FIRSTWAVE CLOUD TECHNOLOGY LIMITED - Annual Report 2013

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TELLUS RESOURCES LTD

FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

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CORPORATE DIRECTORY

ABN 35 144 733 595

Directors

Anthony Wehby Non-Executive Chairman Carl Dorsch Managing Director Stephen Woodham Executive Director Richard Willson Non-Executive Director Ben J Salmon RFD QC Non-Executive Director

Company Secretary

Anne Adaley

Registered Office and Principal Place of Business

Level 3, Suite 301 66 Hunter Street SYDNEY NSW 2000 T: (02) 9231 6231 F: (02) 9231 6687 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

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INDEX PAGE CORPORATE DIRECTORY ........................................................................................ 2 DIRECTORS’ REPORT ............................................................................................... 4 REMUNERATION REPORT ...................................................................................... 12 AUDITOR'S INDEPENDENCE DECLARATION ....................................................... 17 CORPORATE GOVERNANCE STATEMENT ........................................................... 18 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME .. 24 STATEMENT OF FINANCIAL POSITION ................................................................. 25 STATEMENT OF CHANGES IN EQUITY .................................................................. 26 STATEMENT OF CASH FLOWS .............................................................................. 27 NOTES TO THE FINANCIAL STATEMENTS ........................................................... 28 DIRECTORS’ DECLARATION .................................................................................. 54 INDEPENDENT AUDITOR'S REPORT ..................................................................... 55 SUPPLEMENTARY INFORMATION ......................................................................... 58

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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

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

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;
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.

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

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

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

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

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).

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;

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

Review of Operations (continued)

 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.

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 50BOEPD over a three month period.

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

Events Subsequent To Reporting Date (continued)

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.

Directors’ meetings

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

follows:
	BOARD	MEETINGS
	NUMBER ELIGIBLE	NUMBER
DIRECTOR	TO ATTEND	ATTENDED
A Wehby	6	5
S Woodham	6	5
R Willson	6	6
B Salmon	3	2

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

Share options

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

DATE OPTIONS	NUMBER OF SHARES	CLASS OF	EXERCISE PRICE OF	EXPIRY DATE OF
GRANTED	UNDEROPTION	SHARES	OPTION	OPTIONS
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

*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.

Performance Rights

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

PERFORMANCE
RIGHTS	NUMBER	GRANT DATE
S Woodham	700,000	5 Apr 2012
Consultants	350,000	21 Sep 2012

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

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 non-audit 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 decision-making 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 17 of this financial report and forms part of this Directors’ report.

FINANCIAL STATEMENTS 30 JUNE 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 NonExecutive 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.

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

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:

			POST-
			EMPLOYMENT
	SHORT-TERM	BENEFITS	BENEFITS	EQUITY
	SALARY		SUPER-	PERFORMANCE
	AND FEES	OTHER	ANNUATION	RIGHTS	TOTAL
NAME	$	$	$	$	$
DIRECTORS
A Wehby1	60,227	-	4,500	-	64,727
S Woodham2	219,996	20,500	19,800	26,867	287,163
R Willson	40,000	-	3,600	-	43,600
B Salmon3	30,344	-	-	-	30,344
Total	350,567	20,500	27,900	26,867	425,834

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

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 year ended 30 June 2012 are set out in the following table:

			POST-
			EMPLOYMENT
	SHORT-TERM	BENEFITS	BENEFITS	EQUITY
	SALARY		SUPER-	PERFORMANCE
	AND FEES	OTHER	ANNUATION	RIGHTS	TOTAL
NAME	$	$	$	$	$
DIRECTORS
A Wehby1	50,000	10,000	4,500	-	64,500
S Woodham2	91,665	8,542	8,250	48,513	156,970
R Willson	40,000	-	3,600	-	43,600
EXECUTIVES
A Adaley3	105,287	-	-	-	105,287
D Ward4	178,928	-	-	-	178,928
Total	465,880	18,542	16,350	48,513	549,285

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.

FINANCIAL STATEMENTS 30 JUNE 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
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.

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

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE PERIOD 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

FINANCIAL STATEMENTS 30 JUNE 2013

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AUDITOR’S INDEPENDENCE DECLARATION

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FINANCIAL STATEMENTS 30 JUNE 2013

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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.

PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	COMPLY	EXPLANATION
					(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
	functions reserved to		the board	and		rather than manage it. The Company’s
	those delegated to senior executives					Corporate Governance Plan includes a Board
	and disclose	those functions.				Charter which sets out the specific
						responsibilities of the Board and provides that
						the Board shall delegate responsibility for the
						day-to-day operations and administration of the
						Company to the Executive Directors and any
						Chief Executive Officer (if appointed).
1.2	Companies should disclose process for evaluating performance of senior executives.			the the	Yes	The Board will monitor the performance of senior management, including measuring actual performance against planned performance. The Board will follow the
						performance evaluation principles outlined in
						its Corporate Governance Plan.
1.3	Companies should provide the information indicated in the Guide to				Yes	The Board Charter discloses the specific responsibilities of the Board and provides that
	reporting on	Principle 1.				the Board shall delegate responsibility for the day-to-day operations and administration 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 independent directors.			be	Yes	A majority of the Directors are currently independent. The Company has five 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.

FINANCIAL STATEMENTS 30 JUNE 2013

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PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	PRINCIPLES AND RECOMMENDATIONS	COMPLY	EXPLANATION
							(YES/NO)
2.2	The chair should			be an independent			Yes	The chair is currently Anthony Wehby, who is
	director.							an 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 executive			Yes	Stephen Woodham was the Managing Director
	officer should not			be exercised by		the		until 23 August 2013 and undertook the role of
	same individual.							Chief Executive Officer. Carl Dorsch was
								appointed Managing Director on 23 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
	nomination committee.							early stages of development, and given 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	the	Yes	In order to ensure the Board continues to
	process		for	evaluating		the		discharge its responsibilities in an appropriate
	performance		of	the	board,	its		manner, a review of the performance over the
	committees and individual directors.							previous 12 months of the Board, its
								committees and individual Directors will be
								arranged by the Board in accordance with the
								terms of the Nomination Committee Charter,
								until such time as a Nomination Committee is
								established.
2.6	Companies		should		provide	the	Yes	A description of the skills and experience of
	information indicated in				the_Guide to_			each of the current Directors is contained in the
	reporting on		Principle 2.					Company’s Directors’ Report and on the
								Company’s website. Three of the five 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.

FINANCIAL STATEMENTS 30 JUNE 2013

PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO)

EXPLANATION

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3. Promote ethical and responsible decision-making

3.1 Companies should establish a code of Yes conduct and disclose the code or a summary of the code as to:
the practices necessary to maintain confidence in the company’s integrity

The Company’s Corporate Governance Plan includes a Corporate Code of Conduct, which provides a framework for decisions and actions in relation to ethical conduct in employment.

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 policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measureable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them.
No The Company’s Corporate Governance Plan does not include an express policy specifically addressing diversity. The Company is not currently in compliance with this recommendation as the Board is comfortable that the Company already has an appropriate approach to encouraging workplace diversity without the need for a formal policy

Under the Corporate Code of Conduct contained in the Company’s Corporate Governance Plan, employees must not harass, discriminate or support others who harass and discriminate against colleagues or members of the public on the grounds of sex, pregnancy, marital status, age, race (including their colour, nationality, descent, ethnic or religious background), physical or intellectual impairment, homosexuality 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 annual report the measureable Governance Plan does not include an express objectives for achieving gender policy specifically addressing diversity. diversity set by the board in The Company is not currently in compliance accordance with the diversity policy with this recommendation as the Board is and progress towards achieving them. comfortable that the Company already has an appropriate approach to encouraging workplace diversity without the need for a formal policy. 3.4 Companies should disclose in each No Anne Adaley, the Company Secretary and annual report the proportion of women Chief Financial Officer, is a woman in a senior employees in the whole organisation, executive position, but there are currently no women in senior executive positions women on the board of the Company. This will and women on the board. be reviewed on an on-going basis. 3.5 Companies should provide the Yes The Corporate Code of Conduct can be found information indicated in the Guide to in the Company’s Corporate Governance Plan reporting on Principle 3. on the Company’s website at www.tellusresources.com.au.

FINANCIAL STATEMENTS 30 JUNE 2013

PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO)

EXPLANATION

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4. Safeguard integrity in financial reporting

4.1 The board should establish an audit No committee.

Given the current size and structure of the Board, the Board has not yet formed a 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 a formal charter.
4.4 Companies should provide the information indicated in the Guide to reporting on Principle 4.

Yes The Company’s Corporate Governance Plan includes a formal charter for the Audit and Risk Committee.

Yes As above. The Company’s Corporate Governance policies are set out on the Company’s website at www.tellusresources.com.au.

5. Make timely and balanced disclosure 5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

5.1 Companies should establish written Yes The Company has a continuous disclosure policies designed to ensure program in place designed to ensure the compliance with ASX Listing Rule factual presentation of the Company’s financial disclosure requirements and to ensure position. The Board has designated the accountability at a senior executive Company Secretary as the person responsible level for that compliance and disclose for overseeing and coordinating disclosure of those policies or a summary of those information to the ASX and shareholders, as policies. well as providing guidance to Directors and employees on disclosure requirements and procedures. 5.2 Companies should provide the Yes As above. information indicated in Guide to The Company’s Corporate Governance Reporting on Principle 5. policies are set out on the Company’s website at www.tellusresources.com.au. 6. Respect the rights of shareholders 6.1 Companies should design a Yes The Company’s Corporate Governance Plan communications policy for promoting includes a shareholder communications effective communication with strategy, which aims to ensure that the shareholders and encouraging their shareholders of the Company are informed of participation at general meetings and all major developments affecting the disclose their policy or a summary of Company’s state of affairs. that policy. 6.2 Companies should provide the Yes As above. information indicated in the Guide to The Company’s Corporate Governance reporting on Principle 6. policies are set out on the Company’s website at www.tellusresources.com.au.

6.2 Companies should provide the Yes As above. information indicated in the Guide to The Company’s Corporate Governance reporting on Principle 6. policies are set out on the Company’s website at www.tellusresources.com.au.
7. Recognise and manage risk 7.1 Companies should establish policies Yes The Board determines the Company’s “risk for the oversight and management of profile” and is responsible for overseeing and material business risks and disclose a approving risk management strategy and

FINANCIAL STATEMENTS 30 JUNE 2013

PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO)

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EXPLANATION

summary of those policies.

policies, internal compliance and internal control.

The Company’s Corporate Governance Plan establishes formal terms of reference for 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. Yes As above. Yes The Board has received the relevant declarations from the Managing Director and Chief Financial Officer in accordance with s295A of the Corporations Act 2001 and the relevant assurances required under Recommendation 7.3 of the ASX Corporate Governance Principles.

7.2 The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.
7.3 The board should disclose whether it Yes The Board has received the relevant has received assurance from the chief declarations from the Managing Director and executive officer (or equivalent) and Chief Financial Officer in accordance with the chief financial officer (or s295A of the Corporations Act 2001 and the equivalent) that the declaration relevant assurances required under provided in accordance with section Recommendation 7.3 of the ASX Corporate 295A of the Corporations Act is Governance Principles. 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
Reporting on Principle 7. policies are set out on the Company’s website at www.tellusresources.com.au.

FINANCIAL STATEMENTS 30 JUNE 2013

PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO)

EXPLANATION

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8. Remunerate fairly and responsibly 8.1 The board should establish a No remuneration committee.

Given the current size and structure of the Board, the Board has not yet formed a 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 should No As above. 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 distinguish Yes As above. 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 to The Company’s Corporate Governance reporting on Principle 8. policies are set out on the Company’s website at www.tellusresources.com.au.

FINANCIAL STATEMENTS 30 JUNE 2013

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STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2013

NOTE	CONSOLIDATED
	2013 2012
	$ $
Revenue from continuing operations 5	94,332 168,336
Expensesfromcontinuing 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	- -
Netlossforthe year	(1,376,816) (1,265,767)

Othercomprehensiveincome,net oftax	- -
Total comprehensive loss	(1,376,816) (1,265,767)
EARNINGS/LOSS PER SHARE:
Basic earnings/(loss) per share(centsper share) 17	(3.1) (4.40)
Diluted earnings/(loss) per share (cents per share) 17	(3.1) (4.40)

This statement should be read in conjunction with the notes to the financial statements.

FINANCIAL STATEMENTS 30 JUNE 2013

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STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

	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
TOTALCURRENT 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
Explorationand evaluationexpenditure 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
TOTALCURRENT 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
Accumulatedlosses	(3,129,575) (1,752,759)
TOTAL EQUITY	4,616,181 5,957,785

This statement should be read in conjunction with the notes to the financial statements.

FINANCIAL STATEMENTS 30 JUNE 2013

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STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2013

		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 for the period		- - (1,265,767) (1,265,767) 3,475,000 - - 3,475,000 - 48,513 - 48,513 (146,045) - - (146,045)
Shares issued during the period
Options granted
Shareissue costs
Balance as at 30 June 2012		7,470,031 240,513 (1,752,759) 5,957,785
		- - (1,376,816) (1,376,816) - 96,000 - 96,000 - 35,212 - 35,212 (96,000) - - (96,000)
Total loss and comprehensive income for the period
Options granted
Performance Rights granted
Shareissue costs
Bl 2		2 2
aance as at 30 June 013		7,374,031 371,75 (3,19,575) 4,616,181

The financial statements should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS 30 JUNE 2013

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STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2013

	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) -
Paymentforacquisitionof Premier MiningPtyLtd	- (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
Paymentsforshareissue costs	- (160,650)
Net cashprovided by financing activities	- 2,314,350

Net decrease in cash held and cash equivalents	(2,493,863) (75,947)
Cashand cashequivalents at the beginning ofthe 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

The financial statements should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS 30 JUNE 2013

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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

FINANCIAL STATEMENTS 30 JUNE 2013

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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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

3. Significant accounting policies (continued)

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.

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 non-controlling 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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

3. Significant accounting policies (continued)

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.

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

3. Significant accounting policies (continued)

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.

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

Significant accounting policies (continued)
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 non-controlling 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.

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:

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

Significant accounting policies (continued)
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:

FINANCIAL STATEMENTS 30 JUNE 2013

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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.

REVENUE Interest revenue Service revenue Total segment revenue RESULTS Operating loss before tax Net loss Included within segment results: Depreciation and amortisation of segment assets Segment assets Segment liabilities 5. Revenue Revenue Interest revenue – bank deposits Interest revenue on loan to PNC Aust Pty Ltd Service revenue			2013 2012
			$ $

			93,532 149,956
			800 18,380
			94,332 168,336

			(1,376,816) (1,265,767)
			(1,376,816) (1,265,767)

			15,207 18,449
			4,740,525 6,278,395
			124,344 320,610

			2013 2012 $ $

			80,464 149,956
			13,068 -
			800 18,380
			94,332 168,336

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

6. Loss for the year

Loss before income tax includes the following specific expenses:

Administrative and corporate costs Business Development costs Impairment of capitalised project expenditure Exploration expenditure expensed Depreciation and amortisation: Depreciation of non-current assets Amortisation of intangible assets Directors benefit expense:* Post employment benefits: - Defined contribution plans		2013 2012 $ $
		926,036 1,072,228 485,953 - 18,102 327,076 6,050 - 11,072 11,833 4,135 6,616
		15,207 18,449
		19,800 16,350
		19,800 16,350

*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

Current tax expense/(income) Deferred tax (income)

Total tax (income)

The prima facie income tax expense on pretax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:

Loss before income tax expense

Prima facie tax payable on profit/(loss)

Tax effect of non-temporary differences Tax effect of equity raising costs debited to equity Tax effect of tax losses and temporary differences not recognised Total income tax expense

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2013	2012
$	$
-	-
-	-
-	-
(1,376,816)	(1,265,767)
(413,045)	(379,730)
156,350	34,010
(48,628)	(42,868)
305,323	388,588
-	-

FINANCIAL STATEMENTS 30 JUNE 2013

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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

c) Tax Losses
Unused tax losses for which no tax loss has been booked as a deferred tax assets Potential benefit at 30%	2013 2012 $ $
	5,623,193 4,300,074
	1,686,958 1,290,022

d) Unrecognised (non-booked) temporary tax differences

Non deductible amounts as temporary differences Accelerated deductions for book compared to tax Total unrecognised temporary differences (excluding losses) Potential effect on future tax expense at 30% Net deferred tax asset		2013 2012 $ $
		97,223 124,166 (2,742,835) (2,415,889)

		(2,645,612) (2,291,723) (793,684) (687,517)

		893,274 602,505

8. Trade and other receivables

GST receivable Other receivables Loan to PNC AUST Pty Ltd* Total		2013 2012 $ $
		36,672 68,337 8,398 2,970 707,639 -


		752,709 71,307

*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

Prepayments

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	2013	2012
	$	$
	13,702	10,613

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

Property, plant and equipment

10. Property, plant and equipment
	COMPUTER HARDWARE FIELD EQUIPMENT TOTAL
	$ $ $
Gross Carrying Amount Balance at 30 June 2011 Additions Balance at 30 June 2012 Additions Balance at 30 June 2013 Accumulated depreciation /amortisation and impairment Balance at 30 June 2011 Depreciation expense Balance at 30 June 2012 Depreciation expense Balance at 30 June 2013 Net Book Value 30-Jun-12 30-Jun-13
	1,291 826 2,117
	13,392 41,263 54,655
	14,683 42,089 56,772
	- - -
	14,683 42,089 56,772
	10 1 11
	4,240 7,593 11,833
	4,250 7,594 11,844
	4,173 6,899 11,072
	8,423 14,493 22,916
	10,433 34,495 44,928
	6,260 27,596 33,856

Aggregate depreciation allocated, whether recognised as an expense, or capitalised as part of the carrying amount of other assets during the year.

Plant and equipment

	2013 2012
	$ $
	11,072 11,833

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

11. Intangible assets	11. Intangible assets
Gross Carrying Amount Balance at 30 June 2011 Additions Balance at 30 June 2012 Additions Balance at 30 June 2013 Accumulated amortisation and impairment Balance at 30 June 2011 Amortisation expense Balance at 30 June 2012 Amortisation expense Balance at 30 June 2013 Net Book Value 30-Jun-12 30-Jun-13 12. Exploration and evaluation expenditure Non-producing properties Exploration and evaluation expenditure: Intangibles Balance at the beginning of the period Additions Mineral tenements acquired on acquisition of Premier Mining Pty Ltd Impairment of mineral properties Balance at 30 June 2013		SOFTWARE TOTAL
		$ $
		16,970 16,970 - -
		16,970 16,970 - -
		16,970 16,970
		172 172 6,616 6,616
		6,788 6,788 4,135 4,135
		10,923 10,923
		10,182 10,182
		6,047 6,047
		2013 2012 $ $


		2,512,841 118,260 304,811 690,586 - 2,031,071 (18,102) (327,076)




	Ltd


		2,799,550 2,512,841

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

Trade and other payables

Current Trade payables Accruals Payroll liabilities 14. Provisions Current Annual leave Non-current Long-service leave 15. Issued capital 44,380,555 fully paid ordinary shares (2012: 44,380,555 fully paid ordinary shares) Share issue expenses	Current Trade payables Accruals Payroll liabilities 14. Provisions Current Annual leave Non-current Long-service leave 15. Issued capital 44,380,555 fully paid ordinary shares (2012: 44,380,555 fully paid ordinary shares) Share issue expenses				2013 2012 $ $ 52,143 184,228 29,214 94,852 32,035 32,450 113,392 311,530 2013 2012 $ $ 5,358 7,541 5,594 1,539 2013 2012 $ $















					8,184,500 8,184,500 (810,469) (714,469)



					7,374,031 7,470,031

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.

Fully paid ordinary shares Balance at the beginning of the period Shares issued during the period and fully paid Share issue costs Ordinary fully paid shares at end of year						2013 2013 2012 2012 NUMBER $ NUMBER $

						44,380,555 7,470,031 26,150,000 4,141,076 - - 18,230,555 3,475,000 - (96,000) - (146,045)


						44,380,555 7,374,031 44,380,555 7,470,031

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

Issued capital (continued)
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

6. Reserves
Option reserve Opening balance Fair value of options issued to the reporting period Fair value of Performance Rights granted/due Balance at end of year			2013 2012 $ $

			240,513 192,000 96,000 - 35,212 48,513


			371,725 240,513

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

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).

Earnings per share

Basic earnings/(loss) per share Diluted earnings/(loss) per share		2013 CENTS PER SHARE 2012 CENTS PER SHARE
		(3.1) (4.40)
		(3.1) (4.40)

The following reflects the income and share data used in the calculations of the basic and diluted earnings per share:

Earnings reconciliation Net loss for the period Earnings used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used as the denominator in calculating basic and dilutive earnings per share		2013 2012 $ $ (1,376,816) (1,265,767) (1,376,816) (1,265,767)




		44,380,555 29,042,232

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:

$0.30 29 July 2011 unlisted options $0.30 30 April 2011 unlisted options $0.25 25 September 2012 unlisted options		2013 2012
		NUMBER NUMBER
		4,800,000 4,800,000 1,200,000 1,200,000 5,000,000 -

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

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.

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 MSW 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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

20. Notes to the statement of cash flows

a) Reconciliation of cash and cash equivalents

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:

Cash at bank and on hand		2013 2012
		$ $
		1,134,661 3,628,524

b) Reconciliation of loss for the period after income tax to cash flows used in operating Loss for the period Depreciation and amortisation of non-current assets Amounts set aside for provisions Equity settled share based payments Impairment of mineral properties Exploration expenditure expensed (Increase)/decrease in assets: Current receivables Prepayments Increase/(decrease) in liabilities: Current and non-current payables Net cash from operating activities	b) Reconciliation of loss for the period after income tax to cash flows used in operating Loss for the period Depreciation and amortisation of non-current assets Amounts set aside for provisions Equity settled share based payments Impairment of mineral properties Exploration expenditure expensed (Increase)/decrease in assets: Current receivables Prepayments Increase/(decrease) in liabilities: Current and non-current payables Net cash from operating activities	activities (1,376,816) (1,265,767) 15,207 18,449 1,870 9,080 35,212 48,513 18,102 327,076 6,050 - 18,600 21,089 (3,089) 5,263 (13,564) 60,709











		(1,298,428) (775,588)

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

21. Financial instruments (continued)

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.

2013 WEIGHTED AVERAGE EFFECTIVE INTEREST RATE %	FIXED MATURITY DATES VARIABLE INTEREST RATE LESS THAN 1 YEAR 1-2 YEARS 2-3 YEARS NON INTEREST BEARING TOTAL $ $ $ $ $ $
Financial assets Cash and cash equivalents 2.77% Trade and other receivables Loan to PNC AUS Pty Ltd 7.0% Financial liabilities Trade and other payables	1,080,530 40,000 - - 14,131 1,134,661 - - - - 45,070 45,070 - 707,639 - - - 707,639
	1,080,530 747,639 - - 59,201 1,887,370
	- - - - 113,392 113,392
	- - - - 113,392 113,392

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

Financial instruments (continued)

FIXED MATURITY DATES

	FIXED MATURITY DATES
2012 WEIGHTED AVERAGE EFFECTIVE INTEREST RATE %	VARIABLE INTEREST RATE LESS THAN 1 YEAR 1-2 YEARS 2-3 YEARS NON INTEREST BEARING TOTAL $ $ $ $ $ $
Financial assets Cash and cash equivalents 3.48% Trade and other receivables Financial liabilities Trade and other payables	3,552,111 40,000 - - 36,413 3,628,524 - - - - 71,307 71,307
	3,552,111 40,000 - - 107,720 3,699,831
	- - - - 311,530 311,530
	- - - - 311,530 311,530

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.

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2013

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:

Balance at beginning of the reporting period Granted during the financial year Expired during the financial year Balance at end of the reporting period		2013 2012 NUMBER OF OPTIONS NUMBER OF OPTIONS
		6,000,000 6,000,000 5,000,000 - - -
		11,000,000 6,000,000

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

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

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

	OPTION	OPTION	OPTION	OPTION
INPUTS INTO THE MODEL	SERIES	SERIES	SERIES	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%

Performance Rights

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

	Balance at beginning of the reporting period Granted during the financial year Converted during the financial year Balance at the end of theperiod		2013 NUMBER 2012 NUMBER
			700,000 - 350,000 1,000,000 - 300,000
			1,050,000 700,000

			FAIR VALUE AT
PERFORMANCE			GRANT
RIGHTS	NUMBER	GRANT DATE	DATE/VESTED
S Woodham	1,000,000	5 April 2012	$48,513
Consultants	350,000	21 Sept 2012	$8,345

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2013

Share based payments (continued)

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.

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.

			VESTING CONDITION –		DISCOUNT FOR
			CONVERTING PROVIDED THE	NO. OF TIMES THE	VESTING PRICE
			PRICE OF SHARES ON THE	VESTING PRICE IS	BARRIER APPLIED
		DEEMED SHARE	ASX IS ABOVE THE	GREATER THAN	TO FAIR VALUE
	NO. OF	PRICE 27	FOLLOWING PRICES AT THE	SHARE PRICE AS	BASED ON 27
PERFORMANCE	PERFORMANCE	JANUARY 2012	TIME OF THE	AT 27 JANUARY	JANUARY
RIGHT	RIGHTS	(CENTS)	CONVERSION (CENTS)	2012	2012 SHARE PRICE
Milestone 2	300,000	14	25	1.79	35%
Milestone 3	400,000	14	40	2.86	65%

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.

Based on the above assumptions (after discounting where appropriate for market based conditions) the values are as follows:

PERFORMANCE	27 JANUARY 2012 VALUE (CENTS) AFTER DISCOUNT
RIGHTS	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

iv) 350,000 Performance Rights, to convert if the Share price reaches 30 cents per Share, on or before 21 September 2015.

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.

Performance rights price inputs

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

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2013

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.

b) Key Management Personnel Compensation

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

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

Related party disclosures

a) Equity interests in related parties

Equity interests in associates and joint ventures

Nil.

b) Key management personnel shareholdings

Fully Paid Ordinary Shares

Fully Paid Ordinary Shares
					BALANCE
	BALANCE	PURCHASES	NET OTHER	BALANCE	HELD
2013	01 July 2012	/(SALES)	CHANGE	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
				BALANCE	BALANCE
	BALANCE	PURCHASES	NET OTHER	30 JUNE	HELD
2012	01 July 2011	/(SALES)	CHANGE	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

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

Related party disclosures (continued)

c) Key management personnel equity holdings

Share Options

											TOTAL
				NET	BALANCE	TOTAL			TOTAL		UN-
	BALANCE	OPTIONS	OPTIONS	CHANGE	30 JUNE	VESTED 30		EXERCISABLE		EXERCISABLE
2013	01 July 2012	GRANTED	EXERCISED	OTHER	2013	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		-
											TOTAL
				NET	BALANCE	TOTAL			TOTAL		UN-
	BALANCE	OPTIONS	OPTIONS	CHANGE	30 JUNE	VESTED 30		EXERCISABLE		EXERCISABLE
2012	01 July 2011	GRANTED	EXERCISED	OTHER	2012	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
Performance Rights
											TOTAL
				NET	BALANCE	TOTAL			TOTAL		UN-
	BALANCE	RIGHTS	RIGHTS	CHANGE	30 JUNE	VESTED 30		EXERCISABLE		EXERCISABLE
2013	01 July 2012	GRANTED	EXERCISED	OTHER	2013	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

											TOTAL
				NET	BALANCE	TOTAL			TOTAL		UN-
	BALANCE	RIGHTS	RIGHTS	CHANGE	30 JUNE	VESTED 30		EXERCISABLE		EXERCISABLE
2012	01 July 2011	GRANTED	EXERCISED	OTHER	2012	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		-

FINANCIAL STATEMENTS 30 JUNE 2013

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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

Remuneration of auditors

25. Remuneration of auditors
Remuneration of the auditor for the Group for: Audit or review of the financial report Remuneration of the auditor for other services: Review of Pro-forma Balance Sheet for the S708 Cleansing Prospectus Total		2013 2012
		$ $

		50,915 35,000 - 1,750



		50,915 36,750

The auditor of the Group is Grant Thornton Audit Pty Ltd.

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.

Purchase consideration Cash consideration (deposit) Cash consideration Cash consideration – reimbursement for Security deposits Total cash consideration Consideration in shares Total Acquisition cost	50,000 950,000 31,071
	1,031,071 1,000,000
	2,031,071

Assets acquired at acquisition date:

Assets acquired at acquisition date:
Receivables (security deposits) Mineral properties Total	62,142 1,968,929
	2,031,071

FINANCIAL STATEMENTS 30 JUNE 2013

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

27. Parent entity information

Information relating to Tellus Resources Ltd (‘the parent entity’).

Statement of Financial Position Current Assets Non-current assets Total Assets Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Statement of Profit or Loss and Comprehensive Income Loss for the year Total Comprehensive loss	2013 2012	2013 2012
		$ $
	1,901,072 3,710,444 2,839,453 2,567,951


	4,740,525 6,278,395
	118,750 319,071 5,594 1,539

	124,344 320,610
	4,616,181 5,957,785
	7,374,031 7,470,031 371,725 240,513 (3,129,575) (1,752,759)



	4,616,181 5,957,785
and Comprehensive Income	(1,376,816) (1,265,767)

	(1,376,816) (1,265,767)

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	Country of incorporation	Percentage owned
Premier Mining Pty Ltd	Australia	100%

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;

FINANCIAL STATEMENTS 30 JUNE 2013

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DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2013

Subsequent Events (continued)

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.

FINANCIAL STATEMENTS 30 JUNE 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

FINANCIAL STATEMENTS 30 JUNE 2013

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INDEPENDENT AUDIT REPORT

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FINANCIAL STATEMENTS 30 JUNE 2013

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FINANCIAL STATEMENTS 30 JUNE 2013

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FINANCIAL STATEMENTS 30 JUNE 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.
ii) 350,000 Performance Rights, to convert if the share price reaches 30 cents per Share, on or before 21 September 2015.

FINANCIAL STATEMENTS 30 JUNE 2013

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SUPPLEMENTARY INFORMATION

Distribution of holders equity security

Distribution of holders equity security
Fully Paid Ordinary Shares
HOLDING	NUMBER OF HOLDERS	TOTAL UNITS	PERCENTAGE %
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

Restricted Securities

Restricted Securities
		DATE ESCROW
CLASS	NUMBER	PERIOD ENDS
Fully paid ordinary shares	21,958,094	23 August 2014
Fully paid ordinary sharesvoluntarily restricted	18,041,906	23 August 2014
Fully paid ordinary sharesvoluntarily restricted	5,555,555	15 May 2014
Unlisted Performance Options*	45,000,000

*Subject to Carl Dorsch remaining employed as managing director of the Company

Substantial shareholder

	ORDINARY	SHARES
SHAREHOLDER
	NUMBER HELD	PERCENTAGE
CNP ENERGY PTY LTD	17,000,000	15.066
QOC FOUNDERS NOMINEES PTY LIMITED	7,598,239	6.743
PARAGON GROUP HOLDING LIMITED, ASIA PACIFIC MINING CAPITAL PTE LTD,
RICH PEAK ENTERPRISES LTD AND BEN SALMON	15,689,035	13.904

FINANCIAL STATEMENTS 30 JUNE 2013

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SUPPLEMENTARY INFORMATION

SUPPLEMENTARY INFORMATION
Top Twenty Shareholders
	ORDINARY SHARES
SHAREHOLDERS	NUMBER HELD PERCENTAGE
CNP ENERGY PTY LTD QOC FOUNDERS NOMINEES PTY LIMITED ASIA PACIFIC MINING CAPITAL PTE LTD PREMIER MINERALS LTD PARAGON GROUP HOLDING LIMITED MR ROBERT SIMEON LORD BEN CAMERON MELVILLE SALMON PARAGON GROUP HOLDING LIMITED ANTONOV HEAVY INDUSTRY & ENGINEERING CONSULTING LIMITED MR DANIEL BARRY MR ROBERT WELBORN MR JEREMY STEVEN MARPLE PANRON PTY LTD MR BARRY EDWARD VERINDER & MRS ANGELA RITA VERINDER VERINDER SUPER FUND A/C> ISCS HOLDINGS PTY LTD ALFA GROUP HOLDINGS LIMITED PETLIND PTY LTD BAINPRO NOMINEES PTY LIMITED DAYWAVE PTY LTD MR PAUL WILLIAM GRIFFIN MRS KRISTEN LOUISE LONG KIRIAKI PAPPAS PORT WILLUNGA SUPERANNUATION PTY LTD SPINITE PTY LIMITED TUSCANI INVESTMENTS PTY LIMITED TOTAL	17,000,000 15.066 7,598,239 6.743 5,787,573 5.129 5,555,555 4.923 4,508,000 3.995 2,710,809 2.402 2,352,941 2.085 2,309,249 2.047 2,004,445 1.776 2,004,445 1.776 2,004,445 1.776 1,764,706 1.564 1,764,706 1.564 1,764,706 1.564 1,700,000 1.507 1,288,000 1.441 1,259,070 1.116 1,237,059 1.096 1,176,471 1.073 1,176,471 1.043 1,176,471 1.043 1,176471 1.043 1,176,471 1.043 1,176,471 1.043 1,176,471 1.043
	72,849,245 64.901

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.

FINANCIAL STATEMENTS 30 JUNE 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

PROJECT	EL NUMBER	INTEREST	PROJECT	EL NUMBER	INTEREST
New South Wales, Australia
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%

Queensland, Australia

Chillagoe Gold Project

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

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
ML	5130	EPM	19607	EPM	19803	EPM	25253

South Australia, Australia

PEL 105 tenement in the Cooper Basin

FINANCIAL STATEMENTS 30 JUNE 2013

AI assistant

FIRSTWAVE CLOUD TECHNOLOGY LIMITED — Annual Report 2013

64905_rns_2013-09-22_b10ea263-9bbc-4ef8-b121-8be593684703.pdf

TELLUS RESOURCES LTD

CORPORATE DIRECTORY

ABN 35 144 733 595

Directors

Company Secretary

Registered Office and Principal Place of Business

Share Register

Securities Exchange Listing

Auditor

DIRECTORS’ REPORT

Directors

Anthony Wehby

Expertise and Experience

Other current directorships

YTC Resources Limited

Nil

Interest in shares and options

Carl Dorsch

Date of Appointment: 23 August 2013

Expertise and Experience

Other current directorships

Anglo Russian Energy Ltd

Former directorships in the last 3 years

Nil

DIRECTORS’ REPORT

Interest in shares and options

Stephen Woodham

Executive Director, (former Managing Director)

Nil

Interest in shares and options

DIRECTORS’ REPORT

Richard Willson

Other current directorships

Ben J Salmon RFD QC

Non-Executive Director

Other current directorships

Nil

DIRECTORS’ REPORT

Company Secretary

Anne Adaley

Principal Activities

Operating Results

Review of Operations

Corporate

Exploration

Chillagoe Gold Project, Qld

DIRECTORS’ REPORT

Review of Operations (continued)

Changes in the State of Affairs

Dividends

Events Subsequent To Reporting Date

DIRECTORS’ REPORT

Events Subsequent To Reporting Date (continued)

Likely Future Developments

Directors’ meetings

DIRECTORS’ REPORT

Share options

Performance Rights

DIRECTORS’ REPORT

Environmental Issues

Indemnities given and insurance premiums paid to auditors and officers

Non Audit Services

DIRECTORS’ REPORT

Remuneration report (Audited)

Principles used to determine the nature and amount of remuneration

DIRECTORS’ REPORT

Remuneration report (Audited Continued)

Details of remuneration

DIRECTORS’ REPORT

Remuneration report (Audited Continued)

Details of remuneration

DIRECTORS’ REPORT

Remuneration report (Audited Continued)

Service Agreements

Anthony Wehby

Non-Executive Chairman

Stephen Woodham

FIRSTWAVE CLOUD TECHNOLOGY LIMITED Annual Report 2013