FIRSTWAVE CLOUD TECHNOLOGY LIMITED - Annual Report 2013

AnnuAl RepoRt 2013

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CoRPoRATE DiRECToRY

tellus ResouRces ltd

ABN 35 144 733 595

diRectoRs

Anthony Wehby Non-Executive Chairman

Carl Dorsch Managing Director

Richard Willson Non-Executive Director

Ben J Salmon RFD QC Non-Executive Director

compAny secRetARy

Anne Adaley George Yatzis

RegisteRed office And pRincipAl plAce of Business

Level 5, 70 Pirie Street Adelaide SA 5000 T: +61 8 8100 9228 F: +61 8 8227 0544 E: [email protected]

shARe RegisteR

Boardroom Limited Level 7 207 Kent Street Sydney NSW 2000 T: (02) 9290 9600 F: (02) 9279 0664

secuRities exchAnge listing

ASX Code: TLU

AuditoR

Grant Thornton Audit Pty Ltd Level 19 2 Market Street Sydney NSW 2000 T: (02) 8297 2400 F: (02) 9299 4445 www.grantthornton.com.au

TELLUS RESoURCES LTD AnnuAl RepoRt 2013

CoRPoRATE PRoFiLE	4
CHAiRMAN’S LETTER	5
oPERATioNS & EXPLoRATioN REPoRT	6
REMUNERATioN REPoRT	15
DiRECToRS’ REPoRT	16
AUDiToR’S iNDEPENDENCE DECLARATioN	27
CoRPoRATE GoVERNANCE STATEMENT	28
STATEMENT oF PRoFiT oR LoSS AND oTHER
CoMPREHENSiVE iNCoME	32
STATEMENT oF FiNANCiAL PoSiTioN	33
STATEMENT oF CHANGES iN EQUiTY	34
STATEMENT oF CASH FLoWS	35
NoTES To THE CoNSoLiDATED
FiNANCiAL STATEMENTS	36
DiRECToRS’ DECLARATioN	59
iNDEPENDENT AUDiToR’S REPoRT	60
SUPPLEMENTARY iNFoRMATioN	63

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CoRPoRATE PRoFiLE

Tellus Resources Ltd (ASX code: TLU) is an Australian-based resources exploration company that generates value for its shareholders by identifying and acquiring properties and projects that have significant discovery and development potential.

As a result of the Company actively pursuing value-added opportunities within the resource sector, on 23 August 2013 Tellus completed the acquisition of PNC AUST Pty Ltd. PNC holds 50% of PEL105, a wet gas project, in the highly prospective Cooper Basin with the right to purchase the remaining 50%.

Carl Dorsch, principal of PNC, became Managing Director of TLU on 23 August 2013 following the completion of the acquisition. Carl has 35 years experience in the hydrocarbon sector.

Tellus has a 100% interest in the Chillagoe Gold Project in North Queensland. The tenement area shows similar mineralisation characteristics to the nearby multi-million ounce Red Dome-Mungana, Kidston and Pajingo projects. With likely provenance as an intrusion-related gold deposit, the region is also highly prospective for silver and base metals.

During the 2014 financial year the Company will undertake exploration at its Cooper Basin project whilst continually seeking further oil and gas opportunities. in addition, strategies to maximise the value of its highly prospective gold assets will be pursued.

HiGHLiGHTS

corporate

Assessment and evaluation of a substantial number of potential projects.
PNC AUST Pty Ltd proposed acquisition announced on 30 April 2013 and completed on 23 August concurrent with a successful capital raising of $2.498M.

Exploration

330m of RC drilling at the Chillagoe Gold Project, completing a total of 3,018m with many of the holes intersecting significant gold mineralisation.
Significant increase in the exploration tenure of the Chillagoe Gold Project with combined EPM Applications lodged within the year covering 361km².

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CHAiRMAN’S LETTER

Dear Investor

The year since our last Annual Report has been one of continued difficult conditions for the junior minerals sector. Despite the challenges the Company’s commitment to identifying and pursuing further project opportunities has been undiminished and, since year end has led to the acquisition of PNC AUST Pty Ltd. This is an exciting acquisition with a significant oil and gas exploration opportunity through its 50% interest in PEL 105 the aquisition of the remaining 50% interest subject to Ministerial approval.

Concurrent with the PNC purchase a successful capital raising of $2.5 million was completed in August 2013. This was a very pleasing result in challenging market conditions where junior exploration companies have struggled to raise equity finance.

Carl Dorsch, the Principal of PNC became Managing Director on completion of the acquisition. Carl has over 35 years experience in the hydrocarbon sector and the Company looks forward to his involvement in the exploration and development of these exciting oil and gas assets. Stephen Woodham has vacated the position of Managing Director and has resigned from the Board. i would like to thank Stephen for his significant contribution to Tellus.

Earlier in the year, the Company completed a significant drilling program within the Empire & Wandoo Mining Leases at the Chillagoe project, intersecting significant gold mineralisation. The Company also increased its footprint in the Chillagoe region by more than 100% during the year.

Drilling at Pirie 1 well at PEL 105 has commenced under a farm-out agreement with Senex Energy Limited and other oil and gas opportunities are under consideration. We are also committed to working on strategies to extract maximum value from the Company’s highly prospective gold assets.

i would like to thank our shareholders for their support during these challenging market conditions. in addition, thanks to my fellow Directors and on behalf of the Board i wish to extend my appreciation to our employees and contractors.

Anthony Wehby chAiRmAn

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oPERATioN & EXPLoRATioN REPoRT

iNTRoDUCTioN

Early in the year a 3,018m RC drilling program was completed within the Empire and Wandoo Mining Leases (ML20380, ML5130 and ML20381).

Final assays were received from the RC drilling program, many of the holes intersected significant gold mineralisation associated with porphyritic intrusives, abundant arsenopyrite, quartz veining and phyllic (serecite) alteration consistent with an intrusive Related Gold (iRG) mineral system reported in ASX Release dated 17/08/2012.

Shallow gold mineralisation intersected in Empire hole TLU007 is significant as the gold grades are increasing with depth; the mineralisation is related to sheeted quartz arsenopyrite veining with intense serecite alteration interpreted to be an intrusive Related Gold (iRG) Deposit similar to Red Dome.

Red Dome gold mineralisation has been proven to extend to a depth of over one kilometre; Red Dome and Mungana have a reported gold resource of 2.7 million ounces of gold and 34 million ounces of silver.

During the year Tellus has significantly increased the exploration tenure in the Chillagoe Gold Project with combined EPM Applications lodged within the year covering 361km².

No exploration was completed on the NSW Projects.

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oPERATioN & EXPLoRATioN REPoRT

QUEENSLAND PRoJECTS

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Figure 1 – Chillagoe Project Tenements
Black Hatching – Granted EPMs at the start of the year
Red Hatching – EPMs Granted during the year
Green Hatching – EPM Applications during the rear
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empire (ml20380)

Early in the year Tellus completed a maiden RC drilling program at the Chillagoe Gold Project.

2,167m of RC was completed just prior to the end of the previous year within the Empire Mining Lease (ML20380) and intersected significant primary gold mineralisation immediately below previously defined oxide intersections in hole TLU007.

TLU007 was terminated at 136m due to difficult drilling conditions. The bottom 32m of the hole had an average gold grade of 0.51g/using a 0.1g/t cut-off. The gold grades are open and increasing with depth (8m @ 1.21g/t Au from 128m to the end of hole using a 0.90g/t cut-off).

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oPERATioN & EXPLoRATioN REPoRT

QUEENSLAND PRoJECTS

Empire (ML20380) (continued)

Figure 2 - Empire Prospect – Section 8095615N >0.5g/t looking north and interpreted Gold Zone orange traces = 0.1g/t AuEq. Red traces = 0.5g/t AuEq >0.1g/t Traces are Au Equivalents to be consistent with the Wandoo sections. Labels are gold only for this section as the silver at Empire is negligible.

The Empire Prospect displays many similarities to Red Dome 23km to the north-east. Red Dome is open at over one kilometre deep.

Wandoo (ML5130, ML20381, ML20234)

330m of RC drilling was completed within the Wandoo mining leases for a total of 851m and all lab assays were received during the first quarter 2012-2013 year.

The gold and silver mineralisation occurs in quartz arsenopyrite veins with a halo of intense phyllic alteration and disseminated sphalerite (zinc), the mineralisation and alteration correlates well between holes at Bayley’s, Wendy’s and Reid’s.

Surface mapping of the workings suggest the mineralisation may have a strike of at least 350m.

1AuEq (Gold Equivalent) = Au + (Ag/50)

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oPERATioN & EXPLoRATioN REPoRT QUEENSLAND PRoJECTS

Bayley’s

TLU014

38m @ 0.55g/t AuEq from 27m
including 3m @ 1.83g/t AuEq from 62m
TLU015
11m @ 0.97g/t AuEq from 28m²
including 3m @ 2.87g/t AuEq from 31m³
14m @ 0.71g/t AuEq from 46m²
including 6m @ 1.42g/t AuEq from 49m³

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Figure 3 – Bayley’s Composite Section looking north Selected TLU014 and 015 intervals (bold) and interpreted Gold-Silver Zone orange traces = 0.1g/t AuEq. Red traces = 0.5g/t AuEq[4]

20.1g/t AuEq cut-off with a maximum internal dilution of 2x the sample interval

30.5g/t AuEq cut-off with a maximum internal dilution of 2x the sample interval

4AuEq (Gold Equivalent) = Au + (Ag/50)

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oPERATioN & EXPLoRATioN REPoRT

NEW SoUTH WALES PRoJECTS

Southern New England IRG Project, NSW

Target Model

intrusive Related Gold (iRG) Deposits are an important deposit style that has been poorly understood for some time. iRG deposits include Fort Knox (Alaska ~4M oz), Donlin Creek (Alaska >33M oz) and in Eastern Australia Kidston (4.5M oz), Red Dome (2.7M oz) and Timbara (New England Fold Belt – 0.4M oz).

Characteristics of iRG Deposits are:

Geochemical - Au, Bi, Te, W, Mo, As (Sb, Sn, Pb, Cu)
Magma Types – Felsic (granites) with ilm>Mag (ie low magnetic signatures in regional data)

The felsic intrusives of the Chillagoe Region and the New England Fold Belt display all these characteristics. Despite possibly the world’s largest undeveloped gold deposit (Donlin Creek) being an iRG Deposit, it is surprising that the New England Fold Belt is not actively being explored for this deposit style by more companies.

New England Project - iRG Target

A large proportion of the New England is underlain by reduced magma suite intrusives prospective for iRGs. Generally iRG deposits that are mostly host within younger sediments and/or volcanics tend to be much larger and higher grade (eg Donlin Creek – 467.7 Mt @ 2.23 g/t), iRG deposits that are host within the carapace or within the intrusions tend to be lower grade disseminated deposits (eg Fort Knox - 169 Mt @ 0.93 g/t).

The prospective felsic intrusives within the New England are more ‘exposed’ or more deeply eroded in the northern part of the Fold Belt this is typified by the Timabara deposit which is small disseminated and host within the pluton. in the southern part of the New England Fold Belt the prospective felsic intrusives are not well exposed consequently the larger higher grade deposits (eg Donlin Creek - 467.7 Mt @ 2.23 g/t) should be preserved.

The prospective felsic intrusions within the Southern New England will be overlain by younger sediments and volcanics hence the intrusions within explorable depth will be represented in the regional aeromagnetic data as areas of low magnetic signature. Areas of significant historic gold workings within the magnetic lows are therefore highly prospective for “Donlin Creek Style” (size and grade) iRG Deposits.

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Target
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Figure 4 - iRG Deposit Model (modified from Lang et al., 1999)

The Company holds four exploration tenements in the New England region of New South Wales.

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Tellus ResouRces lTd ANNUAL report 2013
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oPERATioN & EXPLoRATioN REPoRT

NEW SoUTH WALES PRoJECTS

Upper Hunter EL7874, Cobark EL7698, Glen Morrison EL7699 and Niangala EL7877 – (TLU 100%)

EL7874 Upper Hunter was granted on the 19th December 2011 for two years. EL7698 (252km²) covers the whole of the Upper Hunter Goldfield and surrounds.

The Upper Hunter Goldfield has sixty five (65) known hard rock historic workings oriented north-south extending over twenty (20) kilometres, operated in the late 1800’s.

only two (2) of the sixty five (65) hard rock workings have received some level of exploration. These were the Royal Standard and Mountaineer mines.

Twelve (12) samples were collected from underground veins within the Royal Standard and Mountaineer of which seven (7) returned gold grades greater than 5 g/t.

The highlight of the sampling program saw one (1) underground face sample return 1,045 g/t gold. other underground sample results included 33.8, 15.6 and 10.8 g/t gold.

Recent interpretation suggests the geology bears close similarity to Donlin Creek in Alaska, at >30 million ounces, one of the largest undeveloped gold projects in the world.

Cobark is eighty five (85) square kilometres in size and sits thirty (30) kilometres to the west of Gloucester. Alluvial gold was first discovered in the district at Copeland in 1876 and reef gold mining started in 1877, about the same time the Cobark Goldfield was discovered thirteen (13) kilometres to the west. NSW Geological Survey records twenty (20) significant workings within the project which were mainly reef gold veins probably worked in the late 1800’s. More recent reconnaissance exploration was carried out in the late 1980’s by Placer Exploration with minimal follow up.

Both Cobark EL7698 and Glen Morrison EL7699 Tenements were renewed for a further two years with a 50% reduction.

No work was undertaken on the Southern New England tenements during the year.

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Figure 5 – Southern New England Project Tenements Blue Regions = interpreted Reduced intrusions from Regional RTP Magnetics Pink Regions = Barrington Tops Granodiorite

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oPERATioN & EXPLoRATioN REPoRT NEW SoUTH WALES PRoJECTS

Glen Morrison EL7699 and Niangala EL7877 – (TLU 100%)

The Glen Morrison project covers fifty nine (59) square kilometres and is situated twenty five (25) kilometres to the south of the town of Walcha. Alluvial gold was first discovered at Glen Morrison in 1870 and shortly afterwards reef gold was discovered. By April 1873 there was an estimated 200 to 300 people working the field.

The Glen Morrison project area contains numerous old gold workings and there is estimated to be over one hundred (100) old shafts. Most of the shafts have been backfilled in recent years. While production records are limited, the Golden Bar reef, to the northern end of the tenement, was reported to have produced more than 70,000oz gold between 1872 and 1874.

Following up on the high grade rock chip sampling results discovered around the Golden Bar and Golden Star Reefs was completed in the previous year, a total of 1,327 metres of Reverse Circulation (RC) drilling was completed on the Glen Morrison Prospect during the quarter. Best results included 4 metres at 0.67g/t Au from 12 metres in hole GMRC002, including one metre at 1.15g/t Au.

A seven (7) metre veined and mineralised intersection in hole GMRC007 returned seven (7) metres at 0.13g/t gold from a depth of seventy two (72) metres.

Manganese

in addition to the gold workings manganese has been mined in the Glen Morrison and Niangala areas in the past, the manganese mineralisation is untested. Manganese minerlisation has been seen close by the Glen Morrison gold workings (see below) and has not been subject to ‘modern’ exploration.

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Figure 6 – Manganese oxide Minerlisation at Surface (Glen Morrison). This Manganese can be traced for approximately 250m.

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oPERATioN & EXPLoRATioN REPoRT NEW SoUTH WALES PRoJECTS

Southeast Lachlan Project, NSW

Southeast Lachlan Project was relinquished during the year.

SUMMARY oF TENURE

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lABel stAtus gRAnt dAte ApplicAtion holdeR nAme hA km² inteRest
dAte
QueenslAnd
Chillagoe Gold Project
ML20234 Granted 24-Apr-03 Premier Mining Pty Ltd Golden Girl 50 100%
ML20380 Granted 11-Mar-04 Premier Mining Pty Ltd Empire one 252 100%
ML20381 Granted 11-Mar-04 Premier Mining Pty Ltd Wandoo Extended 161.6 100%
ML5130 Granted 19-Jul-84 Premier Mining Pty Ltd Mt Wandoo 17.3 100%
EPM10780 Granted 19-oct-95 Premier Mining Pty Ltd 6.6 100%
EPM18397 Granted 31-Jul-13 Premier Mining Pty Ltd 19.7 100%
EPM18398 Granted 9-Aug-12 Premier Mining Pty Ltd 39.4 100%
EPM19377 Granted 12-Mar-13 Premier Mining Pty Ltd 19.7 100%
EPM19378 Granted 12-Mar-13 Premier Mining Pty Ltd 52.5 100%
EPM19605 Granted 23-Jul-13 Tellus Resources Ltd 78.8 100%
EPM19607 Granted 23-Jul-13 Tellus Resources Ltd 65.6 100%
EPM19803 Application 1-Aug-12 Premier Mining Pty Ltd 39.4 100%
EPM25193 Application 1-Mar-13 Premier Mining Pty Ltd 32.8 100%
EPM25230 Application 2-Apr-13 Premier Mining Pty Ltd 177.1 100%
EPM25233 Application 2-Apr-13 Premier Mining Pty Ltd 82.0 100%
EPM25253 Application 26-Apr-13 Premier Mining Pty Ltd 29.6 100%
NEW SoUTH WALES
Southern New England
EL7699 Granted 4-Feb-11 Tellus Resources Ltd Glen Morrison 58.8 100%
EL7698 Granted 4-Feb-11 Tellus Resources Ltd Cobark 40.8 100%
EL7874 Granted 19-Dec-11 Tellus Resources Ltd Upper Hunter 249.6 100%
EL7877 Granted 4-Jan-12 Tellus Resources Ltd Niangala 43.5 100%
Rockley
EL7993 Granted 25-oct-12 Tellus Resources Ltd Triangle Flat 151.3 100%
EL8004 Granted 30-oct-12 Tellus Resources Ltd Rockley 157.2 100%
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Table 1 – Tenement Schedule

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oUTLooK

Following the purchase of PNC AUST Pty Ltd, the drilling of Pirie 1 at PEL105 in the Cooper Basin is the near term focus. The Pirie 1 well is targeting Birkhead, Toolachee, Patchawarra and Tirrawarra oil and wet gas prospects. Recoverable oil in the Tirrawarra could be as high as 3 million barrels.

The Company has also agreed to a farmout arrangement with Senex Energy Limited which will result in a 50% interest of PEL105 being transferred to Senex subject to ministerial approval. in return, PNC will cash call Senex for $3.5M in two equal tranches of $1.75M to assist with the funding of the drilling.

in 2014, the Company will continue to work on the most effective strategy to maximise the value of the Chillagoe gold assets including the opportunity to negotiate with prospective suitable joint venture partners.

Competent Persons Statement

The information in this report that relates to Exploration Results is based on information provided by Mr D Ward, Member of Australasian institute of Mining and Metallurgy and the Senior Exploration Consultant to Tellus Resources Ltd. Mr Ward has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking 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. Mr Ward consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information in this report that relates to Hydrocarbon Resources is based on information compiled by Mr Carl Dorsch of the Company who is leading the Company’s operations efforts with the help of various professional consultants who are experts in their fields.

Mr Dorsch has been a member of the Society of Petroleum Engineers since 1981. He holds Bachelor of Science and Bachelor of Chemical Engineering degrees from the University of Adelaide, South Australia and is a Chartered Engineer as well as a Fellow of the institute of Chemical Engineers.

Mr Dorsch has over 35 years experience in the oil and gas exploration and production business both in Australia and on the international stage. Although specialising in drilling and completion operations, his career has included reservoir and production operations.

Mr Dorsch has sufficient expertise in the activities undertaken to qualify as a Competent Person as defined in the 2004 Edition of the Joint ore Reserves Committee (JoRC) Australasian Code for Reporting of Exploration Results. Mr Dorsch hereby consents to the inclusion of the information in this report and the form and context in which it appears.

Disclaimer

This document has been prepared by Tellus Resources Ltd (“Tellus”) and may contain some references to forecasts, estimates, assumptions and other forward looking statements. These forward-looking statements reflect the current internal projections, expectations or beliefs of Tellus based on information currently available to Tellus. Although the company believes that its expectations, estimates and forecast outcomes are based on reasonable assumptions, it can give no assurance that they will be achieved. They may be affected by a variety of variables and changes in underlying assumptions that are subject to risk factors associated with the nature of the business, which could cause actual results to differ materially from those expressed herein. Statements concerning reserves and/or resources may also be deemed to be forward looking statements in that they involve elements based on specific assumptions. Tellus Resources Ltd has taken all reasonable care in producing the text and images contained in this report but do not warrant that the information contained herein is accurate or up to date. The information in this report is based on publicly available information, internal data and information from other sources. it is not intended to give investment or other advice to any party or individual(s) and the information is not a substitute for detailed investigation or analysis. Tellus Resources Ltd will not be responsible for any loss or damage (direct or indirect, consequential or otherwise) resulting from the use of information provided in this report

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Tellus ResouRces lTd ANNUAL report 2013
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tellus ResouRces ltd ABN 35 144 733 595

finAnciAl RepoRt foR the yeAR ended 30 June 2013

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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

The Directors of Tellus Resources Ltd (“Tellus Resources” and/or “the Company”) present their Report together with the financial report of the Company and the entity it controlled (referred to hereafter as the “Group”) at the end of, or during the year ended 30 June 2013, unless otherwise stated.

DiRECToRS

The following persons held office as Directors of Tellus Resources during or since the end of the reporting period and up to the date of this report:

Anthony Wehby

Non-Executive Chairman Date of Appointment: 21 June 2010

Expertise and Experience

Anthony Wehby has more than 35 years professional experience. He was a partner with PwC for 19 years until 2000 and since that time has been a consultant providing advice on mergers and acquisitions, iPo’s, funding and valuations. During his time at PwC, Anthony specialised in providing corporate finance advice to a wide range of clients, including those in the mining and exploration sectors.

Anthony serves on the board of ASX-listed YTC Resources Limited (since 2007) and as Chairman of YTC since December 2011. He also serves on the board of the Royal Rehabilitation Centre Sydney. Anthony is a Fellow of the institute of Chartered Accountants in Australia and a member of the Australian institute of Directors.

other current directorships

YTC Resources Limited

Former directorships in the last 3 years

Nil

Interest in shares and options

660,000 fully paid ordinary shares and 500,000 unlisted options over ordinary shares in Tellus Resources.

Carl Dorsch

Managing Director Date of Appointment: 23 August 2013

Expertise and Experience

Mr. Carl William Dorsch, BSc, BE, CEng, FiChemE is a Chartered Chemical Engineer with a 35 year career in hardrock, oil and gas exploration and development projects in Australia and internationally. He was appointed Managing Director of Tellus Resources Ltd on 23 August 2013. He served as Managing Director of Adelaide Energy Limited from its ASX listing in July 2007 until its takeover in January 2012. Mr. Dorsch was Managing Director of Strzelecki Metals Limited (formerly, Primary Resources Limited) from November 11, 2005 to February 1, 2007.

other current directorships

Anglo Russian Energy Ltd

Former directorships in the last 3 years

Nil

Interest in shares and options

17,000,000 fully paid ordinary shares held by CNP Energy Pty Limited ACN 159 055 384. Carl Dorsch holds a relevant interest (23.88%) in CNP Energy Pty Limited ACN 159 055 384.

45,000,000 performance options over ordinary shares subject to Carl Dorsch remaining employed as managing director of the Company. These options convert into fully paid ordinary shares in the Company on a 1:1 ratio, for nil consideration as follows:

5,000,000, where the 30 day volume weighted average price (VWAP) for the ordinary shares of the Company reaches at least $0.175 per share;
5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.200 per share;
5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.225 per share;

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DiRECToRS’ REPoRT FoR THE YEAR ENDED 30 JUNE 2013

15,000,000, when production testing of PEL 105 in either open or closed hole that can demonstrate an immediate flow capacity for the well in excess of a sustained minimum of 100 BoEPD for a period in excess of 7 days. Such test must be certified by a relevant expert in the field being either an independent consulting reservoir engineer or the contracted testing company, provided that such threshold is achieved on or prior to 31 December 2014; and
15,000,000 where the Company has acquired a direct or indirect interest in the Wichita County Project and the production from the leases which form the Wichita County Project reaches an average of 50 BoEPD over a three month period.

Stephen Woodham

Executive Director, (former Managing Director)

Date of Appointment: 30 January 2012 to 23 August 2013, Managing Director and Executive Director from 23 August 2013 Stephen Woodham has over 20 years’ experience in the mining and exploration industry in Western Australia and New South Wales specialising in field logistics and support and land access in rural and remote environments. He also has a successful track record of tenement acquisition, mining investment and commercial and cross cultural negotiation.

As founding director of LFB Resources Limited, Stephen negotiated the purchase of an extensive portfolio of tenements from Rio Tinto in 1996 and later negotiated joint ventures with Sumitomo of Japan and AngloGold prior to the takeover of that company by Alkane Exploration in 1999.

Stephen was a founding partner in field logistics business Southern Cross Technical & Field Services, consulting to a number of companies since 1999. He was also a founding partner in Techdrill Services, a successful drilling company operating in New South Wales.

Stephen has served on the boards of Force Resources Ltd, YTC Resources Limited (YTC) and Centaurus Resources. Stephen was a founding director of YTC and he was successful in attracting Chinese state-owned Yunnan Tin Company as a seed investor. Stephen was also a founding director of Centaurus Resources, a company now operating in the iron ore sector of Brazil.

other current directorships

Nil

Former directorships in the last 3 years

YTC Resources Limited

Interest in shares and options

1,568,000 fully paid ordinary shares in Tellus Resources.

Richard Willson

Non-Executive Director Date of Appointment: 12 November 2010 Richard is an accountant with more than 18 years’ experience.

He has worked in public practice and in various financial management and company secretarial roles within the resources and agricultural sectors for both publicly listed and private companies.

in addition to his role as Chief Financial officer and Company Secretary with YTC Resources Ltd, Richard is a Director of the ASX listed Ausnico Ltd, a Director and Company Secretary of the not for profit Unity Housing Company and an Alternate Director of YTC Resources Ltd.

Richard was previously Chief Financial officer and Company Secretary of ASX listed companies Flinders Mines Ltd, Maximus Resources Ltd and ERo Mines Ltd. He acted as an Alternate Director for Flinders Mines Ltd and Maximus Resources Ltd and was heavily involved with the Eromanga Uranium Ltd iPo which later became ERo mines Ltd.

As CFo and Company Secretary of the privately owned company Sydac Pty Ltd, he was instrumental in its sale to a large global company. Richard has worked in senior financial roles within the BHP Billiton group and was the Finance Manager and Company Secretary for the Provimi Australia and Jumbuck Pastoral groups. He has also acted a Director for a number of private companies.

Richard has a Bachelor of Accounting from the University of South Australia, is a Fellow of CPA Australia and a Fellow of the institute of Company Directors. Richard is a founding member of the AiCD Emerging Directors Committee.

other current directorships

Ausnico Limited

YTC Resources Limited

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DiRECToRS’ REPoRT FoR THE YEAR ENDED 30 JUNE 2013

Former directorships in the last 3 years

Nil

Interest in shares and options

400,000 fully paid ordinary shares and 500,000 unlisted options over ordinary shares in Tellus Resources.

Ben J Salmon RFD QC

Non-Executive Director

Date of Appointment: 19 october 2012

Ben has practised as a barrister in Canberra since 1967. He was elected as a member of the ACT Law Society Council and the ACT Bar Council. He served two terms as President of the Bar Council. Ben has served in the Australian Army Reserve, initially in infantry and later in the Legal Corps being appointed a Judge Advocate and Defence Force Magistrate. He was appointed Queens Counsel in 1985. He has practised in many areas of the law including commercial and company matters. Ben has a Bachelor of Laws from Sydney University and was first admitted to practice by the Supreme Court of New South Wales in July 1965. He represents Asia Pacific Mining Capital Pte Ltd, a cornerstone investor following the capital raising for the Chillagoe Gold Project in 2012.

other current directorships

Nil

Former directorships in the last 3 years

Nil

Interest in shares and options

Nil

CoMPANY SECRETARY

Anne Adaley

Anne has more than 25 years’ experience in the resources sector, including senior management roles with a number of listed public Australian exploration and mining companies. She has also spent more than a decade as Company Secretary for several listed public companies.

Anne is principal of Australian Mining Corporate and Administrative Services Pty Ltd (AMCAS) which provides a full range of consulting services and business support to management including accounting, financial services and company secretarial. Anne also currently acts as Company Secretary and/or Chief Financial officer for a number of ASX listed companies and pre iPo companies.

Prior to establishing AMCAS in 2010, Anne served as Chief Financial officer and Company Secretary to Monaro Mining NL, Finance and Administration Manager to Climax Mining Limited and Company Secretary and Group Financial Controller to Gympie Gold Limited.

PRiNCiPAL ACTiViTiES

The principal activities of the Group are: exploration for minerals including gold deposits; and the acquisition and development of mineral tenements.

oPERATiNG RESULTS

The Group incurred a loss after tax for the reporting period of $1,376,816 (2012: a loss of $1,265,767).

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Tellus ResouRces lTd ANNUAL report 2013
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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

REViEW oF oPERATioNS

During the reporting period, the Company continued to evaluate and assess value-adding opportunities to bring into its portfolio of assets.

corporate

The Group reported a loss of $1,376,816 of which $485,953 was incurred on business development costs including identifying and evaluation of new projects.
on 30 April 2013, the Company announced that it had entered into a conditional agreement to acquire 100% of the issued shares in PNC AUST Pty Ltd (PNC). Completion of the Acquisition was conditional on, amongst other things, the Company’s shareholders approval of the resolutions as set out in the Notice of Meeting to the Extraordinary General Meeting (EGM) held on 10 July 2013. All resolutions were carried by shareholders at the EGM. Furthermore, it was a condition of the Acquisition that the Company raise a minimum of AUD 2,000,000 to fund the ongoing operations of the Company. on 23 August 2013, the Company announced the completion of the acquisition of PNC AUST Pty Ltd (“PNC”) having successfully raised $2,498,373 and the issue of 28,458,367 ordinary fully paid shares to various sophisticated investors who participated in the placement. Refer to the Subsequent Events note below for further detail.

Exploration

Chillagoe Gold Project, Qld

During the reporting period, the Company:

completed a 3,018m RC drilling program within the Empire and Wandoo Mining Leases (ML20380, ML5130 and ML20381). Many of the holes intersected significant gold mineralisation associated with porphyritic intrusives, abundant arsenopyrite, quartz veining and phyllic (serecite) alteration consistent with an intrusive Related Gold (iRG) mineral system reported in ASX Release dated 17 August 2012;
reviewed and evaluated regional prospectivity outside of the Empire and Wandoo Mining Leases. Additional surface geochemistry not previously identified was discovered from old reports from a prospect called Simpsons within EPM18398. Simpsons lies approximately 5.5km south-east of the Wandoo mining leases along strike of the Palmerville Fault Zone;
was granted four new Exploration Permits, EPM18397, EPM18398 EPM19377 and EPM19378 adjacent to the existing Chillagoe title. on 23 July 2013, two further applications were granted, EPM19605 and EPM19607. in addition, applications were also made for 5 EPMs to complement the existing Chillagoe Gold Project portfolio. These granted EPMs and applications will significantly increase the overall footprint Tellus has in the region by over 100%;
continued to work on the most effective strategy to maximise the value of the Chillagoe gold assets including the opportunity to negotiate with prospective suitable joint venture partners; and
did not carry out any exploration on the NSW Projects.

CHANGES iN THE STATE oF AFFAiRS

There were no significant changes in the state of affairs of the Group during the reporting period ended 30 June 2013 other than as referred to in this report and the Financial Statements or notes thereto.

DiViDENDS

The Directors recommend that no dividend be paid for the reporting period ended 30 June 2013 nor have any amounts been paid or declared by way of dividend during the reporting period.

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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

EVENTS SUBSEQUENT To REPoRTiNG DATE

on 30 April 2013, the Company announced that it had entered into a conditional agreement to acquire 100% of the issued shares in PNC AUST Pty Ltd (PNC). Completion of the Acquisition was conditional on, amongst other things, the Company’s shareholders approval of the resolutions as set out in the Notice of Meeting to the Extraordinary General Meeting (EGM) held on 10 July 2013. All resolutions were carried by shareholders at the EGM. Furthermore, it was a condition of the Acquisition that the Company raise a minimum of AUD 2,000,000 to fund the ongoing operations of the Company.

on 23 August 2013 the Company:

announced the completion of the acquisition of PNC AUST Pty Ltd (“PNC”) having successfully raised $2,498,373 and the issue of
28,458,367 ordinary fully paid shares to various sophisticated investors who participated in the placement.
issued 40,000,000 Consideration Shares in total at an issue price of $0.10 to complete the acquisition of PNC AUST Pty Ltd as approved by shareholders at the EGM on 10 July 2013;
allotted 20,736,953 fully paid ordinary shares at an issue price of $0.10 per share raising $2,073,695;
allotted 7,721,414 fully paid ordinary shares at an issue price of $0.055 per share raising $424,678;
appointed Carl Dorsch as the Managing Director and in pursuant to the Employment Agreement issued 45,000,000 performance options over ordinary shares subject to Carl Dorsch remaining employed as managing director of the Company. These options convert into fully paid ordinary shares in the Company on a 1:1 ratio, for nil consideration as follows:
5,000,000, where the 30 day volume weighted average price (VWAP) for the ordinary shares of the Company reaches at least $0.175 per share;
5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.200 per share;
5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.225 per share;
15,000,000, when production testing of PEL 105 in either open or closed hole that can demonstrate an immediate flow capacity for the well in excess of a sustained minimum of 100 BoEPD for a period in excess of 7 days. Such test must be certified by a relevant expert in the field being either an independent consulting reservoir engineer or the contracted testing company, provided that such threshold is achieved on or prior to 31 December 2014; and
15,000,000 where the Company has acquired a direct or indirect interest in the Wichita County Project and the production from the leases which form the Wichita County Project reaches an average of 50 BoEPD over a three month period.
on 11 September 2013, the Company and its wholly owned subsidiary PNC AUST Pty Ltd (PNC) announced a farmout arrangement with Senex Energy Limited (“Senex”) in its PEL 105 tenement in the Cooper Basin, South Australia.
Upon signing of the Heads of Agreement PNC transfers a 50% interest in PEL 105 to Senex. Senex will contribute $3.5M to the costs of drilling Pirie in two equal tranches as follows:
Tranche 1 : $1.75M prior to spudding Pirie 1; and
Tranche 2: $1.75M 25 days after spud.

Following the rig release on Pirie 1 well operated by PNC, PNC will transfer operatorship of the Permit to Senex. Upon assuming operatorship, Senex will sole fund a further well in the Permit on or before June 30, 2014. Following this, PNC will transfer a further 20% interest in the block to Senex. interests at this stage will be: Senex: 70% and PNC 30% cent.

other than as stated elsewhere in this report, the Directors are not aware of any other matters or circumstances at the date of this report that have significantly affected or may significantly affect the operations, the results of the operations or the state of affairs of the Group in subsequent financial years.

LiKELY FUTURE DEVELoPMENTS

The Directors intend that the Group will undertake exploration at its Cooper Basin project acquired post-year end whilst continually seeking further oil and gas opportunities. in addition, strategies to maximise the value of its highly prospective gold assets will be pursued.

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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

DiRECToRS’ MEETiNGS

The number of meetings of directors held during the year and the number of meetings attended by each director were as follows:

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BoARd meetings
diRectoR numBeR eligiBle to Attend numBeR Attended
A Wehby 6 5
S Woodham 6 5
R Willson 6 6
B Salmon 3 2
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The Board does not have separately established committees dealing with audit, nomination, remuneration and risk management. The full Board carried out this role in accordance with the principles as set out in the Company’s Corporate Governance Plan.

Share options

Details of unissued shares or interests of Tellus Resources under option at the date of this report are:

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dAte options numBeR of shARes clAss of shARes exeRcise pRice of expiRy dAte of options
gRAnted undeR option option
29 July 2010 3,700,000 ordinary $0.30 31 Mar 2014
02 Dec 2010 1,100,000 ordinary $0.30 31 Mar 2014
30 Apr 2011 1,200,000 ordinary $0.30 30 Apr 2014
25 Sep 2012 5,000,000 ordinary $0.25 25 Sep 2014
23 Aug 2013 45,000,000 ordinary
totAl 56,000,000
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*on 23 August 2013, 45,000,000 performance options over ordinary shares were granted to Carl Dorsch subject to remaining employed as managing director of the Company. These options convert into fully paid ordinary shares in the Company on a 1:1 ratio, for nil consideration as follows:

i) 5,000,000, where the 30 day volume weighted average price (VWAP) for the ordinary shares of the Company reaches at least $0.175 per share;

ii) 5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.200 per share;

iii) 5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.225 per share;

iv) 15,000,000, when production testing of PEL 105 in either open or closed hole that can demonstrate an immediate flow capacity for the well in excess of a sustained minimum of 100 BoEPD for a period in excess of 7 days. Such test must be certified by a relevant expert in the field being either an independent consulting reservoir engineer or the contracted testing company, provided that such threshold is achieved on or prior to 31 December 2014; and

v) 15,000,000 where the Company has acquired a direct or indirect interest in the Wichita County Project and the production from the leases which form the Wichita County Project reaches an average of 50 BoEPD over a three month period.

No options have been exercised as at the date of this report.

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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

PERFoRMANCE RiGHTS

Details of Performance Rights on issue at the date of this report are:

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peRfoRmAnce Rights numBeR gRAnt dAte
S Woodham 700,000 05 April 2012
Consultants 350,000 21 Sep 2012
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The Performance Rights will convert as follows:

i) 300,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 25 cents per Share, on or before 27 January 2017. ii) 400,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 40 cents per Share, on or before 27 January 2017. iii) 350,000 Performance Rights, to convert if the share price reaches 30 cents per Share, on or before 21 September 2015.

ENViRoNMENTAL iSSUES

The Group is subject to environmental regulations under the laws of the Commonwealth and State. The Group has a policy of complying with its environmental performance obligations and at the date of this report is not aware of any breach of such regulations.

indemnities given and insurance premiums paid to auditors and officers

During the reporting period, the Company paid an insurance premium to insure the Directors and officers of the Group. The officers of the Company covered by the insurance policy include all Directors and the Company Secretary. The liabilities insured are 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 the Company, 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 willful 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 to cause detriment to the Company. Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract.

The Company has entered into an agreement with the Directors and officers to indemnify them against any claim and related expenses, which arise as a result of work completed in their respective capabilities.

The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer or auditor of the Company against a liability incurred as such by an officer or auditor.

NoN AUDiT SERViCES

The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those nonaudit services during the year is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

All non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Board to ensure they do not impact upon the impartiality and objectivity of the auditor; and
The non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decisionmaking capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

Details of the amounts paid to the auditors of the Group, Grant Thornton, and its related practices for audit and non-audit services provided during the year are set out in Note 25 to the Financial Statements.

A copy of the auditor’s independence declaration as required under s307C of the Corporations Act 2001 is included on page 27 of this financial report and forms part of this Directors’ report.

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Tellus ResouRces lTd ANNUAL report 2013
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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

REMUNERATioN REPoRT (AUDiTED)

The Directors of Tellus Resources present the Remuneration Report prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001.

The remuneration report is set out under the following main headings:

Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements

Principles used to determine the nature and amount of remuneration

The following report determines the principle used to determine the nature and amount of remuneration. The Board is responsible for determining and reviewing compensation arrangements for the Directors and Key Management Personnel. The role also includes responsibility for share options incentives, superannuation entitlements, retirement and termination entitlements, fringe benefits policies, liability insurance policies and other terms of employment.

The Board will review the arrangements having regard to performance, relevant comparative information and at its discretion may obtain independent expert advice on the appropriateness of remuneration packages or fees paid to Key Management Personnel. No remuneration consultant was used during the period. Remuneration packages are set at levels intended to attract and retain Key Management Personnel capable of managing the Group’s activities. Where Key Management Personnel positions are held by consultants, fees are based on normal commercial terms and conditions.

The remuneration of an Executive Director will be decided by the Board, without the affected Executive Director participating in that decision-making process.

The total maximum remuneration of Non-Executive Directors is the subject of a Shareholder resolution in accordance with the Company’s Constitution, the Corporations Act and the ASX Listing Rules, as applicable. The determination of Non-Executive Directors’ remuneration within that maximum will be made by the Board having regard to the inputs and value to the Company of the respective contributions by each Non-Executive Director. The current limit, which may only be varied by Shareholders in general meeting, is an aggregate amount of $250,000 per annum.

The Board may award additional remuneration to Non-Executive Directors called upon to perform extra services or make special exertions on behalf of the Group.

The executive pay and reward framework has three components:

base pay and benefits;
long-term incentives through share schemes; and
other remuneration such as superannuation.

The combination of these comprises the Key Management Personnel total remuneration.

All remuneration is fixed and no portion is based on performance targets. The award of long-term incentives is based upon the discretion of the Board.

DiRECToRS’ REPoRT FoR THE YEAR ENDED 30 JUNE 2013

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REMUNERATioN REPoRT (AUDiTED CoNTiNUED)

Details of remuneration

Details of the nature and amount of each element of the emoluments of each of the key management personnel of the Group for the period ended 30 June 2013 are set out in the following table:

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shoRt-teRm Benefits post-employment eQuity
Benefits
nAme sAlARy And fees otheR supeRAnnuAtion peRfoRmAnce Rights totAl
$ $ $ $ $
diRectoRs
- -
A Wehby [1] 60,227 4,500 64,727
S Woodham [2] 219,996 20,500 19,800 26,867 287,163
R Willson 40,000 - 3,600 - 43,600
B Salmon [3] 30,344 - - - 30,344
totAl 350,567 20,500 27,900 26,867 425,834
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A Wehby: Total remuneration of $64,727 includes Directors fees totaling $50,000 and consulting fees totaling $10,227 (plus SGC) being advisory fee for services provided in addition to the duties of a non-executive director.
S Woodham: other short-term employee benefits include motor vehicle allowance which forms part of the total remuneration. The expense in relation to performance rights for the reporting period amounts to $26,867.
B Salmon: Total remuneration of $30,344 reflects the period from date of appointment as a director of the Company being 19 october 2012 to 30 June 2013.

Details of remuneration

Details of the nature and amount of each element of the emoluments of each of the key management personnel of the Group for the year ended 30 June 2012 are set out in the following table:

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shoRt-teRm Benefits post-employment eQuity
Benefits
nAme sAlARy And fees otheR supeRAnnuAtion options [9] totAl
$ $ $ $ $
diRectoRs
-
A Wehby [1] 50,000 10,000 4,500 64,500
S Woodham [2] 91,665 8,542 8,250 48,513 156,970
R Willson 40,000 - 3,600 - 43,600
executiVe
- - -
A Adaley [3] 105,287 105,287
D Ward [4] 178,928 - - - 178,928
totAl 465,880 18,542 16,350 48,513 549,285
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A Wehby: Total remuneration of $64,500 includes Directors fees totaling $50,000 plus SGC of $4,500 and consulting fees totaling $10,000 being advisory fee for services provided in addition to the duties of a non-executive director.
S Woodham: Total remuneration of $156,970 reflects the period 1 February 2012 to 30 June 2012. other short-term employee benefits include motor vehicle allowance which forms part of the total remuneration. The expense in relation to performance rights amounts to $48,513.
A Adaley: Total remuneration of $105,287 reflects consulting fees paid to Australian Mining Corporate and Administrative Services Pty Ltd during the year ended 30 June 2012, a company in which Mrs. Adaley has an interest, for providing accounting and company secretarial services to Tellus Resources. This arrangement is based on normal commercial terms and conditions.
D Ward: Total remuneration of $178,928 reflects consulting fees paid to Rathwood Resources Pty Ltd during the year ended 30 June 2012, a company in which Mr. Ward has an interest, for providing consulting, geological and management services to Tellus Resources. This arrangement is based on normal commercial terms and conditions. Mr. Ward stepped down from the Board on 1 February 2012 and assumed the role of Senior Exploration Consultant. The amounts included are for the entire year.

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Tellus ResouRces lTd ANNUAL report 2013
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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

REMUNERATioN REPoRT (AUDiTED CoNTiNUED)

Service Agreements

Contracts for services of key management personnel in place during the reporting period are as follows:

Anthony Wehby

Non-Executive Chairman

Letter of Agreement with Anthony Wehby stipulates remuneration of $50,000 per annum plus superannuation.

Stephen Woodham

Executive Director (former Managing Director)

By an agreement dated 27 January 2012 the Company engaged the services of Mr Stephen Woodham to serve as Managing Director until terminated. The Board may terminate the consultancy agreement at any time by giving not less than three (3) months notice in writing; or immediately in instances of misconduct. Mr Woodham may terminate the agreement by giving not less than three (3) months notice in writing.

Under the terms of the Agreement, the Company shall pay a Base Salary of A$220,000 per annum (plus 9% compulsory superannuation contribution) and grant the following Performance Rights under the Tellus Resources Performance Rights Plan adopted by Shareholders on 8 November 2011 (PRP) on the terms and conditions set out below:

i) 300,000 Performance Rights, to convert into ordinary shares following the successful completion of a capital raising being finalised on or before 30 April 2012, whereby the Company raises not less than $2 million. These Performance Rights were converted on 16 May 2012.
ii) 300,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 25 cents per Share, on or before 27 January 2017; and iii) 400,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 40 cents per Share, on or before 27 January 2017.

The appointment also contains provisions for confidentiality, leave entitlements and termination rights that are customary for an appointment of this nature.

Richard Willson

Non-Executive Director

Letter of Agreement with Richard Willson stipulates remuneration of $40,000 per annum plus superannuation.

Ben Salmon

Non-Executive Director

Letter of Agreement with Ben Salmon stipulates remuneration of $40,000 per annum plus superannuation.

END oF AUDiTED REMUNERATioN REPoRT

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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

VoTiNG AND CoMMENTS AT THE CoMPANY’S 2012 ANNUAL GENERAL MEETiNG

The Company received 60% of “yes” votes on its remuneration report for the 2012 financial year. The Company did not receive any specific feedback at the AGM on its remuneration report.

PRoCEEDiNGS oN BEHALF oF CoMPANY

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

Signed in accordance with a resolution of the Directors.

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Anthony Wehby Chairman

Sydney, 23 September 2013

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DiRECToRS’ REPoRT

FoR THE YEAR ENDED 30 JUNE 2013

AUDiToR’S iNDEPENDENCE DECLARATioN

Grant Thornton Audit Pty Ltd ACN 130 913 594 Level 19, 2 Market Street Sydney NSW 2000 Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E [email protected] W www.grantthornton.com.au

Auditor’s Independence Declaration

To the Directors of Tellus Resources Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Tellus Resources Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b no contraventions of any applicable code of professional conduct in relation to the audit.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

A J Archer Partner - Audit & Assurance Sydney, 23 September 2013

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

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CoRPoRATE GoVERNANCE STATEMENT

FoR THE YEAR ENDED 30 JUNE 2013

This Corporate Governance Statement sets out the Company’s current compliance with the 2010 revised ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (Principles and Recommendations). The Principles and Recommendations are not mandatory. However, the Company is required to provide a statement in its annual reports disclosing the extent to which the Company has followed the Principles and Recommendations.

The Board of the Company currently has in place a corporate governance policy which has been posted in a dedicated corporate governance information section of the Company’s website at www.tellusresources.com.au.

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pRinciples And comply explAnAtion
RecommendAtions (yes/no)
1. lAy solid foundAtions foR mAnAgement And oVeRsight
1.1 Companies should establish the Yes The Board’s role is to govern the Company rather than manage it. The Company’s
functions reserved to the board Corporate Governance Plan includes a Board Charter which sets out the specific
and those delegated to senior responsibilities of the Board and provides that the Board shall delegate responsibility for
executives and disclose those the day-to-day operations and administration of the Company to the Executive Directors
functions. and any Chief Executive officer (if appointed).
1.2 Companies should disclose Yes The Board will monitor the performance of senior management, including measuring
the process for evaluating the actual performance against planned performance. The Board will follow the
performance of senior executives. performance evaluation principles outlined in its Corporate Governance Plan.
1.3 Companies should provide the Yes The Board Charter discloses the specific responsibilities of the Board and provides that
information indicated in the Guide the Board shall delegate responsibility for the day-to-day operations and administration
to reporting on Principle 1. of the Company to the Executive Directors and Chief Executive officer (if appointed).
The Company’s Corporate Governance policies are set out on the Company’s website at
www.tellusresources.com.au.
2. stRuctuRe the BoARd to Add VAlue
2.1 A majority of the board should be Yes A majority of the Directors are currently independent. The Company has five Directors
independent directors. and Anthony Wehby, Richard Willson, and Ben Salmon are independent.
The Board seeks to ensure that the appropriate mix of skills and expertise is present on
the Board to facilitate successful strategic direction.
The Board Charter specifies that an independent Director is one who is independent
of management and free from any business or other relationship which could, or could
reasonably be perceived to, materially interfere with the exercise of independent
judgment.
independent Directors should also meet the definition of independence as set out in the
ASX Corporate Governance Council Principles and Recommendations.
The independence of Directors will be regularly assessed by the Board in light of their
interests, all of which must be disclosed.
2.2 The chair should be an Yes The chair is currently Anthony Wehby, who is an independent Director.
independent director. The Company’s Corporate Governance Plan outlines that the Chair should be a non-
executive Director and that if a Chairman ceases to be an independent Director, the
Board will consider appointing a lead independent Director.
2.3 The roles of chair and chief Yes Stephen Woodham was the Managing Director until 23 August 2013 and undertook
executive officer should not be the role of Chief Executive officer. Carl Dorsch was appointed Managing Director on 23
exercised by the same individual. August 2013 and undertakes the role of Chief Executive officer and Anthony Wehby is
the Non-Executive Chair, thus not been being the same individual.
The Company’s Corporate Governance Plan also outlines that in the future the Chief
Executive officer should not be the Chairman of the Company during his term as Chief
Executive officer or in the future.
2.4 The board should establish a No Based on the fact that the Company is in its early stages of development, and given
nomination committee. the current size and structure of the Board, the Board has not yet formed a separate
Nomination Committee. Currently matters typically dealt with by such a committee
are dealt with by the Board, however, the Board has formal terms of reference for the
establishment of a Nomination Committee.
2.5 Companies should disclose Yes in order to ensure the Board continues to discharge its responsibilities in an appropriate
the process for evaluating the manner, a review of the performance over the previous 12 months of the Board, its
performance of the board, committees and individual Directors will be arranged by the Board in accordance with
its committees and individual the terms of the Nomination Committee Charter, until such time as a Nomination
directors. Committee is established.
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CoRPoRATE GoVERNANCE STATEMENT

FoR THE YEAR ENDED 30 JUNE 2013

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pRinciples And comply explAnAtion
RecommendAtions (yes/no)
2.6 Companies should provide the Yes A description of the skills and experience of each of the current Directors is contained
information indicated in the Guide in the Company’s Directors’ Report and on the Company’s website. Three of the five
to reporting on Principle 2. members of the current Board, Anthony Wehby, Richard Willson and Ben J Salmon
are considered to be independent Directors in accordance with the definition of an
independent Director as contained in the Company’s Corporate Governance Plan.
Based on the fact that the Company is in its early stages of development, the Company
has not yet fully complied with Principle 2 of the ASX Corporate Governance Council
Principles and Recommendations. To the extent that it has not complied with Principle
2, the Company will seek to do so as the Company develops.
The Nomination Committee, when established, will determine the procedure for the
selection and appointment of new Directors and the re-election of incumbents, having
regard to the ability of the individual to assist the Board in fulfilling its responsibilities,
as well as assist the Company in achieving growth and delivering value to shareholders.
The policy for the appointment of new Directors is set out in the Company’s Corporate
Governance Plan.
The Company’s Corporate Governance policies are set out on the Company’s website at
www.tellusresources.com.au.
3. PRoMoTE ETHICAL AND RESPoNSIBLE DECISIoN-MAkING
3.1 Companies should establish a code Yes The Company’s Corporate Governance Plan includes a Corporate Code of Conduct,
of conduct and disclose the code which provides a framework for decisions and actions in relation to ethical conduct in
or a summary of the code as to: employment.
• the practices necessary to
maintain confidence in the
company’s integrity
• the practices necessary to take
into account their legal obligations
and the reasonable expectations
of their stakeholders
• the responsibility and
accountability of individuals for
reporting and investigating reports
of unethical practices.
3.2 Companies should establish a No The Company’s Corporate Governance Plan does not include an express policy
policy concerning diversity and specifically addressing diversity. The Company is not currently in compliance with
disclose the policy or a summary this recommendation as the Board is comfortable that the Company already has an
of that policy. The policy should appropriate approach to encouraging workplace diversity without the need for a formal
include requirements for the policy
board to establish measureable Under the Corporate Code of Conduct contained in the Company’s Corporate
objectives for achieving gender Governance Plan, employees must not harass, discriminate or support others who
diversity and for the board harass and discriminate against colleagues or members of the public on the grounds
to assess annually both the of sex, pregnancy, marital status, age, race (including their colour, nationality, descent,
objectives and progress in ethnic or religious background), physical or intellectual impairment, homosexuality
achieving them. or transgender. Such harassment or discrimination may constitute an offence under
legislation. Managers should understand and apply the principles of Equal Employment
opportunity.
3.3 Companies should disclose in each No As noted above, the Company’s Corporate Governance Plan does not include an express
annual report the measureable policy specifically addressing diversity.
objectives for achieving gender The Company is not currently in compliance with this recommendation as the Board
diversity set by the board in is comfortable that the Company already has an appropriate approach to encouraging
accordance with the diversity workplace diversity without the need for a formal policy.
policy and progress towards
achieving them.
3.4 Companies should disclose in each No Anne Adaley, the Company Secretary and Chief Financial officer, is a woman in a senior
annual report the proportion of executive position, but there are currently no women on the board of the Company.
women employees in the whole This will be reviewed on an on-going basis.
organisation, women in senior
executive positions and women on
the board.
3.5 Companies should provide the Yes The Corporate Code of Conduct can be found in the Company’s Corporate Governance
information indicated in the Guide Plan on the Company’s website at www.tellusresources.com.au.
to reporting on Principle 3.
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CoRPoRATE GoVERNANCE STATEMENT

FoR THE YEAR ENDED 30 JUNE 2013

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pRinciples And comply explAnAtion
RecommendAtions (yes/no)
4. SAFEGUARD iNTEGRiTY iN FiNANCiAL REPoRTiNG
4.1 The board should establish an No Given the current size and structure of the Board, the Board has not yet formed a
audit committee. separate audit committee.
However, the Board has established a formal terms of reference for an Audit and Risk
Committee.
The Board does not consider that at this stage any efficiencies or other benefits would
be gained from establishing a separate committee. Accordingly, until the Audit and
Risk Committee is established, the Board will carry out the duties of the Audit and Risk
Committee in accordance with the terms of reference that have been adopted.
4.2 The audit committee should be No As above.
structured so that it:
• consists only of non-executive
directors
• consists of a majority of
independent directors
• is chaired by an independent
chair, who is not chair of the
board
• has at least three members.
4.3 The audit committee should have Yes The Company’s Corporate Governance Plan includes a formal charter for the Audit and
a formal charter. Risk Committee.
4.4 Companies should provide the Yes As above.
information indicated in the Guide The Company’s Corporate Governance policies are set out on the Company’s website at
to reporting on Principle 4. www.tellusresources.com.au.
5. MAKE TiMELY AND BALANCED DiSCLoSURE
5.1 Companies should establish Yes The Company has a continuous disclosure program in place designed to ensure the
written policies designed to ensure factual presentation of the Company’s financial position. The Board has designated
compliance with ASX Listing Rule the Company Secretary as the person responsible for overseeing and coordinating
disclosure requirements and to disclosure of information to the ASX and shareholders, as well as providing guidance to
ensure accountability at a senior Directors and employees on disclosure requirements and procedures.
executive level for that compliance
and disclose those policies or a
summary of those policies.
5.2 Companies should provide the Yes As above.
information indicated in Guide to The Company’s Corporate Governance policies are set out on the Company’s website at
Reporting on Principle 5. www.tellusresources.com.au.
6. RESPECT THE RiGHTS oF SHAREHoLDERS
6.1 Companies should design Yes The Company’s Corporate Governance Plan includes a shareholder communications
a communications policy strategy, which aims to ensure that the shareholders of the Company are informed of all
for promoting effective major developments affecting the Company’s state of affairs.
communication with shareholders
and encouraging their
participation at general meetings
and disclose their policy or a
summary of that policy.
6.2 Companies should provide the Yes As above.
information indicated in the Guide The Company’s Corporate Governance policies are set out on the Company’s website at
to reporting on Principle 6. www.tellusresources.com.au.
7. RECoGNiSE AND MANAGE RiSK
7.1 Companies should establish Yes The Board determines the Company’s “risk profile” and is responsible for overseeing
policies for the oversight and and approving risk management strategy and policies, internal compliance and internal
management of material business control.
risks and disclose a summary of The Company’s Corporate Governance Plan establishes formal terms of reference for
those policies. disclosure of risk management review procedure and internal compliance and control.
in the event that an audit committee is established, the Board will delegate to the Audit
and Risk Committee responsibility for implementing the risk management system.
However, given the current size and structure of the Board, the Board has not yet
established the Audit and Risk Committee. Until such a committee is established, the
Board will carry out these duties with the terms of reference that have been adopted.
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Tellus ResouRces lTd ANNUAL report 2013
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CoRPoRATE GoVERNANCE STATEMENT

FoR THE YEAR ENDED 30 JUNE 2013

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pRinciples And comply explAnAtion
RecommendAtions (yes/no)
7.2 The board should require Yes As above.
management to design and
implement the risk management
and internal control system to
manage the company’s material
business risks and report to it on
whether those risks are being
managed effectively. The board
should disclose that management
has reported to it as to the
effectiveness of the company’s
management of its material
business risks.
7.3 The board should disclose Yes The Board has received the relevant declarations from the Managing Director and
whether it has received assurance Chief Financial officer in accordance with s295A of the Corporations Act 2001 and
from the chief executive officer the relevant assurances required under Recommendation 7.3 of the ASX Corporate
(or equivalent) and the chief Governance Principles.
financial officer (or equivalent)
that the declaration provided
in accordance with section
295A of the Corporations Act is
founded on a sound system of risk
management and internal control
and that the system is operating
effectively in all material respects
in relation to financial reporting
risks.
7.4 Companies should provide the Yes As above.
information indicated in Guide to The Company’s Corporate Governance policies are set out on the Company’s website at
Reporting on Principle 7. www.tellusresources.com.au.
8. REMUNERATE FAiRLY AND RESPoNSiBLY
8.1 The board should establish a No Given the current size and structure of the Board, the Board has not yet formed a
remuneration committee. separate remuneration committee.
However, the Board has established formal terms of reference for a remuneration
committee. The Board does not consider that any efficiencies or other benefits would
be gained from establishing a separate committee. Accordingly, until the Remuneration
Committee is established, the Board will carry out the duties of the Remuneration
Committee in accordance with the terms of reference that have been adopted.
8.2 The remuneration committee No As above.
should be structured so that it:
• consists of a majority of
independent directors
• is chaired by an independent
director
• has at least three members
8.3 Companies should clearly Yes As above.
distinguish the structure of non-
executive directors’ remuneration
from that of executive directors
and senior executives.
8.4 Companies should provide the Yes As above.
information indicated in the Guide The Company’s Corporate Governance policies are set out on the Company’s website at
to reporting on Principle 8. www.tellusresources.com.au.
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STATEMENT oF PRoFiT oR LoSS AND oTHER CoMPREHENSiVE iNCoME FoR THE YEAR ENDED 30 JUNE 2013

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consolidAted note 2013 2012
$ $
Revenue from continuing operations 5 94,332 168,336
Expenses from continuing operations 6 (1,471,148) (1,434,103)
Loss before income tax (1,376,816) (1,265,767)
income tax expense relating to the ordinary activities 7 - -
Net loss for the year (1,376,816) (1,265,767)
- -
other comprehensive income, net of tax
Total comprehensive loss (1,376,816) (1,265,767)
eARnings/loss peR shARe:
Basic earnings/(loss) per share (cents per share) 17 (3.1) (4.40)
Diluted earnings/(loss) per share (cents per share) 17 (3.1) (4.40)
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This statement should be read in conjunction with the notes to the financial statements.

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Tellus ResouRces lTd ANNUAL report 2013
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STATEMENT oF FiNANCiAL PoSiTioN

AS AT 30 JUNE 2013

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consolidAted note 2013 2012
$ $
CURRENT ASSETS
Cash and cash equivalents 20(a) 1,134,661 3,628,524
Trade and other receivables 8 752,709 71,307
Prepayments 9 13,702 10,613
totAl cuRRent Assets 1,901,072 3,710,444
non-cuRRent Assets
Property, plant and equipment 10 33,856 44,928
intangibles 11 6,047 10,182
Exploration and evaluation expenditure 12 2,799,550 2,512,841
totAl non-cuRRent Assets 2,839,453 2,567,951
totAl Assets 4,740,525 6,278,395
cuRRent liABilities
Trade and other payables 13 113,392 311,530
Provisions 14 5,358 7,541
totAl cuRRent liABilites 118,750 319,071
non-cuRRent liABilities
Provisions 14 5,594 1,539
totAl non-cuRRent liABilites 5,594 1,539
totAl liABilities 124,344 320,610
net Assets 4,616,181 5,957,785
eQuity
Share capital 15 7,374,031 7,470,031
Reserves 16 371,725 240,513
Accumulated losses (3,129,575) (1,752,759)
totAl eQuity 4,616,181 5,957,785
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This statement should be read in conjunction with the notes to the financial statements.

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STATEMENT oF CHANGES iN EQUiTY

FoR THE YEAR ENDED 30 JUNE 2013

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consolidAted issued cApitAl eQuity ReseRVe AccumulAted losses totAl
$ $ $ $
Balance as at 30 June 2011 4,141,076 192,000 (486,992) 3,846,084
Total loss and comprehensive income
- - (1,265,767) (1,265,767)
for the period
Shares issued during the period 3,475,000 - - 3,475,000
options granted - 48,513 - 48,513
Share issue costs (146,045) - - (146,045)
Balance as at 30 June 2012 7,470,031 240,513 (1,752,759) 5,957,785
Total loss and comprehensive income - - (1,376,816) (1,376,816)
for the period
- -
options granted 96,000 96,000
Performance Rights granted - 35,212 - 35,212
Share issue costs (96,000) - - (96,000)
Balance as at 30 June 2013 7,374,031 371,725 (3,129,575) 4,616,181
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The financial statements should be read in conjunction with the accompanying notes.

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Tellus ResouRces lTd ANNUAL report 2013
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STATEMENT oF CASH FLoWS

FoR THE YEAR ENDED 30 JUNE 2013

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consolidAted note 2013 2012
$ $
CASH FLoWS FRoM oPERATiNG ACTiViTiES
Cash payments in the course of operations (1,379,692) (951,228)
interest received 80,464 160,230
other income 800 15,410
Net cash used in operating activities 20(b) (1,298,428) (775,588)
CASH FLoWS FRoM INVESTING ACTIVITIES
Payments for exploration and evaluation of mineral resources (495,435) (523,517)
Payments for property, plant and equipment - (60,121)
Loan to PNC AUS Pty Ltd (700,000) -
-
Payment for acquisition of Premier Mining Pty Ltd (1,031,071)
Net cash by used in investing activities (1,195,435) (1,614,709)
CASH FLoWS FRoM FINANCING ACTIVITIES
Proceeds from issue of shares - 2,475,000
Payments for share issue costs - (160,650)
Net cash provided by financing activities - 2,314,350
Net decrease in cash held and cash equivalents (2,493,863) (75,947)
Cash and cash equivalents at the beginning of the period 3,628,524 3,704,471
Cash and cash equivalents at the end of the period 20(a) 1,134,661 3,628,524
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The financial statements should be read in conjunction with the accompanying notes.

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

Note 1 Nature of operations Note 2 General information Note 3 Significant accounting policies Note 4 Segment information
Note 5 Revenue
Note 6 Loss for the year
Note 7 income taxes
Note 8 Trade and other receivables
Note 9 other assets
Note 10 Property, plant and equipment
Note 11 intangible assets Note 12 Exploration and evaluation expenditure Note 13 Trade and other payables Note 14 Provisions Note 15 issued capital Note 16 Reserves Note 17 Earnings per share Note 18 Commitments for expenditure Note 19 Contingent liabilities and contingent assets Note 20 Notes to the statement of cash flows Note 21 Financial instruments
Note 22 Share-based payments
Note 23 Key management personnel compensation
Note 24 Related party disclosures
Note 25 Remuneration of auditors
Note 26 Acquisition of Premier Mining Pty Ltd
Note 27 Parent entity information Note 28 Controlled entity

Note 29 Subsequent events

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS

FoR THE YEAR ENDED 30 JUNE 2013

1. Nature of operations

Tellus Resources Ltd and its subsidiary (the Group) principal activities include mineral exploration.

2. General information

Tellus Resources Ltd is the Group’s ultimate parent company and is a listed public company limited by shares incorporated and domiciled in Australia. Tellus Resources was incorporated on 21 June 2010.

Tellus Resources is a for-profit entity for the purpose of preparing the financial statements.

The registered and principal place of business is Suite 301, Level 3, 66 Hunter Street, Sydney NSW 2000. Tellus Resources’ shares are listed on the ASX.

3. Significant accounting policies

a) Basis of preparation

Statement of compliance

The consolidated general purpose financial statements of the Group have been prepared in accordance with Australian Accounting Standards, Australian Accounting interpretations and other authoritative pronouncements of the Australian Accounting Standards Board. Australian Accounting Standards incorporate international Financial Reporting Standards (‘iFRS’) as issued by the international Accounting Standards Board. Compliance with Australian Accounting Standards ensure that the financial statements and notes also comply with iFRS. The consolidated financial statements for the year ended 30 June 2013 (including comparatives) were approved and authorised for issue by the board of Directors on 23 September 2013.

Historical Cost Convention

The financial report has been prepared on an accrual basis and is based on the historical costs modified, where applicable by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Functional and presentation currency

Both the functional and presentation currency of the Group is in Australian dollars.

Critical accounting estimates and judgements

The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised.

Judgments made by management in the application of Australian Accounting Standards that have significant effect on the financial report and estimates with a significant risk of material adjustment in the next year are discussed in Note 3 (s) below.

b) Basis of consolidation

The Group financial statements consolidate those of the parent company and all of its subsidiary undertakings drawn up to 30 June 2013. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of 30 June 2013.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

3. Significant accounting policies (continued)

Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the noncontrolling interests based on their respective ownership interests.

c) Cash and Cash Equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

d) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation.

Depreciation is calculated on the diminishing balance method as follows:

– Computer equipment 40% – Computer software 40% – Field Equipment 20%

The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period and adjusted if appropriate.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit or Loss and other Comprehensive income.

e) intangibles

Amortisation is calculated on the diminishing balance method as follows:

– Computer software 40%

f) Exploration and Evaluation Expenditure Pre-licence costs are recognised in the Statement of Profit or Loss and other Comprehensive income as incurred.

Exploration and evaluation expenditure, including the costs of acquiring licences, are capitalised on a project by project basis. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.

Expenditure deemed to be unsuccessful is recognised in the Statement of Profit or Loss and other Comprehensive income immediately.

Exploration and evaluation assets are assessed for impairment if facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

g) impairment

At each reporting date, the Group reviews the carrying value of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. if such an indication exists, the recoverable amount of the assets, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Statement of Profit or Loss and other Comprehensive income.

h) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (“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 the expense.

Receivables and payables are stated with the amount of GST included.

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

3. Significant accounting policies (continued)

i) income Tax

income tax on the profit or loss for the year comprises current and deferred tax. income tax is recognised in the Statement of Profit or Loss and other Comprehensive income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the Balance Sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. No temporary differences are recognised on the initial recognition of goodwill

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised

Effective 15 May 2012, the Company and subsidiaries signed a tax sharing agreement pursuant to the Tax Consolidation Legislation to form a tax consolidation group for the purposes of determining the allocation of the group tax liability and which of the parties is to fund the group tax liability.

j) Trade and other Payables

Trade and other payables are stated at cost and are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services. The amounts are unsecured and usually paid within 30 days of recognition.

k) Trade and other Receivables

Trade and other receivables are stated at their cost less impairment losses.

l) Revenue

interest revenue is recognised on a receivable basis. interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

m) operating expenses

operating expenses are recognised in profit and loss upon utilisation of the service or at date of their origin.

n) Segment reporting

operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

o) Share based payments

Equity-settled share-based payments granted are measured at fair value at the date of grant. Fair value is calculated using the Black Scholes methodology share options. The fair value determined at the grant date of the equity-settled share-based payments is recognised over the vesting period.

p) Contributed equity

ordinary shares are classified as equity. incremental costs directly attributable to the issue of new shares are recognised directly in equity as a deduction, net of tax allowable from proceeds.

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

3. Significant accounting policies (continued)

q) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
the profit attributable to owners of the Group, excluding any costs of servicing equity other than ordinary shares; and
by the weighted average number of ordinary shares outstanding during the financial 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 additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
r) New and amended accounting standards and interpretations
Certain new accounting standards and interpretations became effective on 1 January 2013. The adoption of the new and revised Australian Accounting Standards and interpretations has had no significant impact on the Group’s accounting policies or the amounts reported during the reporting period.
AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of items of other Comprehensive income (Applies annual reporting periods beginning on or after 1 July 2012). AASB 2011-9 requires entities to group items presented in other Comprehensive income (oCi) on the basis of whether they are potentially reclassifiable to profit or loss subsequently, and changes the title of ‘statement of comprehensive income’ to ‘statement of profit or loss and other comprehensive income’.

The adoption of AASB 2011-9 has resulted in changes to the Group’s presentation of its financial statements.

AASB 9 Financial instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010). AASB 9 Financial instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard will affect in particular the Group’s accounting for its available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. in the current reporting period, the Group did not record any such gains in other comprehensive income.

There is no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial instruments: Recognition and Measurement and have not been changed.

Consolidation Standards

A package of consolidation standards are effective for annual periods beginning or after 1 January 2013. information on these new standards is presented below. The Group’s management have yet to assess the impact of these new and revised standards on the Group’s consolidated financial statements.

AASB 10 Consolidated Financial Statements (AASB 10)
AASB 10 supersedes the consolidation requirements in AASB 127 Consolidated and Separate Financial Statements (AASB 127) and interpretation 112 Consolidation – Special Purpose Entities. it revised the definition of control together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics of consolidation and the accounting for any noncontrolling interests and changes in control remain the same.
AASB 11 Joint Arrangements (AASB 11)
AASB 11 supersedes AASB 131 interests in Joint Ventures (AASB 131). it aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. it introduces two accounting categories (joint operations and joint ventures) whose applicability is determined based on the substance of the joint arrangement. in addition, AASB 131’s option of using proportionate consolidation for joint ventures has been eliminated. AASB 11 now requires the use of the equity accounting method for joint ventures, which is currently used for investments in associates.
AASB 12 Disclosure of interests in other Entities (AASB 12) AASB 12 integrates and makes consistent the disclosure requirements for various types of investments, including unconsolidated structured entities. it introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

3. Significant accounting policies (continued)

Consequential amendments to AASB 127 Separate Financial Statements (AASB 127) and AASB 128 investments in Associates and Joint Ventures (AASB 128)
AASB 127 Consolidated and Separate Financial Statements was amended to AASB 127 Separate Financial Statements which now deals only with separate financial statements. AASB 128 brings investments in joint ventures into its scope. However, AASB 128’s equity accounting methodology remains unchanged.
AASB 13 Fair Value Measurement (AASB 13)

AASB 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. it is applicable for annual periods beginning on or after 1 January 2013. The Group’s management have yet to assess the impact of this new standard.

Amendments to AASB 119 Employee Benefits (AASB 119 Amendments)
The AASB 119 Amendments include a number of targeted improvements throughout the Standard. The main changes relate to defined benefit plans. They:
eliminate the ‘corridor method’, requiring entities to recognise all gains and losses arising in the reporting period in other comprehensive income
streamline the presentation of changes in plan assets and liabilities
enhance the disclosure requirements, including information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in them. The entity does not have any defined benefit plans. Therefore, these amendments will have no significant impact on the entity.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove individual Key Management Personnel Disclosure Requirements (AASB 124 Amendments)

AASB 2011-4 makes amendments to AASB 124 Related Party Disclosures to remove individual key management personnel disclosure requirements, to achieve consistency with the international equivalent (which includes requirements to disclose aggregate (rather than individual) amounts of KMP compensation), and remove duplication with the Corporations Act 2001. The amendments are applicable for annual periods beginning on or after 1 July 2013. The Group’s management have yet to assess the impact of these amendments.

Amendments to AASB 2012-2 and AASB 2012-3 Financial instruments: Presentation and AASB 7 Financial instruments: Disclosures 5 The amendments to AASB 2012-2 and AASB 2012-3 add application guidance to address inconsistencies in applying AASB 2012’s criteria for offsetting financial assets and financial liabilities. Qualitative and quantitative disclosures have been added to AASB 7 relating to gross and net amounts of recognised financial instruments that are (a) set off in the statement of financial position and (b) subject to enforceable master netting arrangements and similar agreements, even if not set off in the statement of financial position. The amendments are applicable for annual periods beginning on or after 1 January 2014 for AASB 2012-2 and on or after 1 January 2015 for AASB 2012-3. The Group’s management have yet to assess the impact of these amendments.

• AASB interpretation 20 Stripping Costs in the Production Phase of a Surface Mine Clarifies that costs of removing mine waste materials (overburden) to gain access to mineral ore deposits during the production phase of a mine must be capitalised as inventories under AASB 112 inventories if the benefits from stripping activity is realised in the form of inventory produced. otherwise, if stripping activity provides improved access to the ore, stripping costs must be capitalised as a non-current, stripping activity asset if certain recognition criteria are met (as an addition to, or enhancement of, an existing asset). The interpretation is applicable for annual periods beginning on or after 1 January 2013. The interpretation will have no impact on the Group as it has no mining activities.

s) Key judgement estimates

in the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the entity’s accounting policies

The following are the critical judgements including those involving estimations, that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

3. Significant accounting policies (continued)

i) Share-based payments

The Group is required to use assumptions in respect of the fair value model, and the variable element in the model, used in determining the share based payments.

ii) Impairment of capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale or other means.

Factors that could impact the future recoverability include the level of reserves and resources, future technological changes which could impact the cost of mining, future legal changes (including changes to the environmental restoration obligations) and changes to commodity prices.

Given the stage of exploration of the Group, it is not possible to reliably estimate future cash flows. The carrying value of mineral properties is reviewed and assessed with reference to comparative transactions, the status of existing joint venture arrangements, market volatility and the significant changes in valuations for all mineral assets as a result of the recent significant discounting of equity markets. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made.

4. Segment information

During the year the Group operated predominantly in one operating segment, being mineral exploration. Segment accounting policies are the same as the Group’s policies described in Note 3.

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2013 2012
$ $
ReVenue
interest revenue 93,532 149,956
Service revenue 800 18,380
Total segment revenue 94,332 168,336
Results
operating loss before tax (1,376,816) (1,265,767)
Net loss (1,376,816) (1,265,767)
included within segment results:
Depreciation and amortisation of segment assets 15,207 18,449
Segment assets 4,740,525 6,278,395
Segment liabilities 124,344 320,610
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5. Revenue

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ReVenue 2013 2012$
$
interest revenue – bank deposits 80,464 149,956
-
interest revenue on loan to PNC Aust Pty Ltd 13,068
Service revenue 800 18,380
94,332 168,336
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Tellus ResouRces lTd ANNUAL report 2013
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS

FoR THE YEAR ENDED 30 JUNE 2013

6. Loss for the year

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2013 2012
$ $
Loss before income tax includes the following specific expenses:
Administrative and corporate costs 926,036 1,072,228
-
Business Development costs 485,953
impairment of capitalised project expenditure 18,102 327,076
-
Exploration expenditure expensed 6,050
depReciAtion And AmoRtisAtion:
Depreciation of non-current assets 11,072 11,833
Amortisation of intangible assets 4,135 6,616
15,207 18,449
diRectoRs Benefit expense:
Post employment benefits:
- Defined contribution plans 19,800 16,350
19,800 16,350
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*During the reporting period, the Group assessed the carrying value of the South East Lachlan Projects resulting in an impairment charge of $18,102. During the comparative period the Group assessed the carrying value of the Glen Morrison and Cobark projects resulting in an impairment charge of $327,076. Tellus retains these licenses for future evaluation and assessment.

7. Income Taxes

a) Income tax expense

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2012 2011
$ $
Current tax expense/(income) - -
Deferred tax (income) - -
Total tax (income) - -
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The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:

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2013 2012
$ $
Loss before income tax expense (1,376,816) (1,265,767)
Prima facie tax payable on profit/(loss) (413,045) (379,730)
Tax effect of non-temporary differences 156,350 34,010
Tax effect of equity raising costs debited to equity (48,628) (42,868)
Tax effect of tax losses and temporary differences not recognised 305,323 388,588
Total income tax expense - -
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

7. Income Taxes (continued)

b) Income tax recognised directly in equity

There is no amount of tax benefit recognised in equity as the tax effect of temporary differences has not been booked.

c) Tax Losses

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2012 2011
$ $
Unused tax losses for which no tax loss has been booked as a deferred tax assets 5,623,193 4,300,074
Potential benefit at 30% 1,686,958 1,290,022
d) Unrecognised (non-booked) temporary tax differences
2013 2012
$ $
Non deductible amounts as temporary differences 97,223 124,166
Accelerated deductions for book compared to tax (2,742,835) (2,415,889)
Total unrecognised temporary differences (excluding losses) (2,645,612) (2,291,723)
Potential effect on future tax expense at 30% (793,684) (687,517)
Net deferred tax asset 893,274 602,505
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8. Trade and other receivables

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2013 2012
$ $
GST receivable 36,672 68,337
other receivables 8,398 2,970
-
Loan to PNC AUST Pty Ltd 707,639
total 752,709 71,307
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*Loan to PNC AUST Pty Ltd is a secured loan with interest charged at 7% per annum and the principal to be repaid by 31 August 2013. There were no past due amounts at 30 June 2013 and no provision has been recorded.

9. other assets

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2013 2012
$ $
Prepayments 13,702 10,613
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Tellus ResouRces lTd ANNUAL report 2013
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS

FoR THE YEAR ENDED 30 JUNE 2013

10. Property, plant and equipment

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CoMPUTER HARDWARE field eQuipment totAl
$ $ $
gRoss cARRying Amount
Balance at 30 June 2011 1,291 826 2,117
Additions 13,392 41,263 54,655
Balance at 30 June 2012 14,683 42,089 56,772
Additions - - -
Balance at 30 June 2013 14,683 42,089 56,772
AccumulAted depReciAtion /AmoRtisAtion And impAiRment
Balance at 30 June 2011 10 1 11
Depreciation expense 4,240 7,593 11,833
Balance at 30 June 2012 4,250 7,594 11,844
Depreciation expense 4,173 6,899 11,072
Balance at 30 June 2013 8,423 14,493 22,916
Net Book Value
30-Jun-12 10,433 34,495 44,928
30-Jun-13 6,260 27,596 33,856
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Aggregate depreciation allocated, whether recognised as an expense, or capitalised as part of the carrying amount of other assets during the year.

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2013 2012
$ $
Plant and equipment 11,072 11,833
11. Intangible assets
SoFTWARE totAl
$ $
gRoss cARRying Amount
Balance at 30 June 2011 16,970 16,970
Additions - -
Balance at 30 June 2012 16,970 16,970
Additions - -
Balance at 30 June 2013 16,970 16,970
AmoRtisAtion expense
Balance at 30 June 2011 172 172
Amortisation expense 6,616 6,616
Balance at 30 June 2012 6,788 6,788
Amortisation expense 4,135 4,135
Balance at 30 June 2013 10,923 10,923
Net Book Value
30-Jun-12 10,182 10,182
30-Jun-13 6,047 6,047
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

12. Exploration and evaluation expenditure

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NoN-PRoDUCING PRoPERTIES 2013 2012
$ $
exploRAtion And eVAluAtion expendituRe:
Intangibles
Balance at the beginning of the period 2,512,841 118,260
Additions 304,811 690,586
-
Mineral tenements acquired on acquisition of Premier Mining Pty Ltd 2,031,071
impairment of mineral properties (18,102) (327,076)
Balance at 30 June 2013 2,799,550 2,512,841
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All interests in mineral tenements are held 100% by the Group. The ultimate recoupment of balances carried forward in relation to areas of interest still in the exploration or evaluation phase is dependent on successful development, and commercial exploitation, or alternatively sale of the respective areas. The Group shall conduct impairment testing on an annual basis unless indicators of impairment are present at the reporting date.

13. Trade and other payables

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cuRRent 2013 2012
$ $
Trade payables 52,143 184,228
Accruals 29,214 94,852
Payroll liabilities 32,035 32,450
113,392 311,530
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14. Provisions

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2013 2012
$ $
Current
Annual leave 5,358 7,541
Non-current
Long-service leave 5,594 1,539
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15. Issued capital

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2013 2012
$ $
44,380,555 fully paid ordinary shares (2012: 44,380,555 fully paid ordinary shares) 8,184,500 8,184,500
Share issue expenses (810,469) (714,469)
7,374,031 7,470,031
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Each ordinary share carries the right to one vote at shareholders’ meetings and is entitled to participate in any dividends or other distributions of the Group.

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fully pAid oRdinARy shARes 2013 2013 2012 2012
numBeR $ numBeR $
Balance at the beginning of the period 44,380,555 7,470,031 26,150,000 4,141,076
Shares issued during the period and fully paid - - 18,230,555 3,475,000
Share issue costs - (96,000) - (146,045)
ordinary fully paid shares at end of year 44,380,555 7,374,031 44,380,555 7,470,031
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Tellus ResouRces lTd ANNUAL report 2013
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

15. Issued capital (continued)

a) There were no equity securities issued during the reporting period.
b) The following equity securities were issued during the comparative period:
i) on 1 March 2012, the Group allotted 3,750,000 fully paid ordinary shares at an issue price of $0.20 per share raising $750,000.
ii) Pursuant to an employment agreement dated 27 January 2012, the Group agreed and shareholders approved on 5 April 2012 to grant to Mr Stephen Woodham (Managing Director), 300,000 Performance Rights to convert to ordinary shares on the successful completion of a capital raising by 30 April 2012. on 15 May 2012, 300,000 fully paid ordinary shares were issued to Mr Woodham.
iii) on 15 May 2012, on settlement of the Agreement with Premier Minerals Limited, Tellus Resources granted Premier $1,000,000 worth of shares in Tellus Resources, being 5,555,555 fully paid ordinary shares at a deemed share issue price of $0.18 each share. These shares were issued in two tranches: 5,261,250 fully paid ordinary shares on 17 May 2012; and 294,305 fully paid ordinary shares on 28 May 2012. These shares are subject to a voluntary escrow period of 24 months (refer to note 26 for further detail).
iv) on 17 May 2012, the Group allotted 4,875,000 fully paid ordinary shares at an issue price of $0.20 per share raising $975,000.
v) on 25 May 2012, the Group allotted 3,750,000 fully paid ordinary shares at an issue price of $0.20 per share raising $750,000.
c) At reporting date the Group had the following options on issue:
i) 4,800,000 options over ordinary shares with an exercise price of $0.30 each, exercisable on or before 31 March 2014.
ii) 1,200,000 options over ordinary shares with an exercise price of $0.30 each, exercisable on or before 30 April 2014.
iii) 5,000,000 options over ordinary shares with an exercise price of $0.25 each, exercisable on or before 25 September 2014.
d) At reporting date the Group has the following Performance Rights on issue on the terms and conditions set out below:
i) 300,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 25 cents per Share, on or before 27 January 2017; and
ii) 400,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 40 cents per Share, on or before 27 January 2017.
iii) 350,000 Performance Rights, to convert if the share price reaches 30 cents per Share, on or before 21 September 2015.
e) Capital Management

Management controls the capital of the Group in order to maximise the return to shareholders and ensure that the Group can fund its operations and continue as a going concern.

Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, working capital requirements, distributions to shareholders and share issues.

16. Reserves

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option ReseRVe 20123 2012
$ $
opening balance 240,513 192,000
Fair value of options issued to the reporting period 96,000 -
Fair value of Performance Rights granted/due 35,212 48,513
Balance at end of year 371,725 240,513
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The following Performance Rights and options over ordinary Shares in the Company were granted during the reporting period:

i) on 25 September 2012, the Group granted 5,000,000 options to Mr Ben Salmon in consideration for his services in introducing the Company to sophisticated investors who participated in the capital raising, the completion of which was announced on 30 April 2012. Each option may be exercised at twenty-five cents (25c) per option on or before 2 years from date of grant. These options have been valued at $96,000 at grant date using the Black Scholes methodology.
ii) on 21 September 2012, the Group issued 350,000 Performance Rights to consultants to convert if the share price reaches 30 cents per Share, on or before 21 September 2015. These Performance Rights have been valued at $23,367 at grant date using the Black Scholes methodology of which $8,345 was expensed during the reporting period.

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

16. Reserves (continued)

iii) Pursuant to an employment agreement dated 27 January 2012, the Group agreed and shareholders approved on 5 April 2012 to grant to Mr Stephen Woodham (Managing Director), 1,000,000 Performance Rights to convert to ordinary shares (refer to the Remuneration report for further detail) over three tranches. Two tranches remain unexercised and a further $26,867 has been expensed during the reporting period.

The following Performance Rights were granted during the comparative reporting period:

i) Pursuant to an employment agreement dated 27 January 2012, the Group agreed and shareholders approved on 5 April 2012 to grant to Mr Stephen Woodham (Managing Director), 300,000 Performance Rights to convert to ordinary shares on the successful completion of a capital raising by 30 April 2012.
on 5 April 2012, the Group granted 300,000 Performance Rights to Mr Woodham. These Performance Rights have been valued at $42,000 at grant date using the Black Scholes methodology. A further $6,513 has been expensed to 30 June 2012, in respect of the two remaining tranches to be granted totalling $48,513 (refer to the Remuneration Report for further detail).

17. Earnings per share

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2012 2011
cents peR shARe cents peR shARe
Basic earnings/(loss) per share (3.1) (4.40)
Diluted earnings/(loss) per share (3.1) (4.40)
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The following reflects the income and share data used in the calculations of the basic and diluted earnings per share:

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eARnings ReconciliAtion 2013 2012
$ $
Net loss for the period (1,376,816) (1,265,767)
Earnings used in calculating basic and diluted earnings per share (1,376,816) (1,265,767)
Weighted average number of ordinary shares used as the denominator in calculating
44,380,555 29,042,232
basic and dilutive earnings per share
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The following potential ordinary shares are not dilutive and are therefore excluded from the weighted average number of ordinary shares and potential ordinary shares in the calculation of diluted earnings per share:

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2013 2012
numBeR numBeR
$0.30 29 July 2011 unlisted options 4,800,000 4,800,000
$0.30 30 April 2011 unlisted options 1,200,000 1,200,000
-
$0.25 25 September 2012 unlisted options 5,000,000
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18. Commitments for expenditure

The Company has minimum expenditure commitments to meet the conditions under which the properties are granted. These minimum expenditure commitments total $388,500. These minimum commitments may vary from time to time, subject to approval by the grantor of titles or by variation of contractual agreements. The expenditure represents potential expenditure which may be reduced by entering into sale, joint venture or relinquishment of the interests and may vary depending upon the results of exploration. Should expenditure not reach the required level in respect of each area of interest, the Company’s interest could be either reduced or forfeited.

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Tellus ResouRces lTd ANNUAL report 2013
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

19. Contingent liabilities and contingent assets

i) Chillagoe Gold Project, QLD
in accordance with the Agreement dated 15 May 2012 with Premier Mining Limited, upon the successful delineation and announcement by Tellus Resources of an indicated JoRC resource of at least 300,000 ounces of gold with a cut-off grade of 3.0 grams per tonne at the Chillagoe Gold Project, Tellus will pay Premier a further $2,000,000 in cash; and issue Premier $2,000,000 worth of shares in Tellus.
ii) Litigation
As previously reported, Mr Albert Gilbert Martin made allegations that the Company had been granted certain exploration licences as a result of the alleged misuse of confidential information by the Department of industry and investment and others, being information which Mr Martin alleges he supplied. All proceedings brought by Mr Martin against the Company have been dismissed and the Company has obtained orders for cost against Mr Martin.

The last proceeding was an application for leave to appeal to the High Court of Australia, which was dismissed on 15 August 2012.

on 5 March 2013, the orders were made in the Supreme Court of NSW against Mr Martin under the Vexatious Proceedings Act. The effect of these is that Mr Martin cannot commence proceedings in courts subject to NSW jurisdiction without leave under Section 14 of the Vexatious Proceedings act.

The Company is entitled to enforce orders for costs against Mr Martin, but has not yet proceeded with such action.

20. Notes to the statement of cash flows

a) Reconciliation of cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:

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2013 2012
$ $
Cash at bank and on hand 1,134,661 3,628,524
b) Reconciliation of loss for the period after income tax to cash flows used in operating activities
2013 2012
$ $
Loss for the period (1,376,816) (1,265,767)
Depreciation and amortisation of non-current assets 15,207 18,449
Amounts set aside for provisions 1,870 9,080
Equity settled share based payments 35,212 48,513
impairment of mineral properties 18,102 327,076
-
Exploration expenditure expensed 6,050
(increase)/decrease in assets:
Current receivables 18,600 21,089
Prepayments (3,089) 5,263
increase/(decrease) in liabilities:
Current and non-current payables (13,564) 60,709
Net cash from operating activities (1,298,428) (775,588)
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

21. Financial instruments

Financial Risk Exposures and Management

The main risks the Group is exposed to through its financial instruments are interest rate risk, liquidity and credit risk. Due to the size of the Group, a separate finance committee does not exist. The Board is responsible for the financial risk management and considers future cash flow requirements as required.

Interest rate risk

interest rate risk is managed by investing cash with major financial institutions in both cash on deposit and term deposit accounts.

Liquidity risk

The Group manages liquidity risk by monitoring forecast cash flows. The Group’s operations require it to raise capital on an on-going basis to fund its planned exploration program and to commercialise its tenement assets. if the Group does not raise capital in the short term, it can continue as a going concern by reducing planned but not committed exploration expenditure until funding is available and/or entering into joint venture arrangements where exploration is funded by the joint venture partner.

Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group as well as through deposits with financial institutions. The Group has adopted a policy of only dealing with credit worthy counterparties obtaining sufficient collateral or other security where appropriate as a means of mitigating the risk of financial loss from defaults and only banks and financial institutions with an ‘A’ rating are utilised. The Group measures risk on a fair value basis.

The maximum exposure to credit risk at reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements.

Price risk

The Group does not derive revenue from sale of products, therefore the effect on profit and equity as a result of changes in the price risk is not considered material. The fair value of the mineral projects will be impacted by commodity price changes and could impact future revenues once operational. However, management monitors current and projected commodity prices.

The Group is mainly exposed to mining services price risk. Management constantly monitors price movements and seeks ways to minimise the cost on operating activities.

Financial instruments

The Group has 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 rates on those financial assets and the financial liabilities.

The Group’s exposure to interest rate risk and effective weighted average interest rate for financial assets and liabilities is set out below.

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fixed mAtuRity dAtes
WEIGHTED
AVeRAge VARiABle non
effectiVe inteRest less thAn inteRest
inteRest RAte RAte 1 yeAR 1-2 YEARS 2-3 YEARS BeARing totAl
2013 % $ $ $ $ $ $
finAnciAl Assets
Cash and cash 2.77% 1,080,530 40,000 - - 14,131 1,134,661
equivalents
Trade and other - - - -
45,070 45,070
receivables
Loan to PNC 7.0% - 707,639 - - - 707,639
AUS Pty Ltd
1,080,530 747,639 - - 59,201 1,887,370
finAnciAl liABilities
Trade and other
- - - - 113,392 113,392
payables
- - - - 113,392 113,392
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Tellus ResouRces lTd ANNUAL report 2013
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

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fixed mAtuRity dAtes
WEIGHTED
AVeRAge VARiABle non
effectiVe inteRest less thAn inteRest
inteRest RAte RAte 1 yeAR 1-2 YEARS 2-3 YEARS BeARing totAl
2012 % $ $ $ $ $ $
finAnciAl Assets
Cash and cash 3.48% 3,552,111 40,000 - - 36,413 3,628,524
equivalents
Trade and other - - - -
71,307 71,307
receivables
3,552,111 40,000 - - 107,720 3,699,831
finAnciAl liABilities
Trade and other
- - - - 311,530 311,530
payables
- - - - 311,530 311,530
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Net fair values

The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values.

Sensitivity analysis

Interest Rate Risk and Price Risk

The Group has performed sensitivity analysis relating to its exposure to interest rate risk and price risk at reporting date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.

Interest Rate Sensitivity Analysis

At 30 June 2013, the effect on loss and equity as a result of fluctuations in the interest rate, with all other variables remaining constant has been considered. For the purpose of this exercise, a 1% increase in the interest rate results in a decrease in loss by $13,768 (2012: $12,657) and an increase in equity by $13,768 (2012: $12,657). These changes are considered to be reasonably possible based on observation of current market conditions.

Price Risk Sensitivity Analysis

As the Group does not derive revenue from sale of products, the effect on profit and equity as a result of changes in the price risk is not considered material. The fair value of the exploration projects will be impacted by commodity price changes and could impact future revenues once operational. However, management monitors current and projected commodity prices.

22. Share based payments

Employee share option plan

There were no employee options granted during the reporting period.

other share-based payment options on issue

The following reconciles other outstanding share-based payment options on issue at the beginning and at the end of the reporting period:

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2013 2012
numBeR of options numBeR of options
Balance at beginning of the reporting period 6,000,000 6,000,000
-
Granted during the financial year 5,000,000
- -
Expired during the financial year
Balance at end of the reporting period 11,000,000 6,000,000
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

22. Share based payments (continued)

The following share-based payment arrangements were in existence during the reporting period:

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options seRies numBeR gRAnt dAte expiRy dAte exeRcise pRice fAiR VAlue At
gRAnt dAte
issued 29 July 2010 3,700,000 29 July 2010 31 March 2014 $0.30 Nil
issued 02 Dec 2010 1,100,000 02 Dec 2010 31 March 2014 $0.30 Nil
issued 30 April 2011 1,200,000 30 April 2011 30 April 2014 $0.30 $192,000
issued 25 Sept 2012 5,000,000 25 Sept 2012 25 Sept 2014 $0.25 $96,000
----- End of picture text -----*

*The fair value at grant date has been calculated using the Black Scholes methodology. Volatility has been calculated with reference to comparable entities.

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inputs into the model option seRies option seRies option seRies option seRies
Grant date 29-Jul-10 2-Dec-10 30-Apr-11 25-Sep-12
Exercise price $0.30 $0.30 $0.30 $0.25
Expected volatility 70% 70% 103.60% 71.5%
option life 3 years 3 years 3 years 2 years
Risk-free interest rate 4.79% 5.33% 5.16% 2.58%
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Performance Rights

The following Performance Rights were in existence during the reporting period:

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----- Start of picture text -----

2013 2012
numBeR numBeR
-
Balance at beginning of the reporting period 700,000
Granted during the financial year 350,000 1,000,000
-
Converted during the financial year 300,000
Balance at the end of the period 1,050,000 700,000
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peRfoRmAnce Rights numBeR gRAnt dAte fAiR VAlue At gRAnt
dAte/Vested
S Woodham 1,000,000 5 April 2012 $48,513
Consultants 350,000 21 Sept 2012 $8,345
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Milestones

The Performance Rights will convert as follows:

i) 300,000 Performance Rights, to convert into ordinary shares following the successful completion of a capital raising being finalised on or before 30 April 2012, whereby the Company raises not less than $2 million. These Performance Rights were converted on 16 May 2012.

ii) 300,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 25 cents per Share, on or before 27 January 2017; and

iii) 400,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 40 cents per Share, on or before 27 January 2017.

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Tellus ResouRces lTd ANNUAL report 2013
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

22. Share based payments (continued)

Valuation of Performance Rights

The Performance Rights have been independently valued by Stantons international. The valuation noted above is not necessarily the market price that the Performance Rights could be traded at and is not automatically the market price for taxation purposes.

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Vesting condition
– CoNVERTING
pRoVided the pRice discount foR
of shARes on the no. of times the Vesting pRice
Asx is ABoVe the Vesting pRice is BARRieR Applied to
no. of deemed shARe FoLLoWING PRICES gReAteR thAn fAiR VAlue BAsed
peRfoRmAnce peRfoRmAnce PRICE 27 JANUARY At the time of the shARe pRice As At oN 27 JANUARY
Right Rights 2012 (cents) conVeRsion (cents) 27 JANUARY 2012 2012 shARe pRice
Milestone 2 300,000 14 25 1.79 35%
Milestone 3 400,000 14 40 2.86 65%
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The determination of the probability and therefore discount to apply is somewhat subjective as it is difficult to predict the future prospects of the Group or the market. However, the time to meet Milestones 2 and 3 are quite long (to 27 January 2017) and the share volatility since the shares have been traded on ASX in May 2011 approximates 67% and these have been taken into account in determining the appropriate discount. For purposes of our valuation, we have estimated the discount to apply to the value of the Performance Rights with market based vesting conditions.

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peRfoRmAnce Rights 27 JANUARY 2012 VALUE (CENTS) AFTER DISCoUNT FoR MARkET
BAsed conditions (milestones 2 And 3)
300,000 Milestone 1 14.0
300,000 Milestone 2 9.1
400,000 Milestone 3 4.9
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Valuation of Performance Rights

The Performance Rights have been independently valued by Grant Thornton. These Performance Rights have been valued at $0.067 each. This valuation is not necessarily the market price that the Performance Rights could be traded at and is not automatically the market price for taxation purposes.

for taxaton purposes.
Performance rights price inputs
Hurdle price	$0.30
Spot price - 25 September 2012	$0.11
Risk free rate	2.56%
issue date	21-Sep-2012
Conversion date	21-Sep-2015
Number of rights issued	350,000
Present value of performance right	$0.067
Total value of performance rights	$23,367

23. key management personnel compensation

The key management personnel of the Group during the reporting period were:

a) key Management Personnel Directors Position A Wehby Non-Executive Chairman (appointed 21 June 2010) S Woodham Executive Director (from 23 August 2013) Managing Director (appointed 30 January 2012 to 23 August 2013) R Willson Non-Executive Director (appointed 12 November 2010) B Salmon Non-Executive Director (appointed 19 october 2012)

Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report.

NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

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23. key management personnel compensation (continued)

b) key Management Personnel Compensation

The aggregate compensation of the key management personnel of the Group is set out below:

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2013 2012
$ $
Short-term key management personnel benefits 371,067 484,422
Post employment benefits 27,900 16,350
Share-based payment 26,867 48,513
total 425,834 549,285
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24. Related party disclosures

a) Equity interests in related parties

Equity interests in associates and joint ventures

Nil.

b) key management personnel shareholdings

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fully pAid oRdinARy shARes
2013 BAlAnce puRchAses /(sAles) net otheR chAnge BAlAnce BAlAnce held
01 July 2012 30 June 2013 nominAlly
diRectoRs
- -
A Wehby 660,000 660,000 60,000
S Woodham 1,568,000 - - 1,568,000 -
R Willson 400,000 - - 400,000 -
B Salmon - - - - -
total 2,628,000 - - 2,628,000 60,000
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fully pAid oRdinARy shARes
2012 BAlAnce puRchAses /(sAles) net otheR chAnge BAlAnce BAlAnce held
01 July 2011 30 June 2012 nominAlly
diRectoRs
- -
A Wehby 660,000 660,000 60,000
S Woodham 1,203,000 365,000 - 1,568,000 -
R Willson 400,000 - - 400,000 -
executiVes
- - -
A Adaley 100,000 100,000
D Ward 400,000 152,556 - 552,556 152,556
total 2,763,000 517,556 - 3,280,556 212,556
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Tellus ResouRces lTd ANNUAL report 2013
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

24. Related party disclosures (continued)

c) key management personnel equity holdings

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shARe options
2013 BAlAnce options options net chAnge BAlAnce totAl totAl totAl un-
01 July 2012 gRAnted exeRcised otheR 30 June 2013 Vested 30 exeRcisABle exeRcisABle
June 2013 30 June 2013 30 June 2013
diRectoRs
- - - - - -
A Wehby 500,000 500,000
S Woodham - - - - - - - -
R Willson 500,000 - - - - - 500,000 -
B Salmon - - - - - - - -
total 1,000,000 - - - - - 1,000,000 -
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shARe options
2012 BAlAnce options options net chAnge BAlAnce totAl totAl totAl un-
21 June 2011 gRAnted exeRcised otheR 30 June 2012 Vested 30 exeRcisABle exeRcisABle
June 2012 30 June 2012 30 June 2012
diRectoRs
- - - - -
A Wehby 500,000 500,000 500,000
S Woodham - - - - - - - -
R Willson 500,000 - - - 500,000 - - 500,000
executiVes
- - - - -
A Adaley 100,000 100,000 100,000
D Ward 500,000 - - - 500,000 - - 500,000
total 1,600,000 - - - 1,600,000 - - 1,600,000
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*options granted represent options issued to shareholders, officers and directors when the Company was in the process of being established.

peRfoRmAnce Rights

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2013 BAlAnce Rights Rights net chAnge BAlAnce totAl totAl totAl un-
01 July 2012 gRAnted exeRcised otheR 30 June 2013 Vested 30 exeRcisABle exeRcisABle
June 2013 30 June 2013 30 June 2013
diRectoRs
- - - - - - - -
A Wehby
S Woodham 700,000 - - - - - 700,000 -
R Willson - - - - - - - -
B Salmon - - - - - - - -
total 700,000 - - - - - 700,000 -
peRfoRmAnce Rights
2012 BAlAnce Rights Rights net chAnge BAlAnce totAl totAl totAl un-
01 July 2011 gRAnted exeRcised otheR 30 June 2012 Vested 30 exeRcisABle exeRcisABle
June 2012 30 June 2012 30 June 2012
diRectoRs
- - - - - - - -
A Wehby
S Woodham - 1,000,000 300,000 - 700,000 - 700,000 -
R Willson - - - - - - - -
B Salmon - - - - - - - -
total - 1,000,000 300,000 - 700,000 - 700,000 -
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS FoR THE YEAR ENDED 30 JUNE 2013

24. Related party disclosures (continued)

Executive Share options and Performance Rights

Details of executive share options and performance rights have been disclosed at note 16 to the financial statements.

d) Transactions with other related parties

Nil

25. Remuneration of auditors

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2013 2012
$ $
Remuneration of the auditor for the Group for:
Audit or review of the financial report 50,915 35,000
Remuneration of the auditor for other services:
-
Review of Pro-forma Balance Sheet for the S708 Cleansing Prospectus 1,750
total 50,915 36,750
The auditor of the Group is Grant Thornton Audit Pty Ltd.
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26. Acquisition of Premier Mining Pty Ltd

on 21 November 2011, Tellus Resources announced it had entered into Binding Heads of Agreement (“the Agreement”) to acquire 100% of the issued capital of Premier Mining Pty Ltd, a wholly owned subsidiary of Premier Minerals Limited, an unlisted Australian public company. Upon execution of the Agreement Tellus paid Premier a non-refundable deposit of $50,000, which provided Tellus exclusivity until settlement.

on 15 May 2012, on Settlement of the Agreement Tellus Resources paid Premier a further $950,000 in cash and granted Premier $1,000,000 worth of shares in Tellus Resources, being 5,555,555 fully paid ordinary shares. These shares were issued in two tranches: 5,261,250 fully paid ordinary shares on 17 May 2012; and 294,305 fully paid ordinary shares on 28 May 2012; and are subject to a voluntary escrow period of 24 months.

Upon successful delineation and announcement by Tellus Resources of an indicated JoRC resource of at least 300,000 ounces of gold with a cut-off grade of 3.0 grams per tonne, Tellus will pay Premier a further $2,000,000 in cash; and issue Premier $2,000,000 worth of shares in Tellus. At the date of acquisition the Directors have assessed that the probability of these amounts becoming payable are remote and so have only been included as a contingent liability. At the date of acquisition, Premier Mining had no employees and its only assets were the mineral properties and related security deposits. Accordingly Premier Mining does not constitute a business and has been accounted for as an asset acquisition.

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puRchAse consideRAtion
Cash consideration (deposit) 50,000
Cash consideration 950,000
Cash consideration – reimbursement for Security deposits 31,071
Total cash consideration 1,031,071
Consideration in shares 1,000,000
Total Acquisition cost 2,031,071
Assets acquired at acquisition date:
Receivables (security deposits) 62,142
Mineral properties 1,968,929
total 2,031,071
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Tellus ResouRces lTd ANNUAL report 2013
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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS

FoR THE YEAR ENDED 30 JUNE 2013

27. Parent entity information

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stAtement of finAnciAl position 2012 2011
$ $
Current Assets 1,901,072 3,710,444
Non-current assets 2,839,453 2,567,951
Total Assets 4,740,525 6,278,395
Current liabilities 118,750 319,071
Non-current liabilities 5,594 1,539
Total liabilities 124,344 320,610
Net Assets 4,616,181 5,957,785
Equity
issued capital 7,374,031 7,470,031
Reserves 371,725 240,513
Accumulated losses (3,129,575) (1,752,759)
Total Equity 4,616,181 5,957,785
Statement of Profit or Loss and Comprehensive Income
Loss for the year (1,376,816) (1,265,767)
Total Comprehensive loss (1,376,816) (1,265,767)
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Refer to notes 18 and 19 for details of the parent entity’s commitments and contingent liabilities. The parent entity has not entered into a deed of cross guarantee at the year end.

28. Controlled entity

contRolled entity Premier Mining Pty Ltd

countRy of incoRpoRAtion

Australia

PERCENTAGE oWNED

100%

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NoTES To THE CoNSoLiDATED FiNANCiAL STATEMENTS

FoR THE YEAR ENDED 30 JUNE 2013

29. Subsequent events

on 30 April 2013, the Company announced that it had entered into a conditional agreement to acquire 100% of the issued shares in PNC AUST Pty Ltd (PNC). Completion of the Acquisition is conditional on, amongst other things, the Company’s shareholders approval of the resolutions as set out in the Notice of Meeting to the Extraordinary General Meeting (EGM) held on 10 July 2013. All resolutions were carried by shareholders at the EGM. Furthermore, it was a condition of the Acquisition that the Company raise a minimum of AUD 2,000,000 to fund the ongoing operations of the Company.

on 23 August 2013 the Company:

announced the completion of the acquisition of PNC AUST Pty Ltd (“PNC”) having successfully raised $2,498,373 and the issue of 28,458,367 ordinary fully paid shares to various sophisticated investors who participated in the placement.
issued 40,000,000 Consideration Shares in total at an issue price of $0.10 to complete the acquisition of PNC AUST Pty Ltd as approved by shareholders at the EGM on 10 July 2013;
allotted 20,736,953 fully paid ordinary shares at an issue price of $0.10 per share raising $2,073,695;
allotted 7,721,414 fully paid ordinary shares at an issue price of $0.055 per share raising $424,678;
appointed Carl Dorsch as the Managing Director and pursuant to the Employment Agreement issued 45,000,000 performance options over ordinary shares subject to Carl Dorsch remaining employed as managing director of the Company. These options convert into fully paid ordinary shares in the Company on a 1:1 ratio, for nil consideration as follows:
5,000,000, where the 30 day volume weighted average price (VWAP) for the ordinary shares of the Company reaches at least $0.175 per share;
5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.200 per share;
5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.225 per share;
15,000,000, when production testing of PEL 105 in either open or closed hole that can demonstrate an immediate flow capacity for the well in excess of a sustained minimum of 100 BoEPD for a period in excess of 7 days. Such test must be certified by a relevant expert in the field being either an independent consulting reservoir engineer or the contracted testing company, provided that such threshold is achieved on or prior to 31 December 2014; and
15,000,000 where the Company has acquired a direct or indirect interest in the Wichita County Project and the production from the leases which form the Wichita County Project reaches an average of 50 BoEPD over a three month period.

on 11 September 2013, the Company and its wholly owned subsidiary PNC AUST Pty Ltd (PNC) announced a farmout arrangement with Senex Energy Limited (“Senex”) in its PEL 105 tenement in the Cooper Basin, South Australia.

Upon signing of the Heads of Agreement PNC transfers a 50% interest in PEL 105 to Senex. Senex will contribute $3.5M to the costs of drilling Pirie in two equal tranches as follows:

Tranche 1 : $1.75M prior to spudding Pirie 1; and
Tranche 2: $1.75M 25 days after spud.

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Tellus ResouRces lTd ANNUAL report 2013
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DiRECToRS’ DECLARATioN

in the opinion of the directors of Tellus Resources Ltd:
a the financial statements and notes of Tellus Resources Ltd are in accordance with the Corporations Act 2001, including:
- i. giving a true and fair view of its financial position as at 30 June 2013 and of its performance for the financial year ended on that date; and
- ii. complying with Australian Accounting Standards (including the Australian Accounting interpretations) and the Corporations Regulations 2001; and
b there are reasonable grounds to believe that Tellus Resources Ltd will be able to pay its debts as and when they become due and payable.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial officer for the financial year ended 30 June 2013.
The financial statements comply with international Financial Reporting Standards.

Signed in accordance with a resolution of the directors:

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Anthony Wehby Chairman

Sydney, 23 September 2013

iNDEPENDENT AUDiToR’S REPoRT

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Grant Thornton Audit Pty Ltd
ACN 130 913 594
Level 19, 2 Market Street
Sydney NSW 2000
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E [email protected]
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Tellus Resources Limited
Report on the financial report
We have audited the accompanying financial report of Tellus Resources Limited (the
“Company”), which comprises the consolidated statement of financial position as at 30 June
2013, the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of changes in equity and consolidated 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 of the financial report in accordance with Australian
Accounting Standards and the Corporations Act 2001. This responsibility includes such
internal controls as the Directors determine are necessary to enable the preparation of the
financial report to be free from material misstatement, whether due to fraud or error. The
Directors also state, in the notes to the financial report, in accordance with Accounting
Standard AASB 101 Presentation of Financial Statements, that compliance with the
Australian equivalents to International Financial Reporting Standards ensures that the
financial report, comprising the financial statements and notes, complies with International
Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. Those standards
require us to comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is
free from material misstatement.
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the
context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member
firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another
and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and it s
Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.
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55
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iNDEPENDENT AUDiToR’S REPoRT

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Tellus ResouRces lTd ANNUAL report 2013
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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 Company’s preparation of the financial report that gives a true and fair view 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 Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report.

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

Independence

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

Auditor’s opinion

In our opinion,

a the financial report of Tellus Resources Limited is in accordance with the Corporations Act 2001, including:
i giving a true and fair view of the consolidated entity’s financial position as at 30 June 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 the notes to the financial statements.

Report on the remuneration report

We have audited the remuneration report included in pages 12 to 15 of 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.

iNDEPENDENT AUDiToR’S REPoRT

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Auditor ’s opinion on the remuneration r eport

In our opinion the remuneration report of Tellus Resources Limited for the year ended 30 June 2013, complies with section 300A of the Corporations Act 2001.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

A J Archer Partner - Audit & Assurance

Sydney, 23 September 2013

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Tellus ResouRces lTd ANNUAL report 2013
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SUPPLEMENTARY iNFoRMATioN

Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows:

ordinary shares

As at 20 September 2013, the issued capital comprised of 112,838,922 fully paid ordinary shares (ASX code: TLU) held by 406 holders.

options

As at 20 September 2013, the Company had the following options available to be exercised:

i) 4,800,000 options over ordinary shares with an exercise price of 30 cents each, exercisable on or before 31 March 2014. ii) 1,200,000 options over ordinary shares with an exercise price of 30 cents each, exercisable on or before 30 April 2014. iii) 5,000,000 options over ordinary shares with an exercise price of 25 cents each, exercisable on or before 25 September 2014.
iv) 45,000,000 performance options over ordinary shares subject to Carl Dorsch remaining employed as managing director of the Company. These options convert into fully paid ordinary shares in the Company on a 1:1 ratio, for nil consideration as follows:
5,000,000, where the 30 day volume weighted average price (VWAP) for the ordinary shares of the Company reaches at least $0.175 per share;
5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.200 per share;
5,000,000, where the 30 day VWAP for the ordinary shares of the Company reaches at least $0.225 per share;
15,000,000, when production testing of PEL 105 in either open or closed hole that can demonstrate an immediate flow capacity for the well in excess of a sustained minimum of 100 BoEPD for a period in excess of 7 days. Such test must be certified by a relevant expert in the field being either an independent consulting reservoir engineer or the contracted testing company, provided that such threshold is achieved on or prior to 31 December 2014; and
15,000,000 where the Company has acquired a direct or indirect interest in the Wichita County Project and the production from the leases which form the Wichita County Project reaches an average of 50BoEPD over a three month period.

Each option converts to one ordinary share.

Performance Rights

As at 20 September 2013, the Company has the following Performing Rights on issue on the terms and conditions set out below:

i) 300,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 25 cents per Share, on or before 27 January 2017; ii) 400,000 Performance Rights, to convert if the 20 day VWAP for the Shares reaches 40 cents per Share, on or before 27 January 2017. iii) 350,000 Performance Rights, to convert if the share price reaches 30 cents per Share, on or before 21 September 2015.

Distribution of holders equity security

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fully pAid oRdinARy shARes peRcentAge
holding numBeR of holdeRs totAl units %
1 - 1,000 1 5 0.000
1,001 - 5,000 7 21,371 0.019
5,001 - 10,000 58 503,000 0.446
10,001 - 100,000 208 8,998,088 7.974
100,001 and over 132 103,316,458 91.561
Total number of holders 406 112,838,922 100.000
Holding less than a marketable parcel 8 21,376
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RestRicted secuRities
clAss numBeR DATE ESCRoW peRiod ends
Fully paid ordinary shares 21,958,094 23 August 2014
Fully paid ordinary shares voluntarily restricted 18,041,906 23 August 2014
Fully paid ordinary shares voluntarily restricted 5,555,555 15 May 2014
Unlisted Performance options 45,000,000
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*Subject to Carl Dorsch remaining employed as managing director of the Company

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SUPPLEMENTARY iNFoRMATioN

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suBstAntiAl shAReholdeR oRdinARy shARes
shAReholdeRs As 20 septemBeR 2013 numBeR held peRcentAge
CNP ENERGY PTY LTD 17,000,000 15.066
QoC FoUNDERS NoMiNEES PTY LiMiTED PARAGoN GRoUP HoLDiNG LiMiTED,
7,598,239 6.743
ASiA PACiFiC MiNiNG CAPiTAL PTE LTD,
RiCH PEAK ENTERPRiSES LTD AND BEN SALMoN 15,689,035 13.904
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ToP TWENTY SHAREHoLDERS oRdinARy shARes
shAReholdeRs As 20 septemBeR 2013 numBeR held peRcentAge
CNP ENERGY PTY LTD 17,000,000 15.066
QoC FoUNDERS NoMiNEES PTY LiMiTED 7,598,239 6.743
ASiA PACiFiC MiNiNG CAPiTAL PTE LTD 5,787,573 5.129
PREMiER MiNERALS LTD 5,555,555 4.923
PARAGoN GRoUP HoLDiNG LiMiTED 4,508,000 3.995
MR RoBERT SiMEoN LoRD 2,710,809 2.402
BEN CAMERoN MELViLLE SALMoN 2,352,941 2.085
PARAGoN GRoUP HoLDiNG LiMiTED 2,309,249 2.047
ANToNoV HEAVY iNDUSTRY & ENGiNEERiNG CoNSULTiNG LiMiTED 2,004,445 1.776
MR DANiEL BARRY 2,004,445 1.776
MR RoBERT WELBoRN 2,004,445 1.776
MR JEREMY STEVEN MARPLE 1,764,706 1.564
PANRoN PTY LTD 1,764,706 1.564
MR BARRY EDWARD VERiNDER & MRS ANGELA RiTA VERiNDER 1,764,706 1.564\
FUND A/C>
iSCS HoLDiNGS PTY LTD 1,700,000 1.507
ALFA GRoUP HoLDiNGS LiMiTED 1,288,000 1.441
PETLiND PTY LTD 1,259,070 1.116
BAiNPRo NoMiNEES PTY LiMiTED 1,237,059 1.096
DAYWAVE PTY LTD 1,176,471 1.073
MR PAUL WiLLiAM GRiFFiN 1,176,471 1.043
MRS KRiSTEN LoUiSE LoNG 1,176,471 1.043
KiRiAKi PAPPAS 1,176471 1.043
PoRT WiLLUNGA SUPERANNUATioN PTY LTD 1,176,471 1.043
SPiNiTE PTY LiMiTED 1,176,471 1.043
TUSCANi iNVESTMENTS PTY LiMiTED 1,176,471 1.043
totAl 72,849,245 64.901
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Voting rights

The voting rights attaching to each class of equity securities are set out below:

a) ordinary Shares – on a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.
b) options – No voting rights.

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Tellus ResouRces lTd ANNUAL report 2013
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SUPPLEMENTARY iNFoRMATioN

Interests in mining tenements

Current interests in tenements held by the Group as at 20 September 2013 are listed below:

New South Wales, Australia

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pRoJect el numBeR inteRest pRoJect el numBeR inteRest
Cobark EL 7698 100% Upper Hunter EL 7874 100%
Glen Morrison EL 7699 100% Rockley ELA 4563 100%
Niangala EL 7877 100% Triangle Flat ELA 4491 100%
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Queensland, Australia

Chillagoe Gold Project

All Mining Leases and Exploration Permits are held 100% by the Group.

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ml numBeR epm numBeR epm numBeR epm numBeR
ML 20234 EPM 10780 EPM 18397 EPM 25193
ML 20380 EPM 19377 EPM 18398 EPM 25230
ML 20381 EPM 19378 EPM 19605 EPM 25233
ML5130 EPM 19607 EPM 19803 EPM 25253
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South Australia, Australia

PEL 105 tenement in the Cooper Basin

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NoTES

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AI assistant

FIRSTWAVE CLOUD TECHNOLOGY LIMITED — Annual Report 2013

64905_rns_2013-10-24_190bf299-efd1-4f07-b166-921f4298ebee.pdf

CoRPoRATE DiRECToRY

tellus ResouRces ltd

diRectoRs

compAny secRetARy

RegisteRed office And pRincipAl plAce of Business

shARe RegisteR

secuRities exchAnge listing

AuditoR

TELLUS RESoURCES LTD AnnuAl RepoRt 2013

CoNTENTS

CoRPoRATE PRoFiLE

HiGHLiGHTS

corporate

Exploration

CHAiRMAN’S LETTER

Dear Investor

oPERATioN & EXPLoRATioN REPoRT

iNTRoDUCTioN

oPERATioN & EXPLoRATioN REPoRT

QUEENSLAND PRoJECTS

empire (ml20380)

oPERATioN & EXPLoRATioN REPoRT

QUEENSLAND PRoJECTS

Empire (ML20380) (continued)

Wandoo (ML5130, ML20381, ML20234)

oPERATioN & EXPLoRATioN REPoRT QUEENSLAND PRoJECTS

Bayley’s

oPERATioN & EXPLoRATioN REPoRT

NEW SoUTH WALES PRoJECTS

Southern New England IRG Project, NSW

Target Model

oPERATioN & EXPLoRATioN REPoRT

NEW SoUTH WALES PRoJECTS

Upper Hunter EL7874, Cobark EL7698, Glen Morrison EL7699 and Niangala EL7877 – (TLU 100%)

oPERATioN & EXPLoRATioN REPoRT NEW SoUTH WALES PRoJECTS

Glen Morrison EL7699 and Niangala EL7877 – (TLU 100%)

Manganese

Southeast Lachlan Project, NSW

SUMMARY oF TENURE

oUTLooK

Competent Persons Statement

Disclaimer

DiRECToRS’ REPoRT

DiRECToRS

Anthony Wehby

Expertise and Experience

other current directorships

Former directorships in the last 3 years

Interest in shares and options

Carl Dorsch

Expertise and Experience

other current directorships

Former directorships in the last 3 years

Interest in shares and options

DiRECToRS’ REPoRT FoR THE YEAR ENDED 30 JUNE 2013

Stephen Woodham

other current directorships

Former directorships in the last 3 years

Interest in shares and options

Richard Willson

other current directorships

DiRECToRS’ REPoRT FoR THE YEAR ENDED 30 JUNE 2013

Former directorships in the last 3 years

Interest in shares and options

Ben J Salmon RFD QC

Non-Executive Director

Date of Appointment: 19 october 2012

other current directorships

Former directorships in the last 3 years

Interest in shares and options

CoMPANY SECRETARY

Anne Adaley

PRiNCiPAL ACTiViTiES

oPERATiNG RESULTS

DiRECToRS’ REPoRT

REViEW oF oPERATioNS

corporate

FIRSTWAVE CLOUD TECHNOLOGY LIMITED Annual Report 2013