 22: Share-based payments.

• ii. For information relating to share options issued to key management personnel during the financial year, refer to Note 22.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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11. Issued Capital (continued)

c) Capital Management

The objectives of management when managing capital is to safeguard the Group’s ability to continue as a going concern, so that the Group may continue to provide returns for shareholders and benefits for other stakeholders.

Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Company at 30 June 2013 and 2013 is as follows:

Cash and cash equivalents Trade and other receivables Trade and other payables Working capital position	2013 $ 2012 $ 2,339,971 2,494,580 297,477 86,877 (790,529) (174,103)
	1,846,919 2,407,354

12. Acquisition of Kokkia Coal Ltd, Pandj Sher ANK and Baidamar Mining Company

On 25 October 2012, the Group acquired 80% of the shares of Kokkia Coal Limited, a holding company for Pandj Sher ANK and Baidamar Mining Company, wholly owned companies incorporated in Kyrgyzstan. Pandj Sher ANK holds a 100% interest in Kokkia and Min-Teke projects located in the Uzgen Coal Basin in Kyrgyzstan. Baidamar Mining Company holds a 100% interest in the Tuyuk-Kargasha project located in Uzgen Basin in Kyrgyzstan.

The acquisition of Kokkia Coal Ltd, Pandj Sher ANK and Baidamar Mining Company is not a business combination, but rather an acquisition of mining tenements.

The purchase consideration was as follows:

500,000,000 fully paid ordinary shares at $0.02 Assumption of Kokkia’s liability to pay for the acquisition of Baidamar Total purchase consideration	$ 10,000,000 2,519,907
	12,519,907

In addition, 900,000,000 Performance Shares were issued by the Company to the vendors and these Performance Shares are conditional on certain milestones being achieved. Refer to Note 22 (iii) for details.

13. Interests of Key Management Personnel (KMP)

Refer to the remuneration report contained in the directors’ report for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2013.

The total remuneration paid to KMP of the company and the group during the year are as follows:

Short-term employee benefits Post-employment benefits Share Based Payments	2013 $ 2012 $ 866,702 202,110 46,702 7,052 843,101 -
	1,756,505 209,162

No compensation was paid in respect to termination benefits.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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a) KMP Share and Option Holdings

The number of options over ordinary shares held by each KMP of the Group during the financial year is 27,000,000 (2012: nil).

As part of his employment agreement, Mr Matthew O’Kane is to be granted 10,000,000 options to be issued under the Groups Employee Incentive Option Plan. As at 30 June 2013 these were yet to be granted.

As part of his employment agreement, Mr Alistair Muir is to be granted 10,000,000 options. These options are to be issued pending shareholder approval, which is to be sought at the Company’s Annual General Meeting to be held in November 2013.

The Board have agreed to issue Mr Ranko Matic with 2,500,000 options. These options are to be issued pending shareholder approval, which is to be sought at the Company’s Annual General Meeting to be held in November 2013.

KMP Option Holdings

30 June 2013 Mr A Molyneux Mr A Muir Mr M O’Kane Mr W Oliver Mr R Matic Mr P O’Malley Mr G Thomas	Balance at beginning of the year Granted as remuneration during the year Exercise of options Other changes during the year Balance at end of year - 20,000,000 - - 20,000,000 - 2,000,000 - - 2,000,000 - - - - - - 5,000,000 - - 5,000,000 - - - - - - - - - - - 25,000,000 - (25,000,000)* -
	- 52,000,000 - (25,000,000) 27,000,000

• Mr Thomas resigned during the year and therefore is no longer a KMP.

Share holdings for KMP for the financial year is 20,385,000 (2012: 9,000,000)

KMP Shareholdings

30 June 2013 Mr A Molyneux Mr A Muir Mr M O’Kane Mr W Oliver Mr R Matic Mr P O’Malley Mr G Thomas	Balance at beginning of the year Granted as remuneration during the year Issued on exercise of options Other changes during the year Balance at end of year - 5,750,000 - 7,000,000* 12,750,000 - - - 635,000 635,000 - - - - - 4,000,000 - - - 4,000,000 - - - 3,000,000* 3,000,000 5,000,000 - - (5,000,000) - - - - - -
	9,000,000 5,750,000 - 5,635,000 20,385,000

• Mr O’Malley resigned during the year and therefore is no longer KMP.

• ** Mr Matic was re-appointed to the Board on 5 November 2012.

• *** Mr Muir purchased these on market during the period.

• **** Mr Molyneux purchased these on market during the period.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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13. Interests of Key Management Personnel (KMP) (continued)

KMP shareholdings (continued)

30 June 2012 Mr W Oliver Mr R Matic Mr P O’Malley Mr S Mackinnon Mr G Thomas	Balance at beginning of the year Granted as remuneration during the year Issued on exercise of options Other changes during the year Balance at end of year 4,000,000 - - - 4,000,000 3,000,000 - - (3,000,000) - - - - 5,000,000 5,000,000 10,000,000 (10,000,000)* - - - - - -
	17,000,000 - - (8,000,000) 9,000,000

• Mr Mackinnon and Mr Matic resigned on 1 April 2012 and therefore were not KMPs at 30 June 2012.

Other KMP Transactions

The number of Performance Rights held by each KMP of the Group during the financial year is 25,000,000 (2012: nil).

KMP Performance Rights Holdings

30 June 2013 Mr A Molyneux Mr A Muir Mr M O’Kane Mr W Oliver Mr R Matic Mr P O’Malley Mr G Thomas	Balance at beginning of the year Granted as remuneration during the year Exercised during the period Other changes during the year Balance at end of year - 25,000,000 - - 25,000,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
	- 25,000,000 - - 25,000,000

Other than the above, there have been no other transactions involving equity interests. For details of other transactions with KMP, refer to Note 14: Related Party Transactions.

14. Related parties

a) Parent Entities

The parent entity within the Group is Celsius Coal Limited.

b) Subsidiaries

Interests in subsidiaries are set out in note 18.

c) Key management personnel

Disclosures relating to key management personnel are set out in note 13.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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14. Related Parties (continued)

d) Transactions with related parties

During the year, there were payments made to Kenosis Capital Partners, a company with which Mr O’Malley is a founding partner. The payments are for advisory services on the global natural resource sector and amounted to $29,868 (2012: 30,901).

During the year, there were no payments made to Billandbry Consulting Pty Ltd, a company with which Mr Oliver is a shareholder and director. The payments in 2012 were for the provision of geological consulting services and amounted to $nil (2012: $12,000)

During the year, there were payments made to Bentleys (WA) Pty Ltd and Capital and Corporate Advisors Pty Ltd, company with which Mr Matic is a shareholder and director. The payments are for the provision of tax advisory services, corporate secretarial and accounting services and amounted to $190,131 (2012: $116,542).

There were no other transactions with related parties. All related party transactions are on normal commercial terms and conditions.

15. Remuneration of auditors

During the year the following amounts were paid or payable to the auditor RSM Bird Cameron Partners:

Investigative Accountant’s Report Tax advice Audit and review fees	Consolidated 2013 $ 2012 $ - 14,000 - 14,254 35,000 25,000
	35,000 53,254

16. Contingent liabilities

There were no material contingent liabilities, not provided for in the financial statements of the Company as at 30 June 2013 (2012: nil).

17. Commitments for expenditure

(a) Tenement Expenditure Commitments:

The Company is required to maintain current rights of tenure to tenements, which require outlays of expenditure in 2012/2013. Under certain circumstances these commitments are subject to the possibility of adjustment to the amount and/or timing of such obligations, however, they are expected to be fulfilled in the normal course of operations.

The Company has tenement rental and expenditure commitments of: Payable: – not later than 12 months	2013 2012 $ $ 114,092 30,000 190,823 210,000 - -
– between 12 months and 5 years
– greater than 5 years
	304,915 240,000

(b) Capital commitments

There are no capital commitments contracted for at balance date.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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18. Controlled entities

18. Controlled entities
			Percentage Owned (%)
	Country of
Name of Entity	Incorporation	Class of Shares	2013	2012
View Nickel Pty Ltd	Australia	Ordinary	100%	100%
Asia Pacific Resources Ltd	Kyrgyz Republic	Ordinary	100%	100%
Oshpur Ltd	Hong Kong	Ordinary	100%	100%
Celsius Coal (Hong Kong) Limited	Hong Kong	Ordinary	100%
Kokkia Coal Ltd	Hong Kong	Ordinary	80%	-
Pandj Sher ANK	Kyrgyz Republic	Ordinary	80%	-
Baidamar Mining Company	Kyrgyz Republic	Ordinary	80%	-

19. Events after the reporting period

The Group applied to renew the license it held for the Bel Alma coal deposit in June 2013, however the Kyrgyz government did not approve the extension of the license, and as a result as of July 27[th] 2013 the current license for this deposit has expired. Due to the fact that the company no longer holds a valid license for this deposit the Company has acted in accordance with IFRS accounting principles and has impaired the assets associated with this deposit. The Company continued to hold discussions with the Kyrgyz government regarding extension of the license for Bel Alma and considering options for action internally and with legal counsel.

On 7th August 2013 and 6[th] September 2013, a total of 10,000,000 options at $0.01 each were exercised providing the company with $100,000.00 in funds and resulting in the issuing of 10,000,000 shares.

On 1 July 2013, the Convertible Note Facility, provided by Blumont became available. The Convertible Note Facility was advised to the market on ASX release dated 7 February 2013 and advised that the Company would be able to draw between $3 million and $5 million (at the Company’s option) after 30 June 2013. The Convertible Notes will carry the interest rate of 12.5% per annum payable half-yearly. The Convertible Notes will be convertible into ordinary shares of Celsius Coal based on the 20-day volume weighted average share price prior to conversion and subject to a floor price of $0.025 per share and a cap of $0.030 per share. Blumont will have the right to call conversion anytime after issuance and the Company will have the right to call conversion anytime from 12-months after issuance, with any conversion subject to the condition that it does not result in a voting interest exceeding 19.90% of Celsius Coal.

On 25[th] September 2013, the Company made its first drawing under the Convertible Note Facility for $2 million with funds to be utilised in covering the costs of the exploration program and administrative overheads of the Company.

Other than the above, the directors are not aware of any other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years.

20. Earnings per share

a) Reconciliation of earnings to profit or loss: (Loss)/Income (Loss)/Earnings used to calculate basic and diluted EPS b) Reconciliation of earnings to profit or loss from continuing operations: (Loss)/Income from continuing operations (Loss)/Earnings used to calculated basic and diluted EPS from continuing operations	Consolidated 2013 2012 $ $ (6,794,262) 642,397
	(6,794,262) 642,397
	(6,794,262) 642,397
	(6,794,262) 642,397

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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20 Earnings per share (continued) c) Weighted average number of ordinary shares used as the denominator in calculating basic EPS Weighted average number of dilutive options outstanding Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS d) Anti-dilutive options on issue not used in dilutive EPS calculation	2013 2012 Number Number 1,601,411,329 925,515,314 - 170,000,000
	1,601,411,329 1,095,515,314
	292,000,000 -

• There is no impact from 292,000,000 options outstanding at 30 June 2013 on the earnings per share calculation because they are anti-dilutive. These options could potentially dilute basic EPS in the future. There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

21. Cash flow information

a) Reconciliation of (loss)/profit from ordinary activities after income tax to net cash outflow from operating activities (Loss)/profit from ordinary activities after income tax Depreciation Impairment charges Capitalised borrowing and interest costs Share-based payment Share of profit in associate Change in operating assets and liabilities and net of effects from purchase of controlled entity: Trade debtors and receivables Other assets Trade and other creditors Net cash (outflow) from operating activities

Consolidated 2013 $ 2012 $ (6,894,240) 642,397 92,874 3,037 2,732,859 (1,135,535) - (13,255) 843,101 - (126,362) (334,278) (787,352) (70,086) (4,263,498) (4,943,209) 616,426 (379,904)

(7,786,192) (6,230,833)

22. Share-based payments

• i. A summary of the movements of all company options issues is as follows:

Options outstanding as at 30 June 2011 Expired Options outstanding as at 30 June 2012 Granted Options outstanding as at 30 June 2013 Options exercisable as at 30 June 2012: Options exercisable as at 30 June 2013:	Number Weighted average exercise price 170,052,500 $2.61 (52,500) $7.80 170,000,000 $0.01 122,000,000 $0.0266 292,000,000 0.0169 170,000,000 $0.01 292,000,000 $0.0169

No options were exercised during the financial year (2012: nil).

The weighted average remaining contractual life of options outstanding at year end was 1.65 years. The exercise price of outstanding shares at the end of the reporting period is $0.0169.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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22. Share-based payments

The fair value of the options granted to employees is deemed to represent the value of the employee services received over the vesting period. The fair value of the options for the year ended 30 June 2013 was $505,251 (2012: nil) and was recognised in the statement of comprehensive income. The weighted average fair value of options granted during the year was $0.018 (2012: $nil).

ii A summary of the movements of all company performance rights issues is as follows:

Performance rights outstanding as at 30 June 2012 Granted Performance rights outstanding as at 30 June 2013 Performance rights exercisable as at 30 June 2013:	Number Weighted average exercise price - 25,000,000 - 25,000,000 NIL

The fair value of the Performance Rights granted during the financial year was $222,850 (2012: nil) and was recognised in the statement of comprehensive income. Performance Rights granted during the year were valued using a Binomial valuation model. The expected life used in the model has been based on management’s best estimate for the effects of the vesting conditions and the probability of meeting the vesting conditions. The fair value has been discounted by 50% to reflect the probability of not meeting the vesting conditions.

The weighted average fair value of performance rights granted during the year was $0.013 (2012: nil). These values were calculated using a Binomial valuation model applying the following inputs:

Weighted average exercise price:	$Nil
Expected vesting period for the performance rights to	Up to 1 year
vest:
Expected share price volatility:	100%
Risk-free interest rate:	2.67%
Dividend yield:	0%

Under the equity package of Mr Alex Molyneux, the maximum number of performance rights to be issued is up to 75 million over 36 months. The Performance Rights will be split into 3 equal tranches of 25 million Performance Rights, with 25 million Performance Rights being issued immediately following approval by the Company’s shareholders in a general meeting on 23 January 2013 and thereafter 25 million Performance Rights being issued on the next two anniversaries of Mr Molyneux’s employment. Upon achievement of the vesting criteria, the Performance Rights will automatically convert into fully paid ordinary shares in the Company.

The Performance Rights will be issued for nil consideration and no consideration will be payable upon the vesting of the Performance Rights on achievement of the performance milestones. Accordingly, no loans will be made in relation to, and no funds will be raised from, the issue or vesting of the Performance Rights. The vesting conditions entail different criteria for various lots of Performance Rights within the 25 million issued, including achieving share price targets, share price performance relative to other comparable companies, raising capital above certain share price targets, business and safety targets.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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iii A summary of the movements of all company performance shares issues is as follows:

Performance shares outstanding as at 30 June 2012 Granted Performance shares outstanding as at 30 June 2013 Performance shares exercisable as at 30 June 2013:	Number Weighted average exercise price - 927,000,000 - 927,000,000 NIL

A total of 900,000,000 performance shares were issued as part of the consideration for the acquisition of Kokkia Coal and 27,000,000 performance shares were issued as consideration to CPS Securities for their services with respect to their corporate advisory and technical services relating to the Kokkia Coal acquisition. They are comprised of the following:

205,400,000 Class A Performance Shares 205,400,000 Class B Performance Shares 205,400,000 Class C Performance Shares 155,400,000 Class D Performance Shares 155,400,000 Class E Performance Shares

Each category of performance shares have differing milestones to be achieved before vesting as follows:

• varying levels of JORC resource targets of coking and thermal coal;

• Celsius Coal Limited solely funding a 30,000 metre drilling program or spend a minimum of $15 million in the first three years; and

• Celsius Coal Limited solely funding a further 30,000 metre drilling program or spend a minimum of $15 million within two and a half years after the first 30,000 metre drilling program is complete.

The performance shares would also vest if the vendors of Kokkia Coal exercise a put option requiring the performance shares to vest.

No performance shares vested during the year ended 30 June 2013 and no amounts have been recognised in the statement of comprehensive income for the year ended 30 June 2013 or statement of financial position as at 30 June 2013.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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23. Parent entity disclosures (a) Financial Position Assets Current Assets Non-Current Assets Total Assets Liabilities Current Liabilities Non-Current Liabilities Total Liabilities Equity Issued capital Reserves Accumulated losses Total Equity (b) Financial Performance Loss for the year Other comprehensive income Total Comprehensive Loss (c) Contingent Liabilities of the Parent Entity There are no such contingencies. (d) Commitments of the Parent Entity Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years Total	2013 2012 $ $ 2,163,152 1,721,094 18,018,531 5,503,718
	20,181,683 7,224,812
	238,776 137,310 6,761,256 5,999,495
	7,000,032 6,136,805
	23,303,437 5,336,646 1,022,178 40,076 (11,143,964) (4,288,715)
	13,181,651 1,088,007
	(6,855,249) (740,214) - -
	(6,855,249) (740,214)
	56,000 38,000 168,000 210,000 - -
	224,000 248,000

24. Blumont Group Limited – Convertible Note Facility

In March 2013, Celsius Coal entered an arrangement with Blumont Group Limited, whereby it would receive $10 million in funding. The first tranche of $5 million would be through a placement of shares, which occurred in March 2013 where 227,272,727 ordinary shares were issued for $5 million in funding.

The second tranche of funding is to be received in the second half of 2013 with the convertible note facility (“ Convertible Notes ”) provided by Blumont, being drawn. This facility will enable the Company to draw a minimum of $3 million and a maximum $5 million (at the Company’s option) after 30 June 2013. The Convertible Notes will carry interest at the rate of 12.5% per annum payable half-yearly and will be convertible into ordinary shares of Celsius based at the 20-day volume weighted average share price prior to conversion and subject to a floor price of $0.025 per share and a cap of $0.030 per share. Blumont will have the right to call conversion anytime after issuance and the Company will have the right to call conversion anytime from 12-months after issuance, with any conversion subject to the condition that it does not result in a voting interest exceeding 19.9% of Celsius.

There has been one drawing on this facility in September 2013, of $2,000,000

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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25. Financial Risk Management

The consolidated entity’s principal financial instruments comprise cash and short-term deposits. The consolidated entity has various other financial assets and liabilities such as other receivables and payables, which arise directly from its operations.

The consolidated entity’s activities expose it to a variety of financial risks, including, credit risk, liquidity risk, foreign exchange rate risk and cash flow interest rate risk. The company is not exposed to price risk.

Risk management is carried out by the Board of Directors, who evaluates and agree upon risk management and objectives.

(a) Market Risk

Interest rate risk

The consolidated entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and financial liabilities comprises:

2013	Floating Interest Rate	Fixed Interest Rate	Fixed Interest Rate	Non Interest Bearing	Total	Weight Effective Interest Rate
		1 Year or Less	1 to 5 Years
	2013 $	2013 $	2013 $	2013 $	2013 $	2013 %
Financial Assets Cash Trade and other receivables Total Financial Assets Financial Liabilities Trade and other payables Total Financial Liabilities	2,339,971 -	- -	- -	- 297,477	2,339,971 297,477	4.88% -
	2,339,971	-	-	297,477	2,637,448
	-	-	-	790,529	790,529	-
	-	-	-	790,529	790,529
2012	Floating Interest Rate	Fixed Interest Rate		Non Interest Bearing	Total	Weight Effective Interest Rate
		1 Year or Less	1 to 5 Years
	2012 $	2012 $	2012 $	2012 $	2012 $	2012 %
Financial Assets Cash Trade and other receivables Total Financial Assets Financial Liabilities Trade and other payables Total Financial Liabilities	494,580 -	2,000,000 -	- -	- 86,877	2,494,580 86,877	4.04% -
	494,580	2,000,000	-	86,877	2,581,457
	-	-	-	174,103	174,103	-
	-	-	-	174,103	174,103

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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The consolidated entity policy is to monitor the interest rate yield curve out to six months to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The consolidated entity does not have any receivables or payables that may be affected by interest rate risk.

Sensitivity analysis

At 30 June 2013, if interest rates had changed by -/+100 basis points from the weighted average rate for the year with all other variables held constant, post-tax loss for both the consolidated entity and the parent entity would have been $23,399 (2012: $24,945) lower/higher as a result of lower/higher interest income from cash and cash equivalents. Management have deemed a movement of 100 basis points to be an appropriate measure for this sensitivity analysis.

(b) Credit risk

The consolidated entity does not have any significant concentrations of credit risk. Credit risk is managed by the Board and arises from cash and cash equivalents as well as credit exposure including outstanding receivables.

All cash balances held in Australia are held at internationally recognised institutions. It is the consolidated entity’s policy to maintain the minimum required cash balances in the Kyrgyz Republic to minimise credit risk associated with those banks.

The maximum exposure to credit risk at reporting date is the carrying amount of the financial assets disclosed within the financial report.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about default rates.

Financial assets that are neither past due and not impaired are as follows:-

Financial assets - counterparties without external credit rating Financial assets with no defaults in the past Cash and cash equivalents ‘AA’ S&P rating Kyrgyz Republic Balances	2013 2012 $ $ 297,477 86,877
	2,131,087 2,494,580 208,884 -

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash balances and access to equity funding.

The Group’s exposure to the risk of changes in market interest rates relate primarily to cash assets.

The directors monitor the cash-burn rate of the Group on an on-going basis against budget and the maturity profiles of financial assets and liabilities to manage its liquidity risk.

As at reporting date the Group had sufficient cash reserves to meet its requirements. The Group has access to a convertible note facility provided by Blumont, for $5,000,000 which became available at 1 July 2013. As at the date of this report a drawing of $2,000,000 has been made on 25th September 2013. Other than this Blumont Facility, the group has no other credit standby facilities or arrangements for further funding or borrowings in place.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2013 (continued)

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25. Financial Risk Management (continued)

The financial liabilities the consolidated entity had at reporting date were other payables incurred in the normal course of the business. These were non interest bearing and were due within the normal 30-60 days terms of creditor payments.

Maturity analysis for financial liabilities

Financial liabilities of the consolidated entity comprise trade and other payables. As at 30 June 2013 and 30 June 2012 all financial liabilities are contractually matured within 60 days.

(d) Foreign currency risk

Foreign exchange risks arise when future commercial transactions and recognised financial assets and financial liabilities are denominated in a currency that is not the entity’s functional currency.

The consolidated entity is primarily exposed to the fluctuations in the US dollar and the Kyrgyz som, as the consolidated entity up holds US dollar bank deposits and much of the consolidated entity’s exploration costs and contracts are denominated in US dollars and Kyrgyz som.

The consolidated entity aims to reduce and manage its foreign exchange risk by holding the majority of its funds in its US dollar account so that the exchange rate is crystallised early and future fluctuations in rates for settlement of USD denominated payables are avoided. As the consolidated entity’s operations develop and expand, the consolidated entity will develop and implement a more sophisticated foreign exchange risk strategy, which will include the use of Forward Exchange Contracts and sophisticated treasury products.

(e) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. All financial assets and financial liabilities of the consolidated entity at the reporting date are recorded at amounts approximating their carrying amount.

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the consolidated entity is the current bid price. At reporting date the consolidated entity had no such financial assets.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature.

26. Company Details

The registered office and principal place of business is: Level 1, 12 Kings Park Road West Perth WA 6005 Telephone: 08 9226 4500 Facsimile: 08 9226 4300

52

DIRECTORS’ DECLARATION

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The directors of the company declare that:

1. the financial statements and notes, as set out in the financial report, are in accordance with the Corporations Act 2001 and:

2. a) comply with Australian Accounting Standards, which, as stated in accounting policy note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and

3. b) give a true and fair view of the financial position as at 30 June 2013 and of the performance for the year ended on that date of the consolidated entity;

4. 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; and

5. the directors have been given the declarations required by s295A of the Corporations Act 2001 from the Executive Chairman and Chief Finance Officer.

This declaration is made in accordance with a resolution of the Board of Directors.

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Alex Molyneux Executive Chairman

Dated this 27[th] day of September 2013

53

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RSM Bird Cameron Partners 8 St George’s Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 8 9261 9100 F +61 8 9261 9101 www.rsmi.com.au

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of Celsius Coal Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• (ii) any applicable code of professional conduct in relation to the audit.

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RSM BIRD CAMERON PARTNERS

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Perth, WA Dated: 27 September 2013

TUTU PHONG Partner

Liability limited by a Major Offices in: RSM Bird Cameron Partners is a member of the RSM network. Each member scheme approved Perth, Sydney, Melbourne, of the RSM network is an independent accounting and advisory firm which under Professional Adelaide and Canberra practises in its own right. The RSM network is not itself a separate legal entity Standards Legislation ABN 36 965 185 036 in any jurisdiction.

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RSM Bird Cameron Partners 8 St George’s Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 8 9261 9100 F +61 8 9261 9101 www.rsmi.com.au

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CELSIUS COAL LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Celsius Coal Limited, which comprises the statement of financial position as at 30 June 2013, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards .

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about 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.

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

Liability limited by a Major Offices in: scheme approved Perth, Sydney, Melbourne, under Professional Adelaide and Canberra Standards Legislation ABN 36 965 185 036

RSM Bird Cameron Partners is a member of the RSM network. Each member of the RSM network is an independent accounting and advisory firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

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Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of Celsius Coal Limited, would be in the same terms if given to the directors as at the time of this auditor's report .

Opinion

In our opinion:

• (a) the financial report of Celsius Coal Limited is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and

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

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

Report on the Remuneration Report

We have audited the Remuneration Report contained within the directors’ report for the year ended 30 June 2013. 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.

Opinion

In our opinion the Remuneration Report of Celsius Coal Limited for the year ended 30 June 2013 complies with section 300A of the Corporations Act 2001 .

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RSM BIRD CAMERON PARTNERS

Perth, WA Dated: 27 September 2013

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TUTU PHONG Partner

ADDITIONAL INFORMATION

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Additional information required by Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 13 September 2013.

(a) Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

Range	Total Holders	Units	% of Issued Capital
1 – 1,000	4,351	1,585,628	0.11
1,001 – 5,000	1,881	4,378,258	0.29
5,001 – 10,000	217	1,628,648	0.11
10,001 – 100,000	264	10,927,071	0.72
100,001 – 9,999,999,999	471	1,484,306,792	98.77
Rounding
Total	7184	1,502,826,397	100.00
Unmarketable Parcels
	Minimum Parcel Size	Holders	Units
Minimum $500.00 parcel at $0.025 per unit	20,000	6,542	8,917.096

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted ordinary shares are:

Rank	Name	Units	% of Units
1.	BLUMONT GROUP LIMITED	227,272,727	15.12
2.	BRIJOHN NOMINEES PTY LTD	81,500,000	5.42
3.	PHEAKES PTY LTD	50,000,000	3.33
4.	AH SUPER PTY LTD	44,000,000	2.93
5.	TT NICHOLLS PTY LTD	39,500,000	2.63
6.	MR MICHAEL FOSTER BLACK & MRS LYNETTE ROBIN BLACK STF S/F 2 A/C>	36,000,000	2.40
7.	CELTIC CAPITAL PTY LTD	34,712,812	2.31
8.	QUINDANNING (BVI) LIMITED	25,000,000	1.66
9.	ZERO NOMINEES PTY LTD	20,500,000	1.36
10.	MR DAVID ARTHUR PAGANIN	19,347,388	1.29
11.	MR WADE ROUTLEDGE & MRS GAY EDWINA ROUTLEDGE S/F A/C>	17,500,000	1.16
12.	MR JASON PETERSON & MRS LISA PETERSON	16,000,000	1.06
13.	PO KING (FAR EAST) PTY LTD	16,000,000	1.06
14.	MR COLIN MACKAY	15,250,000	1.01
15.	MR TODD ROBERT PEARSON	15,074,737	1.00
16.	GREENSEA INVESTMENTS PTY LTD	15,000,000	1.00
17.	MR ROBERT JONATHAN WALL	15,000,000	1.00
18.	BANDILA LIMITED	14,550,000	0.97
19.	CHANCERY HOLDINGS PTY LTD	14,000,000	0.93
20.	MR JOHN DELLA BOSCA	13,955,000	0.93
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)		730,162,664	48.58

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ADDITIONAL INFORMATION

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(c) Substantial shareholders

		Name	Units	%
		BLUMONT GROUP LTD	227,272,727	15.12%
		BRIJOHN NOMINEES PTY LTD	81,500,000	5.42%

(d) Voting rights

All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

(e) Options

There are no listed options. There are 292,000,000 unlisted options over unissued shares on issue.

(f) Schedule of interest in mining tenements

			Percentage held /
	Location	Tenement	earning
MURRIN MURRIN STH		E39/1641	100%
NICKEL		E39/1684	100%
CARNILYA		L26/0241	30%
CARNILYA		M26/0047	30%
CARNILYA		M26/0048	30%
CARNILYA		M26/0049	30%
CARNILYA		M26/0453	30%
KYRGYZ REPUBLIC		BEL ALMA	100%*
KYRGYZ REPUBLIC		SARY MOGOL	100%
KYRGYZ REPUBLIC		TUYUK-KARGASHA	80%
KYRGYZ REPUBLIC		KOKKIA	80%
KYRGYZ REPUBLIC		MIN-TEKE	80%

• As of July 27th 2013 this permit expired.

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