HAWSONS IRON LTD - Annual Report 2013

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ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED 30 JUNE 2013

Annual Financial Report 30 June 2013

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CORPORATE DIRECTORY

Board of Directors

Nick Sheard Non-Executive Chairman Quentin Hill Managing Director Bin Cai Non-Executive Director Paul Cholakos Non-Executive Director Bob Hair Non-Executive Director Dr Neil Williams Non-Executive Director

Company Secretary

Chris Powell

Registered Office Solicitors Level 6 HWL Ebsworth 345 Ann Street Level 23, Riverside Centre, Brisbane Qld 4000 123 Eagle Street Brisbane Qld 4000 PO Box 10919 Adelaide Street Brisbane QLD 4000 Telephone: +61 7 3220 2022 Facsimile : +61 7 3220 1291 Email: [email protected] Website: www.carpentariaex.com.au

Auditors Share Registry BDO Audit Pty Ltd Link Market Services Limited Level 10, 12 Creek Street Level 19 Brisbane QLD 4000 324 Queen Street Brisbane QLD 4000 Telephone: 07 3237 5999 Fax: 07 3221 9227 Telephone: 1300 554 474 Website: www.bdo.com.au Facsimile: 02 9287 0303 Website: www.linkmarketservices.com.au

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DIRECTORS' REPORT

Your directors present their report on Carpentaria Exploration Limited for the year ended 30 June 2013.

DIRECTORS

The names and details of the Directors of Carpentaria Exploration Limited (Carpentaria) in office at the date of this report or at any time during the financial year are:

Name	Position	Period of directorship
Stuart Nicholas Sheard	Non-Executive Chairman	Appointed March 2007
Quentin Hill	Managing Director	Appointed 1 September 2013
Bin Cai	Non-Executive Director	Appointed May 2011
Paul Cholakos	Non-Executive Director	Appointed 2 April 2012
Robert William Hair	Non-Executive Director	Appointed August 2007
Dr Neil Williams	Non-Executive Director	Appointed 1 January 2012

Nick Sheard FAIG, R.P. GEO,ASEG

Chairman

Nick has over 39 years of experience in the industry – most recently Vice President-Exploration for Inco Limited, formerly the world's second largest producer of nickel. Prior to that, he was the Global Exploration Manager for MIM Holdings Limited, after being initially employed by MIM as Chief Geophysicist.

Nick helped develop the novel MIMDAS electrical survey system currently being used commercially as a deep seeking quality EM and IP system. He is a member of Australian Society of Exploration Geophysicists (ASEG) and Australian Institute of Geoscientists (AIG) and is a Registered Professional Geoscientist – Mineral Exploration and Geophysics.

Effective 1 September 2013, Nick has relinquished his role as Executive Chairman of Carpentaria and will now be a Non-Executive Director and continue as Chairman.

Nick is also a Non-Executive Director of ASX listed Mirabela Nickel Ltd (MBN appointed 2007). Otherwise, he has not been a director of a listed company in the last three years.

Quentin Hill Bachelor of Science (Geology) Managing Director

Quentin is a geologist with over 16 years’ experience in exploration and development in Australia. He has wide ranging commodity experience including gold, iron ore, coal and base metals. Quentin was Carpentaria’s Senior Geologist when the Company listed and was integral in the discovery of the 1.4Bt Hawsons Iron Project, where he also managed the successful resource drilling.

Prior to his 5 years with Carpentaria, Quentin held technical positions with major miners, including seven years with Delta Gold, and more recently with Vale’s coal division. He also held a senior role in the Queensland Government, where he implemented several exploration funding initiatives.

He is a member of the Australian Institute of Geoscientists and the Society of Economic Geologists.

Effective 1 September 2013, Quentin was appointed as Managing Director of the Company. Otherwise, he has not been a director of a listed company in the last three years.

Bob Hair BA (Hons)

Non-Executive Director

Bob is by background a lawyer (having been admitted as a barrister in Queensland in 1983) with over 24 years of experience in the resources sector. He was previously an in-house lawyer, director of subsidiary companies and Commercial Manager and General Manager in the MIM group in Australia, Asia, Europe, North America, South America, and GM Commercial for the ASX-listed Highlands Pacific Limited.

He is currently Managing Director of the ASX, JSE and AIM-listed Ferrum Crescent Limited (ASX,JSE,AIM:FCR, appointed July 2011). He is the Chairman of the Carpentaria Audit Committee and a member of the Carpentaria Remuneration Committee. Otherwise, he has not been a director of a listed company in the last three years.

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Bin Cai

Non-Executive Director

Appointed a Non-Executive Director in May 2011, Bin is Managing Director of Conglin International Investment Group Pty Ltd, a major shareholder of Carpentaria. With 19 years of experience in resources investment, Bin and the Conglin Group have an outstanding record of successful strategic investments in emerging Australian resources companies.

The Conglin Group has longstanding partnerships with major steel producers in China, having developed a successful coking coal and iron ore trading business in the Asian economic powerhouse.

Bin is currently a Director of the ASX listed Orion Metals Limited (ASX:ORM appointed July 2012), and Alternate Director for ASX listed Northern Minerals Limited (ASX:NTU appointed August 2013). Otherwise, he has not been a director of a listed company in the last three years.

Dr Neil Williams PSM BSc Hons (ANU) PhD (Yale) FTSE FAICD FAIM

Non-Executive Director

Recently retired as Chief Executive Officer of the Australian government’s geoscience agency, Geoscience Australia, Dr Williams has had a distinguished career spanning all aspects of mineral exploration, both in Australia and internationally, including serving as Chief Geologist for MIM. Dr Williams has won numerous Australian and international awards in his field. He has also had a distinguished academic career, currently serving as an Honorary Professorial Fellow at the University of Wollongong, as well as a number of other industry and management bodies including the Queensland Exploration Council.

He is also a Committee Member of the Carpentaria Audit Committee and the Remuneration Committee.

Dr Williams has not been a director of any other listed company in the 3 years prior to 30 June 2013.

Paul Cholakos Bachelor of Engineering (Mining), MBA Non-Executive Director

Paul has 26 years of resources industry experience, successfully managing complex development projects for leading oil and gas and diversified mining companies. He holds Master of Business Administration and Bachelor of Engineering degrees. Paul currently serves as Executive General Manager, Project Development of major Australian oil and gas company Oil Search Limited (ASX:OSH appointed early 2013).

He is also Chairman of the Carpentaria Remuneration Committee and a Committee Member of the Audit Committee.

Paul has not been a director of any other listed company in the last three years.

Interests in the shares and options of the Company

As at the date of this report, the interests of the Directors in the shares and options of Carpentaria Exploration Limited are shown in the table below:

		Non-Recourse
	Ordinary	Employee
Director	Shares	Shares	Options
Nick Sheard	2,225,000	1,500,000	-
Quentin Hill	410,000	1,500,000	300,000
Bob Hair	30,000	1,500,000	-
Bin Cai	10,479,0001	-	500,000
Neil Williams	-	-	500,000
Paul Cholakos	-	-	500,000

1 Held by Australian Conglin International Investment Group Pty Ltd of which Mr Bin Cai is managing director.

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SENIOR MANAGEMENT

The names and details of the Company’s key personnel during the financial year and until the date of this report are as follows.

Doug Brewster

Exploration Manager

Doug is a career minerals exploration geologist with over 26 years of Australian and international multi-commodity experience. He is an eastern Australia specialist and graduate of the University of Sydney.

Doug worked initially for CRAE (now Rio Tinto) and then in a senior role at Delta Gold (now Barrick), where he assisted rebuilding their eastern Australia exploration effort in the late 1990s. He subsequently operated as a successful mineral exploration consultant providing services to a number of major and junior mining companies, including Troy Resources, Inco (now Vale) and Toro Energy.

He is experienced in gold, base-metal massive sulphide, porphyry copper, iron-oxide copper-gold, iron ore, coal, uranium, diamond, clay and mineral sand exploration. Doug is a member of the Geological Society of Australia (GSA), Society of Economic Geologists (SEG), Society of Mining, Metallurgy and Exploration (SME) and the Australian Institute of Geoscientists (AIG).

Chris Powell

Company Secretary

Chris has over 35 years of experience across a number of industries in similar roles. He has a wealth of administration and financial knowledge gathered through employment in senior management roles in New Zealand and Australia. Chris holds a Diploma of Management and is a member of the Australian Institute of Management (FAIM).

CORPORATE INFORMATION

Corporate Structure

Carpentaria is a company limited by shares and incorporated and domiciled in Australia. Its shares are publicly traded on the Australian Securities Exchange (ASX). Carpentaria has prepared a consolidated financial report encompassing the entities that it controlled during the financial year.

NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES

The principal activity of the Consolidated Entity during the course of the financial year was mineral exploration.

Following listing on ASX on 17 November 2007, the Consolidated Entity has continued exploration activity on its projects in Queensland, New South Wales and South Australia.

There was no significant change in the nature of the activity of the Consolidated Entity during the year.

CURRENCY

The financial report is presented in Australian dollars and amounts are rounded to the nearest dollar.

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OPERATING RESULTS

Commentary and Comparison with Prior Year

For the year ended 30 June 2013, the loss for the Consolidated Entity after providing for income tax was $1,821,480 (2012: profit of $197,017):

	2013	2012
	$	$
Revenue	174,178	445,951
Other income	-	2,943,098
Fair value loss on financial assets at fair value through profit or loss	(755,695)	(1,309,420)
Employment benefit expenses	(1,184,133)	(1,138,885)
Depreciation and amortisation expense	(101,864)	(96,043)
Finance costs	(14,113)	(19,748)
Impairment of exploration expenditure	-	(4,746)
Impairment of receivables	-	(132,662)
Rental and other lease expenses	(176,940)	(151,593)
Legal expenses	(848,023)	(187,052)
Project generation expenses	(296,591)	(137,308)
Administration expenses	(719,630)	(739,575)
Profit/(loss) before income tax	(3,922,811)	(527,983)
Research and development income tax refund	2,101,331	725,000
Profit/(loss) after income tax expense	(1,821,480)	197,017

Impairment of receivables in 2012 relates to write off of amounts owed by Bonython Metal Group Pty Ltd (BMG) during the 2012 financial year. This impairment can be regarded as a one-off item to the extent it will not be incurred in future periods unless additional receivables are impaired.

Other income relates to the Consolidated Entity’s sale of the Hughenden coal assets to Guilford Coal (GUF) during the 2012 financial year. This income can be regarded as a one-off item to the extent it will not be received in future periods unless additional prospects are sold.

Excluding the impact of other income and impairment of receivables , which is not recurring in nature or comparable, the loss for the 2013 financial year is approximately $0.79M less than the adjusted loss of 2012.

This decrease is attributable to:

This decrease is attributable to:
	$M
Reduced interest income resulting from falling interest rates and lower cash holdings	(0.27)
Decrease in loss of value of GUF shares	0.55
Other increases in administrative and employee costs	(0.87)
Increase in research and development income tax refund	1.38
	0.79

$0.66M of the increase in administrative costs in 2013 is attributable to legal costs related to the Hawsons Iron Project.

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Cash Position

The Consolidated Entity’s cash position decreased from year end 2012 by $2,201,542 as a result of:

“corporate activity” relating to requisitioned meetings, dealings with the liquidators of our previous JV partner in the Hawsons Iron Project, BMG (in liquidation) and establishing new joint venture agreements, for the way forward.
Meeting statutory exploration expenditure including, adding value with the continuing progress of our major iron ore project at Hawsons.

The effects of the additional costs were offset with an income tax refund relating to the Research & Development program at the Tin/Tungsten project in NSW.

Business Strategies and Prospects For Future Financial Years

The new joint venture partner, Pure Metals Pty Ltd, has a 40% share of the Hawsons Iron Project and must pay Carpentaria $2.8 million in September 2013 and also sole fund a $5.0 million work program within the next twelve months ending May 2014.

Pure Metals Pty Ltd assumed management of the project to advance critical components of a bankable feasibility study (BFS), including test drilling of the proposed project water supply, continuing detailed studies for the environmental impact study (EIS), preparation of a Mining Lease Application and modelling of a 10 Mtpa production case utilising existing infrastructure to significantly reduce capital requirements. Work on the project is being undertaken in accordance with the program and budget as agreed by the JV partners. The JV Management Committee has regular meetings to ensure that the timeframe for all deliverable work programs deadlines is met and to ensure that the financial commitments are on time and on budget.

The Consolidated Entity’s budgeted exploration expenditure on currently held tenements for the coming 12 months ending 30 June 2014 is $2.2m. This encapsulates a philosophy of having critical decision points in all exploration programs to quickly assess any work undertaken and decide whether to continue or not. This will ensure the exploration dollar is focused and targeted in the right direction.
A continuing program of identifying and implementing cost reductions where possible.

This strategy should result in the Consolidated Entity’s maintaining a strong financial position in future years.

REVIEW OF FINANCIAL POSITION

Capital structure

At 30 June 2013 the Company had 107,991,301 (including 8,700,000 non-recourse employee shares) shares and 4,100,000 options on issue.

Treasury policy

The Board controls the funds, which are handled on a day to day basis by the Company Secretary.

Liquidity and funding

Cash includes cash on hand and at call and term deposits with banks readily convertible to cash and is used in the cash management function on a day to day basis.

Dividends

No dividends were paid during the financial year ended 30 June 2013 (2012: nil) and no dividend is recommended for the current year.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There was no matter or circumstance during the financial year that has significantly affected the state of affairs of the Group.

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REVIEW OF OPERATIONS

Exploration

During the year Carpentaria finalised a joint venture with Pure Metals over its Hawsons Iron Project (HIP), and the bankable feasibility study (BFS) was started. The tungsten resource (JORC 2004) at Yanco Glen was increased following completion of drilling during the previous year. At the Braemar Iron Project JV a 500 m drilling program was completed with encouraging results.

Project generation and exploration continued in Carpentaria’s geographical focus of eastern Australia, and three promising gold projects with outcropping mineralisation located in the Lachlan and New England Fold Belts within central and eastern New South Wales were secured at no cost to shareholders.

Hawsons Iron Project

Following submission by Carpentaria of the Preliminary Environmental Assessment (PEA) in August 2012, the NSW Government issued the Director General’s Requirements (DGRs) for an environmental impact statement (EIS). This led to the declaration of the HIP as a ‘State Significant Development’, a first step towards the granting of a mining lease over the deposit.

A memorandum of understanding (MoU) was signed with rail provider Genesee & Wyoming Australia Pty Ltd (GWA) for the transport to Port Pirie of 5 Mtpa of magnetite concentrate with possible expansion to 20 Mtpa.

Throughout the year, very positive results were obtained from mineral processing test-work. In December, small-scale pilot plant test results confirmed assumptions in the conceptual processing flow sheet and demonstrated that a highquality iron concentrate can be produced at low cost from the Hawsons mineralisation. This test-work was developed to maximise the unique character of the Hawsons mineralisation. The test-work included crushing, grinding and magnetic separation and returned a high quality concentrate grade of 69.5% Fe and 3.1% SiO2.

In June, test-work completed by Outotec, a leading international minerals processing company, demonstrated that the project’s prefeasibility water requirement estimate can be reduced by over 30%, potentially reducing capital and operating costs of the tailings and water reclamation facility. Work by Outotec also confirmed the potential to upgrade the concentrate significantly through the use of low-cost hydro-separators, which could eliminate the need for more expensive Isa milling in the circuit.

Commercially, a 40% share of the project was transferred from BMG (in liquidation) to Pure Metals. In May 2013, after two years with the liquidators, Pure Metals acquired a 40% share in the old BMG joint venture and subsequently a new joint venture with Pure Metals was finalised. Under this agreement Pure Metals has a 40% share of the Hawsons Iron Project and must pay Carpentaria $3.8 million and sole fund a $5.0 million work program within the next twelve months ending June 2014. At the end of the 2012/2013 financial year, Pure Metals assumed management of the project and will continue to advance critical components of a BFS, including test drilling of the proposed project water supply, continuing detailed studies for the EIS, preparation of a Mining Lease Application and modelling of a 10 Mtpa production case utilising existing infrastructure to significantly reduce capital requirements.

Broken Hill Tin, Tungsten Project

At EL7829, Yanco Glen, detailed interpretation and analysis of the previous year’s work by the independent geological consultants H&S Consultants (formerly Hellman and Schofield Pty Ltd) resulted in estimation of a new Inferred Resource of 3.4 Mt at 0.11% WO3, at 0.05% WO3 cut-off, containing 3,950 t WO3 (JORC 2004) Further investigations, including metallurgical test-work to determine the economic potential of the project, are ongoing.

At EL7921, Kantappa, geological mapping and rock channel sampling of tin-bearing pegmatites in the environs of the historic Kantappa Tin Mine indicated that mineralisation in this area was narrow and discontinuous.

At EL7957, Corona, results were more positive. At the Anaconda Prospect, work included 30 one-metre rock channel samples and a 269 sample soil geochemistry survey. The channel sampling was encouraging, with maximum values of 143 ppb gold, 5 g/t silver and 160 ppm copper. The soil survey returned anomalous results along its western edge, with maximum values of 35 ppb gold, 228 ppm copper and 42 ppm nickel.

– Braemar JV (SA EL 5181)

Following interpretation of ground magnetic data collected during the previous year, a three hole, 500 m reverse circulation (RC) drilling program was completed to test the grade and extent of two high amplitude magnetic targets. All three holes intersected magnetite-bearing siltstones broadly similar to those occurring at the Hawsons Iron Project. Laboratory Davis Tube results were encouraging and indicate that mass recoveries are high relative to other Braemar Iron Formation results. Petrographic observation shows the magnetite at Braemar is finer-grained and of a lower metamorphic grade than mineralisation at Hawsons. This indicates that Braemar ore would require different processing

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from that being designed for Hawsons. Drilling results included 106 m at 26.5% Davis Tube mass recovery with 62.7% Fe in concentrate.

– South Dam (SA EL 4395)

In February 2013, Carpentaria regained 100% control of the licence, which abuts the Braemar JV, from the liquidators of BMG who were the previous JV partner. Geophysical interpretation along 6 km of the highest intensity portion of the magnetic anomaly indicates a potential thickness of the Braemar Iron Formation of 160 to 230 m. Depth to unoxidised ironstone is estimated to in the order of 100 m vertical.

Barellan

This licence, EL 7896, was granted this year at no material cost to shareholders and is very promising for intrusion related gold deposits, with encouraging historical results at surface. A land access agreement for a key part of the licence was completed, and following review of data a program has been designed to follow up historical results and prospect other parts of the licence.

Advene

The Advene licence, EL8095, was granted on 28 May 2013 at no material cost to shareholders. Landholder access agreements for the bulk of the EL have been completed. An initial field visit located the historical mineral occurrences known as the Mt Wilga and Josephine Moulder Mines and several other unrecorded mineral occurrences. The licence is underexplored and exploration can advance rapidly. Some 50 rock and stream sediment samples have been collected for gold and base metal analysis. Results are awaited at the time of writing. The geology of the project indicates that it is promising for the recently recognised intrusion related gold style that has been little explored for within the Lachlan Fold Belt.

Tooloom

The Tooloom licence, EL8082, was granted on 1 May 2013 at no material cost to shareholders. Processing of magnetic, gravity and radiometric data from open-source airborne surveys, together with review of historical exploration data, has identified the Isabella Prospect as having potential for intrusion-related breccia system similar to the nearby Phoenix breccia pipe. Exploration will commence at Tooloom in the next year.

Koonenberry Nickel Project

Rehabilitation of previous exploration work was completed. Exploration results were reviewed to identify the most prospective ground within the six licences forming the project area. As a result, a total of 452 units of the original 600 units comprising the project area were relinquished, and the Company is exploring farm out and divestment options.

Temora Gold Project

Delays obtaining access for exploration on Crown Land administered by the NSW Department of Lands continue to frustrate planned drilling at the Mother Shipton gold prospect. Mother Shipton is a high priority drilling target in this licence, and Carpentaria will be attempting to finalise access to this prospect during the next year. During the year a 50% reduction was made to EL7680, Ilabo.

McDougalls/Torrowangee Iron Project

Results were obtained for an RC hole drilled in the previous year. Although that hole was abandoned at 39 m due to excessive water, the bottom 7 m intersected highly magnetic, quartz-magnetite gneiss. Davis Tube Recovery (DTR) results returned average mass recoveries of 30% magnetite and concentrates with an average of 70% iron, <1% silica and low aluminium, phosphorus and sulphur for all grind sizes. The project is currently under review to determine future action.

Mt Agate JV

Results were obtained for a seven hole, 1,231 m RC drilling program conducted the previous year by Carpentaria’s JV partner ActivEX Ltd. ActivEX reported that all holes intersected varying hematite altered and brecciated granite with disseminated chalcopyrite, molybdenite and rare earth elements with pyrite and hematite, typical of some of the more significant Mt Isa Eastern Fold Belt intrusion related mineral deposits. Work is ongoing.

Glen Isla Project

During the year a 50% reduction was made to EL7574, Gundong. Desktop reviews of past exploration results from the two licences forming this project have been conducted with a view to divestment.

Competent Person Statement: The information in this report that relates to Exploration Results is based on information compiled by Mr Nick Sheard, who is a Fellow of the Australian Institute of Geoscientists and is a Registered Professional Geoscientist -Mineral Exploration and Geophysics. Mr Sheard is a full time employee of Carpentaria Exploration Limited and Mr Sheard has sufficient expertise which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Sheard consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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ENVIRONMENTAL REGULATION AND PERFORMANCE

The Company’s operations are subject to environmental regulations in relation to its exploration activities. The directors are not aware of any significant breaches during the period covered by this report.

MEETINGS OF DIRECTORS

The following table sets out the number of meetings of the Company’s directors and of the Audit and the Remuneration Committees held during the year ended 30 June 2013 and the number of meetings attended by each director.

Nick Sheard Bob Hair Bin Cai Neil Williams Paul Cholakos	Directors’ Meetings Audit Remuneration
	Attended Eligible to Attend Attended Eligible to Attend Attended Eligible to Attend 12 12 - - - - 12 12 2 2 1 1 4 12 - - - - 12 12 1 2 1 1 10 12 1 2 - 1

INDEMNIFICATION OF OFFICERS OR AUDITOR

Each of the directors and the secretary of the Company has entered into a Deed with the Company whereby the Company has provided certain contractual rights of access to books and records of the Company and certain indemnification to those directors and secretary.

The Company has insured all of the directors of Carpentaria Exploration Limited. The contract of insurance prohibits the disclosure of the nature of the liabilities covered and amount of the premium paid. The Corporations Act 2001 does not require disclosure of the information in these circumstances.

During the financial year, Carpentaria paid a premium of $10,398 to insure the directors and secretary of the Company and its Australian-based controlled entities.

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 entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wrongful act by the officers. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

The Company has not indemnified its auditor.

PROCEEDINGS ON BEHALF OF THE COMPANY

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

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SHARE OPTIONS

As at the date of this report there was a total of 4,100,000 ordinary shares of Carpentaria Exploration Limited under options:

Number of Options	Exercise Price	Vesting Date	Expiry Date
2,600,000	$0.290	16 December 2011	15 December 2014
1,500,000	$0.440	30 November 2012	29 November 2015

No option holder has any right under the options to participate in any other share issue of the Company or any other entity.

Details of options issued, exercised and expired during the financial year are set out below:

	Movements
Expiry Date Exercise Price	1 July 2012 Issued Exercised Expired 30 June 2013
31 July 2012 $0.114 26 November 2012 $0.150 16 February 2013 $0.250 2 March 2013 $0.850 15 December 2014 $0.290 29 November 2015 $0.440	700,000 - (700,000) - - 2,000,000 - (2,000,000) - - 600,000 - - (600,000) - 1,300,000 - - (1,300,000) - 2,700,000 - (100,000) - 2,600,000 - 1,500,000 - - 1,500,000
	7,300,000 1,500,000 (2,800,000) (1,900,000) 4,100,000

2,800,000 ordinary shares of Carpentaria Exploration Limited were issued during the year on exercise of options granted. No amounts remain unpaid on these shares.

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REMUNERATION REPORT - AUDITED

This report outlines the remuneration arrangements in place for the directors and key management personnel of Carpentaria Exploration Limited (the Company).

Remuneration Policy

The performance of the Company depends upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives.

The Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the directors and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash, equity and fringe benefits. It is intended that the manner of payments chosen will be optimal for the recipient without creating undue cost for the Company. Further details on the remuneration of directors and executives are set out in this Remuneration Report.

The Company aims to reward the executive directors and key management personnel with a level and mix of remuneration commensurate with their position and responsibilities within the Company. The Board’s policy is to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering long-term incentives.

In accordance with best practice corporate governance, the structure of non-executive director and executive director and key management personnel remuneration is separate and distinct except that non-executive directors, as well as executives, participate in incentives involving the issue to them of securities in the Company.

Non-Executive Director Remuneration

The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

The Company’s specific policy for determining the nature and amount of emoluments of board members of the Company is as follows:

In accordance with the Constitution, the existing shareholders of the Company have determined in general meeting the maximum non-executive director remuneration to be $220,000 per annum. This limit excludes the value of equity instruments provided to non-executive directors.

The directors have resolved that each non-executive director is entitled to receive fees of $40,000 per annum (plus superannuation) and the Chairman of Directors is entitled to receive $60,000 per annum (plus superannuation). Payments of fees will be in addition to any payments to directors in any employment capacity. A director will not be entitled to receive directors’ fees if he or she is employed by the Company in a full-time executive capacity.

A director may also be paid fees or other amounts as the directors determine if a director performs special duties or otherwise performs services outside the scope of the ordinary duties of a director. A director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties.

The remuneration of non-executive directors for the year ended 30 June 2013 is detailed in Table 1 of this Remuneration Report.

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REMUNERATION REPORT (continued)

Executive Chairman and Key Management Personnel Remuneration

reward executives for Company and individual performance against targets set by reference to appropriate benchmarks;
align the interests of executives with those of shareholders;
link reward with the strategic goals and performance of the Company; and
ensure total remuneration is competitive by market standards.

The remuneration of the Executive Chairman and key management personnel for the period ended 30 June 2013 is detailed in Tables 1 and 2 and details of options issued are set out in Table 3.

Employment Contracts

Agreement with Executive Chairman

On 17 August 2007, the Company and Mr Nick Sheard entered into an agreement containing the terms and conditions under which he will provide his services as chief executive officer of the Company. The agreement came into effect upon the Company’s listing on the Australian Securities Exchange, which occurred on 14 November 2007.

The agreement:

was extended to 30 September 2013;
provides for an annual salary of $230,000 plus 9 % superannuation and reimbursement of all reasonable business expenses;
contains provision for three months' notice for termination. The Company may terminate this employment agreement by providing 12 months written notice or providing payment in lieu of the notice period (being $230,000, based on the fixed component of Mr Sheard's remuneration); and
otherwise contains standard terms relating to confidentiality, conflicts of interest and representations and warranties.

Effective 1 September 2013, Nick has relinquished his role as Executive Chairman of Carpentaria and will now be a Non-Executive Director and continue as Chairman.

Agreement with Managing Director

Effective 1 September 2013, Mr. Quentin Hill was appointed as Managing Director of the Company under the following terms and conditions:

annual salary of $240,000 plus 9.25% superannuation payments and reimbursement of all reasonable business expenses;
entitled to participate in a performance bonus on terms determined by the Board (in consultation with the Executive) from time to time;
entitled to receive such shares and/or options to acquire shares on terms and conditions (including price) as determined by the Board in its absolute discretion from time to time;
provision for three months' notice for termination; (being $60,000, based on the fixed component of remuneration) and
standard terms relating to leave, confidentiality, conflicts of interest and representations and warranties.

Prior to 1 September 2013, Mr. Quentin Hill was employed as Principal Geologist New Business under the following terms and conditions:

Annual salary of $202,500 plus 9% superannuation payments and reimbursement of all reasonable business expenses;
provision for one month’s notice for termination. The Company may terminate this employment agreement by providing one month’s written notice and providing payment in lieu of the notice period (being $16,250 - one month’s salary); and
otherwise contains standard terms relating to confidentiality, conflicts of interest and representations and warranties.

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REMUNERATION REPORT (continued)

Agreement with Company Secretary

On 1 June 2007, the Company and Mr. Chris Powell entered into an agreement containing the terms and conditions under which the services of Company Secretary are provided to the Company. The agreement came into effect upon the Company’s listing on the Australian Securities Exchange, which occurred on 14 November 2007.

The agreement:

currently extended to 30 September 2013;
involves the payment to Mr. Powell of an annual salary of $160,000 plus 9% superannuation payments and reimbursement of all reasonable business expenses;
has provision for two months' notice for termination; (being $25,291, based on the fixed component of Mr Powell's remuneration); and
otherwise contains standard terms relating to leave, confidentiality, conflicts of interest and representations and warranties.

Agreement with Exploration Manager

On 9 August 2007, the Company and Mr Doug Brewster entered into an agreement containing the terms and conditions under which the services of Exploration Manager are provided to the Company. The agreement came into effect upon the Company’s listing on the Australian Securities Exchange, which occurred on 14 November 2007.

The agreement:

currently extended to 30 September 2013;
annual salary of $212,125 plus 9% superannuation and reimbursement of all reasonable business expenses;
three months' notice for termination. The Company may terminate this employment agreement by providing three months’ written notice and providing payment in lieu of the notice period (being $53,031, three months' salary based on the fixed component of Mr Brewster's remuneration); and
otherwise contains standard terms relating to confidentiality, conflicts of interest and representations and warranties.

Details of Directors and Key Management Personnel

Directors

Name	Position	Detail
Stuart Nicholas Sheard1	Non-Executive Chairman	Appointed March 2007
Quentin Hill1	Managing Director	Appointed 1 September 2013
Robert William Hair	Non-Executive Director	Appointed August 2007
Bin Cai	Non-Executive Director	Appointed May 2011
Dr Neil Williams	Non-Executive Director	Appointed 1 January 2012
Paul Cholakos	Non-Executive Director	Appointed 2 April 2012

1 Mr Sheard retired from his Executive Chairman role on 1 September 2013 and remains a director in his new role of Non-Executive Chairman. Mr Hill was appointed Managing Director on 1 September 2013.

Key Management Personnel

Name	Position	Detail
Doug Brewster	Exploration Manager	Commenced 9 August 2007
Quentin Hill1	Principal Geologist New Business/ Project Development Manager	Classified as key management from 1 July 2011 following promotion to Project Development Manager
Chris Powell	Company Secretary	Commenced 1 June 2007

Key management personnel are those directly accountable and responsible for the operational management and strategic direction of the Company and the consolidated entity.

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REMUNERATION REPORT (continued)

Table 1: Director Remuneration

Table 1: Director	Remuneration
2013	Short Term Post- Employm ent Long- term benefits Share-based Payments (1) Salary & Fees Cash Bonus Non- cash benefits Superan nuation Long service leave Options/ NRE shares Total Performance Related % % consisting of options
$ Directors Nick Sheard Robert Hair Bin Cai Neil Williams Paul Cholakos	$ $ $ $ $ $ 230,000 30,0002 - 20,700 - - 280,700 10.69% - 40,000 - - 3,600 - - 43,600 - - 40,000 - - 3,600 - 37,350 80,950 - 46.14% 40,000 - - 3,600 - 37,350 80,950 - 46.14% 40,000 - - 3,600 - 37,350 80,950 - 46.14% 390,000 30,000 - 35,100 - 112,050 567,150

(1) The value of equity instruments granted in the year is the fair value of the options and employee share plan calculated at grant date using a Black-Scholes option-pricing model. The value of instruments granted and treated as an expense is the proportionate cost incurred in the current year in accordance with AASB2 Share Based Payment.

(2) Discretionary bonus granted on 28 June 2013 in recognition of commencement of BFS. 100% of the bonus vested in the 2013 financial year and will be paid in the 2014 financial year.

financial year.
2012	Short Term Post- Employ ment Long- term benefits Share-based Payments (5) Salary & Fees Cash Bonus Non- cash benefits Superan nuation Long service leave Options/ NRE shares Total Performance Related % % consisting of options
$ Directors Nick Sheard Robert Hair Bin Cai Neil Williams(1) Paul Cholakos(2) Mike Chester(3) Stan Macdonald(4)	$ $ $ $ $ $ 230,000 - - 18,000 - - 248,000 - - 40,000 - - 3,600 - - 43,600 - - 40,000 - - 3,600 - - 43,600 - - 20,000 - - 1,800 - - 21,800 - - 10,000 - - 900 - - 10,900 - - 6,667 - - 600 - - 7,267 - - 23,333 - - 2,100 - - 25,433 - - 370,000 - - 30,600 - - 400,600

(1) Neil Williams was appointed on 1 January 2012

(2) Paul Cholakos was appointed on 2 April 2012

(3) Mike Chester resigned on 8 August 2011

(4) Stan Macdonald resigned on 3 February 2012

(5) The value of equity instruments granted in the year is the fair value of the options and employee share plan calculated at grant date using a Black-Scholes option-pricing model. The value of instruments granted and treated as an expense is the proportionate cost incurred in the current year in accordance with AASB2 Share Based Payment.

Table 2: Remuneration of key management personnel

2013	Short Term Post- Employ ment Long- term benefits Share-based Payments (1) Salary & Fees Cash Bonus2 Non- cash benefits Superan nuation Long service leave Options/ NRE shares Total Performance Related % % consisting of options
$ $ $ $ $ $ $ Key Management Personnel Doug Brewster 212,125 20,000 - 19,091 - - 251,216 7.96% - Quentin Hill 202,500 20,000 - 18,225 - - 240,725 8.31% - Chris Powell 160,000 20,000 - 14,214 - - 194,214 10.30% - 574,625 60,000 - 51,530 - - 686,155

(1) The value of equity instruments granted in the year is the fair value of the options and employee share plan calculated at grant date using a Black-Scholes option-pricing model. The value of instruments granted is treated as an expense is the proportionate cost incurred in the current year in accordance with AASB2 Share Based Payments.

(2) Discretionary bonus granted on 28 June 2013 in recognition of commencement of BFS. 100% of the bonus vested in the 2013 financial year and will be paid in the 2014 financial year.

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REMUNERATION REPORT (continued)

2012	Short Term Post- Employ ment Long- term benefits Share-based Payments (1) Salary & Fees Cash Bonus Non- cash benefits Superan nuation Long service leave Options/ NRE shares Total Performance Related % % consisting of options
$ $ $ $ $ $ $ Key Management Personnel Doug Brewster 212,125 - - 19,091 - 21,480 252,696 - 8.50% Quentin Hill 195,000 - - 17,550 - 21,480 234,030 - 9.18% Chris Powell 151,750 - - 13,658 - 21,480 186,888 - 11.49% 558,875 - - 50,299 - 64,440 673,614

(1) The value of equity instruments granted in the year is the fair value of the options and employee share plan calculated at grant date using a Black-Scholes option-pricing model. The value of instruments granted is treated as an expense is the proportionate cost incurred in the current year in accordance with AASB2 Share Based Payments.

No termination benefits have been paid or accrued for any director or key management personnel in the year ended 30 June 2013 (2012:nil).

Table 3: Equity Instruments issued as part of remuneration for the year ended 30 June 2013

Options

All options are issued by Carpentaria Exploration Limited for nil consideration. All options vest on issue and therefore hold no vesting conditions. The number and terms of the options issued are as follows:

		No. of	Option
		Options	fair value	Exercise	Total		Vesting and
		granted	at grant	price per	value of		First	% of	% of
		and	date	option	options	Expiry	exercise	options	options
	Grant date	vested	$	$	$	date	date	vested	forfeited
Key Management Personnel
Bin Cai	30/11/2012	500,000	0.0747	0.440	37,350	29/11/2015	30/11/2012	100%	0%
Neil Williams	30/11/2012	500,000	0.0747	0.440	37,350	29/11/2015	30/11/2012	100%	0%
Paul Cholakos	30/11/2012	500,000	0.0747	0.440	37,350	29/11/2015	30/11/2012	100%	0%

The value of options granted in the year is the fair value of the options calculated at grant date using a Black-Scholes option-pricing model. The total value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period. The model takes into account the following factors:

Inputs into pricing model
Grant date Vesting date Exercise price Share price at grant date Life of the options Underlying share price volatility Expected dividends Risk free interest rate	30 November 2012 30 November 2012 $0.440 $0.21 3 years 80% Nil 3.25%

These options have no further service or performance conditions attached and will not affect future years’ remuneration.

The options issued formed part of the standard remuneration of each key management personnel and as such were not dependent upon a performance condition.

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REMUNERATION REPORT (continued)

Table 4: Equity instruments (including options and NRE shares) granted as part of remuneration

	Value of equity	Value of equity	Value of equity
	instruments granted	instruments exercised	instruments lapsed
2013	during the year $	during the year $ 1	during the year $
Directors
Nick Sheard	-	140,000	-
Bin Cai	37,350	-	-
Neil Williams	37,350	-	-
Paul Cholakos	37,350	-	-
Key Management Personnel
Doug Brewster	-	60,250	-
Quentin Hill	-	-	-
Chris Powell	-	24,100	-

1 The value at the exercise date of options that were granted as part of remuneration and were exercised during the year has been determined as the intrinsic value of the options at that date.

Shares issued on exercise of remuneration options

Details of ordinary shares in the Company provided as a result of the exercise of remuneration options to each director of Carpentaria Exploration Limited and other key management personnel of the group are set out below.

		Number of ordinary	Amount paid per
Name	Date of exercise of option	shares issued on exercise of options	ordinary share $
		during theyear
Directors
Nick Sheard	26 November 2012	2,000,000	0.15
Key Management Personnel
Doug Brewster	27 July 2012	250,000	0.114
Chris Powell	27 July 2012	100,000	0.114

No amounts are unpaid on any shares issued on the exercise of options.

Relationship between remuneration and Company performance

The factors that are considered to affect shareholder return during the last 5 years are summarised below:

	2013	2012	2011	2010	2009
Measures	$	$	$	$	$
Share price at end of financial year	0.205	0.350	0.310	0.340	0.080
Market capitalisation at end of financial year ($M)	22.14	36.81	32.47	24.70	5.40
Profit/(loss) for the financial year	(1,821,480)	197,017	(3,407,685)	1,565,849	(1,477,436)
Cash spend on exploration programs	3,622,822	3,768,081	1,398,629	1,827,615	1,370,053
Director and Key Management Personnel remuneration	1,253,305	1,074,214	2,095,828	897,281	641,914

Given that the remuneration is commercially reasonable, the link between remuneration, Company performance and shareholder wealth generation is tenuous, particularly in the exploration and development stage of a minerals company. Share prices are subject to the influence of international metal prices and market sentiment towards the sector, and increases or decreases may occur independently of executive performance or remuneration.

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REMUNERATION REPORT (continued)

The Company may issue options to provide an incentive for key management personnel which, it is believed, is in line with industry standards and practice and is also believed to align the interests of key management personnel with those of the Company’s shareholders.

No remuneration consultants were used in the 2013 financial year.

Equity instruments issued as part of remuneration

Equity instruments are issued to directors and executives as part of their remuneration. The equity instruments are not issued solely on performance criteria, but are also issued to all directors and executives of Carpentaria Exploration Limited to increase executive retention and goal congruence between executives, directors and shareholders.

End of Remuneration Report

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NON-AUDIT SERVICES

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the Group are important. Details of the amounts paid or payable to the auditor (BDO Audit Pty Ltd) for non-audit services provided during the year are set out below.

The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor
none of the services undermines the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

During the year, the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms:

Taxation services $22,260

AUDITOR’S INDEPENDENCE DECLARATION

The attached Auditor’s Independence Declaration forms part of the Directors’ Report.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of the Company support and have adhered to the principles of corporate governance. The Company’s corporate governance statement is contained in a separate section of this report.

EVENTS AFTER BALANCE SHEET DATE

Subsequent to year end the following non-recourse employee shares (NRE) were issued to employees:

Number of NREs	Exercise Price	Vesting Date	Expiry Date
3,500,000	$0.300	5 July 2013	5 July 2016

There have been no other events since 30 June 2013 that impact upon the financial report.

Signed in accordance with a resolution of the Board of Directors

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S N Sheard Chairman

Dated this 18th day of September 2013

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Annual Financial Report 30 June 2013

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Tel: +61 7 3237 5999 Level 10, 12 Creek St Fax: +61 7 3221 9227 Brisbane QLD 4000 www.bdo.com.au GPO Box 457 Brisbane QLD 4001 Australia

DECLARATION OF INDEPENDENCE BY K L COLYER TO THE DIRECTORS OF CARPENTARIA EXPLORATION LIMITED

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

the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Carpentaria Exploration Limited and the entities it controlled during the period.

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K L Colyer

Director

BDO Audit Pty Ltd

Brisbane, 18 September 2013

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms.

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CORPORATE GOVERNANCE STATEMENT

The Board of Directors of Carpentaria Exploration Limited (“Board”) is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of Carpentaria Exploration Limited (CAP) on behalf of the shareholders by whom they are elected and to whom they are accountable.

In fulfilling its obligations and responsibilities to its various stakeholders, the Board is a strong advocate of corporate governance. This statement outlines the principal corporate governance procedures of CAP. The Board supports a system of corporate governance to ensure that the management of CAP is conducted to maximise shareholder wealth in a proper and ethical manner. This statement has been placed on the Company’s website www.capex.net.au. The references in this statement to the “Recommendations” are references to the “Corporate Governance Principles and Recommendations”, Second Edition, published by ASX, and a reference to an “ASX Principle” is a reference to a principle contained in the Recommendations.

The Company’s Corporate Governance Statement is structured with reference to the Recommendations, which are as follows:

Principle	1.	Lay solid foundations for management and oversight
Principle	2.	Structure the board to add value
Principle	3.	Promote ethical and responsible decision making
Principle	4.	Safeguard integrity in financial reporting
Principle	5.	Make timely and balanced disclosure
Principle	6.	Respect the rights of shareholders
Principle	7.	Recognise and manage risk
Principle	8.	Remunerate fairly and responsibly

Given the size of the Company and the number of Board members, the Company is not in a position to be fully compliant with the Recommendations. The Company’s current policies do not meet the set out recommended practices in the following areas:

ASX Principle 2.3 requires that the roles of a chairman and chief executive officer (or the like) should not be exercised by the same person. Mr Nick Sheard during the year was the Chairman and chief executive officer of the Company.

While the Board recognised the importance of the need for the division of responsibilities between the Chairman and the Managing Director, it considered that the existing structure provided unified leadership important to a small company with early stage exploration projects. Mr Sheard’s dual role made him responsible (along with the whole Board) for determining strategic direction of the Company, as well as having primary responsibility for day to day management. This dual role assisted the Company to run in a cost effective and efficient manner. Mr Sheard has since the end of the reporting period resigned from his position as an executive, and the Board is satisfied that CAP complies with ASX Principle 2.3.

ASX Principle 2.4 requires listed entities to establish a nomination committee. The Company does not have a separately established nomination committee. Given the current size of the Board, the Board considers that this function is efficiently achieved with full Board support, in accordance with the guidelines set out in the Board’s charter (available on the Company’s website).

ASX Principle 2.6 Information: The Board will undertake an annual review of the performance of the Board and the individual directors and examine the appropriate mix of skills to ensure maximum effectiveness and contribution to the results of the company business.

The evaluation for this financial period was conducted at the Board meeting held 28 June 2013. The process of the review included:

discussions as to the expertise and experience of the current Board members
having regard to the present and future needs of the Company whether the number of Directors is adequate

It was concluded unanimously that the present Board would be maintained to cover the Company’s current activities as it met all the principles required as set out in the Board Charter under “Roles of the Board and Management” (Board Charter available on Company’s website.)

The Audit and Remuneration Committees’ performance was also discussed and were re-constituted as set out in the Directors’ Report.

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ASX Principles 3.1 and 3.2 require the Company to make available a summary of the Company’s Code of Conduct and its Share Trading Policy and suggest that these should be posted on the Company’s website. These policies have been posted on the Company’s website. In relation to the Share Trading Policy there are internal review processes requiring advice to be made when there is trading in the Company’s securities by directors and senior executives. This is coupled with an “alert” offered by the registry in the event of any trading.

Structure of the Board

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors’ Report. Directors are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgment. The Company also takes into account the criteria for independence set out in the Recommendations.

In the context of director independence, “materiality” is considered from both the Company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively material on the following basis - balance sheet items are material if they have a value of more than 5% of pro-forma net assets and profit and loss items are material if they will have an impact on the current year operating result of 10% or more. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point to the actual ability of the director in question to shape the direction of the Company’s loyalty.

In accordance with the definition of independence above, and the materiality thresholds set, the following directors of the Company are considered to be independent:

Name	Position
Mr Bob Hair	Non-Executive Director
Dr Neil Williams	Non-Executive Director
Mr Paul Cholakos	Non-Executive Director

In accordance with the definition of independence above, and the materiality thresholds set, the following directors of the Company are not considered to be independent:

Mr Nick Sheard, Executive Chairman. Holds position of Chief Executive Officer (CEO).
Mr Bin Cai, Non-Executive Director. Officer of a substantial shareholder.

There are procedures in place, agreed by the Board, to enable directors, in furtherance of their duties, to seek independent professional advice at the Company’s expense.

The term in office held by each director in office at the date of this report is as follows:

Name	Term in Office
Mr Nick Sheard	76 Months
Mr Bob Hair	71 Months
Mr Bin Cai	26 Months
Dr Neil Williams	18 Months
Mr Paul Cholakos	15 Months

It is the whole Board’s responsibility in respect of appointing and removing the Company Secretary.

All directors have unlimited access to all company information to discharge their responsibilities, if required.

Policies for reporting unethical practices and legal obligations are contained in the Company’s Corporate Governance Charter available on the website.

Functions of the Board and Senior Management are set out in the Board Charter under “Roles of the Board and Management” (Board Charter available on Company’s website.)

Performance

The performance of the Board and executives is reviewed against both measurable and qualitative indicators. The 2013 review was be undertaken on 28 June 2013. The performance criteria against which directors and executives are assessed are aligned with the financial and non-financial objectives of the Company. Directors whose performance is consistently unsatisfactory may be sanctioned.

Details of the criteria used in these evaluations are included in the Remuneration Report.

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Remuneration Committee

The Board has established a Remuneration committee to ensure that the Board continues to operate within the established guidelines. The committee during the year comprised three directors namely Paul Cholakos (Chairman), Bob Hair and Neil Williams.

Role

The role of the committee is to review and make recommendations as to remuneration packages for directors and senior executives including employee incentive and equity-based plans.

It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality board and executive team by remunerating directors and executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Remuneration Committee links the nature and amount of executive directors’ and executives’ emoluments to the Company’s financial and operational performance. Each executive’s remuneration is reviewed annually based upon individual and Company performance. The expected outcomes of the remuneration structure are the retention and motivation of executives, the attraction of quality management to the company and performance incentives which allow executives to share the rewards of the success of the Company.

For details on the amount of remuneration and all monetary and non-monetary components for each of the key management personnel during the year and for all directors, refer to the Remuneration Report in the Directors’ Report.

In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of the Company and the performance of the individual during the period.

There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors. The Board is responsible for determining and reviewing compensation arrangements for the directors themselves and the chief executive officer and the executive team.

A copy of the ‘Remuneration Policy’ is available on the Company’s website.

Audit Committee

The Audit Committee operates under a charter (available on the Company’s website) approved by the Board. It is the Board’s responsibility to ensure that an effective internal control framework exists within the Company that is specific to the material business risks that the Company faces. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of operational key performance indicators. The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control, risk management and ethical standards for the management of the Company to the Audit Committee. The Audit Committee meets as required to ensure that it can undertake its role effectively. Minutes of the audit committee meetings are recorded and provided to the board in the next full Board meeting.

The Committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. The members of the Audit Committee during the year were Bob Hair (Chairman), Neil Williams and Paul Cholakos.

Audit Process

As part of the Company’s commitment to safeguarding integrity in financial reporting, Carpentaria Exploration’s accounts are subject to annual audit by an independent, professional auditor, who also reviews the half-yearly accounts. The Auditor attends and is available to answer questions at, the Company’s annual general meetings.

Auditor Independence

The Company has implemented procedures to monitor the independence and competence of the Company’s external auditors.

Details of the amounts paid for both work and non-audit services are set out in each annual report. The Board requires that adequate handovers occur in the year prior to rotation of an audit partner to ensure an efficient and effective audit under the new partner.

For additional details of directors’ attendance at Audit and Risk Management Committee meetings and to review the qualifications of the members of the Audit and Risk Management Committee, please refer to the Directors’ Report.

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Continuous Disclosure

The Company understands and respects that timely disclosure of price sensitive information is central to the efficient operation of the Australian Securities Exchange, prevention of selective or inadvertent disclosure, conduct of investor and analysts briefings, media communications, commenting on expected earnings, communications black-out periods and review of briefings and communications. The policy is reviewed periodically and updated as required. The Company Secretary has responsibility for overseeing and coordinating disclosure of information to the Australian Securities Exchange.

The Company Secretary also liaises with the Chairman and the Managing Director in relation to continuous disclosure matters. The Managing Director is responsible for overseeing and coordinating disclosure of information to analysts, brokers and shareholders. The Company’s continuous disclosure policy may be viewed on the Company’s website.

Communications with Shareholders

The Board aims to ensure that shareholders are kept informed of all major developments affecting CAP. Information is communicated to shareholders through the distribution of annual reports; and presentation to shareholders at the Annual General Meeting, which they are encouraged to attend. The Company’s Communications Policy has been placed on the website. In addition, all reports, including quarterly reports and releases made by CAP throughout the year with respect to its activities are distributed widely via the Australian Securities Exchange and are posted on the Company’s website.

Diversity

Carpentaria, as the context permits is committed to workplace diversity. Carpentaria recognises the benefits arising from employee and board diversity, including a broader pool of high quality employees, improving employee retention, accessing different perspectives and ideas and benefiting from all available talent.

Carpentaria values diversity in all aspects of its business and is committed to creating an environment where the contribution of all its personnel is received fairly and equitably. The Company’s Diversity Policy has been placed on the website.

ASX Recommendation 3.4 provides that companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them.

The Board has at this stage not set measurable objectives for achieving gender diversity. The directors and key management personnel are selected on the basis of their qualifications and experience. If and when the company grows and expands its interest it anticipates a greater level of workplace diversity.

ASX Recommendation 3.4 provides that companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.

The table in respect of this follows:

Measure	Female Proportion
Organisation	13%
Senior Management	Nil
Board	Nil

Risk Management

CAP has developed a framework for a risk management policy and internal compliance and control system which covers organisational, financial and operational aspects of the Company's affairs. This framework has been designed to specifically address the material business risks faced by the Company. The Managing Director is responsible for ensuring maintenance of, and compliance with appropriate systems.

Oversight of the risk management system

The Board monitors and receives advice on areas of operational and financial risk, and considers strategies for appropriate risk management arrangements. Operational, financial reporting and regulatory compliance risks are continually assessed, monitored and managed at management level, and any specific areas of significant risk are dealt with at Board level. Whilst the Board acknowledges that it is responsible for the overall internal control framework, it is also cognisant that no cost-effective internal control system will preclude all errors and irregularities.

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To manage the Company’s risk profile, the Board has established an internal control framework comprising:

for financial reporting accuracy and compliance with the financial reporting regulatory framework:
there is a comprehensive budgeting system with an annual budget approved by the directors. Monthly financial results are reported against budget and revised forecasts for the remainder of the year are prepared when necessary;
cash flow statements are also prepared and included within a package of information reported to the Managing Director weekly and directors on a monthly basis;
half-yearly and annual statutory reports which are reviewed and audited respectively by the Company’s external auditors and reported to the ASX;
risk exposures relating to interest rate fluctuations are managed in accordance with the Board’s Policy;
in that the interest rate risk is exposed to the Australian market and given the current policy of Government backed guarantees on funds held at Australian Banks the risk is acceptable and in accordance with the Policy. The Risk Management Committee comprising all Board members which meets regularly to determine, with the assistance of external treasury advisers where appropriate, appropriate interest rate hedging strategies to manage these risks and ensure that such activities are conducted in compliance with the Company’s Policy;
all business transactions of a material nature are properly authorised and executed; and
the recruitment and retention of personnel with due experience, commitment and integrity.

The financial reporting risk management framework and associated internal controls have been assessed by management and found to be operating effectively and efficiently. The operational risk management procedures are reviewed on an ongoing basis to ensure they appropriately support corporate objectives.

Financial

The Company’s financial situation is not complex. Weekly cash flow reports and monthly management accounts are prepared and circulated to directors for review and consideration. All major project expenditure must be approved by the Board. Carpentaria Exploration maintains appropriate insurance cover. This includes cover in respect of:

workers’ compensation;
public liability; and
property insurance.

The Company may obtain cover for directors’ and officers’ liability, to the extent permitted by the Corporations Act 2001 . The Company implements appropriate data backup of its financial and other electronic information, this includes an offsite back-up of this information. Physical records are held within the Company’s office and are contained, where appropriate, in a fire-proof safe.

Risk Factors

The risk factors associated with the Company and its business were set out in its prospectus dated September 2007 and lodged with the Australian Securities and Investments Commission in that month. These risk factors are still considered by Carpentaria Exploration’s Board to be relevant to the Company and are appended to this policy.

Other risks faced by the Company and disclosed in the Financial Report are:

Credit risk;
Market risk – Interest rate risk; and
Liquidity risk.

A copy of the CAP’s Risk Management Policy can be obtained from the Company’s website.

Prior to signing the Group’s annual financial statements, CAP’s Managing Director and Company Secretary report in writing to the Board that:

the statement given in accordance with recommendation 7.2 and 7.3 is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and
the Company’s risk management and internal compliance and control framework is operating efficiently and effectively in relation to financial risks.

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Chief Executive Officer and Company Secretary certification

In accordance with section 295A of the Corporations Act 2001 , the Chief Executive Officer and Company Secretary have provided a written statement to the board that:

The assurance provided on the Company’s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the board; and
The Company’s risk management and internal compliance and control system is operating effectively in all material respects in relation to financial risks.For further information on corporate governance policies adopted by the Company, refer to our website: www.capex.net.au or contact the Company Secretary.

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Statement of Comprehensive Income For the year ended 30 June 2013

Note	2013 2012 $ $	2013 2012 $ $
Revenue 2 Other income 2 Fair value loss on financial assets at fair value through profit or loss Employment benefit expenses Depreciation and amortisation expense Finance costs Impairment of exploration expenditure Impairment of receivables Rental and other lease expenses Legal expenses Project generation expenses Administration expenses	174,178 445,951 - 2,943,098 (755,695) (1,309,420) (1,184,133) (1,138,885) (101,864) (96,043) (14,113) (19,748) - (4,746) - (132,662) (176,940) (151,593) (848,023) (187,052) (296,591) (137,308) (719,630) (739,575)
Profit/(loss) before income tax Research and development income tax refund 3	(3,922,811) (527,983) 2,101,331 725,000
Profit/(loss) after income tax expense Other comprehensive income	(1,821,480) 197,017 - -
Total comprehensive income	(1,821,480)	197,017
	Cents Cents
Earnings per share Basic earnings/(loss) per share 5 Diluted earnings/(loss) per share 5	(1.70) 0.21 (1.70) 0.21

The Statement of Comprehensive Income should be read in conjunction with the Notes to the Financial Statements.

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Balance Sheet As at 30 June 2013 Note	2013 2012 $ $
CURRENT ASSETS Cash and cash equivalents 7 Trade and other receivables 8 Financial assets at fair value through profit or loss 9 Other current assets 10	4,136,905 6,338,447 227,768 208,664 224,597 1,190,580 334,178 340,645
TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment 11 Exploration and evaluation assets 13 Intangible assets 12	4,923,448 8,078,336 157,221 190,869 11,463,708 8,248,488 31,936 62,643
TOTAL NON-CURRENT ASSETS TOTAL ASSETS	11,652,865 8,502,000 16,576,313 16,580,336
CURRENT LIABILITIES Trade and other payables 15 Borrowings 16 Provisions 17	1,696,178 378,263 98,419 91,633 170,902 115,688
TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings 16	1,965,499 585,584 15,762 99,070
TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES	15,762 99,070 1,981,261 684,654

NET ASSETS	14,595,052 15,895,682
EQUITY Share capital 18 Share based payment reserve 19 Accumulated losses	18,225,593 17,629,473 1,787,033 2,017,477 (5,417,574) (3,751,268)
TOTAL EQUITY	14,595,052 15,895,682

The Balance Sheet should be read in conjunction with the Notes to the Financial Statements.

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Statement of Changes in Equity For the year ended 30 June 2013 Consolidated Entity	Share Capital Reserves Accumulated Losses Total $ $ $ $
Balance at 1 July 2011	16,938,223 2,033,078 (4,157,206) 14,814,095
Transactions with owners in their capacity as owners Issue of share capital Share-based payment expense Transfers	691,250 - - 691,250 - 193,320 - 193,320 - (208,921) 208,921 -
Comprehensive income Profit after income tax Other comprehensive income	- - 197,017 197,017 - - - -
Total comprehensive income	- - 197,017 197,017
Balance at 30 June 2012	17,629,473 2,017,477 (3,751,268) 15,895,682
Balance at 1 July 2012	17,629,473 2,017,477 (3,751,268) 15,895,682
Transactions with owners in their capacity as owners Issue of share capital Share-based payment expense Transfers	408,800 - - 408,800 - 112,050 - 112,050 187,320 (342,494) 155,174 -
Comprehensive income Loss after income tax Other comprehensive income	- - (1,821,480) (1,821,480) - - - -
Total comprehensive income	- - (1,821,480) (1,821,480)
Balance at 30 June 2013	18,225,593 1,787,033 (5,417,574) 14,595,052

The Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements.

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	Annual Financial Report 30 June 2013	Annual Financial Report 30 June 2013
Cash Flow Statement For the year ended 30 June 2013 Note	2013 2012 $ $
CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Interest received Interest paid Research and development income tax refund received	(2,604,178) (2,969,785) 207,346 548,651 (14,113) (19,748) 2,101,331 725,000
Net cash used in operating activities 20 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant & equipment Proceeds from sale of equity accounted associate 14 Funds received from equity accounted associate Receipt of deposit from Pure Metals Pty Ltd Proceeds received for exploration and evaluation assets Payments for exploration and evaluation assets Proceeds from the sale of financial assets	(309,614) (1,715,882) (12,134) (25,304) - 502,877 - 726,496 1,000,000 - 228,825 959,172 (3,622,822) (3,768,081) 210,288 -
Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Repayments of borrowings Repayment of finance leases	(2,195,843) (1,604,840) 408,800 565,000 - (7,937) (104,885) (95,660)
Net cash provided by financing activities Net increase/(decrease) in cash and cash equivalents	303,915 461,403 (2,201,542) (2,859,319)
Cash and cash equivalents at the beginning of the financial year	6,338,447 9,197,766
Cash and cash equivalents at the end of the financialyear 7	4,136,905	6,338,447

The Cash Flow Statement should be read in conjunction with the Notes to the Financial Statements.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Introduction

This financial report covers the Consolidated Entity of Carpentaria Exploration Limited (the “Company”) and its controlled entities (together referred to as the “Consolidated Entity”). Carpentaria Exploration Limited is a listed public company, incorporated and domiciled in Australia.

The following is a summary of the material accounting policies adopted by the Consolidated Entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Operations and principal activities

The principal activity of the Consolidated Entity is mineral exploration.

Currency

The financial report is presented in Australian dollars, rounded to the nearest dollar, which is the functional currency of the Parent.

Authorisation of financial report

The financial report was authorised for issue on 18 September 2013.

Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001 . The consolidated entity is a for-profit entity for the purpose of preparing the financial statements

Compliance with IFRS

The consolidated financial statements of the Carpentaria Exploration Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Historical cost convention

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

Critical accounting estimates and judgements

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on historical experiences and the best available current information on current trends and economic data, obtained both externally and within the Consolidated Entity. These estimates and judgements made assume a reasonable expectation of future events but 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 effects only that period or in the period and future periods if the revision affects both current and future periods. There were no key adjustments during the year which required estimates and/or judgements.

– Key judgements exploration & evaluation assets

The Consolidated Entity performs regular reviews on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. These reviews are based on detailed surveys and analysis of drilling results performed to balance date.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting policies

(a) Principles of Consolidation

The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Carpentaria Exploration Limited at the end of the reporting period. A controlled entity is any entity over which Carpentaria Exploration Limited has the ability and right to govern the financial and operating policies so as to obtain benefits from the entity’s activities.

A list of controlled entities is contained in Note 28 to the financial statements.

In preparing the consolidated financial statements, all inter-group balances and transactions between entities in the consolidated group have been eliminated in full on consolidation.

Joint Ventures

The Consolidated Entity’s share of the assets, liabilities, revenue and expenses of joint ventures are included in the appropriate items of the consolidated financial statements.

Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions).

When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.

(b) Income Tax

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

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

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

Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss.

Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss.

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

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

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

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Income Tax (continued)

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

The charge for current income tax expense is based on the profit/(loss) for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance date.

Deferred tax is accounted for using the balance sheet method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, (except for a business combination) where there is no effect on accounting or taxable profit or loss.

(c) Plant and Equipment

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

Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(g) for details of impairment).

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

The cost of fixed assets constructed within the Consolidated Entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the Consolidated Entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of asset is:

Class of Fixed Asset Plant and equipment Plant and equipment under lease	Depreciation Rate
	20% 12.5%

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

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Exploration and Evaluation Assets

Exploration and evaluation assets incurred are capitalised in respect of each identifiable area of interest. These costs are only capitalised to the extent that they are expected to be recovered through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area of interest.

Costs of site restoration are provided over the life of the project from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with local laws and regulations and clauses of the permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

(e) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that is transferred to entities in the Consolidated Entity, are classified as finance leases.

Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values.

Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses on a straight-line basis over the lease term.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term.

(f) Financial Instruments

Recognition and initial measurement

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

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

Classification and subsequent measurement

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

Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Financial Instruments (continued)

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

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

(i) Financial assets at fair value through profit or loss

Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of shortterm profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, where they are expected to mature within 12 months after the end of the reporting period.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Consolidated Entity’s intention to hold these investments to maturity. They are subsequently measured at amortised cost.

Held-to-maturity investments are included in non-current assets where they are expected to mature more than 12 months after the end of the reporting period. All other investments are classified as current assets.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

They are subsequently measured at fair value with changes in such fair value (ie gains or losses) recognised in other comprehensive income (except for impairment losses). When the financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit or loss.

Available-for-sale financial assets are included in non-current assets where they are expected to be sold more than 12 months after the end of the reporting period. All other financial assets are classified as current assets.

(v) Financial liabilities

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

Impairment

At the end of each reporting period, the Consolidated Entity assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in profit or loss. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Financial Instruments (continued)

Financial guarantees

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

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

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

the likelihood of the guaranteed party defaulting in a year period;
the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and
the maximum loss exposed if the guaranteed party were to default.

Derecognition

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

(g) Impairment of Assets

At the end of each reporting period, the Consolidated Entity assesses whether there is any indication that an asset may be impaired. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard.

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

(h) Employee Benefits

Provision is made for the Consolidated Entity’s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within 1 year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than 1 year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wages increases and the probability that the employee may satisfy vesting requirements. Those cash flows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash flows.

- Equity settled compensation

Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes pricing model. The volatility input in the pricing model is determined by the historical volatility of the Company’s share price over a similar period to the exercise period. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest.

(i) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short-term highly liquid investments with original maturities of 3 months or less, and bank overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the statement of financial position.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(j) Revenue and Other Income

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

Interest revenue is recognised using the effective interest rate method.

(k) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers.

(l) Share Capital

Issued and paid up capital is recognised at the fair value of the consideration received by the Consolidated Entity. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

The Company has issued shares to employees and directors under the Company’s employee share plan. The shares have been issued in return for an interest free loan from the Consolidated Entity whereby the Consolidated Entity only has recourse to the shares. This issue of shares has been valued as an option grant in accordance with AASB2 “Share Based Payments. The shares are disclosed in the financial statements as non-recourse employee shares (NRE Shares).

(m) Earnings per Share

The Consolidated Entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding NRE shares. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

(n) Comparative Figures

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

(o) New Accounting Standards and Interpretations

None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2012 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(p) New Standards and Interpretations Not Yet Adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2013 reporting periods. The Consolidated Entity has decided against early adoption of these standards. The Consolidated Entity’s assessment of the impact of these new standards and interpretations is set out below:

- AASB 9 Financial Instruments, 2009 11 Amendments to Australian Accounting Standards arising from AASB 9 and 2010-7 Amendments to Australian Accounting Standards arising from AASB 9

This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2015 and completes phase I of the IASB's project to replace IAS 39 (being the international equivalent to AASB 139 'Financial Instruments: Recognition and Measurement'). This standard introduces new classification and measurement models for financial assets, using a single approach to determine whether a financial asset is measured at amortised cost or fair value. To be classified and measured at amortised cost, assets must satisfy the business model test for managing the financial assets and have certain contractual cash flow characteristics. All other financial instrument assets are to be classified and measured at fair value. This standard allows an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income, with dividends as a return on these investments being recognised in profit or loss. In addition, those equity instruments measured at fair value through other comprehensive income would no longer have to apply any impairment requirements nor would there be any 'recycling' of gains or losses through profit or loss on disposal. The accounting for financial liabilities continues to be classified and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity's own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch. The Consolidated Entity will adopt this standard from 1 July 2015 but the impact of its adoption is yet to be assessed by the Consolidated Entity.

AASB 10: 'Consolidated Financial Statements'

This standard replaces part of IAS 27: 'Consolidated and Separated Financial Statements' and is applicable for the annual period beginning 1 January 2013. This new standard introduces a new definition of control that determines which entities are consolidated. This new definition of control may potentially lead to the consolidation of entities that were not previously included in the Consolidated Entity resulting in more assets and liabilities on the books. The Consolidated Entity is currently assessing the impact of this standard.

AASB 11: 'Joint Arrangements'

This standard replaces IAS 31: 'Interests in Joint Ventures' and is applicable for annual periods beginning on or after 1 January 2013. This new standard introduces new rules which classify joint arrangements as either a joint operation or joint venture. Under the new standard, proportionate consolidation is not allowed and all joint ventures must be equity accounted. All joint arrangements held by the Consolidated Entity will need to be reassessed to determine whether the joint operation or joint venture classification is appropriate, and therefore the potential impacts of a change on the presentation of the Financial Statements. The Consolidated Entity is currently assessing the impact of this standard.

AASB 12: ' Disclosure of Interest in Other Entities'

This standard is applicable to annual reporting periods beginning on or after 1 January 2013. It contains the entire disclosure requirement associated with other entities, being subsidiaries, associates and joint ventures. The disclosure requirements have been significantly enhanced when compared to the disclosures previously located in AASB 127 'Consolidated and Separate Financial Statements', AASB 128 'Investments in Associates', AASB 131 'Interests in Joint Ventures' and Interpretation 112 'Consolidation - Special Purpose Entities'. The adoption of this standard from 1 July 2013 will significantly increase the amount of disclosures required to be given by the consolidated entity such as significant judgements and assumptions made in determining whether it has a controlling or non-controlling interest in another entity and the type of non-controlling interest and the nature and risks involved.

AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13

This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2013. The standard provides a single robust measurement framework, with clear measurement objectives, for measuring fair value using the 'exit price' and it provides guidance on measuring fair value when a market becomes less active. The 'highest and best use' approach would be used to measure assets whereas liabilities would be based on transfer value. As the standard does not introduce any new requirements for the use of fair value, its impact on adoption by the Consolidated Entity from 1 July 2013 should be minimal, although there will be increased disclosures where fair value is used.

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Annual Financial Report 30 June 2013

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(q) New Standards and Interpretations Not Yet Adopted (continued)

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements

These amendments are applicable to annual reporting periods beginning on or after 1 July 2013, with early adoption not permitted. They amend AASB 124 'Related Party Disclosures' by removing the disclosure requirements for individual key management personnel ('KMP'). The adoption of these amendments from 1 July 2013 will remove the duplication of information relating to individual KMP in the notes to the financial statements and the directors report. As the aggregate disclosures are still required by AASB 124 and during the transitional period the requirements may be included in the Corporations Act or other legislation, it is expected that the amendments will not have a material impact on the Consolidated Entity.

(r) Parent Entity Financial Information

The financial information for the parent entity, Carpentaria Exploration Limited, disclosed in note 28 has been prepared on the same basis as the consolidated financial statements, except as set out below.

(i) Investments in subsidiaries, associates and joint venture entities

Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Carpentaria Exploration Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments.

(s) Funding Arrangements

The Consolidated Entity incurred a net loss of $1,821,480 for the year ended 30 June 2013. As at 30 June 2013 the Consolidated Entity has cash reserves of $4,136,905, net current assets of $2,957,949 and net assets of $14,095,052. The Consolidated Entity has not generated revenues from operations. The financial report has been prepared on a going concern basis.

The ability of the Consolidated Entity to continue as a going concern is principally dependent upon one or more of the following:

the receipt of the $2,800,000 from Pure Metals Pty Ltd in consideration for its interest in the Hawsons Iron Project;
the ability of the Company to raise additional capital in the future; and
the successful exploration and subsequent exploitation of the Company’s tenements.

These conditions give rise to material uncertainty which may cast significant doubt over the Consolidated Entity’s ability to continue as a going concern.

The directors are confident of securing funds as and when necessary to meet the Consolidated Entity’s obligations as and when they fall due.

Should the Consolidated Entity be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements.

This financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary should the Consolidated Entity be unable to continue as a going concern.

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Annual Financial Report
30 June 2013
2013 2012
$ $

NOTE 2 REVENUE & OTHER INCOME
Revenue
Bank interest	174,178	445,951
	174,178	445,951
Other Income
Gain on sale of 20% investment in FTB(QLD)PtyLtd(refer to note 14)	-	2,943,098
	-	2,943,098

NOTE 3 INCOME TAX

A reconciliation of income tax expense (benefit) applicable to accounting profit/ (loss) before income tax at the statutory income tax rate to income tax expense (benefit) recognised for the years ended 30 June 2013 and 2012 is as follows:

Accounting profit /(loss)before income tax	(3,922,811)	(527,983)
Tax at the Australian tax rate of 30% (2012: 30%)	(1,176,843)	(158,395)
Non-deductible expenses	523,367	68,587
Other	-	(35,271)
Deferred tax assets not bought to account	653,476	125,079
Research and development income tax refund	2,101,331	725,000
Income tax	2,101,331	725,000
Recognised deferred tax assets
Unused tax losses	2,856,294	2,474,546
Deductible temporary differences	587,373	-
	3,439,112	2,474,546
Recognised deferred tax liabilities
Assessable temporary differences	3,443,667	2,474,546
	3,443,667	2,474,546
Net deferred tax recognised	-	-
Unrecognised temporary differences and tax losses
Unused tax losses and temporary differences for which no deferred tax asset has been recognised	3,553,550	1,632,100

The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Consolidated Entity can utilise these benefits.

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	Annual	Financial Report
		30 June 2013
	2013	2012
	$	$
NOTE 4 AUDITORS’ REMUNERATION
Amounts received or due and receivable by the Auditors for:
- auditing and reviewing the financial reports – BDO Audit Pty Ltd	41,950	-
- auditing and reviewing the financial reports – BDO East Coast Partnership	-	42,542
Non audit services:
- Taxation services – BDO Audit Pty Ltd	22,260	-
- Taxation services – BDO East Coast Partnership	-	35,450
- Other assurance services – BDO East Coast Partnership	-	7,500
	64,010	85,492

NOTE 5 EARNINGS PER SHARE

Earnings used to calculate basic and dilutive EPS	(1,821,480)	197,017
	2013	2012
	#	#
Weighted average number of ordinary shares outstanding during the year	98,432,123	94,723,951
Adjustments for calculation of diluted earningsper share - options	-	1,397,542
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculatingdiluted earningsper share	98,432,123	96,121,493

Options, including in-substance options related to NRE shares, could potentially dilute basic earnings per share in the future but were not included in the calculation of diluted earnings per share for 2013 as they were anti-dilutive

NOTE 6 DIVIDENDS & FRANKING CREDITS

There were no dividends paid or recommended during the financial year. There are no franking credits available to the shareholders of the Company.

	2013	2012
	$	$
NOTE 7 CASH & CASH EQUIVALENTS
Cash on hand and at bank	1,286,038	192,603
Cash on deposit	2,850,867	6,145,844
	4,136,905	6,338,447
NOTE 8 TRADE & OTHER RECEIVABLES
Other receivables	212,587	160,315
Interest receivables	15,181	48,349
	227,768	208,664

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		Annual Financial Report	Annual Financial Report	Annual Financial Report
				30 June 2013
		2013		2012
		$		$
NOTE 9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Shares in Guilford Coal Limited		224,597		1,190,580
NOTE 10 OTHER CURRENT ASSETS
Prepayments		13,039		18,820
Bonds and deposits		321,139		321,825
		334,178		340,645
NOTE 11 PLANT & EQUIPMENT
Plant and equipment
At cost		124,704		112,570
Accumulated depreciation		(93,996)		(65,260)
		30,708		47,310
Plant and equipment under lease
At cost		225,935		200,560
Accumulated depreciation		(99,422)		(57,001)
		126,513		143,559
Total plant and equipment		157,221		190,869
Movements in carrying amounts
	Plant and equipment	Plant and equipment under lease		Total
	$		$	$
Balance at 1 July 2011	47,561	183,256		230,817
Additions	25,304		-	25,304
Depreciation expense	(25,555)	(39,697)		(65,252)
Balance at 30 June 2012	47,310	143,559		190,869
Balance at 1 July 2012	47,310	143,559		190,869
Additions	12,134		-	12,134
Additions – finance lease	-	25,375		25,375
Depreciation expense	(28,736)	(42,421)		(71,157)
Balance at 30 June 2013	30,708	126,513		157,221

Leased assets held under hire purchase are pledged as security for the related finance lease liabilities.

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	Annual	Financial Report
		30 June 2013
	2013	2012
	$	$
NOTE 12 INTANGIBLE ASSETS
Software – at cost	7,759	7,759
Software – at cost (under lease)	87,465	87,465
Accumulated amortisation	(63,288)	(32,581)
	31,936	62,643
Movements
Opening balance	62,643	93,434
Additions	-	-
Additions – finance lease	-	-
Amortisation	(30,707)	(30,791)
Closing balance	31,936	62,643
Leased assets are pledged as security for the related finance leases.
NOTE 13 EXPLORATION AND EVALUATION ASSETS
Opening balance	8,248,488	4,087,228
Net current year expenditure	3,444,045	4,212,795
Disposals	(228,825)	(46,789)
Impairment of exploration expenditure	-	(4,746)
	11,463,708	8,248,488

Recoverability of the carrying amount of exploration and evaluation assets is dependent on the successful development and commercial exploitation of areas of interest, and the sale of minerals or the sale of the respective areas of interest.

NOTE 14 EQUITY ACCOUNTED INVESTMENTS

Investment in associates	-	-
Movements
Opening balance	-	9,994
Additions	-	49,785
Disposals	-	(59,779)
Share of loss	-	-
Closing balance	-	-

Sale of FTB (QLD) Pty Ltd

On 14 September 2011, the Consolidated Entity sold its remaining 20% share in FTB (QLD) Pty Ltd to Guildford Coal Limited for the following consideration:

$1.5 million cash
2,184,551 fully paid ordinary securities in Guildford Coal Limited (GUF) with a market value at 14 September of $2.5 million
$0.50 per tonne royalty on coal production from the Hughenden Coal Project, capped at 10 million tonnes per year for 20 years.

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NOTE 14 EQUITY ACCOUNTED INVESTMENTS (continued)

At the date of disposal the Consolidated Entity owed Guildford Coal Limited, joint venture contributions of $270,627 that were netted off the $1.5 million payment. The Consolidated Entity also had a receivable from FTB (QLD) Pty Ltd of $726,496 that was also settled through the cash payment of $1.5 million. As a result the net cash received on disposal of FTB (QLD) Pty Ltd was $502,877 .

The disposal had the following effect on the financial statements:

	$
Cash consideration received	1,500,000
Market value of GUF shares at sale date	2,500,000
Total consideration received	4,000,000
Less amounts owed by FTB (QLD) Pty Ltd	(726,496)
Less carrying value of investment in FTB (QLD) Pty Ltd	(59,779)
Less joint venture contributions owed to Guildford Coal Limited	(270,627)
Gain on disposal	2,943,098

	2013	2012
	$	$
NOTE 15 TRADE & OTHER PAYABLES
Other payables and accrued expenses	696,178	378,263
Deposit paid by Pure Metals Pty Ltd (refer note 27 for further details)	1,000,000	-
	1,696,178	378,263
NOTE 16 BORROWINGS
Current
Finance leases	98,419	91,663
Non-Current
Finance leases	15,762	99,070

The above facilities represent the only finance facilities available to the Consolidated Entity. There are no unused facilities at balance date (2012: Nil).

The finance leases are secured over the individual assets that the leases relate to.

NOTE 17 PROVISIONS

Employee benefits 170,902 115,688

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			Annual	Financial Report
				30 June 2013
			2013	2012
			$	$
NOTE 18 SHARE CAPITAL
Fully paid ordinary shares			18,225,593	17,629,473
Ordinary Shares
	2013	2012	2013	2012
	$	$	#	#
At the beginning of the year	17,629,473	16,938,223	96,491,301	94,341,301
Share placement1	-	126,250	-	450,000
Exercise of options2	408,800	-	2,800,000	-
Transfer from reserves3	187,320	-	-	-
Transfers from treasuryshares4	-	565,000	-	1,700,000
At reporting date	18,225,593	17,629,473	99,291,301	96,491,301
Non-recourse employee shares (NRE)
At the beginning of the year	-	-	7,400,000	10,400,000
NRE shares transferred to treasury shares4	-	-	-	(3,000,000)
At reporting date	-	-	7,400,000	7,400,000
Treasury shares
At the beginning of the year	-	-	1,300,000	-
Transfers from NRE shares4	-	-	-	3,000,000
Transfers to ordinary shares4	-	-	-	(1,700,000)
At reporting date	-	-	1,300,000	1,300,000

Total Ordinary, NRE and Treasury Shares	18,225,593	17,629,473	107,991,301	105,191,301

1 2012: 250,000 ordinary fully paid shares issued at $0.225 each in consideration for land access rights. 200,000 ordinary fully paid shares issued at $0.350 each in consideration for acquiring an interest in exploration licence on EL 3998.

2 2013: 2,800,000 options were exercised during the period for consideration of $408,800. Exercise prices ranged between $0.114 and $0.29 per share.

3 2013: $187,320 was transferred out of the options reserve into share capital. This transaction had no impact on cashflows or total equity.

4 2012: In accordance with the CAP share plan, former directors Mike Chester and Stan McDonald’s NRE shares became due and payable within 7 days of them resigning from the board. The former directors elected to not repay the loan and consequently their 3,000,000 NRE shares were transferred, in trust, to the Company for sale and recorded as Treasury shares. At 30 June 2012, the Company had sold 1,700,000 shares at an average of $0.332 per share (transferred to ordinary shares) and continues to hold in trust 1,300,000 Treasury shares.

Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Ordinary shares have no par value and the company does not have a limited amount of authorised capital.

Non-recourse employee (NRE) shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. NRE shares will not qualify for participation in any dividend reinvestment plan of the Company until the loan amount in respect of those shares has been repaid. The Company has a lien over the NRE shares in respect of which the loan amount is outstanding. The Company is entitled to sell any unpaid NRE shares in accordance with the CAP share plan. (Refer to note 21 for further information).

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Annual Financial Report 30 June 2013

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NOTE 18 SHARE CAPITAL (continued)

Options

	Movements
Expiry Date Exercise Price	1 July 2012 Issued Exercised Expired 30 June 2013
31 July 2012 $0.114 26 November 2012 $0.150 16 February 2013 $0.250 2 March 2013 $0.850 15 December 2014 $0.290 29 November 2015 $0.440	700,000 - (700,000) - - 2,000,000 - (2,000,000) - - 600,000 - - (600,000) - 1,300,000 - - (1,300,000) - 2,700,000 - (100,000) - 2,600,000 - 1,500,000 - - 1,500,000
	7,300,000 1,500,000 (2,800,000) (1,900,000) 4,100,000

	2013	2012
	$	$
NOTE 19 RESERVES
Share based payment reserve	1,787,033	2,017,477
Share based payment reserve movements during the year
Opening balance	2,017,477	2,033,078
Share based payments	112,050	193,320
Transfer to share capital	(187,320)	-
Transfer to accumulated losses(expired options)	(155,174)	(208,921)
Closing balance	1,787,033	2,017,477

Share based payment reserve

The share based payments reserve is used to record the value of share based payments provided to directors, employees and contractors as part of their remuneration.

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Annual Financial Report
30 June 2013
2013 2012
$ $

NOTE 20 CASH FLOW INFORMATION

Reconciliation of profit/ (loss) after income tax to net cash outflow from
operating activities
Profit/(loss) after income tax	(1,821,480)	197,017
Depreciation and amortisation	101,864	96,043
Non`‑`cash employee benefits expense – share`‑`based payments	112,050	193,320
Impairment of exploration expenditure	-	4,746
Impairment of receivables	-	132,662
Gain on sale of equity accounted associate	-	(2,943,098)
Fair value loss on financial assets at fair value through profit or loss	755,695	1,309,420
Change in operating assets and liabilities
(Increase)/decrease in receivables	(19,104)	84,248
(Increase)/decrease in other assets	6,467	(109,087)
(Decrease)/increase in trade payables and accruals	499,680	(665,581)
(Decrease)/increase inprovisions	55,214	(15,572)
Net cash outflow from operating activities	(309,614)	(1,715,882)

Non-cash transactions investing & financing activities

2013: Plant and equipment totalling $25,375 was acquired by way of finance lease.

2012: 250,000 ordinary fully paid shares issued at $0.225 each in consideration for land access rights.

200,000 ordinary fully paid shares issued at $0.350 each in consideration for the renewal of the exploration licence on EL 3998.

2,184,551 shares in Guildford Coal Limited as part consideration for the disposal of its 20% interest in FTB (QLD) Pty Ltd. Refer Note 14 for further details.

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Annual Financial Report 30 June 2013

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NOTE 21 SHARE BASED PAYMENTS

- Equity based instruments Options

The establishment of the CAP Employee Option Plan was approved by shareholders at the 2006 annual general meeting. The Employee Option Plan is designed to provide long-term incentives for senior managers and above (including executive directors) to deliver long-term shareholder returns.

The Company has granted options over ordinary shares to directors, employees and consultants as part of their remuneration packages. The options were granted for nil consideration and are not quoted on the ASX. Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share.

Information with respect to the number of options granted is as follows:

2013

2013
Tranche GrantDate ExpiryDate Exercise Price	Balance at start ofyear Granted inyear Exercised inyear Lapsed during year Balance at end ofyear Vested and exercisable at end of year
8 20 July 2009 31 July 2012 $0.114 9 1 Oct 2009 31 July 2012 $0.114 10 26 Nov 2009 26 Nov 2012 $0.150 11 16 Feb 2010 16 Feb 2013 $0.250 13 1 March 2011 2 March 2013 $0.850 14 16 Dec 2011 15 Dec 2014 $0.290 15 30 Nov 2012 29 Nov 2015 $0.440 Weighted average exercise price Weighted average share price at date of exercise	600,000 - (600,000) - - - 100,000 - (100,000) - - - 2,000,000 - (2,000,000) - - - 600,000 - - (600,000) - - 1,300,000 - - (1,300,000) - - 2,700,000 - (100,000) - 2,600,000 2,600,000 - 1,500,000 - - 1,500,000 1,500,000
	7,300,000 1,500,000 (2,800,000) (1,900,000) 4,100,000 4,100,000
	0.33 0.44 0.15 0.66 0.34 0.34
	0.26

2012

2012
Tranche GrantDate ExpiryDate Exercise Price	Balance at start ofyear Granted inyear Exercised inyear Lapsed during year Balance at end ofyear Vested and exercisable at end of year
8 20 July 2009 31 July 2012 $0.114 9 1 Oct 2009 31 July 2012 $0.114 10 26 Nov 2009 26 Nov 2012 $0.150 11 16 Feb 2010 16 Feb 2013 $0.250 12 12 July 2010 27 May 2012 $0.413 13 1 March 2011 2 March 2013 $0.850 14 16 Dec 2011 15 Dec 2014 $0.290 Weighted average exercise price Weighted average share price at date of exercise	600,000 - - - 600,000 600,000 100,000 - - - 100,000 100,000 2,000,000 - - - 2,000,000 2,000,000 600,000 - - - 600,000 600,000 1,850,000 - - (1,850,000) - - 1,300,000 - - - 1,300,000 1,300,000 - 2,700,000 - - 2,700,000 2,700,000
	6,450,000 2,700,000 - (1,850,000) 7,300,000 7,300,000
	0.37 0.29 - 0.413 0.33 0.33
	-

The weighted average remaining contractual life of share options outstanding at the end of the period was 1.81 years. (2012: 1.22 years).

Fair value of options granted

The assessed fair value at the date of grant of options issued is determined using a black scholes option pricing model that takes into account the exercise price, the underlying share price at the time of issue, the term of the option, the underlying share’s expected volatility, expected dividends and the risk free interest rate for the expected life of the instrument.

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NOTE 21 SHARE BASED PAYMENTS (continued)

The value of the options was calculated by using the Black-Scholes pricing model applying the inputs shown below:

	Tranches issued in 2013	Tranches issued in 2012
Inputs into pricing model	15	14
Grant date Vesting date Exercise price Share price at grant date Life of the options Underlying share price volatility Expected dividends Risk free interest rate Fair value per option	30 November 2012 30 November 2012 $0.440 $0.21 3 years 80% Nil 3.25% 0.0747	16 December 2011 16 December 2011 $0.290 $0.20 3 years 82% Nil 4.25% 0.0716

The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.

Equity based instruments – Director and Employee Shares with Non-Recourse Loans

In 2011 year, the Company issued 10,400,000 ordinary shares to Directors and employees pursuant to the CAP Employee Share Plan. The shares were issued as a result of the Consolidated Entity achieving Corporate KPI1, being a discovery and resource outline. This KPI was met on 17 December 2010. The shares were issued in March 2011 following board approval.

The director shares have an issue price of $0.48, being the VWAP over the 10 days prior to 31 May 2011. The employee shares have an issue price of $0.60, being the VWAP over the 10 days prior to 3 March 2011. The shares have been issued in return for an interest free loan from the Consolidated Entity whereby the Consolidated Entity only has recourse to the shares. This issue of shares has been treated as an option grant in accordance with AASB2 “Share Based Payments”. In line with AASB2 “Share Based Payments”, the related expense for the shares is recorded from the date that agreement with the employee is met, being the date Corporate KPI 1 was met (in this case the announcement of a resource outline on 17 December 2010).

Information with respect to the number of director and employee shares with non-recourse loans granted is as follows:

2013

2013
Tranche Grant Date Escrow Date Exercise Price	Balance at start of year Granted in year Exercised inyear Lapsed/ transferred during year Balance at end ofyear Exercisable at end ofyear
Director 1 31 May 2011 31 May 2012 $0.48 Director 2 31 May 2011 31 May 2013 $0.48 Employee 1 1 March 2011 2 March 2013 $0.60 Weighted average exercise price 2012 Tranche Grant Date Escrow Date Exercise Price	1,500,000 - - - 1,500,000 1,500,000 1,500,000 - - - 1,500,000 1,500,000 4,400,000 - - - 4,400,000 4,400,000
	7,400,000 - - - 7,400,000 7,400,000
	0.58 - - - 0.58 0.58
	Balance at start of year Granted in year Exercised inyear Lapsed/ transferred during year(1) Balance at end ofyear Exercisable at end ofyear
Director 1 31 May 2011 31 May 2012 $0.48 Director 2 31 May 2011 31 May 2013 $0.48 Employee 1 1 March 2011 2 March 2013 $0.60 Weighted average exercise	3,000,000 - - (1,500,000) 1,500,000 1,500,000 3,000,000 - - (1,500,000) 1,500,000 1,500,000 4,400,000 - - - 4,400,000 4,400,000
	10,400,000 - - (3,000,000) 7,400,000 7,400,000
	0.53 - - 0.48 0.58 0.58

1 In accordance with the CAP share plan, former directors Mike Chester and Stan McDonald’s NRE shares became due and payable within 7 days of them resigning from the board. The former directors elected to not repay the loan and consequently their 3,000,000 NRE shares were transferred, in trust, to the Company for sale and recorded as Treasury shares. At 30 June 2012, the Company had sold 1,700,000 shares at an average of $0.332 per share (transferred to ordinary shares) and continues to hold in trust 1,300,000 Treasury shares.

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NOTE 21 SHARE BASED PAYMENTS (continued)

The value of the Director and Employee Shares with Non-Recourse Loans was calculated by using the Black-Scholes pricing model applying the inputs shown below:

Inputs into pricing model	Director 1	Director 2	Employee 1
Grant date Vesting date Exercise price Share price at grant date Life of the options Underlying share price volatility Expected dividends Risk free interest rate	31 May 2011 31 May 2011 $0.48 $0.51 1 year 54% Nil 4.68%	31 May 2011 31 May 2011 $0.48 $0.51 2 years 54% Nil 4.68%	1 March 2011 1 March 2011 $0.60 $0.66 2 years 54% Nil 4.68%

– Equity based instruments Ordinary Shares

During the prior year the Company issued 200,000 ordinary fully paid shares at $0.35 per share ($70,000) consideration for acquiring an interest in exploration licence on EL 3998. The fair value of the interest in the tenement was deemed to equal the value of the share issues. The value of the shares was determined by reference to the Company’s trading price on the ASX at the date of the transaction.

During the prior year the Company issued 250,000 ordinary fully paid shares at $0.225 per share ($56,250) in consideration for tenement land access. The fair value of the service received was unable to be estimated reliably and the fair value of the tenement land access was deemed to equal the value of the share issues. The value of the shares was determined by reference to the Company’s trading price on the ASX at the date of the transaction.

- Expenses arising from share based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

	2013	2012
	$	$
Options issued under employee option plan	112,050	193,320
Shares issued under employee share scheme	-	-
	112,050	193,320

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NOTE 22 RELATED PARTY and KEY MANAGEMENT PERSONNEL

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Key management personnel compensation

Key management personnel comprise directors and other persons having authority and responsibility for planning, directing and controlling the activities of the Consolidated Entity.

	2013	2012
Summary	$	$
Short-term employee benefits	1,054,625	928,875
Post-employment benefits	86,630	80,899
Share-basedpayments	112,050	64,440
	1,253,305	1,074,214

Director/Key Management Personnel shareholdings (number of shares, including NRE shares)

2013	Opening	Granted as	On Exercise of	Net Change	Closing
	Balance	remuneration	Options	Other	Balance
Directors
Nick Sheard	1,900,000	-	2,000,000	(400,000)	3,500,000
Bob Hair	1,530,000	-	-	-	1,530,000
Bin Cai1	10,479,000	-	-	-	10,479,000
Neil Williams	-	-	-	-	-
Paul Cholakos	-	-	-	-	-
Key Management Personnel
Doug Brewster	1,265,000	-	250,000	-	1,515,000
Quentin Hill	410,000	-	-	-	410,000
Chris Powell	1,040,000	-	100,000	-	1,140,000
Total	16,624,000	-	2,350,000	(400,000)	18,574,000

1 Held by Australian Conglin International Investment Group	1 Held by Australian Conglin International Investment Group	Pty Ltd of which Mr	Bin Cai is managing director.
2012	Opening	Granted as	On Exercise of	Net Change	Closing
	Balance	remuneration	Options	Other	Balance
Directors
Nick Sheard	1,900,000	-	-	-	1,900,000
Bob Hair	1,530,000	-	-	-	1,530,000
Bin Cai1	10,479,000	-	-	-	10,479,000
Neil Williams	-	-	-	-	-
Paul Cholakos	-	-	-	-	-
Mike Chester2	1,586,401	-	-	(1,586,401)	-
Stan Macdonald2	2,000,000	-	-	(2,000,000)	-
Key Management Personnel
Doug Brewster	1,265,000	-	-	-	1,265,000
Quentin Hill	410,000	-	-	-	410,000
Chris Powell3	1,060,000	-	-	(20,000)	1,040,000
Total	20,230,401	-	-	(3,606,401)	16,624,000

1 Held by Australian Conglin International Investment Group Pty Ltd of which Mr Bin Cai is managing director.

2 Net Change Other represents movement on retirement as director. 3

Net Change Other represents amounts sold during the year

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NOTE 22 RELATED PARTY and KEY MANAGEMENT PERSONNEL (continued)

Director/Key Management Personnel option holdings (number of options)

2013	Opening	Granted as	Options	Options	Closing	Vested and
	Balance	remuneration	Exercised	Lapsed/	Balance	exercisable
				Sold
Directors
Nick Sheard	2,000,000	-	(2,000,000)	-	-	-
Bob Hair	-	-	-	-	-	-
Bin Cai	-	500,000	-	-	500,000	500,000
Neil Williams	-	500,000	-	-	500,000	500,000
Paul Cholakos	-	500,000	-	-	500,000	500,000
Key Management Personnel
Doug Brewster	550,000	-	(250,000)	-	300,000	300,000
Quentin Hill	300,000	-	-	-	300,000	300,000
Chris Powell	400,000	-	(100,000)	-	300,000	300,000
Total	3,250,000	1,500,000	(2,350,000)	-	2,400,000	2,400,000
2012	Opening	Granted as	Options	Options	Closing	Vested and
	Balance	remuneration	Exercised	Lapsed/	Balance	exercisable
				Sold
Directors
Nick Sheard	2,000,000	-	-	-	2,000,000	2,000,000
Bob Hair	-	-	-	-	-	-
Bin Cai	-	-	-	-	-	-
Neil Williams	-	-	-	-	-	-
Paul Cholakos	-	-	-	-	-	-
Mike Chester	-	-	-	-	-	-
Stan Macdonald	-	-	-	-	-	-
Key Management Personnel
Doug Brewster	650,000	300,000	-	(400,000)	550,000	550,000
Quentin Hill	400,000	300,000	-	(400,000)	300,000	300,000
Chris Powell	500,000	300,000	-	(400,000)	400,000	400,000
Total	3,550,000	900,000	-	(1,200,000)	3,250,000	3,250,000

Amounts Owed to Key Management Personnel and Other Related Parties

There were no amounts payable to Directors, key management personnel or other related parties at 30 June 2013 (2012: nil).

Transactions with Related Parties

There were no other transactions between the Consolidated Entity and its related parties during the year (2012: nil).

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NOTE 23 FINANCIAL RISK MANAGEMENT

The Consolidated Entity's financial instruments consist mainly of deposits with banks and accounts receivable and payable and investments in listed securities.

There have been no substantive changes in the Consolidated Entity's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

The Board is responsible for managing the Consolidated Entity’s identification and control of financial risks and for evaluating treasury management strategies in the context of the most recent economic conditions and forecasts.

The main risks arising from the Consolidated Entity’s financial instruments are interest rate risk, credit risk, liquidity risk and price risk. The Consolidated Entity uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate risk and assessments of market forecasts for interest rate prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.

(a) Credit Risk

Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the Consolidated Entity incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the Consolidated Entity.

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements. There is no collateral held as security at 30 June 2013.

Credit risk is reviewed regularly by the Board. It arises from exposure to customers as well as through deposits with financial institutions. The Consolidated Entity does not have any material credit risk exposure to the any debtor or group of debtors under financial instruments entered into by the Consolidated Entity.

Maximum exposure to credit risk

Non-trade receivables	227,768	208,664
Cash and cash equivalents	4,136,905	6,338,447
	4,364,673	6,547,111
Ageing of receivables
Not past due	227,768	208,664
Past due 0-90 days	-	-
Past due >90 days	-	-
Impaired	-	-
	227,768	208,664

Credit risk - Cash and cash equivalents

The credit quality of financial assets that are neither past due nor impaired is considered strong. The counterparty to these financial assets is Commonwealth Bank and Westpac, large financial institutions with strong credit ratings.

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NOTE 23 FINANCIAL RISK MANAGEMENT (continued)

(b) Liquidity risk

Liquidity risk is the risk that the Consolidated Entity may encounter difficulties raising funds to meet financial obligations as they fall due.

Liquidity risk is reviewed regularly by the Board. The Consolidated Entity manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash resources are maintained.

The table below reflects the contractual maturity financial liabilities. Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing at 30 June 2013. The amounts disclosed represent undiscounted cash flows.

The remaining contractual maturities of the financial liabilities are:

	2013 2012 $ $
	Less than one year Trade and other payables 696,178 378,263 Finance leases 103,361 111,467 One to five years Finance leases 16,991 95,206
	816,530 584,936

Terms and conditions relating to the above financial instruments:

Trade creditors are unsecured, non-interest bearing and are normally settled on 30 day terms
Other creditors are unsecured and non-interest bearing
Due to the short term nature of the current payables the carrying value is assumed to approximate their fair value.
Finance leases are secured by way of fixed charge over the leased assets. The finance leases are a subject to interest rates ranging from of 7.73% to 10.06%.

(c) Market Risk

Market risk arises from the use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).

Interest rate risk

Interest rate risk is managed by constant monitoring of interest rates. The Consolidated Entity's interest rate exposure is limited to its variable rate cash and cash equivalents assets.

Interest rates over the 12 month period were analysed and a sensitivity determined to show the effect on profit and equity after tax if the interest rates at reporting date had been 100 basis points higher or lower, with all other variables held constant. This level of sensitivity was considered reasonable given the current level of both short-term and long-term Australian interest rates. The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date.

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NOTE 23 FINANCIAL RISK MANAGEMENT (continued)

At 30 June 2013, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Judgements of reasonably possible movements: +1.00% (100 basis points) -1.00% (100 basis points)	Post Tax Profit Higher/(Lower) Equity Higher/(Lower) 2013 $ 2012 $ 2013 $ 2012 $
	1,286 1,926 1,286 1,926 (1,286) (1,926) (1,286) (1,926)

Price risk

The Consolidated Entity’s exposure to securities in the current period arose from an investment in one listed company, Guilford Coal Ltd. The Consolidated Entity actively monitors the underlying investment in the context of its overall strategic and financial objectives.

At 30 June 2013, the Consolidated Entity had the following exposure to price risk:

	2013	2012
	$	$
Shares in Guilford Coal Limited	224,597	1,190,580

At 30 June 2013, if the market prices had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Judgements of reasonably possible movements: + 25% - 25%	Post Tax Profit Higher/(Lower) Equity Higher/(Lower) 2013 $ 2012 $ 2013 $ 2012 $
	56,149 297,645 56,149 297,645 (56,149) (297,645) (56,149) (297,645)

AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

(i) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)

(ii) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and

(iii) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

Level 1 Investments: Quoted prices (unadjusted) in active markets for identical assets

For the year ended 30 June 2013 the value of the listed shares was based on the closing price of Guilford Coal Ltd’s securities as quoted on the ASX on 30 June 2013. Total realised and unrealised losses for the period included in profit and loss that relate to financial assets held at fair value through profit or loss at the end of the reporting period were $755,695 (2012: $1,309,420).

(d) Capital Risk Management

Management controls the capital of the Consolidated Entity in order to provide capital growth to shareholders and ensure the Consolidated Entity can fund its operations and continue as a going concern. The Consolidated Entity’s capital includes ordinary share capital. Further detail on share capital can be found in Note 18. There are no externally imposed capital requirements. Management effectively manages the Consolidated Entity’s capital by assessing the Consolidated Entity’s financial risks and adjusting its capital structure in response to changes in these risks and the market. These responses include the management share issues.

There have been no changes in the strategy adopted by management to control the capital of the Consolidated Entity since the prior year.

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NOTE 23 FINANCIAL RISK MANAGEMENT (continued)

(e) Fair Values

The fair values of financial assets and liabilities approximate their carrying value. Except for shares in Guildford Coal Limited, no financial assets or liabilities are readily traded on organised markets in standardised form.

NOTE 24 SEGMENT REPORTING

Reportable Segments

The Consolidated Entity has identified its operating segment based on internal reports that are reviewed and used by the executive team in assessing performance and determining the allocation of resources. The Consolidated Entity does not yet have any products or services from which it derives an income.

Accordingly, management currently identifies the Consolidated Entity as having only one reportable segment, being exploration for minerals in Australia. The financial results from this segment are equivalent to the financial statements of the consolidated entity. There have been no changes in the operating segments during the year.

All assets are located in Australia.

	2013	2012
	$	$
NOTE 25 COMMITMENTS
Operating leases
Minimum lease payments:
Payable within one year	121,244	146,827
Payable within oneyear and fiveyears	230,256	32,327
Total contracted at balance date	351,500	179,154

The Consolidated Entity leases various offices and office equipment under non-cancellable operating leases expiring within one to three years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.

Finance leases

Future minimum lease payments:
Payable within one year	103,361	111,467
Payable between oneyear and fiveyears	16,991	95,206
	120,352	206,673
Less future interestpayments	(6,171)	(15,970)
	114,181	190,703
Present value of minimum lease payments:
Current (Note 16)	98,419	91,633
Non-Current (Note 16)	15,762	99,070
	114,181	190,703

Finance leases relate to exploration equipment, computer equipment and vehicles with a written down value of $126,513. Under the lease terms, the Consolidated Entity will acquire the leased assets at the end of the lease.

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NOTE 25 COMMITMENTS (continued)

Future exploration

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

	2013	2012
	$	$
Exploration obligations to be undertaken:
Payable within one year	1,723,869	1,943,250
Payable between oneyear and fiveyears	3,768,409	698,722
	5,492,278	2,641,972

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

NOTE 26 CONTINGENT LIABILITIES AND CONTINGENT ASSETS

There are no contingent liabilities or contingent assets at 30 June 2013 that require disclosure in the financial report.

NOTE 27 JOINT VENTURE ARRANGEMENTS

HAWSONS IRON PROJECT

During May 2013, after two years with the liquidators, Pure Metals Pty Ltd acquired a 40% share in the project and subsequently a new joint venture with Pure Metals Pty Ltd was finalised. Under this agreement Pure Metals Pty Ltd has obtained a 40% share of the Hawsons Iron Project and must pay Carpentaria $3.8 million (in two tranches) and sole fund a $5.0 million work program within the next twelve months ending June 2014.

At the end of the financial year, Pure Metals assumed management of the project and will continue to advance critical components of a BFS, including test drilling of the proposed project water supply, continuing detailed studies for the EIS, preparation of a Mining Lease Application and modelling of a 10 Mtpa production case utilising existing infrastructure to significantly reduce capital requirements.

At the date of this report, the first tranche of $1.0 million has been paid by Pure Metals Pty Ltd. This amount is currently reflected as a deposit liability (refer Note 15), as Carpentaria will not recognise the transaction as complete until Pure Metals Pty Ltd fulfils its initial obligation under the joint venture agreement to pay Carpentaria $3.8 million. If the remaining second tranche of $2.8 million is not paid and Carpentaria chooses to invoke the buyback provision in the agreement, these funds would need to be refunded to Pure Metals Pty Ltd.

The second tranche of $2.8 million was due on 9 July 2013 and was not paid. Carpentaria agreed to an extension of 60 days. In exchange for receiving this extension, Pure Metals Pty Ltd agreed to pay an additional $100,000 bringing the total amount payable to $2.9 million.

Pure Metals Pty Ltd did not meet their revised obligations and have advised Carpentaria payment will be made in full by 20 September 2013. Carpentaria advised shareholders on 10 September 2013 that the parties are discussing on-going remedies to achieve this payment.

These matters to date have not affected the on-going management of the Hawsons Iron Project.

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NOTE 27 JOINT VENTURE ARRANGEMENTS (continued)

The Consolidated Entity’s interests in the assets employed in the joint venture are included in the balance sheet, in accordance with the accounting policy described in Note 1, under the following classifications:

Non-Current assets
Exploration and evaluation assets	4,176,234	2,001,521
Total Non-Current Assets	4,176,234	2,001,521

Future Exploration

The Consolidated Entity has certain obligations to expend minimum amounts on exploration in the joint venture tenement areas to maintain its interest in the joint ventures. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the consolidated entity. Under the joint venture agreement with Pure Metals Pty Ltd referred to above these commitments are required to be met by Pure Metals Pty Ltd.

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NOTE 28 PARENT ENTITY INFORMATION

The Parent Entity of the Consolidated Entity is Carpentaria Exploration Limited.

	2013 $	2012 $
Parent Entity Financial Information Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Issued capital Share based payment reserve Accumulated losses Total equity Profit/(loss) after income tax Other comprehensive income Total comprehensive income	4,658,851 12,102,867 16,761,718 1,965,498 15,762 1,981,260 14,780,458 18,225,593 1,787,033 (5,232,168) 14,780,458 (1,821,480) - (1,821,480)	8,038,335 8,727,407
		16,765,742
		585,584 99,070
		684,654
		16,081,088
		17,629,473 2,017,477 (3,565,862)
		16,081,088
		167,515 -
		167,515

Controlled Entities of the Parent Entity

Willyama Prospecting Pty Ltd	Percentage Owned 2013 2012 % %
	100% 100%

Commitments, Contingencies and Guarantees of the Parent Entity

The committed expenditure for future periods of the Parent Entity is the same as those for the Consolidated Entity. Refer to Note 25 for details.

The Parent Entity has no contingent assets, contingent liabilities or guarantees at balance date.

NOTE 29 EVENTS AFTER BALANCE SHEET DATE

Subsequent to year end the following non-recourse employee shares (NRE) were issued to employees:

Number of NRE’s	Exercise Price	Vesting Date	Expiry Date
3,500,000	$0.300	5 July 2013	5 July 2016

There have been no other events since 30 June 2013 that impact upon the financial report.

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DIRECTORS' DECLARATION

The directors of the company declare that:

The financial statements, comprising the statement of comprehensive income, balance sheet, cash flow statement, statement of changes in equity, accompanying notes, are in accordance with the Corporations Act 2001 and:
a. comply with Accounting Standards and the Corporations Regulations 2001 ; and
b. give a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date.
The Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.
In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
The remuneration disclosures included in pages 12 to 18 of the directors’ report (as part of audited Remuneration Report), for the year ended 30 June 2013, comply with section 300A of the Corporations Act 2001.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A.

This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:

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S N Sheard

Chairman

Brisbane 18 September 2013

Page 60 of 64

Tel: +61 7 3237 5999 Level 10, 12 Creek St Fax: +61 7 3221 9227 Brisbane QLD 4000 www.bdo.com.au GPO Box 457 Brisbane QLD 4001 Australia

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INDEPENDENT AUDITOR’S REPORT

To the members of Carpentaria Exploration Limited

Report on the Financial Report

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

Directors’ Responsibility for the Financial Report

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

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Independence

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

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Opinion

In our opinion:

(a) the financial report of Carpentaria Exploration Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 1 (s) in the financial report, which indicates that the ability of the consolidated entity to continue as a going concern is dependent upon the future successful raising of necessary funding through equity, successful exploration and subsequent exploitation of the consolidated entity’s tenements and/or the receipt of funds from a joint venture partner. These conditions, along with other matters as set out in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity’s ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 12 to 18 of the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

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

BDO Audit Pty Ltd

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

Kim Colyer
----- End of picture text -----

Director

Brisbane, 18 September 2013

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ADDITIONAL STOCK EXCHANGE INFORMATION

DISTRIBUTION OF NUMBER OF HOLDERS OF EQUITY SECURITIES AS AT 13 SEPTEMBER 2013

	Ordinary shares fully paid
NumberofSecuritiesHeld	No.of holders
1 to 1,000	189
1,001 to 5,000	544
5,001 to 10,000	382
10,001 to 100,000	789
100,001 and over	113
	2,017
Number of shareholders holding less than a marketable parcel of shares	0

TWENTY LARGEST HOLDERS OF EACH QUOTED SECURITY

Security: CAP - ORDINARY SHARES

Rank	Name	BALANCE	% HELD
1	SILVERGATE CAPITAL PTY LTD	19,691,371	17.61%
2	AUSTRALIA CONGLIN INTERNATIONAL INVESTMENT GROUP PTY LTD	10,479,000	9.37%
3	NEFCO NOMINEES PTY LTD	5,535,338	4.95%
4	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	3,415,812	3.06%
5	MR CONGLIN YUE	3,100,000	2.77%
6	SYDNEY EQUITIES PTY LTD	2,274,000	2.03%
7	MR STUART NICHOLAS SHEARD	2,225,000	1.99%
8	BEST EXPAND INVESTMENTS LIMITED	1,550,735	1.39%
9	CAMCOVE PTY LTD	1,500,000	1.34%
10	DOUGLAS CHARLES BREWSTER	1,500,000	1.34%
	CHRISTOPHER JOHN BYNON-POWELL & VICTORIA ANNE BYNON-
11	POWELL	1,500,000	1.34%
12	QUENTIN HILL	1,500,000	1.34%
13	MR STUART NICHOLAS SHEARD	1,500,000	1.34%
14	JOHN DONOHUE	1,500,000	1.34%
15	CARPENTARIA EXPLORATION LTD	1,300,000	1.16%
16	MR TECK MING LOO & MRS SHINKO LOO	909,476	0.81%
17	FORSYTH BARR CUSTODIANS LTD	808,619	0.72%
	MR WILLIAM JAMES MCCORMACK & MRS SUSAN ROSEMARY
18	MCCORMACK & GALAWOOD PTY LTD	669,588	0.60%
19	VCM INVESTMENTS PTY LTD	625,419	0.56%
20	MRCONGLIN YUE	567,482	0.51%
		62,151,840	55.57%

VOTING RIGHTS

All ordinary shares carry one vote per share without restriction.

SUBSTANTIAL SHAREHOLDERS

Substantial shareholders as shown in substantial shareholder notices received by the Company at 13 September 2013 are:

Name of Shareholder	Ordinary Shares
AUSTRALIA CONGLIN INTERNATIONAL INVESTMENT GROUP PTY LTD	10,479,000
SILVERGATE CAPITAL PTY LTD	19,691,371

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Annual Financial Report 30 June 2013

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INTERESTS IN MINING TENEMENTS

Exploration Permits for Minerals. All tenements are held by Carpentaria Exploration Limited as the principal and sole holder with 100% unencumbered share, apart from those marked accordingly in the table below:

Licence No.	Licence No.	Name	Original Grant Date	Expiry Date	Sub Blocks	Area Km2	%
EL	6246	Glen Isla	24/05/2004	24/05/2014	12	33.9	100%
EL	6901	Combaning	8/10/2007	8/10/2013	154	435.8	100%
EL	6936 ~~1~~	Euriowie	7/11/2007	7/11/2013	31	90.9	100%
EL	6979 ~~2, 3~~	Redan	11/12/2007	11/12/2013	62	179.8	60%
EL	7208 ~~3~~	Burta	22/09/2008	22/09/2015	100	289.7	60%
EL	7375 ~~4~~	Dirnaseer	30/07/2009	30/07/2013	41	115.9	100%
EL	7504 ~~3~~	Little Peak	8/04/2010	8/04/2014	14	40.6	60%
EL	7574	Gundong	5/07/2010	5/07/2014	20	47.5	100%
EL	7655	McDougalls C	6/12/2010	6/12/2015	24	70.7	100%
EL	7656	McDougalls A	6/12/2010	6/12/2015	19	55.8	100%
EL	7657	McDougalls B	6/12/2010	6/12/2015	34	100.2	100%
EL	7680 ~~4~~	Ilabo	11/01/2011	11/01/2013	18	50.8	100%
EL	7735 ~~4~~	Koonenberry 1	16/05/2011	16/05/2013	29	86.3	100%
EL	7736 ~~4~~	Koonenberry 2	16/05/2011	16/05/2013	21	62.3	100%
EL	7737 ~~4~~	Koonenberry 3	16/05/2011	16/05/2013	15	44.4	100%
EL	7738 ~~4~~	Koonenberry 4	16/05/2011	16/05/2013	8	23.7	100%
EL	7739 ~~4~~	Mt Shannon	16/05/2011	16/05/2013	46	137.1	100%
EL	7740 ~~4~~	Wertago	16/05/2011	16/05/2013	29	85.5	100%
EL	7741	McDougalls D	16/05/2011	16/05/2016	13	38.3	100%
EL	7829 ~~4~~	Yanco Glen	2/09/2011	2/09/2013	50	146.2	100%
EL	7841	Hawsons Knob	20/09/2011	20/09/2013	176	510.1	100%
EL	7896	Barellan	6/02/2012	6/02/2014	100	283.4	100%
EL	7921	Kantappa	19/04/2012	19/04/2014	86	252.5	100%
EL	7957	Corona	29/06/2012	29/06/2014	47	137.9	100%
EL	8082	Tooloom	1/05/2013	1/05/2016	100	297.4	100%
EL	8095	Advene	28/05/2013	28/05/2015	100	287.1	100%
EL	5181 ~~5~~	Braemar	10/12/2007	9/12/2014	76	218.0	0%
EL	4395	South Dam	10/12/2009	9/12/2014	30	86.0	100%
EPM	14955 ~~6~~	Mount Agate	29/06/2006	28/06/2016	55	176.0	100%
EL	6246	Glen Isla	24/05/2004	24/05/2014	12	33.9	100%
Licence total 29 1,510 4,384

1 100 % Willyama Prospecting Pty Ltd (wholly owned subsidiary of Carpentaria)

2 1.5% NSR royalty to Perilya Broken Hill Pty Ltd.

3 JV farm-out; Pure Metals Pty Ltd

4 Under Renewal Process

5 JV farm-in; Maosen Australia Pty Ltd

6 JV farm-out; ActivEX Ltd

Page 64 of 64

AI assistant

HAWSONS IRON LTD — Annual Report 2013

65053_rns_2013-09-19_a448f7aa-1640-4fc1-bdb9-e2c24a8453ab.pdf

ANNUAL FINANCIAL REPORT

CORPORATE DIRECTORY

Board of Directors

Company Secretary

DIRECTORS' REPORT

DIRECTORS

Nick Sheard FAIG, R.P. GEO,ASEG

Chairman

Bob Hair BA (Hons)

Non-Executive Director

Bin Cai

Dr Neil Williams PSM BSc Hons (ANU) PhD (Yale) FTSE FAICD FAIM

Non-Executive Director

Paul Cholakos Bachelor of Engineering (Mining), MBA Non-Executive Director

Interests in the shares and options of the Company

SENIOR MANAGEMENT

Doug Brewster

Exploration Manager

Chris Powell

Company Secretary

CORPORATE INFORMATION

Corporate Structure

NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES

CURRENCY

OPERATING RESULTS

Commentary and Comparison with Prior Year

Cash Position

Business Strategies and Prospects For Future Financial Years

REVIEW OF FINANCIAL POSITION

Capital structure

Treasury policy

Liquidity and funding

Dividends

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

REVIEW OF OPERATIONS

Exploration

Hawsons Iron Project

Broken Hill Tin, Tungsten Project

– Braemar JV (SA EL 5181)

– South Dam (SA EL 4395)

Barellan

Advene

Tooloom

Koonenberry Nickel Project

Temora Gold Project

McDougalls/Torrowangee Iron Project

Mt Agate JV

Glen Isla Project

ENVIRONMENTAL REGULATION AND PERFORMANCE

MEETINGS OF DIRECTORS

INDEMNIFICATION OF OFFICERS OR AUDITOR

PROCEEDINGS ON BEHALF OF THE COMPANY

SHARE OPTIONS

REMUNERATION REPORT - AUDITED

Remuneration Policy

Non-Executive Director Remuneration

REMUNERATION REPORT (continued)

Employment Contracts

Agreement with Executive Chairman

Agreement with Managing Director

REMUNERATION REPORT (continued)

Agreement with Company Secretary

The agreement:

Agreement with Exploration Manager

The agreement:

Directors

REMUNERATION REPORT (continued)

Table 1: Director Remuneration

Table 2: Remuneration of key management personnel

Annual Financial Report 30 June 2013

REMUNERATION REPORT (continued)

Table 3: Equity Instruments issued as part of remuneration for the year ended 30 June 2013

Options

REMUNERATION REPORT (continued)

Shares issued on exercise of remuneration options

Relationship between remuneration and Company performance

REMUNERATION REPORT (continued)

HAWSONS IRON LTD Annual Report 2013