JADE GAS HOLDINGS LIMITED — Annual Report 2013

Oct 29, 2013

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ABN 55 062 879 583ABN 55 062 879 583

Annual Report

QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES ABN 55 062 879 583

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CORPORATE DIRECTORY

FINANCIAL REPORT FOR THE YEAR

1 July 2012 to 30 June 2013

Board of Directors

Mr Paul Piercy – Non-executive Chairman Mr Jerome G Vitale – Executive Director Dr Dennis Gee – Non-executive Director

Company Secretary

Mr Stuart Third

Registered Office

Level 1, 467 Scarborough Beach Road OSBORNE PARK WA 6017 Phone: +61 8 9217 9800 Fax: + 61 8 9217 9899 Email: info@questminerals.com.au www.questminerals.com.au

Solicitors

Kings Park Corporate Lawyers Suite 8, 8 Clive Street WEST PERTH WA 6005 Phone: + 61 8 9420 0000 Fax: + 61 8 9226 5821

Minter Ellison Lawyers Allendale Square 77 St Georges Terrance PERTH WA 6000 Phone: + 61 8 6189 7800 Fax: + 61 8 6189 7999

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

Share Registry

Banker

National Australia Bank Limited 226 Main Street OSBORNE PARK WA 6017

Advanced Share Registry Ltd 150 Stirling Highway NEDLANDS WA 6009 Phone: +61 8 9389 8033 Fax: + 61 8 9389 7871

Stock Exchange Listing

Auditors

Rothsay Chartered Accountants Level 1 4 Ventnor Street WEST PERTH WA 6005 Phone: + 61 8 9486 7094

Australian Securities Exchange Quest Minerals Limited

ASX Code: QNL

Financial Report 2012/2013 Quest Minerals Limited and controlled entities

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

CONTENTS

LETTER FROM DIRECTORS	3
REVIEW OF OPERATIONS	5
DIRECTORS’ REPORT	12
AUDITOR’S INDEPENDENCE DECLARATION	25
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	26
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	27
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	28
CONSOLIDATED STATEMENT OF CASH FLOWS	29
NOTES TO THE FINANCIAL STATEMENTS	30
DIRECTORS’ DECLARATION	74
INDEPENDENT AUDITOR’S REPORT	75
CORPORATE GOVERNANCE STATEMENT	77
ASX ADDITIONAL INFORMATION	84
TENEMENT SCHEDULE	85

Financial Report 2012/2013 Quest Minerals Limited and controlled entities

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LETTER FROM DIRECTORS

Dear Shareholder,

The present Board has been in place since 22 April 2013 when Mr Paul Piercy was appointed nonexecutive Chairman and Mr Jerome (Gino) Vitale was appointed as managing Director, with Dr Dennis Gee continuing in his capacity as non-executive director. In the period leading up to the appointment of Messrs Piercy and Vitale, there had been a number of destabilizing meetings of shareholders called to force the removal of individual directors and replacement with alterative directors, with one such meeting resulting in the removal of one director at a general meeting of shareholders held in December 2012.

With all of this distracting activity, the Company’s share price has not surprisingly suffered drastically and with it our capacity to raise capital in what has been a very weak market for microcap junior explorers. Notwithstanding, the new board was able to secure the continued financial support from the Company’s largest shareholder, Maxillion Limited, who provided $700,000 in funding through Debenture Notes during May and June. This provided the necessary working capital to complete a planned metallurgical testwork programme as part of a scoping study update, review of the JORC classified mineral resource estimate on the Perenjori Iron Ore Project and funding of corporate administration costs. On 22 October 2013 the company announced that a further $300,000 in Debenture Notes previously committed from another investor will be available for drawdown by the Company by 30 October 2013.

The Notes were originally repayable on 15 December 2013 however all of the Note holders have agreed that the repayment date will now be the earlier of 15 December 2014 or the date five business days after any change in the composition of the Company’s board, if it cannot be demonstrated to the Note holder’s sole and unfettered satisfaction that the change will not have a materially adverse effect upon the Company’s ability to perform its obligations under the Note.

The conditionality of this financial support reflects a real concern amongst investors and shareholders about the manner in which this Company has run its affairs in the past, and provides a very strong signal that they will not tolerate management time and the Company’s limited resources being wasted on unproductive endeavour in the future. The new Board is on notice and fully embraces the concept that directors’ and management efforts must be directed to adding value to shareholders’ investment by focussing on advancing the Company’s key project, in our case the Perenjori Iron Ore Project, which has excellent potential for future development.

Accordingly your present Board has, since it was constituted on 22 April, worked hard to ‘ clear the decks ’ from the legacy issues of the past, and implement changes to ensure that all future management effort and financial and other resources available to the Company are focussed on this objective. The Board has undertaken a thorough review of the Company’s project development strategy, administration costs, governance matters, quality and transparency of financial reporting, and compliance with its continuous disclosure obligations. In doing so, in addition to securing the funding referred to above, the Company achieved and reported the following significant events since the present Board was constituted:

• substantial reduction in corporate administration costs, brought about by the termination of an administration services agreement to an entity associated with Mr Vladimir (Roger) Nikolaenko, which arose in circumstances which meant that past and continuing obligations contained in the agreement are not enforceable, and a move to lower cost shared office facilities;

• determined that a $1.5m debt owed to another entity associated with Mr Nikolaenko arose in circumstances which meant that the debt and obligation were not enforceable. This obligation and that claimed upon termination of the above services agreement, have not been recognised as financial obligations in the Company’s 2013 statutory accounts, thereby relieving the Company from significant financial liabilities;

• announced a 30% increase in the Inferred Resource for the Perenjori iron ore project and are negotiating an extension of the earn-in period under which the Company can acquire a direct 80% interest in the project;

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• review of the carrying value of its mineral exploration assets, resulting in an impairment provision of approximately $5.4 million reflected in the Group’s consolidated Income Statement, with a corresponding reduction in the carrying value of the Company’s mineral exploration portfolio to around $1.0 million, essentially representing the Company’s investment in Perenjori;

• taken steps to recover approximately $1.1 million owed to the Company from unpaid calls made on holders of partly paid shares which became due on 4 October 2013;

• on 17 October 2013 announced a one-for-one non-renounceable rights issue to shareholders to raise a minimum of $541,943 to fund continued exploration at Perenjori and for working capital purposes, and

• reached agreement to settle a debt for $812,000 owed by the Company to an entity controlled by Mr Vitale, the Company’s Managing Director for the lesser sum of $175,000, with Mr Vitale underwriting $125,000 of the proposed rights issue;

In addition at the date of this report, the Board is in advanced discussion with the syndicate who presently own the Perenjori tenements to secure a minimum two year extension of the Farm-in agreement which presently expires in April 2014. Based on discussions to date the Board is confident that it will be able to secure such an extension in the short term.

The present Board has provided stability and continuity following a period of significant instability. It is united and takes its stewardship seriously. To this end it has put in place measures to ensure that there are proper reporting and accountability processes to safeguard the Company’s assets. Nevertheless, the Company faces significant difficulties and an uncertain future. Due to delays in completing its governance review, details of which are contained in this report and in the Prospectus, the Company’s 2013 statutory accounts were lodged late and its shares subsequently suspended from quotation on ASX. We have since been informed by ASX that the Company’s shares will not be re-instated for quotation until, amongst other things, such time as the Company can demonstrate the adequacy of its financial position. The Company is yet to formally apply to ASX regarding a decision on its reinstatement conditions, and does not have a final decision with respect to ASX’s reinstatement conditions (which may go beyond demonstrating adequate a financial position). Furthermore, the composition of your Board going forward will not be known until the forthcoming AGM when all directors are up for re-election thus creating uncertainty that the present governance initiatives taken by the Board may be reversed or circumvented in the future.

The Board believes that subject to any other requirements that may be imposed by ASX, the rights issue offer made under the Prospectus lodged on 22 October, together with the proceeds from the Debenture Notes due on 30 October 2013, will facilitate re-instatement to quotation. Proceeds from the offer and from the Debenture Notes will be applied to:

• repay a portion of outstanding debt; fund sufficient exploration at the Perenjori iron ore project so as to secure a (yet to be agreed) two year extension of the earn-in period to acquire an 80% interest (to April 2016); and

• provide working capital whilst the Company seeks to negotiate and implement a long term recapitalisation plan in circumstances and on terms more favourable to those that the Company currently is in.

Following our review, your Directors believe that they have identified most of the issues that face the Company and are taking steps to address them. We are confident that this process will lead to stabilisation of the Company’s affairs and create a foundation on which to build value for shareholders in the future. We encourage you to attend the forthcoming Annual General Meeting of the Company, details of which will be forwarded in a separate formal Notice of Meeting.

Yours faithfully,

Mr Paul Piercy Non-Executive Chairman

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Mr Jerome (Gino) Vitale

Executive Director

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Dr Dennis Gee Non-Executive Director

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

REVIEW OF OPERATIONS

Perenjori Iron Ore Project

The key strategy and focus of Quest Minerals Limited (“Company”) is the advancement of the Perenjori high-grade magnetite iron ore project (‘Project”) located near the Port of Geraldton in Western Australia. The Project comprises EL 70/2777 (Feral) and EL 70/2858 (Alken), in which it is earning an 80% interest. Figure 1 highlights the Project’s strategic location 218 km south-east of Geraldton, only 14 km from the rail link that connects directly to the port and close to existing infrastructure with good access to power and water.

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Figure 1: Perenjori project location, showing proximity to rail and road infrastructure

Geologically the area consists of a V-shaped structure defined by two greenstone belts, each with multiple banded iron formation (BIF) units. Activity in 2013 has continued to focus on the eastern-most (lower) BIF unit of the eastern belt on Feral, where there is a 3.7km-long segment of BIF that averages 60-70 meters in outcrop width, dips uniformly 73°W, and occupies an elevated ridge. This is designated the Core BIF Zone.

Significantly, recent detailed geological mapping in the western belt on Alken demonstrates a similar planar BIF 3.3km in strike length, here called the Bestry BIF Zone (Figure2), which is 50-60m in outcrop width, and dipping 75[0] west. The Bestry BIF zone has been drilled for surficial hematite without significant results, but has not been drill tested for magnetite.

The Core BIF Zone on Feral is the focus of exploration activity and conceptual development studies. Two cored diamond holes drilled in November 2012 into the northern part of the CBZ on EL 70/2777 (“Feral”, on Figure 2 ) provided information for an update of the mineral resources and metallurgical characterisation of the BIF including, for the first time, definitive intersections of the hanging and footwalls. This enabled 18 determinations of specific gravity to be made from the recovered core regularly across the BIF unit. This confirms a significantly higher specific gravity than used in the previous inferred resource estimation.

Financial Report 2012/2013 Quest Minerals Limited and controlled entities

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REVIEW OF OPERATIONS

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Figure2: Geological map of Perenjori

Project showing Core BIF and Bestry BIF Zones

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Figure3: Geological Section of the Core BIF Zone from metallurgical drill holes

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Financial Report 2012/2013 Quest Minerals Limited and controlled entities

QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

REVIEW OF OPERATIONS

The present mineral resource estimate for Perenjori is summarised below (ASX announcement 27 September 2013):

Table 1: JORC Mineral Resource Estimate for Perenjori Iron Ore Project at cut-off grade of 20% Fe

Zone	Category	Tonnage Mt	Fe%	**Al2O3% **	**SiO2% **	S%
Core BIF Zone	Inferred	93.3	37.22	1.67	41.59	0.05
Eastern Belt (excluding CBZ)	Inferred	78.7	37.64	1.45	41.66	0.03
Western Belt	Inferred	19.7	29.77	3.39	47.04	0.32
Total	Inferred	191.7	36.61	1.75	42.18	0.07

The estimate was provided by the Company’s consultants CSA Global (CSA) in Perth Western Australia using a lower cut-off grade of 20% Fe.

Core BIF Zone

Current development scoping studies are focussed on an area expected to be the most likely location for any commercial development, designated as the Core BIF Zone (CBZ), on the eastern-most BIF of the eastern belt, between 6752550 mN and 6756230 mN. This is a zone of elevated topography and simple structure of the main BIF which is 50-55m in true width, and dips uniformly west at 72[0] .

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Figure 4: Area of drilling (shown as black circles) contributing to Inferred Resource and un-drilled BIF contributing to the Exploration Target on both EL 70/2858 (Alken) and EL 70/2777 (Feral). New Bestry BIF target is located at the top end of western limb

The Core BIF Resource is 2,800m along strike, 50m wide on average and has been modelled down to 300m below surface; however the Inferred category only extends to 175m below surface, all material lower than this is unclassified. A blank block model was created using 50mN x 10mE x 25mRl parent blocks,

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REVIEW OF OPERATIONS

constrained within the mineralisation wireframe and sub-celled to 10m x 5 m x 2m were necessary to prevent volume loss. Assays were composited to 1m and estimated using the inverse distance squared method.

CSA Global now report an Inferred Resource within the Core BIF Zone as 93.3 Mt at 37.2% Fe (refer Table 1) to a depth of 175m. Together with the previously reported exploration target within the CBZ, the conceptual tonnage potential of the CBZ is of the order of 150Mt, which is the figure used for conceptual scoping studies presently being undertaken by the Company.

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Figure 5: Map showing the area of inferred resource in the Core BIF Zone in relation to the Inferred Resource (blue bands) outside of the CBZ.

CSA has previously estimated an overall Exploration Target of range 320 – 360Mt at 32-37% Fe for zones outside the area of historical drilling (ASX release 29 Mar 2012). The exploration targets have been estimated using the high-resolution (200m line spacing, 50m ground clearance) aeromagnetic imagery and extrapolation of the RC drill holes that contributed to the previously released Mineral Resource estimate. These tonnage targets lie outside the areas of the resource drilling. The potential quantity and grade of the Exploration Target is conceptual in nature. There has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

The target zones lie within the northern part of Feral and in much of Alken, outside of the areas of historical drilling, as shown on Figure 4 . The increment of 44.7 million tonnes in Inferred Resources included in CSA’s present resource estimate falls within this target (for comparison, refer the Company’s previous resource statement, included in ASX release 31 July 2013, Report for Quarter ended 30 June 2013). These results provide confidence that further resource-definition drilling planned by the Company will meet its stated Exploration Target.

Altogether there are now eight holes over a 2.6km strike length in the CBZ. None of these holes yet have down-hole surveys. Only the recent core holes have located both the footwall and hanging wall of the BIF unit. However BIF contacts are accurately located at the surface using Geotracker linked to MapInfo and using high-resolution GeoEye satellite imagery. This enables a reasonable geological model to be constructed for the main BIF.

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REVIEW OF OPERATIONS

CSA modelled the Core BIF using a constraining wireframe based on lithology and a nominal cut-off of 20% Fe. Dip of the BIF unit was established using the surface mapping and downhole lithological intersections.

Quest has submitted to DMP a Program of Works for an 18-hole RC drilling program on the Core BIF Zone on Feral, with the objective of lifting the confidence level of resources to Indicated status. These planned holes lie in remnant native vegetation on freehold farming land. As such there are some environmental considerations. Mattiske Environmental Consultants have recently completed field surveys of the specific drill sites and proposed access tracks. The level of environmental assessment is still to be set.

The Company has also commissioned Mintrex Consultants to oversee the completion of further metallurgical test work utilizing recovered core from the Feral area and to undertake a new scoping study to include updated estimates of operating and capital costs and a project financial model to be developed. The scoping proposal suggested is for a 12Mt/y mining operation, producing 5Mt/y high-grade magnetite concentrate and 240kt of hematite. Logistics would include trucking of product to the Perenjori railhead some 20km distant by road, then rail to the Port of Geraldton on the existing railway.

Nigeria Gold Exploration

Quest Minerals, through its subsidiary Boab Mining Nigeria holds 11 granted exploration licenses in western Nigeria. As a result of political unrest in the north of Nigeria, tightness of working capital, and difficulties with tenement management, activity has focused only on the Bin Yauri Project in Kebbi State, western Nigeria, specifically 7283EL, for which Certificate of Title has been issued.

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Figure6: Location of Boab Mining tenements in Nigeria

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REVIEW OF OPERATIONS

Rock-chip grab samples of quartz veins on the hills flanking active artisan workings on EL 7283 yielded high values in gold at Kurege and Aduku Prospects. Peak values of 13g/tonne with several supporting values >1g/tonne, occur over an aggregate strike length of 2.5km. The high gold values lie in a structural corridor interpreted as a pressure shadow trending northeast from the ovate-shaped Yelwa Granite.

Follow-up rock-chip sampling in which composite samples were collected over the widths of the quartz veins, returned significant but reduced levels of gold, up to a peak of 2.3g/tonne. This indicates the presence of “spotty” gold.

Gold mineralisation is associated with multiple quartz veins that relate to shear zones within schist. These are the common hosts to gold mineralisation within this region, as seen at the historical Bin Yauri gold mining centre 20km to the southwest.

Mapping in the structural pressure-shadow area between Kurege-Aduku Prospects and the Yelwa Granite body records abundant quartz veins, some anomalous gold values and hitherto unknown artisanal workings. This area, called the Kimu Corridor lies on the strike extension of the Kurege-Aduku line.

Close-spaced (80 x 40m) soil sampling programs were undertaken over Kurege-Aduke, and more widely spaced (800 x 400m) were undertaken in the Kimu corridor. The close-spaced sampling around Kurege and Aduku identified sharp bull-eye anomalies which now represent targets for future trenching and drilling.

The broader survey in the Kimu Corridor reveals a large coherent gold anomaly 6km long and 1km wide at the 12ppb (90percentile) threshold, with three peak values above 40ppb (98percentile). This large anomaly requires infill soil geochemistry at 80m x 40m to define precise targets.

Quest’s strategy in Nigeria is to generate several drill-ready gold targets and to seek a farm-in partner to fund further exploration. Due to uncertainty as to funding, the Company has raised an impairment provision at 30 June 2013 and is now carrying this asset at nil value in the balance sheet.

Victory Bore Project E57/550

Quest Minerals holds a 100% interest in E57/550 in the Mid West region of Western Australia. The tenement covers the northern 11 km segment of a 25 km long magnetic anomaly overlying two major magnetite rich horizons within a layered gabbro complex. This style of layered intrusive is a host for vanadium and titaniumbearing magnetite iron deposits such as the nearby Windimurra Vanadium Project (Atlantic Limited) which is now in production.

In March 2011 Quest announced an inferred resource based on RC and DD drilling and this remains the present mineral resource estimate:

Table 2: JORC Mineral Resource Estimate for Victory Bore

Category	Tonnes	Fe	P	SiO2	Al2O3	LOI	V2O5	TiO2
Inferred	151,000,000	25.0	0.013	28.6	14.8	0.56	0.44	6.73

A full scoping study was undertaken by leading industry consultants METS and Cube Consulting during the year ended 30 June 2012. Results indicated that although technically positive as a ferrovanadium project, it was marginally economic at the then-present depressed price for vanadium. The scoping study was independently reviewed by Promet Engineers who concurred with this view.

The Company has raised a significant impairment provision at 30 June 2013 to reflect the uncertain future of the project given present market conditions and is now carrying the project at nil value in the balance sheet. Although little work has been done on Victory Bore in the last year, the Ti-V-Fe deposit remains of value,

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REVIEW OF OPERATIONS

and the Company intends to investigate the potential for alternative mineralization on the tenement package other than ferrovanadium, preferably through a farm-out to a joint venture partner.

Competent Persons Statement

Information in this Annual Report that relates to exploration results reflects information compiled by Dr Dennis Gee a Director of the company and a member of the AIG. He has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity upon which he is reporting on as a Competent Person as defined in the 2004 Edition of “The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.” He consents to the inclusion in this report of the matters based on the information compiled by him, in the form and context in which it appears.

Information in this Annual Report that relates to Mineral Resources is compiled by Rory Devlin and Bielin Shi, both Members of AIG. Both are employed by CSA Global Pty Ltd, and each have sufficient experience relevant to the styles of mineralisation and types of deposit under consideration to qualify as Competent Persons in terms of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2004 Edition). Both have consented to the inclusion of information compiled by them in previous ASX releases.

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DIRECTORS’ REPORT

Your directors submit their report for the Company and its controlled entities (“the Consolidated Entity” or “the Group”) for the year ended 30 June 2013.

DIRECTORS

The names and details of the Company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

Mr Paul Piercy Non-executive Chairman (Appointed 22 April 2013) Qualifications Dip Met. FAusIMM, CP, FAICD Experience Appointed Non-executive Chairman on 22 April 2013 Mr Piercy is a metallurgist with wide operational mining experience who has held senior management and technical positions within the Rio Tinto Limited group, including General Manager of Hamersley Iron’s Dampier port and the rail operations, General Manager of Hamersley Iron’s Paraburdoo and Channar operations and Managing Director of Novacoal and Kembla Coal and Coke. From 1997 to 2000 Mr Piercy was Managing Director of WestTrac Equipment before paying an integral role in the successful establishment of WestTrac China, as it Chairman/CEO based in China. Interest in shares & options Nil ordinary shares, nil options. Special responsibilities Mr Piercy is the Non-executive Chairman of the Company. Directorships held in other listed entities Mr Piercy is currently a non-executive Director of Pilbara iron ore developer Australasian Resources Limited and China based miner Dragon Mountain Gold Limited. Mr Jerome G Vitale Executive Director (Appointed 22 April 2013) Qualifications B Comm, ACA, FAICD, Sen F Finsia Experience Appointed Managing Director on 22 April 2013 Mr Vitale is a seasoned finance, corporate and operations executive with over 25 years wide ranging experience in the mineral resources sector. He is a Chartered Accountant, a Senior Fellow of the Financial Services Institute of Australia and a Fellow of the Australian Institute of Company Directors. After a period of 14 years working in the stockbroking sector and later in investment banking with Standard Chartered Bank and the Normandy Mining Group, as Managing Director of Burdekin Resources Mr Vitale led a team responsible for the mine development and operation of the successful McKinnons gold project in Cobar New South Wales. He was Managing Director of Redbank Mines Limited from 2000 to 2008 during which time the company acquired the Redbank Copper Mine in the Northern Territory producing high value concentrates with off-take and financing arrangements negotiated with a major International commodities trading group.

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DIRECTORS’ REPORT

Most recently Mr Vitale has developed his consultancy, Vitale Corporate, a successful mining consulting business with a focus on corporate turnarounds and extensive relationships with a number of China State Owned enterprises (SOE’s) and private equity investors based in Hong Kong and China.

Interest in shares & options

Nil ordinary shares, nil options.

Special responsibilities

Mr Vitale is the Managing Director of the Company.

Directorships held in other listed entities

Mr Vitale does not currently hold any directorships in other listed entities.

Former directorships in other listed entities in the past 3 years are Carpathian – Resources Limited (May October 2011).

Dr Dennis Gee

Non-Executive Director

Qualifications

BSc (Hons), PhD, GMAICD

Experience Appointed Non-executive Director on 15 June 2010 and appointed Executive Director on 18 September 2012

Dr Dennis Gee is an eminent Australian geologist with 48 years’ experience in the mining industry, government service and research management. In the latter part of his career he was Chief Executive Officer of the Cooperative Research Centre for Landscape Environments and Mineral Exploration attached to CSIRO. This involved a large research team working on geochemical, biological and hydrological process in the regolith. Previously he was the Director of the Northern Territory Geological Survey, and successfully implemented a new strategic plan to stimulate mineral exploration in the Northern Territory of Australia. Prior to that, he was Regional Manager with MIM Exploration, and Exploration Manager for Reynolds Australia Metals. Both Reynolds and MIM were top-ranking mining companies in Australia, with world-class gold and basemetal production. He served as Deputy Director of the Geological Survey of Western Australia, and supervised the completion of 1:250,000 scale regional mapping of the State.

Dr Gee commenced his career with the Tasmanian Mines Department. He is a graduate of the University of Tasmania with BSc (Hons) and PhD. He is a former President of the Geological Society of Australia. He has widespread exploration experience in mineral and energy commodities throughout Australia, South America and Africa. He is Member of the Australian Institute of Geoscientists, and Graduate Member of the Australian Institute of Company Directors.

Interest in shares & options

775,080 ordinary shares, nil options.

Special responsibilities

Dr Gee provides the Company with technical geological experience.

Directorships held in other listed entities

Mr Gee does not currently hold any directorships in other listed entities.

Former directorships in other listed entities in the past 3 years are: Torrens Energy Limited (Chairman) (ASX: TEY) (February 2007 to March 2012).

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DIRECTORS’ REPORT

Mr Alan Winduss	Non-executive Chairman (Resigned 22 April 2013)
Qualifications	CPA, FTIA, FAICD, AFAIM
Experience	Appointed director on 11 August 2008, resigned on 22 April 2013
	Mr Winduss is a director of Winduss & Associates Pty Ltd, Chartered
	Accountants, and has been involved in professional accounting in public practice
	for over 25 years, specialising in corporate management, finance, capital raising,
	restructuring and corporate governance matters including ASX and ASIC
	compliance.
	Mr Winduss is a Fellow of the Australian Institute of Company Directors, a
	Fellow of the Taxation Institute of Australia, an Associate Fellow of the
	Australian Institute of Management and a registered company auditor.
	Mr Winduss has extensive experience in advising companies operating in the
	mining exploration sector.
Interest in shares & options	398,796 ordinary shares, nil options.
Special responsibilities	Mr Winduss was the Non-executive Chairman of the Company until 22 April,
	2013.
Directorships held in other
listed entities	United Overseas Australia Limited ASX and SGX Listed (ASX: UOS) (since
	November 1995), UOA REIT BHD Bursa Malaysia Listed (since October 2008),
	UOA Development Bursa Malaysia Listed (since January 2011), Advanced
	Share Registry Limited (ASX: ASW) (since August 2008).
	Former directorships in other listed entities in the past 3 years are: IFS
	Construction Services Limited (ASX: AFS) (20 July 2012 to 27 August 2012),
	Black Ridge Mining Ltd (ASX: BRD) (4 February 2011 to 15 May 2013) and
	Magna Mining Limited (ASX: MAN) (24 September 2009 to 15 May 2013).
Mr Robert Molkenthin	Executive Director (Appointed 20 December 2012, Resigned 22 April, 2013)
Qualifications	BA, ACA
Experience	Appointed as Executive Director on 20 December 2012, resigned on 22 April
	2013
	Mr Molkenthin has over 25 years’ experience in Australia and internationally in
	a wide range of business environments at all levels in corporate finance and
	business operations. Previous experience encompasses capital raising, IPOs and
	corporate restructuring in the engineering, mining, property and retail sectors.
Interest in Shares & Options	Nil ordinary shares, nil options.
Special Responsibilities	Mr Molkenthin was the Executive Director of the Company.
Directorships held in other
listed entities	Mr Molkenthin does not currently hold any directorships in other listed entities.

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DIRECTORS’ REPORT

Former directorships in other listed entities in past 3 years are: Black Ridge Mining Ltd (ASX: BRD) (11 April 2012 to 15 May 2013).

Mr Lewis Tyndall	Non-executive Director (Removed 17 December 2012)
Qualifications	Barrister
Experience	Appointed Director on 15 March 2004

Mr Lewis de Vere Tyndall is a Barrister of the Supreme Court of NSW. He has practiced in Commercial and Environmental Law and Equity for the last 19 years. Prior to that, he was the CEO of a medium sized public company in the sports and leisure sector. He currently sits on either the executive or advisory board of a number of private companies.

Mr Tyndall advises and speaks on domestic and international law and commerce, climate and carbon economy. He has wide ranging skills in public company and project funding acquisition and implementation having acted for and advised clients in those areas prior to going to the Bar. Interest in shares & options 11,689 ordinary shares, nil options. Special responsibilities Mr Tyndall was a Non-executive Director of the Company. Directorships held in other listed entities Mr Tyndall does not currently hold, and has not held in the past 3 years, any directorships in other listed entities. Mr Chris Barker Non-executive Director (Appointed 18 September 2012, resigned 19 December 2012) Experience Appointed director 18 September 2012 Mr Chris Barker is a highly experienced mining management executive in both mining and industrial engineering and has extensive operational mining, project development and exploration experience in Australia and internationally. He has an extensive knowledge of the technical aspects of mining from geological resources evaluation and geo-technical assessment, to all operational mining and processing production aspects. In addition, his experience on mine evaluation, project feasibility studies, project planning and scheduling and capital project control and project development are highly acknowledged.

Mr Barker's broad-based Project and Operational experience, technical knowledge and management expertise has been invaluable in guiding the development of projects and operational mines into highly successful producers in Australia and internationally. He has held executive management positions with major mining companies that include Chief General Manager at Anglo American Ashanti Goldfields; General Manager at TiWest Minerals Sands project north of Perth and Consolidated Rutile Limited.

Interest in shares & options Nil ordinary shares, nil options.

Special responsibilities Mr Barker was a Non-executive Director of the Company.

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DIRECTORS’ REPORT

Directorships held in other listed entities Mr Barker does not currently hold, and has not held in the past 3 years, any directorships in other listed entities. OTHER OFFICERS Mr Anthony Hamilton Chief Executive Officer (Appointed 4 May 2012, resigned 18 September 2012)

	Mr Anthony Hamilton was appointed Chief Executive Officer of the company
	with effect from 4 May 2012 and resigned on 18 September 2012. He has
	operational experience in base metals, gold, diamonds, oil & gas and project
	development.
Mr Stuart Third	Company Secretary (Appointed 12 September 2012)
	Mr Stuart Third is a Chartered Accountant and a Chartered Tax Advisor, and
	holds Bachelor of Business and Master of Taxation. He is a director of a
	Western Australian Chartered Accounting practice and has been involved in
	professional accounting in public practice for over 15 years, undertaking roles in
	corporate management, finance and corporate governance matters including ASX
	and ASIC compliance. He has extensive experience in advising companies both
	listed and in the private sector.
Mr David Semmens	Company Secretary (Resigned 12 September 2012)

PRINCIPAL ACTIVITIES

The principal activity during the financial year was mineral exploration including the exploration and evaluation of opportunities located domestically and internationally.

OPERATING RESULTS

The Consolidated Entity’s operating loss after tax for the year ended 30 June 2013 was $4,149,387 (2012: loss of $1,188,590).

REVIEW OF OPERATIONS

Progress of the group’s activities, and future emphasis, in relation to projects and negotiations thereon located in Western Australia and overseas are detailed in the Review of Operations which precedes the Directors’ Report.

FINANCIAL POSITION

At the end of the financial year, the Consolidated Entity had $382,355 (2012: $609,491) in cash and on deposit.

DIVIDENDS

The directors do not recommend the payment of a dividend for this financial year. No dividends have been paid or declared by the Company since the end of the previous financial year (2012: Nil).

SIGNIFICANT CHANGE IN STATE OF AFFAIRS

On 22 August 2012, the Company issued 60,000,000 shares at a deemed price of $0.011 each as part consideration for certain obligations under the Victory Bore Sale Agreement (Note 21).

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DIRECTORS’ REPORT

On 12 September 2012, the Company announced the appointment of Mr Stuart Third as Company Secretary following the resignation of Mr David Semmens effective from 12 September 2012.

On 19 September 2012, the Company announced the appointment of Mr Chris Barker as a Non-executive Director effective from 18 September 2012 and resignation of Mr Anthony Hamilton as Chief Executive Officer of the Company effective from 18 September 2012.

On 17 December 2012, Mr Lewis Tyndall was removed from the Board pursuant to a s249 Notice received from a shareholder.

On 20 December 2012, the Company announced the appointment of Mr Robert Molkenthin as an Executive Director effective from 20 December 2012 and resignation of Mr Chris Barker as a Non-executive Director of the Company effective from 20 December 2012.

The Company raised $225,000 from a fully underwritten share placement undertaken in October and a further $198,000 in December 2012 through a Share Purchase Plan Offer to existing shareholders in Australia and New Zealand which saw 24,750,000 shares issued to shareholders that took advantage of the plan.

The Company conducted General Meetings on 17 October 2012 and 17 December 2012 in addition to the Annual General Meeting on 7 November 2012. A further General Meeting was conducted on 22 January 2013 which provided a new authority to place shares to raise capital for the Company.

On 22 April 2013, the Company announced the appointment of Mr Paul Piercy as a Non-executive Chairman and Mr Jerome Vitale as Managing Director effective from 22 April and resignation of Mr Alan Winduss as Nonexecutive Chairman and Mr Robert Molkenthin as an Executive Director of the Company effective from 22 April 2013.

During late May 2013, the Company entered a trading halt and subsequent voluntary suspension whilst it negotiated terms of funding. The Company was restored to trading upon announcement on 20 May 2013 that it had entered into agreements to issue unsecured debenture notes to an aggregate value of $1 million (of which $700,000 has been received) from major shareholder Maxillion Limited and other professional and sophisticated investors to advance Perenjori Iron Ore Project and for working capital purposes.

In the opinion of Directors there were no other significant changes in the state of affairs of the group that occurred during the financial year under review not otherwise disclosed in this report or the consolidated financial statements.

SIGNIFICANT EVENTS SUBSEQUENT TO BALANCE DATE

On 22 July 2013, the Company changed registered office and principal place of business. These were again changed to the present location effective from 8 October 2013.

On 30 July 2013, the Company announced the termination of an administration service contract between Quest Minerals Ltd and Corporate Admin Services Pty Ltd (CAS). CAS had made a claim for approximately $110,000 in unpaid fees, and on that basis had purported to terminate the agreement. CAS has also claimed a termination payment of approximately $33,000 per month from July 2013 to the end of the term of the agreement (4 May 2014). The agreement arose in circumstances that required shareholder approval under Chapter 2E of the Corporations Act 2001 . Such approval was not obtained and as a result the agreement is not enforceable. The Directors have advised CAS of this.

During a review of the Company’s corporate governance practices and policies the Company considered the $3.02 million deferred payment obligation (Debt) owed to Mutual Holdings Pty Limited, an entity controlled by Mr Vladimir (Roger) Nikolaenko. The Debt arose upon the delineation of Inferred Resources pursuant to the terms of acquisition of the Victory Bore Vanadium Project announced on 23 October, 2009. The Debt was reduced by

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DIRECTORS’ REPORT

$0.66 million in August 2012 and was recognized in the Company’s balance sheet contained in the Interim Financial Report at 31 December 2012. It was due for repayment in August 2014.

Mutual Holdings subsequently assigned approximately $0.8 million of the Debt to Haramont Pty Limited, a company controlled by Mr Vitale. Mr Vitale was later appointed the Company’s Managing Director.

Flowing from the review, the Directors have determined that the Debt arose in circumstances that required shareholder approval under Chapter 2E of the Corporations Act 2001 . Such approval was not obtained. As a result the independent directors have determined that the Debt is not enforceable. Given Haramont purchased its portion of the Debt as a bona fide purchaser for value without notice, there was uncertainty whether Haramont’s portion of the Debt was enforceable. To resolve the uncertainty, on 30 September 2013 the Company and Haramont agreed a compromise under which, and with effect from 30 June 2013, the Company accepted that it was indebted to Haramont for $175,000 (or approximately 20% of Haramont’s portion of the Debt). All applicable interest was waived. Further details are provided at Notes 25 and 26 to the Financial Statements.

As the Directors have determined that the balance of the Debt (owed to Mutual Holdings) is not enforceable, the Debt is not payable and has been removed from the Company’s recorded liabilities. Notwithstanding this, and so that the Company’s financial statements and notes give a true and fair view of the risk that Mutual Holdings may succeed in enforcing the Debt, the Directors have formed the opinion that additional information on the circumstances in which the Debt arose is necessary to give a true and fair view of the Company’s financial position and performance. That information is at Note 21 to the financial statements for the year ended 30 June 2013.

On 30 August 2013, the Company made calls for a total of $1.1 million on Partly Paid Shares with final payment due on 4 October 2013. At the date of this report, payments due on the call had not been received from the holders of the partly paid shares. The Company is taking steps for the shares to be forfeited and for the unpaid call to be recovered.

Except for the above, no matters or circumstances have arisen since the end of the financial year, that have significantly affected, or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years.

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

The Company intends to continue its current activities and continue to look for other appropriate opportunities. Further information regarding the likely developments in the operations of the consolidated entity has not been included in this report because disclosure of this information would be likely to result in an unreasonable prejudice to the group.

LIKELY DEVELOPMENTS AND FUTURE RESULTS

Other than as referred to in the Review of Operations, further information as to likely developments in the operations of the Consolidated Entity would, in the opinion of the directors, be speculative and may hinder the Consolidated Entity in the achievement of its commercial objectives.

OPTIONS

At the date of this report the Company had 35,000,000 (2012: 42,000,000) options which were outstanding. Refer to Note 19 of the financial statements for further details of the options outstanding.

During the year 25,000,000 (2012: 10,000,000) options were issued and 32,000,000 (2012: 14,040,000) options lapsed.

During, and since the end of, the financial year, no fully paid ordinary shares were issued by virtue of the exercise of options (2012: Nil). None of the options on issue entitle the holder to participate in any share issue of the Company or any other body corporate.

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DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED)

This report details the nature and amount of remuneration for each Director of Quest Minerals Limited.

Remuneration policy

The remuneration policy of Quest Minerals Limited has been designed to align Director objectives with Shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives. The Board of Quest Minerals Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best Executives and Directors to run and manage the Company as well as create goal congruence between Directors and Shareholders.

The Board’s policy for determining the nature and amount of remuneration for Board members is as follows:

The remuneration policy, setting the terms and conditions for an Executive Director was developed by the Board. The Board reviews Executive packages annually by reference to the Company’s performance, Executive performances and comparable information from industry sectors and other listed companies in similar industries.

The Board policy is to remunerate Non-executive Directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the Non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-executive Directors is subject to approval by Shareholders at the Annual General Meeting. Fees for Non-executive Directors are not linked to the performance of the Company.

The full Board reviews recommendations on Remuneration packages and other terms of employment for Executive Directors and other senior Executives. Remuneration packages are set at levels that reflect the nature of the Company’s operations and resources.

Remuneration for work outside that ordinarily performed by of Non-executive Directors from time to time is determined by the Board.

Nomination and Remuneration Committee

On 6 June 2012, the Board resolved to form a Nomination and Remuneration Committee to oversee the remuneration policy outlined above. The members of the Committee were Mr Lewis Tyndall and Dr Dennis Gee.

Until the formation of the Committee, the Board was responsible for establishing the Company’s remuneration policies and practices and to ensure they match the group’s objectives. The Company’s Board proposed the Managing Directors’ total remuneration package and is responsible for reviewing the non executive remuneration. Since 6 June 2012, the Committee has become responsible for these matters.

The Committee did not meet during the year, and the Board resolved that given the size and circumstances of the Company, the functions of the Remuneration Committee could be more readily attended to by the Board. On 25 June 2013, the Board resumed the functions of the Remuneration Committee.

Non-executive Director and executive remuneration

The remuneration of non-executive directors may not exceed in aggregate in any financial year the amount fixed by the Company. Currently the non-executive directors are remunerated by way of director fees which have been set at $40,000 p.a. for the non-executive Chairman and $30,000 for the non-executive directors, amounts considered reasonable for a company of its size and operational activity.

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DIRECTORS’ REPORT

Details of Executives – Service agreement Jerome Vitale Managing Director

Remuneration and other terms of employment are formalised in a service agreement with Mr Vitale and his private company Haramont Pty Ltd (Haramont) as detailed below:

• Term of agreement – Commencing on 22 April 2013 for an initial term of twelve (12) months and may be extended by mutual agreement by the parties on an annual basis at the anniversary date. In the event that the Company does not wish to extend the initial term or any subsequent anniversary date, it must provide a minimum of 3 months written noticed before the anniversary date. Failure to provide such notice will be deemed to be an automatic extension of the term by a period of twelve (12) months from the anniversary date;

• Base remuneration of $12,500 per month plus superannuation, standard entitlements and a cash bonus at the discretion of the Board based short and long term key performance criteria to be set by the Board on an annual basis.

• The base remuneration is subject to a rise and fall clause that allows for additional utilisation of Mr Vitale’s time as dictated by project development requirements and the level of complexity and size of the company’s operations, up to a maximum of $25,000 per month.

• Offered 30 million performance rights with annual expiry dates between 30 April 2015 and 30 April 2017, subject to the market capitalisation of the Company (calculated on the closing price of the Company’s shares as traded on the Australian Securities Exchange (ASX) for 10 consecutive trading days) achieving stated targets as follows:

• Market capitalisation $25.0 million – 10 million performance rights

• Market capitalisation $35.0 million – 10 million performance rights

• Market capitalisation $45.0 million – 10 million performance rights

• The issue of the performance rights is subject to the approval of shareholders at the next General Meeting to be held after the 2013 Annual General Meeting.

• Mr Vitale’s key short term and long term performance criteria will be determined by the Board of Directors from time to time but at least annually. In the first year, or if not met within the first anniversary then as soon as practicable thereafter, the key performance objectives are:

• to secure a suitable joint venture partner for the Perenjori Iron Ore Project on terms that are acceptable to the Board, including the re-imbursement of historical costs on the project expended by the Company. If this objective is met Mr Vitale will be entitled to a bonus equivalent to one year’s remuneration plus applicable superannuation calculated at the statutory rate calculated at the average annualized rate applicable in the three months immediately preceding the date on which this key performance criterion is met.

and

• to complete the recapitalization of the Company through a capital raising of which a minimum ‘new cash’ (i.e. excluding any off-set against existing debt owed by the Company to any third party) component is to be a cumulative $1.6 million. If this objective is met, Mr Vitale will be entitled to a bonus of $100,000 payable within 14 days of completion

• In the event there is a material change to Mr Vitale’s role or seniority, scope of duties, responsibilities, or remuneration which is not agreed, he will be paid a sum equivalent to 12 months’ remuneration calculated at the average annualised rate applicable in the three months immediately preceding the date of the material change termination plus any accrued benefits and any bonus to which he is entitled.

• If, after a probationary period of six (6) months commencing on 22 April 2013, the Agreement is terminated by the Company for any reason other than the insolvency of Haramont or material breaches of duty, Mr

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DIRECTORS’ REPORT

Vitale will be paid a sum equivalent to the lesser of (a) 12 months’ remuneration calculated at the average annualized rate applicable in the three months immediately preceding the date of termination plus any accrued benefits and any bonus to which he is entitled and (b) the maximum amount which the Company may pay in accordance with ASX Listing Rule 10.19. The payment will become due and payable within 14 days of the date of termination.

Reward for Performance

During the year there was no reward for the performance component of any remuneration package.

Key Management Personnel Positions

• P Piercy Non-executive Chairman: appointed 22 April 2013.

• JG Vitale Executive Director: appointed 22 April 2013.

• D Gee Executive Director: appointed as Non-Executive Director on 15 June 2010, appointed as Executive Director on 18 September 2012 and Non-Executive Director from 20 December 2012.

• A Winduss Non-executive Chairman: appointed 11 August 2008, resigned 22 April 2013.

• L Tyndall Non-executive Director: appointed 15 March 2004, removed 17 December 2012

• C Barker Non-executive Director: appointed 18 September 2012, resigned 19 December 2012

• R Molkenthin Executive Director: appointed 20 December 2012, resigned 22 April 2013.

• A Hamilton Chief Executive Officer: appointed 4 May 2012, resigned 18 September 2012.

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	Value of options as	proportion of remuneration (%)		-	-	-	-	-	-	-	-			-	-	-	-	-	-
	Proportion of	remuneration - performance related (%)		-	-	-	-	-	-	-	-			-	-	-	-	-	-
		Total $		7,562	56,771	78,750	49,167	13,859	7,500	10,135	223,744			71,324	30,000	36,000	58,663	86,240	282,227
Share-based payment	Equity-settled	Options $		-	-	-	-	-	-	-	-			-	-	-	-	-	-
		Shares $		-	-	-	-	-	-	-	-			-	-	-	-	-	-
Post-employment benefits		Superannuation $		-	4,688	-	-	-	-	-	4,688			-	-	-	-	-	-
Short-term employee benefits		Non- monetary $		-	-	-	-	-	-	-	-			-	-	-	-	-	-
		Profit share & bonus $		-	-	-	-	-	-	-	-			-	-	-	-	-	-
		Salary & fees $		7,562	52,083	78,750	49,167	13,859	7,500	10,135	219,056			71,324	30,000	36,000	58,663	86,240	282,227
			2013	Paul Piercy	Jerome Vitale	Dennis Gee	Alan Winduss	Lewis Tyndall	Chris Barker	Robert Molkenthin	Total 2013		2012	Alan Winduss	Lewis Tyndall	Dennis Gee	Mathew Gauci	Paddy Reidy	Total 2012

QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT

Options granted as part of remuneration

During the year, no options were granted as part of remuneration.

DIRECTORS’ INTERESTS

Equity Investments

All options refer to options over ordinary shares of Quest Minerals Limited, which are exercisable on a one-for-one basis.

Options and rights over equity investments granted as compensation.

During the financial year no options over unissued shares in Quest Minerals Limited were granted to directors, employees and consultants as part of their remuneration other than the Company agreeing, subject to shareholder approval which is yet to be obtained, to grant 30 million performance rights to Mr Vitale (2012: Nil).

During the 2012 financial year, options over unissued shares in Quest Minerals Limited granted pursuant to shareholders approval during the 2010 financial year, to the following directors, employees and consultants as part of their remuneration expired:

• Options held by A. Winduss (3,000,000) and Authorised Holdings Pty Ltd (3,000,000) were not exercised by the due date of 30 June 2012 and therefore lapsed.

• Options held by P. Reidy (3,000,000) were not exercised within one month of the cessation of employment and were cancelled.

END OF REMUNERATION REPORT (AUDITED)

DIRECTORS’ MEETINGS

The number of Directors’ meetings held in the year and the number of meetings attended by each Director during the year were as follows:

P. Piercy J. Vitale D. Gee A. Winduss L. Tyndall C. Barker R. Molkenthin	Directors’ Meetings Nomination and Remuneration Committee No. of meetings held while in office Meetings attended No. of meetings held while in office Meetings attended
	5 5 n/a n/a 5 5 n/a n/a 17 17 - - 12 12 n/a n/a 6 5 - - 4 4 n/a n/a 5 5 n/a n/a

As at the date of this report, the Consolidated Entity did not have an audit committee, as the directors believe the size of the Consolidated Entity and the size of the Board do not currently warrant its existence.

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DIRECTORS’ REPORT

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, the Consolidated Entity paid premiums totalling $15,800 (2012: $12,893) in respect of a contract insuring all the directors of the Company against a liability incurred in their role as directors of the consolidated entity, except where:

• the liability arises out of conduct involving a wilful breach of duty;

• there has been a contravention of the relevant sections of the Corporations Act;

• the conduct involves trading whilst insolvent;

• the conduct involves an operation carried on outside Australia.

On 6 May 2013, Indemnification Agreements were signed with Paul Piercy, Jerome Vitale and Dennis Gee as Directors of the Company and Stuart Third as Company Secretary providing indemnification as officers of the Company against any claim brought against the officers whilst performing their respective duties.

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.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Company’s exploration operations are subject to environmental regulations under Commonwealth and State legislation. The Directors believe that the Company has adequate systems in place for the management of the requirements under those regulations, and are not aware of any breach of such requirements as they apply to the Company.

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 purpose 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.

AUDITOR INDEPENDENCE

A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001, is set out on the following page and forms part of the director’s report.

NON-AUDIT SERVICES

There were no non-audit services provided by the external auditors during the financial year.

SIGNED in accordance with a resolution of the directors

==> picture [88 x 56] intentionally omitted <==

Paul Piercy Chairman Perth, 14 October 2013

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AUDITOR’S INDEPENDENCE DECLARATION

TO THE DIRECTORS OF QUEST MINERALS LIMITED

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor

for the audit of Quest Minerals Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been:

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

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

---------------------------------------------

GRAHAM SWAN FCA PARTNER ROTHSAY

CHARTERED ACCOUNTANTS Perth, 14 October 2013

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

	Note	2013	2012
		$	$
Continuing operations
Revenue from ordinary activities
Other revenue	3	247	14,278
Financial income	3	3,170	29,315
Total revenue		3,417	43,593
Expenses from ordinary activities
Exploration expenses	12	-	-
Deprecation	4,14	(6,651)	(6,997)
Finance expenses	4	(6,640)	(150,444)
Professional fees	4	(961,276)	(691,840)
Exploration and evaluation expenditure written
off		(36,335)	-
Impairment	12	(5,433,860)	-
Administration expenses		(178,980)	(280,403)
Occupancy expenses	4	(86,649)	(102,499)
Foreign exchange loss		(192)	-
Total Expenses		(6,710,583)	(1,232,183)
Loss from ordinary activities before income tax
expense		(6,707,166)	(1,188,590)
Income tax expense	5	-	-
Loss from continuing operations		(6,707,166)	(1,188,590)
Other comprehensive income
Gain on write down of liabilities	3	2,557,779	-
Total other comprehensive income		2,557,779	-
Total comprehensive loss for the year		(4,149,387)	(1,188,590)
Earnings per share
Basic loss per share (cents per share)	8	0.81	0.35
The company’s potential ordinary shares are not	considered dilutive and accordingly basic loss per
share is the same as diluted loss per share.
Diluted loss per share (cents per share)	8	0.81	0.35

The above statement of comprehensive income should be read in conjunction with the accompanying notes. Financial Report 2012/2013 Page 26 Quest Minerals Limited and its controlled entities

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013

Note ASSETS Current assets Cash and cash equivalents 9 Trade and other receivable 10 Other current asset 11 Totalcurrent assets Non-current assets Property, plant and equipment 14 Exploration and evaluation expenditure 12 Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables 15 Short term provisions 18 Interest bearing liabilities 16 Total current liabilities Non-current liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 19(a) Reserves 19(d) Accumulated losses TOTAL EQUITY	2013 2012 $ $ 382,355 609,491 15,314 42,058 15,459 9,514
	413,128 661,063
	10,158 16,809 1,011,314 3,069,143
	1,021,472 3,085,952
	1,434,600 3,747,015
	280,331 238,420 - - 879,118 200,000
	1,159,449 438,420
	- -
	1,159,449 438,420
	275,151 3,308,595
	92,041,389 90,925,446 1,356,900 1,356,900 (93,123,138) (88,973,751)
	275,151 3,308,595

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

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CONSOLIDATED STATEMENT OF CHANGE OF EQUITY FOR THE YEAR ENDED 30 JUNE 2013

Note Balance at 1 July 2011 Shares issued during the year Share based payments 23(c) Net loss recognised directly in equity Share issue costs Transfer on expiry of option 19(d) Issue of options 19(d) Balance at 30 June 2012 Balance at 1 July 2012 Shares issued during the year Share based payments 23(c) Net loss recognised directly in equity Share issue costs Transfer on expiry of option 19(d) Issue of options 19(d) Balance at 30 June 2013	Contributed Equity Accumulated Losses Reserves Total Equity $ $ $ $ 88,630,056 (87,936,361) 1,388,100 2,081,795 2,435,750 - - 2,435,750 - - - - - (1,188,590) - (1,188,590) (140,360) - - (140,360) 151,200 (151,200) - - - 120,000 120,000
	90,925,446 (88,973,751) 1,356,900 3,308,595
	90,925,446 (88,973,751) 1,356,900 3,308,595 1,200,500 - - 1,200,500 - - - - - (4,149,387) - (4,149,387) (84,557) - - (84,557) - - - - - - - -
	92,041,389 (93,123,138) 1,356,900 275,151

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

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

Note CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers Interest received Other revenue Finance expenses Payment to suppliers and employees Foreign exchange loss Net cash used in operating activities 23 CASH FLOWS FROM INVESTING ACTIVITIES Exploration and evaluation expenditures 12 Purchase of property, plant and equipment 14 Net cash provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of ordinary shares Proceeds from debentures Share issue expenses Repayment of borrowings Net cash provided by financing activities Net increase/(decrease) in cash held Cash and cash equivalents at the beginning of financial year Cash and cash equivalents at the end of financial year 9	2013 2012 $ $ 319 1,163 3,170 29,315 247 948 (750) (10,610) (928,064) (1,320,662) (192) -
	(925,270) (1,299,846)
	(375,309) (536,276) - (3,704)
	(375,309) (539,980)
	480,500 2,435,750 700,000 - (84,557) (140,360) (22,500) -
	1,073,443 2,295,390
	(227,136) 455,564 609,491 153,927
	382,355 609,491

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

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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This financial report includes the financial statements and notes of Quest Minerals Limited and its Controlled Entities.

Basis of preparation

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

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

Except for cash flow information, 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.

a. Principles of consolidation

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

Where controlled entities have entered or left the Group during the year, the financial performance of those entities is included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 13 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.

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

b.

Income tax

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

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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.

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.

c.

Plant and equipment

Each class of 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).

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

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land and leasehold improvements, is depreciated on a prime cost basis over the asset’s useful life to the Company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated on a straight line basis over the estimated useful lives of the improvements.

The depreciation rates used for the depreciable assets are:

Class of fixed asset	Depreciation rate
Furniture & fittings	10%
Computer equipment	25%

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

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

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 reserve relating to that asset are transferred to retained earnings.

d. Exploration, evaluation and development expenditure

Exploration, evaluation and development expenditures 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.

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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. Lease

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the consolidated group, 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 in the periods in which they are incurred.

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

f. Financial instruments

Initial recognition and measurement

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

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

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Classification and subsequent measurement

Finance instruments are subsequently measured at either 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 .

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.

The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments.

• i) 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 short-term 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. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.

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 Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.

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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 any remeasurements other than impairment losses and foreign exchange gains and losses recognised in other comprehensive income. 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 classified as non-current assets when they are expected to be sold after 12 months from the end of the reporting period. All other available-for-sale financial assets are classified as current assets.

v) Financial Liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.

Fair values

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

Impairment

At the end of each reporting period, the Group assesses whether there is objective evidence that a financial instrument has been impaired. A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial asset(s).

In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point.

In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults.

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For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account

When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Company recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered.

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 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 during the next reporting period;

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

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

Financial guarantees are subsequently measured at the higher of the best estimate of the obligation in accordance with AASB 137: Provisions, Contingent Liabilities and Contingent Assets 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.

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 Company 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 Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information, including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset,

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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 (eg in accordance with the revaluation model in AASB 116: Property, Plant and Equipment ). 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 Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

h. Investments in associates

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

Details of the Group’s investments in associates are provided in Note 13.

i. Intangibles

Research and development

Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably.

Development costs have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful life of the project.

j. Foreign currency transactions and balances

Functional and presentation currency

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

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be

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carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge.

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

Group companies

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

• assets and liabilities are translated at exchange rates prevailing at the end of the reporting period;

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

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

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

k.

Contributed equity

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

l.

Employee benefits

Provision is made for the company’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 one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy any 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 attributable to employee benefits.

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Equity-settled compensation

The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions)

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a pricing model which incorporates all market vesting conditions.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (market conditions) if applicable.

The cost of equity-based transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If any equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

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 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.

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m. Provisions

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

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

n.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other shortterm highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the statement of financial position.

o.

Revenue and other income

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

Interest revenue is recognised using the effective interest rate method.

Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at reporting date and where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable.

All revenue is stated net of the amount of goods and services tax.

p.

Trade and other payables

Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

q.

Goods and Services Tax (GST)

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

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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.

r.

Comparative figures

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

Where the Group has retrospectively applied an accounting policy, made a retrospective restatement of items in the financial statements or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed.

s.

Critical accounting estimates and judgments

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

Key estimates

– i) Impairment general

The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. A review of the Group’s carrying amounts for its exploration assets has resulted in an impairment loss being recorded.

– ii) Impairment carbon price

In November 2011, the Federal Parliament passed the Clean Energy Act 2011 , which implements a carbon pricing mechanism from 1 July 2012. Under the mechanism, entities that produce over the threshold level of carbon emissions will be required to purchase permits to offset their carbon emissions.

The Group is not directly impacted by the carbon pricing mechanism because it does not control facilities that produce emissions greater than the threshold level. However, the Group will be indirectly impacted by the mechanism through increases in the prices it pays for energy and materials purchased from suppliers that are impacted by the introduction of the mechanism. The Group also anticipates that it will experience an increase in expenditures related to waste disposal under the carbon pricing mechanism, although any future increases in such costs are likely to be less significant than the anticipated increases in energy and material costs.

Management of the Group has considered whether the introduction of the carbon pricing mechanism is an impairment indicator and has determined that it is not expected to have a significant impact on the estimated net cash flows of the Group’s operations or the

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recoverability of its assets, principally because the Group has the capacity to pass on any increases in production costs through its contracts with customers. Nevertheless, management has adjusted the discount rate it applies when determining the recoverable amount of an asset or cash-generating unit to reflect the uncertainty around price increases, particularly beyond – the fixed price phase (2012 2015) of the carbon pricing mechanism.

t. Earnings per Share

Basic earnings per share is calculated as net loss attributable to members of the Company, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net loss attributable to members of the Company, adjusted for:

• costs of servicing equity (other than dividends)

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;

Divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

u.

Share-based payments

Equity settled transactions:

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 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.

v .

New accounting standards for application in future periods

The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Group. The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that are relevant to the Group but applicable in future reporting periods is set out below:

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• AASB 9: Financial Instruments (December 2010) and AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) .

These Standards are applicable retrospectively and include revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments.

The key changes made to accounting requirements include:

• simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;

• simplifying the requirements for embedded derivatives;

• removing the tainting rules associated with held-to-maturity assets;

• removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;

• allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument;

• requiring financial assets to be reclassified where there is a change in an entity’s business model as they are initially classified based on: (a) the objective of the entity’s business model for managing the financial assets; and (b) the characteristics of the contractual cash flows; and

• requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profit or loss.

The Company has not yet been able to reasonably estimate the impact of these pronouncements on its financial statements.

• AASB 2010–8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112] (applies to periods beginning on or after 1 January 2012).

This Standard makes amendments to AASB 112: Income Taxes and incorporates – Interpretation 121: Income Taxes Recovery of Revalued Non-Depreciable Assets into AASB 112.

Under the current AASB 112, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using it or by selling it. The amendments introduce a presumption that an investment property is recovered

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.

The amendments are not expected to significantly impact the Company.

These Standards were mandatorily applicable for annual reporting periods commencing on or after 1 January 2013. However, AASB 2012–6: Amendments to Australian – Accounting Standards Mandatory Effective Date of AASB 9 and Transition Disclosures (issued September 2012) defers the mandatory application date of AASB 9 from 1 January 2013 to 1 January 2015. In light of this change to the mandatory effective date, – the Group is expected to adopt AASB 9 and AASB 2010 7 for the annual reporting period ending 31 December 2015. Although the directors anticipate that the adoption of AASB 9 and AASB 2010–7 may have a significant impact on the Group’s financial instruments, it is impracticable at this stage to provide a reasonable estimate of such impact.

- AASB 10: Consolidated Financial Statements , AASB 11: Joint Arrangements , AASB 12: Disclosure of Interests in Other Entities , AASB 127: Separate Financial Statements (August 2011) and AASB 128: Investments in Associates and Joint Ventures (August 2011) (as amended by AASB 2012–10: Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments ), and AASB 2011–7: Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (applicable for annual reporting periods commencing on or after 1 January 2013).

AASB 10 replaces parts of AASB 127: Consolidated and Separate Financial Statements (March 2008, as amended) and Interpretation 112: Consolidation – Special Purpose Entities . AASB 10 provides a revised definition of “control” and additional application guidance so that a single control model will apply to all investees. This Standard is not expected to significantly impact the Group’s financial statements.

AASB 11 replaces AASB 131: Interests in Joint Ventures (July 2004, as amended). AASB 11 requires joint arrangements to be classified as either “joint operations” (where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities) or “joint ventures” (where the parties that have joint control of the arrangement have rights to the net assets of the arrangement).

AASB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint venture, joint operation or associate. AASB 12 also introduces the concept of a “structured entity”, replacing the “special purpose entity” concept currently used in Interpretation 112, and requires specific disclosures in respect of any investments in unconsolidated structured entities. This Standard will affect disclosures only and is not expected to significantly impact the Group’s financial statements.

To facilitate the application of AASBs 10, 11 and 12, revised versions of AASB 127 and AASB 128 have also been issued. The revisions made to AASB 127 and AASB 128 are not expected to significantly impact the Group’s financial statements.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

• AASB 13: Fair Value Measurement and AASB 2011–8: Amendments to Australian Accounting Standards arising from AASB 13 (applicable for annual reporting periods commencing on or after 1 January 2013).

AASB 13 defines fair value, sets out in a single Standard a framework for measuring fair value, and requires disclosures about fair value measurement.

AASB 13 requires:

The key changes made to accounting requirements include:

• inputs to all fair value measurements to be categorised in accordance with a fair value hierarchy; and

• enhanced disclosures regarding all assets and liabilities (including, but not limited to, financial assets and financial liabilities) to be measured at fair value.

These Standards are not expected to significantly impact the Group.

• AASB 2011– 4: Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (applicable for annual reporting periods beginning on or after 1 July 2013).

This Standard makes amendments to AASB 124: Related Party Disclosures to remove the individual key management personnel disclosure requirements (including paras Aus29.1 to Aus29.9.3). These amendments serve a number of purposes, including furthering trans-Tasman convergence, removing differences from IFRSs, and avoiding any potential confusion with the equivalent Corporations Act 2001 disclosure requirements.

This Standard is not expected to significantly impact the Group’s financial report as a whole because:

• some of the disclosures removed from AASB 124 will continue to be required under s 300A of the Corporations Act, which is applicable to the Group; and

• AASB 2011–4 does not affect the related party disclosure requirements in AASB 124 applicable to all reporting entities, and some of these requirements require similar disclosures to those removed by AASB 2011–4.

• AASB 119: Employee Benefits (September 2011) and AASB 2011–10: Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) (applicable for annual reporting periods commencing on or after 1 January 2013).

These Standards introduce a number of changes to accounting and presentation of defined benefit plans. The Group does not have any defined benefit plans and so is not impacted by the amendment.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

AASB 119 (September 2011) also includes changes to the presentation and disclosure of defined benefit plans, including:

• removal of the “corridor” approach from AASB 119, thereby requiring entities to recognise all changes in a net defined benefit liability/(asset) when they occur; and

• - disaggregation of changes in a net defined benefit liability/(asset) into service cost, net interest expense and remeasurements and recognition of:

• i) service cost and net interest expense in profit or loss; and ii) remeasurements in other comprehensive income.

AASB 119 (September 2011) also includes changes to the criteria for determining when termination benefits should be recognised as an obligation.

The Company has not yet been able to reasonably estimate the impact of these changes to AASB 119.

• AASB 2012–2: Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities (applicable for annual reporting periods commencing on or after 1 January 2013).

AASB 2012–2 principally amends AASB 7: Financial Instruments: Disclosures to require entities to include information that will enable users of their financial statements to evaluate the effect or potential effect of netting arrangements, including rights of setoff associated with the entity’s recognised financial assets and recognised financial liabilities, on the entity’s financial position.

This Standard is not expected to significantly impact the Group’s financial statements.

• AASB 2012–3: Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities (applicable for annual reporting periods commencing on or after 1 January 2014).

This Standard adds application guidance to AASB 132: Financial Instruments: Presentation to address potential inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered equivalent to net settlement.

This Standard is not expected to significantly impact the Group’s financial statements.

• AASB 2012–5: Amendments to Australian Accounting Standards arising from Annual –

• Improvements 2009 2011 Cycle (applicable for annual reporting periods commencing on or after 1 January 2013).

This Standard amends a number of Australian Accounting Standards as a consequence of the issuance of Annual Improvements to IFRSs 2009–2011 Cycle by the International Accounting Standards Board, including:

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

• AASB 1: First-time Adoption of Australian Accounting Standards to clarify the requirements in respect of the application of AASB 1 when an entity discontinues and then resumes applying Australian Accounting Standards;

• AASB 101: Presentation of Financial Statements and AASB 134: Interim Financial Reporting to clarify the requirements for presenting comparative information;

• AASB 116: Property, Plant and Equipment to clarify the accounting treatment of spare parts, stand-by equipment and servicing equipment;

• AASB 132 and Interpretation 2: Members’ Shares in Co-operative Entities and Similar Instruments to clarify the accounting treatment of any tax effect of a distribution to holders of equity instruments; and

• AASB 134 to facilitate consistency between the measures of total assets and liabilities an entity reports for its segments in its interim and annual financial statements.

This Standard is not expected to significantly impact the Group’s financial statements.

w .

Going concern

The financial report has been prepared on a going concern basis, which contemplates the continuity of the normal business activities and the realisation of assets and settlement of liabilities in the normal course of business.

For the year ended 30 June 2013, the Group incurred an operating loss of $4,149,387 (2012: $1,188,590) and an operating cash outflow of $925,270 (2012: $1,299,846). As at 30 June 2013, the Group had a net current asset deficiency of $746,321. During the period to the date of this report, the Directors have taken steps to ensure that the Company and the Consolidated Entity continue as going concerns. These steps include entering into discussions with prospective lead managers and underwriters with a view to:

• i) making a placement of shares to sophisticated investors accordance with ASX Listing Rule 7.1 under which the Company may issue up to 15% of its present number of shares on issue, the purpose of which is to raise working capital; and

• ii) making a pro rata entitlements issue offer to shareholders for the purpose of raising capital to further develop the Perenjori Iron Ore Project, provide working capital to cover administration costs and to repay $875,000 in outstanding Debenture Notes and financial obligations, and for general working capital.

On 31 July 2013 the Company announced that an administrative services contract with Corporate Admin Services Pty Ltd (“CAS”) (“Agreement”) under which CAS had been providing book keeping, administration and a limited range of reporting and supervisory services to Quest since 2007, has been terminated. CAS had been paid approximately $33,000 per month plus expenses on a cost plus basis and office rent. The Company has since relocated its offices arranged for alternative delivery of the administrative functions previously provided by CAS. These steps are expected to result in substantial cost savings compared to prior years.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

The Directors have undertaken a thorough review of the Company’s

• i) projects, and determined to, in the Company’s current circumstances, incur the minimal expenditure required to keep its Victory Bore and Nigerian gold project in good standing;

• ii) corporate governance practices and policies and made significant changes to ensure there is improved transparency and management accountability. The Board considers these measures, coupled with appropriate industry experience and improved depth brought by the two new directors appointed in April 2013, will enhance its ability to attract capital in the short term to enable the Company to develop its assets and continue as a going concern.

As a result of their review and thorough investigations in relation to the financial obligations and affairs generally of the Company, the Directors have taken a stance in relation to the enforceability of material claims made by a party they believe was a related party for the purposes of Chapter 2E of the Corporations Act at the time certain material contracts were entered into. The first of these contracts was entered into in May 2007 and relates to the provision of administration services, for which unpaid fees of $110,000 plus an early termination fee of $407,000 is claimed. The second contract relates to the acquisition (in October 2009) of an exploration tenement which involved the payment of $540,000 in cash and shares (already paid) plus deferred cash consideration which has been determined to be $3,020,000 in accordance with the terms of the agreement. Details of these transactions and the findings of the Directors are contained in Notes 20(b) and 21 to these financial statements. For the reasons outlined in these Notes, the Directors consider that these claims are not enforceable liabilities of the Company and accordingly they are not reflected as such in the Company and Group balance sheet at 30 June 2013. In the event that the stance taken by the Company is legally challenged and the claims found to be enforceable, there is significant uncertainty that the Company will be able to raise sufficient funds or sell assets in the normal course of business to meet these obligations and continue as a going concern.

In addition, the ability of the Company and the Group to continue as a going concerns and to pay their debts as and when they fall due is dependent on the following:

• i) the ability of the Company and Group to secure additional funding through either the issue of new shares, convertible notes, debt or a combination of all these to further explore and develop its exploration assets. The form and value of such raisings is yet to be determined;

• ii) ongoing management of the quantum and timing of exploration expenditure in line with the Company’s available funds;

The Directors have reviewed the general business outlook and the circumstances of the Company and the Group including the matters referred to at Notes 16, 20 and 21, and are of the opinion that the Company will be able to achieve the matters set out above and there are therefore reasonable grounds to believe that the Company and the Group will be able to pay their debts as and when they become due and payable, and the going concern basis of preparation is appropriate for the preparation of the Group’s 2013 financial report.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Notwithstanding this, as a junior explorer with exploration projects and a dependency on the financial markets for its future funding, there is significant uncertainty whether the Company and the Group will be able to continue as going concerns.

Should the Company and the Group be unable to continue as going concerns, they may be required to realise their assets and extinguish liabilities other than in the normal course of business and at amounts different from those stated in the financial report. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary should the Company and the Group be unable to continue as going concerns.

Note	2013	2012
	$	$

NOTE 2: PARENT INFORMATION

The following information has been extracted from the books and records of the parent and has been prepared in accordance with Accounting Standards.

STATEMENT OF FINANCIAL POSITION

ASSETS Current assets TOTAL ASSETS LIABILITIES Current liabilities TOTAL LIABILITIES EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY STATEMENT OF COMPREHENSIVE INCOME Total loss for the year	413,128 661,063
	1,434,600 3,747,015
	1,159,449 438,420
	1,159,449 438,420
	92,041,389 90,925,446 1,356,900 1,356,900 (93,123,138) (88,973,751)
	275,151 3,308,595
	(4,149,387) (1,188,590)

Guarantees

The Company has not entered into any guarantees, in the current or previous financial year, in relation to the debts of its subsidiaries.

Contingent liabilities

Details of contingent liabilities are set out in Note 21.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Contractual commitments

Details of contractual commitments are set out in Note 20.

At 30 June 2013, the Company had not entered into any contractual commitments for the acquisition of property, plant and equipment (2012: Nil).

Note NOTE 3: REVENUE AND OTHER INCOME Other revenue Finance income Total revenue from ordinary activities Gain on write down of liabilities Total other comprehensive income	2013 2012 $ $ 247 14,278 3,170 29,315
	3,417 43,593
	2,557,779 -
	2,557,779 -

The gain on write down of liabilities has been recognised following a thorough review of the circumstances in which the previously reported obligations came about. For the reasons set out at Note 16, Note 21 and Note 25, previously reported obligations aggregating to this value are considered to be unenforceable against the Group.

NOTE 4: LOSS FOR THE YEAR

Loss from ordinary activities before income tax expenses has been arrived at after charging the following items:

Professional fees - Audit fees - Company secretarial fees - Consulting and administration fees - Legal fees - Accounting fees - Recruitment fees - ASX / Share registry fees Rental expenses on operating leases - Minimum lease payments Finance expenses–External Depreciation	19,500 30,500 70,254 58,173 629,974 527,481 83,872 2,928 56,927 11,700 - 30,000 100,749 31,058
	961,276 691,840
	86,649 102,499 6,640 150,444 6,651 6,997

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note	2013	2012
	$	$

NOTE 5: INCOME TAX

A reconciliation between tax revenue and the product of accounting loss before income tax multiplied by Group’s applicable income tax rate is as follows:

Accounting loss before tax from continuing operations Loss before tax from discontinued operations At the parent entity’s statutory income tax rate of 30% (2012: 30%) - Other non deductible items - Unused tax losses and temporary differences not recognised as deferred tax assets Income tax attributable to entity	(4,149,387) (1,188,590) (1,244,816) (356,577) - 36,632 1,244,816 319,945
	- -

Net deferred tax assets have not been brought to account, as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised.

NOTE 6: KEY MANAGEMENT PERSONNEL (KMP) COMPENSATION

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

The totals of remuneration attributable to KMP of the Company during the year are as follows:

Short-term employee benefits Post-employment benefits Total KMP compensation	219,056 282,227 4,688 -
	223,744 282,227

KMP Options and Rights Holdings

The number of options over ordinary shares held by each KMP of the Company during the financial year is as follows:

30 June 2013 P Piercy JG Vitale A Winduss L Tyndall D Gee C Barker R Molkenthin	Balance at start of year Commencing office Granted as remuneration during the year Acquired during the year Expired during the year Cancelled during the year Ceasing office Balance at end of year - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
	- - - - - - - -

Detailed remuneration disclosures are provided in the Remuneration Report on pages 17 – 22.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

30 June 2012 A Winduss L Tyndall D Gee A Hamilton P Reidy	Balance at start of year Commencing office Granted as remuneration during the year Acquired during the year Expired during the year Cancelled during the year Ceasing office Balance at end of year 3,000,000 - - - (3,000,000) - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,000,000 - - - - (3,000,000) - -
	6,000,000 - - - (3,000,000) (3,000,000) - -

KMP shareholdings

The number of ordinary shares in the Company held by each KMP of the Company during the financial year is as follows:

30 June 2013 P Piercy JG Vitale A Winduss L Tyndall D Gee C Barker R Molkenthin	Balance at start of year Commencing Office Issued during the year Purchased/(sold) during the year Ceasing Office Balance at end of year - - - - - - - - - - - - 398,796 - - - (398,796) - 11,689 - - - (11,689) - 775,080 - - - - 775,080 - - - - - - - - - - - -
	1,185,565 - - - (410,485) 775,080

30 June 2012 A Winduss L Tyndall D Gee A Hamilton P Reidy	Balance at start of year Commencing Office Issued during the year Purchased/(sold) during the year Ceasing Office Balance at end of year 398,796 - - - - 398,796 11,689 - - - - 11,689 - - - 775,080 - 775,080 - - - - - - 122,000 - - - (122,000) -
	532,485 - - 775,080 (122,000) 1,185,565

Note NOTE 7: AUDITORS’ REMUNERATION Audit of accounts	2013 2012 $ $ 19,500 30,500
	19,500 30,500

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

	Note	2013	2012
		$	$
NOTE 8: EARNINGS PER SHARE
Earnings used in the calculation of EPS
Loss		(4,149,387)	(1,188,590)
		Number	Number
Weighted average number of ordinary shares used
as the denominator in calculating basic EPS		513,117,943	359,934,990

The Company’s potential ordinary shares are not considered dilutive and accordingly basic loss per share is the same as diluted loss per share.

NOTE 9: CASH AND CASH EQUIVALENTS
Cash at bank		382,355	609,491
		382,355	609,491
NOTE 10: TRADE AND OTHER RECEIVABLES
GST receivable		14,502	41,246
Other receivable		812	812
		15,314	42,058
NOTE 11: OTHER CURRENT ASSETS
Prepayments		15,459	9,514
		15,459	9,514
NOTE 12: EXPLORATION AND DEVELOPMENT	EXPENDITURE
Balance at beginning of year	3,069,143		2,532,867
Mining tenement acquired		-	-
Exploration and evaluation expenditure incurred	392,366		536,276
Payments due under Sale Agreement recognised at 31
December 2012 (refer Note 21)	3,020,000		-
Exploration expenditure written off		(36,335)	-
Impairment adjustment	(5,433,860)		-
	1,011,314		3,069,143

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Impairment of Projects

A review of the capitalised expenditure for each of the projects of the Group was undertaken by the Board. Given the present priorities of the Group and present market conditions, a decision was made to write down the carrying values of the Victory Bore project and the Nigerian interests to nil. The Board has considered the carrying value of the Perenjori project and determined that the carrying value is justified due to the Company’s intention to continue work and further invest in the project as the key asset of the Company.

Exploration Licence 70/2858 (known as Alken being the western limb of the Perenjori Project), expires on 31 October 2013. Quest is in the process of lodging a formal application for an extension of term with the WA Department of Mines and Petroleum (DMP). The Company has met the DMP minimum expenditure obligations as required under the Farm-in agreement under which it is earning an 80% interest in the project. The Directors are not aware of any reason why the terms of the licence will not be extended by DMP in the ordinary course of business.

Under the farm-in agreement for the Perenjori Project (E70/2227 (Feral) and E70/2858 (Alken) the Company has an obligation to spend $2.3 million in aggregate by end of May 2014 to earn an 80% respective interest in the underlying tenements. At the date of this report, approximately $0.9m of eligible exploration expenditure had been spent on the project, leaving approximately $1.4 million to be spent. The Company is in discussion with the private syndicate from whom it is earning its interest in the project to extend the term for the farm-in for a minimum of two years from May 2014.

In respect of Exploration Licence 50/550 known as the Victory Bore project, after impairment provision the carrying value at 30 June 2013 is nil. The Company lodged an Extension of Term with DMP for a further two years for a reduced number of blocks which (contain the reported JORC Inferred Resource) prior to its expiry date recorded as 22 August 2013, however the Company is advised that the expiry date on the DMP data base will remain the same until its application for an extension is determined (granted or rejected). If it is rejected, then the tenement will have expired as – at 22 August 2013. If it is granted, the expiry date will be updated to reflect the new expiry date depending on how many years are granted for the extension.

NOTE 13: CONTROLLED ENTITIES

NOTE 13: CONTROLLED ENTITIES
	Country of
Controlled entities consolidated	incorporation	Percentage owned (%)
Subsidiaries of Quest Minerals Limited		2013	2012
Direct
Victory Bore Pty Ltd	AUS	100	100
Acacia Mining Pty Ltd	AUS	100	100
Mulga Mining Pty Ltd	AUS	100	100
Quest Gold Prospects Pty Ltd	AUS	100	100
Boab Mining Nigeria Ltd *	NG	100	100

*All companies were incorporated in Australia, except for Nigerian registered Boab Mining Nigeria Ltd.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

	Note	2013	2012
		$	$
NOTE 14: PROPERTY, PLANT AND EQUIPMENT
Fixture & fittings
At cost		768	768
Accumulated depreciation		(428)	(349)
		340	419
Computer equipment
At cost		33,127	33,127
Accumulated depreciation		(23,309)	(16,737)
		9,818	16,390
		10,158	16,809
Movements in carrying amount
Movement in the carrying amounts for each class of	property, plant and equipment		between the
beginning and the end of the current financial year:
Fixture & fittings
Balance at beginning of the year		569	648
Additions		-	-
Disposals		-	-
Depreciation expense		(79)	(79)
Carrying amount at the end of the year		490	569
Computer equipment
Balance at beginning of the year		16,240	19,454
Additions		-	3,704
Disposals		-	-
Depreciation expense		(6,572)	(6,918)
Carrying amount at the end of the year		9,668	16,240
		10,158	16,809
NOTE 15: TRADE AND OTHER PAYABLES
Trade payables*		191,011	141,141
Sundry payables and accrued expenses		89,320	97,279
		280,331	238,420

*Trade payables are non-interest bearing and normally settled in 30 days.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note NOTE 16: BORROWINGS Loans from others–unsecured Loans from others–related Debenture Notes	2013 2012 $ $ 4,118 200,000 175,000 - 700,000 -
	879,118 200,000

The Group recognised an unsecured debt owing to NatWest Securities Limited (NatWest) of $200,000 in its report for the year ended 30 June 2012. The unsecured debt was subject to interest at 12% and due for payment subject to negotiation with NatWest. NatWest has not responded to requests by the Board to establish that the Company received the funds said to have been lent or matters as required under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). The Directors have obligations under that Act to establish the bona fide identity of the recipient of funds being transferred to offshore accounts outside Australia. As NatWest is an overseas entity that has not provided any means by which it can presently be identified, the Board has determined that it is unable to consider the amount to be presently payable and has determined to consider the amount a contingent liability of the Group. See Note 21 for further details.

On 30 September 2013 and with effect from 30 June 2013, the Company entered into a deed of acknowledgement and release with Haramont Pty Limited, an entity controlled by Mr Jerome (Gino) Vitale with respect to a debt assigned by Mutual Holdings Pty Limited to Haramont. See Notes 25 and 26 for details.

On 21 May 2013, the Company announced that it had secured the financial support of major shareholder Maxillion Limited (Maxillion) and other professional and sophisticated investors via the provision of unsecured Debenture Notes to an aggregate value of $1,000,000 (Notes).

Of the total of $1,000,000 in Notes, Maxillion agreed to subscribe to $700,000 which was received during May and June 2013. The balance from the other investors, expected to be received during the September 2013 quarter, remains outstanding and the Company has reserved all of its rights. The key terms of the Notes are:

• i) maturity date: 15 December 2013 if not repaid earlier;

• ii) security status unsecured;

• iii) Conversion rights The Company may, or at the request of a majority (by value) of the noteholders will, seek shareholder approval on or before 30 November 2013 to repay the Notes through the issue of up to 20 unlisted convertible notes of $50,000 each; subject to shareholder approval to the extent that such is required to comply with ASX Listing Rules and all other regulatory approvals including notification to FIRB, such convertible notes and accrued interest thereon will be automatically convertible to shares in the Company;

• iv) Right of Offset - in the event that the Company undertakes an entitlements issue to all shareholders to the extent of its shareholding at the time, it must offset the principal and interest owing against application moneys required under the offer in its capacity as shareholder or, if applicable, as underwriter or sub-underwriter to the offer;

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

• v) Application of funds: funds raised from the Notes have been applied for the advancement of the Perenjori Iron Project, payment of trade creditors and for general working capital purposes, but not for the repayment of any debt that is not currently due and payable.

Note	2013	2012
	$	$

NOTE 17: NON-CURRENT TAX

Deferred tax assets

Deferred tax not brought to accounts, the benefits of which will only be realised if the conditions for deductibility set out in Note 1(b) occur:

Losses available for offset against future tax liabilities (at 30%) Accrued expenses and provisions	21,707,155 22,648,487 (97,542) (727,004)
	21,609,613 21,921,483

Movement in temporary difference during the year

Temporary differences Exploration expenditures Other payables and provisions Other items Capital raising expenses (Section 40-880)	30 June 2013 $ Movement 2013 $ 1 July 2012 $ Movement 2012 $ 1 July 2011 $ (303,394) 617,349 (920,743) (160,883) (759,860) 26,718 (2,388) 29,105 (2,675) 31,781 - - - - - 179,134 14,501 164,634 (15,094) 179,727
	(97,542) 629,462 (727,004) (178,652) (548,352)

Deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets (and deferred tax liabilities relating to capitalised exploration expenditure for which immediate tax write-off is available) have not been recognised in the financial statements.

NOTE 18: PROVISIONS

Current

Employee leave entitlement

Note	2013 2012 $ $ - -
	- -

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note NOTE 19: ISSUED CAPITAL a. Issued share capital 541,943,285 fully paid ordinary shares (2012: 413,637,730) 2,500,000 contributing ordinary shares; partly paid to $0.005 (2012: 2,500,000) 16,980,000 contributing ordinary shares; partly paid to $0.0025 (2012: 16,980,000) Nil contributing ordinary shares; partly paid to $0.0575 (2012: 3,000,000) b. Ordinary shares At the beginning of the reporting period: Shares issued during the year - Shares issued on 2 August 2011 pursuant to a placement at $0.02 each - Shares issued on 14 October 2011 pursuant to a placement at $0.06 each - Shares issued on 29 December 2011 pursuant to a placement at $0.015 each - Shares issued on 22 August 2012 pursuant to a placement at $0.011 each - Shares issued on 15 October 2012 pursuant to a placement at $0.06 each - Shares issued on 2 November 2012 pursuant to a placement at $0.09 each - Shares issued on 31 December 2012 pursuant to a placement at $0.008 each - Shares issued on 11 January 2013 pursuant to a placement at $0.006 each At the end of the reporting period	2013 2012 $ $ 91,986,439 90,697,996 12,500 12,500 42,450 42,450 - 172,500
	92,041,389 90,925,446
	Number Number 413,637,730 254,337,730 - 45,000,000 - 14,300,000 - 100,000,000 60,000,000 - 3,000,000 - 30,555,555 - 24,750,000 - 10,000,000 -
	541,943,285 413,637,730

• 2013 - Issue of Fully Paid Ordinary Shares on final payment of $0.0025 each on 3,000,000 Partly Paid Shares of $0.0575.

• 2012 - Issue of Fully Paid Ordinary Shares on final payment of $0.0025 each on 14,300,000 Partly Paid Shares of $0.0575.

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

			Note	2013	2012
				Number	Number
c.	Options over ordinary shares
As	at 30 June 2013, there are 35,000,000		(2012: 42,000,000) unissued	options on issue	over ordinary
shares:
Options on issue at beginning of period				42,000,000	46,040,000
Options issued for cash				25,000,000	10,000,000
Options expired				(32,000,000)	(11,040,000)
Options cancelled				-	(3,000,000)
Options on issue at end of period				35,000,000	42,000,000
	Date of expiry	Exercise price		Number	Number
	30 June 2013		$0.020	-	15,000,000
	30 June 2013		$0.040	-	10,000,000
	30 June 2013		$0.070	-	7,000,000
	29 June 2015		$0.020	10,000,000	10,000,000
	03 April 2016		$0.012	25,000,000	-
				35,000,000	42,000,000

Terms and conditions of contributed equity

Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

d. Option premium reserve

Note Opening balance Employee share based payments Transfer to equity Transfer to accumulated losses Issue of options	2013 2012 $ $ 1,356,900 1,388,100 - - - - - (151,200) - 120,000
	1,356,900 1,356,900

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2013

During the year ended 30 June 2013, the following options were issued:

• 25,000,000 unlisted options exercisable at 1.2 cents each on or before 4 April 2016

During the year ended 30 June 2013, the following options expired:

• 15,000,000 unlisted options exercisable at 2 cents expired on 30 June 2013

• 10,000,000 unlisted options exercisable at 4 cents expired on 30 June 2013

• 7,000,000 unlisted options exercisable at 7 cents expired on 30 June 2013

2012

During the year ended 30 June 2012, the following options were issued:

• 10,000,000 unlisted options exercisable at 2 cents each on or before 29 June 2015

During the year ended 30 June 2012, the following options expired:

• 50,040,000 unlisted options exercisable at 5 cents expired on 30 June 2012

• 2,000,000 unlisted options exercisable at 10 cents expired on 30 June 2012

• 2,000,000 unlisted options exercisable at 15 cents expired on 30 June 2012

• 2,000,000 unlisted options exercisable at 20 cents expired on 30 June 2012

During the year ended 30 June 2012, the following options have expired in accordance with the terms and conditions of those options (For details of disclosure refer to Note 24: Share Based Payments):

• 1,000,000 unlisted options exercisable at 10 cents each and expiring 1 September 2012

• 1,000,000 unlisted options exercisable at 15 cents each and expiring 1 September 2012

• 1,000,000 unlisted options exercisable at 20 cents each and expiring 1 September 2012

e. Capital management policy

The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. The Group’s focus has been to raise sufficient funds through equity to fund its activities. The Group monitors capital on the basis of the gearing ratio. However there are no external borrowings as at balance date.

There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting.

The Group is not subject to externally imposed capital requirements.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

NOTE 20: CONTRACTUAL AND LEASING COMMITMENTS

a. Operating lease commitments

The Company occupies its business premises on a monthly tenancy. There is no future lease commitment as either the Landlord or the Company may terminate the tenancy by providing one months’ notice to the other party.

b.

Administration service agreement

The Company was party to an Administration Services Agreement with Corporate Admin Services Pty Ltd (the “Contractor” or “CAS”), an entity controlled by substantial shareholder Vladimir (Roger) Nikolaenko, from 1 April 2007 (“Services Agreement”) for an initial fee of $370,000 (excluding GST) annually. This fee was escalated by CPI increases and was payable monthly in advance. Under the Services Agreement CAS provided book-keeping, administration and a limited range of reporting and supervisory services to the Company. The term of the Agreement was for a period of five years, with an option to extend at the sole discretion of the Contractor for further period of two years. The contract was purportedly extended by CAS for a further two years from 1 April 2012 via a notice purportedly given to the Company two months prior to the fifth anniversary, as required by the terms of the agreement. Subject to terms included in the agreement, should the Company terminate the Agreement without prior notice, it would be liable to pay the Contractor the full amount of fees payable for the then remainder of the contract term.

Pursuant to the circumstances in which the Agreement arose, (refer Note 21) the Directors have formed the view that no contractual obligation exists to be recognised at 30 June 2013.

Details of the termination payments are set out in Note 25: Events after the Reporting Period

Note - not later than 12 months - between 12 months and 5 years - greater than 5 years	2013 2012 $ $ - 370,000 - 277,500 - -
	- 647,500

c. Employee remuneration commitments

Commitment under employee contract not provided for in the financial statements.

Remuneration and other terms of employment for Mr Vitale, Managing Director, are formalised in a Consulting and Service agreement as detailed below:

• term of agreement – 12 months to 22 April 2014 with an option to extend for a further 12 months;

• minimum consulting Fees of $150,000 pa;

• the Agreement may be terminated by either party by the provision of 3 months’ written notice or written resignation by Mr Vitale.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note - not later than 12 months - between 12 months and 5 years - greater than 5 years	2013 2012 $ $ 121,644 - - - - -
	121,644 -

d. Exploration expenditure commitments

In order to maintain current rights of tenure to exploration tenements, the Controlled Entity is required to outlay tenement lease rentals and perform minimum exploration work to meet minimum expenditure requirements specified by various government authorities. These obligations are subject to renegotiation when application for a mining lease is made and at various other times. These obligations are not provided for in the financial report and are payable:

- not later than 12 months - between 12 months and 5 years - greater than 5 years	31,264 290,215 10,486 348,699 - -
	41,750 638,914

NOTE 21: CONTINGENT LIABILITIES

Estimates of potential financial effect of contingent liabilities that may become payable:

Administration service agreement

On 30 July 2013 the Company announced that CAS had made a claim for approximately $110,000 in unpaid fees, and on that basis it purported to terminate the Services Agreement referred to at Note 20(b). CAS has also claimed a termination payment of approximately $33,000 per month from July 2013 to the end of the term of the agreement (4 May 2014). During the review of the corporate governance policies and procedures of the Group initiated by the Board as reconstituted on 22 April 2013, it has been determined that CAS was, at least when the Services Agreement was entered into, a related party for the purposes of Chapter 2E of the Corporations Act 2001 and as such the Services Agreement required shareholder approval. As shareholder approval was not obtained, the Company believes that agreement is unenforceable and any amounts purported to be owing under the agreement not payable.

At the date of this report CAS has not commenced nor given any notice of an intention to contest the determination of the Board with respect of unenforceability of the Services Agreement. In the event that CAS commences an action in the courts and is successful in obtaining orders for payment of its claims the contingent termination fee payable is calculated at $407,000 excluding GST. This is in addition to the claim for unpaid fees.

At the date of this report, the enquiries of the Board with respect to the amount of any counter claims Quest may have against CAS under the Services Agreement are incomplete and continuing and the Company has reserved all of its rights in respect of any claims it has against CAS in relation to the performance of the services and applicable charges under the Services Agreement (including amounts previously paid by Quest).

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Victory Bore exploration licence

Under a tenement of heads of agreement and tenement sale agreement dated 23 October 2009 (Sale Agreement) the Company agreed to acquire mining tenement E57/550 (Victory Bore) from Mutual Holdings (Mutual Holdings), an entity controlled by Mr Vladimir (Roger) Nikolaenko. The Sale Agreement provided (amongst other things) as follows:

• a. Upon the establishment of a JORC compliant Inferred Resource, Indicated Resource or Measured Resource on Victory Bore the Company is to make payments to Mutual Holdings as follows:

• i) Where the resource relates to iron ore, vanadium, titanium or phosphate – Inferred Resource $0.02 per tonne of ore, Indicated Resource $0.04 per tonne of ore and Measured Resource $0.06 per tonne of ore.

• ii) Where the resource relates to U3O8 or any base metal – Inferred Resource $0.05 per tonne of ore, Indicated Resource $0.08 per tonne of ore and Measured Resource $0.10 per tonne of ore.

• iii) Where the resource relates to gold or any other precious metal – Inferred Resource $0.20 per tonne of ore, Indicated Resource $0.30 per tonne of ore and Measured Resource $0.50 per tonne of ore.

• b. Mutual Holdings is also to be paid a further payment of $1.00 per tonne of iron ore derived from the tenement and a royalty equal to 1% of gross revenue received by the Company from the sale of gold, any other precious metal or base metal derived from the tenement.

On 4 March 2011 the Company announced a maiden resource at Victory Bore of 151mt at 25% Fe and 0.44% V2O5. An agreement with Mutual Holdings was entered into when the maiden Inferred Resource was announced deferring the payment of the additional amount identified in (a) above until an alternative agreement was reached. That agreement expired in August 2012 at which time a debt management agreement was entered into to commence repayment of the acknowledged debt of $3,020,000 (Debt) (refer Note 12). The first repayment was through the Company issuing 60,000,000 shares at a deemed price of $0.011 per share for the conversion of $660,000 of the Debt. Further repayments were to be made out of future capital raisings, limited to 10% of each amount raised until the Debt was fully repaid. Mutual Holdings had the right to elect to convert each repayment amount into shares of the Company at a price per share equal to the price at which capital is being raised. Interest accrued on the outstanding balance of the Debt at 12% per annum.

On or about 19 April 2013 the Company received notice that Mutual Holdings had assigned part of the Debt ($812,915) to Haramont Pty Limited, a company controlled by Mr Vitale.

During a review of the Company’s corporate governance practices and policies the Board considered the Debt and the circumstances in which it arose. Following a review of the Company’s books and records, and statements from the Company’s former directors and officers and others, the Directors have determined that when the Sale Agreement was entered into, Mutual Holdings (being controlled by Mr Nikolaenko) was a related party of the Company for the purposes of Chapter 2E of the Corporations Act.

As a result the Sale Agreement required shareholder approval under Chapter 2E of the Corporations Act 2001 . Such approval was not obtained and, as a consequence the Company believes that a court will not enforce the Debt. For that reason the balance of the Debt (being $1,444,785) and unpaid

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

interest has been removed from the Groups’ balance sheet at 30 June 2013. Mr Nikolaenko and Mutual Holdings have been advised of the unenforceability of the Debt, and have not taken any steps to enforce the Debt. In the event Mutual Holdings does so and is successful, the contingent liability payable is $1,444,785 together with unpaid interest at 12% per annum.

Unsecured Borrowings

Unsecured borrowings of $200,000 owed to NatWest Securities Limited (NatWest), and previously recorded by the Group, have been reclassified as a contingent liability. NatWest, an offshore entity, has not responded to a number of written requests by the Board to establish that the Company received the funds said to have been lent, NatWest’s place of incorporation, or identity of the ultimate beneficiary lying behind the nominated recipient of funds and other matters as required under the AntiMoney Laundering and Counter-Terrorism Financing Act 2006 (Cth). The Directors have obligations under that Act to establish the bona fide identity of the recipient of funds being transferred to offshore accounts outside Australia, and cannot transfer funds without doing so. As NatWest is an overseas entity that has not provided any means by which it can presently be identified, the Board has determined that the Company cannot either pay the balance said to be owing or to classify and report the amount to be presently payable, and instead report the amount a contingent liability of the Group. In the event NatWest is able to provide the information required to the Directors’ satisfaction, the liability will be recognised as an unsecured borrowing.

Other than the matters detailed above the Directors are not aware of any further contingent liability as at the date of the financial statements.

NOTE 22: OPERATING SEGMENT

For the year ended 30 June 2013, the Consolidated Entity’s operations were predominantly in the mining exploration sector in Australia.

The Consolidated Entity identified its operating segments based on the internal reports that are reviewed and used by the directors (the Chief Operating Decision Makers) in assessing performance and in determining the allocation of resources.

Financial Report 2012/2013 Quest Minerals Limited and its controlled entities At 30 June 2013 REVENUE Other revenue Segment result ASSETS / LIABILITIES Asset Segments assets Liabilities Segment liabilities Net assets	Mining & exploration Corporate Consolidated $ $ $ - 3,417 3,417
	(3,387,495) (761,892) (4,149,387)
	1,011,314 423,286 1,434,600 - (1,159,449) (1,159,449)
	1,011,314 (736,163) 275,151
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

At 30 June 2012 Mining & Exploration Corporate Consolidated $ $ $ REVENUE Other revenue - 43,593 43,593 Segment result - (1,188,590) (1,188,590) ASSETS / LIABILITIES Asset Segments assets 3,069,143 677,872 3,747,015 Liabilities Segment liabilities - (438,420) (438,420) Net assets 3,069,143 239,452 3,308,595 Note 2013 2012 $ $ NOTE 23: CASH FLOW INFORMATION a. Reconciliation of cash Cash at end of financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows: Cash and cash equivalents 382,355 609,491 b. Reconciliation with operating loss Reconciliation of cash flows from operations with operating loss after income tax is set out as follows: Operating losses (4,149,387) (1,188,590) Non-cash flows included in loss: - Exploration expenditure written off / impaired 5,470,195 - - Depreciation expense 6,651 6,997 - Expenses incurred and settled by equity - 120,000 - Gain on write down of liabilities (2,557,779) Changes in assets and liabilities: - (Increase)/decrease in receivables - 1,163 - (Increase)/decrease in prepayments (5,945) (9,514) - (Increase)/decrease in creditors and accruals 284,251 (248,896) - Increase/(decrease) in employee entitlements - - - Increase/(decrease) in provisions 26,744 18,994 Net cash provided by/(used by) operating activities (925,270) (1,299,846)	Mining & Exploration $ -	Corporate Consolidated $ $ 43,593 43,593
	-	(1,188,590) (1,188,590)
	3,069,143 -	677,872 3,747,015 (438,420) (438,420)
	3,069,143	239,452 3,308,595
		2013 2012 $ $
		382,355 609,491
		(925,270) (1,299,846)

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

		Note	2013		2012
			$		$
c.	Non-cash operating activities
	Expenses settled by equity			-	120,000

NOTE 24: SHARE-BASED PAYMENTS

a. Options granted to key management personnel as share-based payments

No key management personnel hold options in year 2013.

NOTE 25: EVENTS AFTER THE REPORTING PERIOD

On 22 July 2013, the Company changed registered office and principal place of business. These were again changed on 8 October 2013 to their present location.

On 30 July 2013, the Company announced the termination of the administration service contract between Quest Minerals Ltd and Corporate Admin Services Pty Ltd (CAS). CAS has made a claim for approximately $110,000 in unpaid fees, and on that basis has purported to terminate the agreement. CAS is also claiming a termination payment of approximately $33,000 per month from July 2013 to the end of the term of the agreement. Further details are contained at Notes 20 and 21.

On 30 August 2013, the Company made calls for a total of $1.1 million on Partly Paid Shares with final payment due on 4 October 2013. At the date of this report, payments due on the call had not been received from the holders of the partly paid shares. The Company is taking steps for the shares to be forfeited and for the unpaid call to be recovered.

On 30 September 2013, the Company agreed a compromise agreement with Haramont Pty Ltd (Haramont), a company controlled by Mr Jerome Vitale, to settle a debt Haramont claimed the Company owed. The debt had been acquired by Haramont as a bona fide purchaser from Mutual Holdings Pty Ltd of a portion of the debt arising under the agreement between the Company and Mutual Holdings to acquire the Victory Bore tenement. (refer Notes 21 and 26 for details).

Given the circumstances in which Debt was assigned to Haramont, there is uncertainty as to whether Haramont (as a bona fide purchaser for value without notice) may enforce its portion of the Debt. Given this uncertainty and in light of the Company’s financial position and operating circumstances, the independent directors and Mr Vitale have agreed to a compromise under which the Company acknowledged that it is indebted to Haramont for a residual debt of $175,000 (Acknowledged Debt), or approximately 20% of Haramont’s portion of the Debt. All applicable interest has been waived.

At the date of this report, the Company is considering a rights issue. Subject to conditions, Haramont has agreed to underwrite the issue for up to $125,000 of the Acknowledged Debt, with its underwriting obligation to be set off against any shortfall under the issue. The balance is to be paid in cash by no later than the earlier of:

• i) the Company raising sufficient capital to repay the balance; and

• ii) 28 February 2014.

In the event that Mr Vitale ceases to be a director of the Company, the outstanding balance of the debt becomes due and payable within five (5) business days of that date.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Except for the above, no matters or circumstances have arisen since the end of the financial year, that have significantly affected, or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years.

NOTE 26: RELATED PARTY TRANSACTIONS

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

a. Key management personnel

The names of each person holding the position of Director of Quest Minerals Limited during the financial year are:

D Gee

P Piercy (Appointed 22 April 2013) JG Vitale (Appointed 22 April 2013) A Winduss (Resigned 22 April 2013) L Tyndall (Removed 17 December 2012)

C Barker (Appointed 18 September 2012, Resigned 19 December 2012)

A Hamilton (Appointed 4 May 2012, Resigned 18 September 2012)

R Molkenthin (Appointed 20 December 2012, Resigned 22 April 2013)

For details of disclosures relating to key management personnel, refer to Note 6: Interests of Key Management Personnel (KMP).

b. Commercial services agreement

– Winduss & Associates Pty Ltd

The Company receives accounting and bookkeeping services from Winduss & Associates Pty Ltd, an accounting practice of which Mr Alan Winduss is a director and shareholder. Fees charged are at normal commercial rates and conditions. The amount of fees paid or accrued to 30 June 2013 for accounting and bookkeeping services is $119,723 (2012: $2,429). The amount owing to Winduss & Associates Pty Ltd at 30 June 2013 is $44,384 (2012: $nil).

c. Commercial service agreement

–

Management Consultant Mining

The Company received mining consulting services from Management Consultant Mining, a Company of which Mr Chris Barker is a director and shareholder. Fees charged are at normal commercial rates and conditions. The amount of fees paid or accrued to 30 June 2013 for mining consulting service is $41,688 (2012: $nil).

d. Deed of acknowledgement and release – Haramont Pty Limited

The Company and Haramont Pty Limited (an entity controlled by Mr Jerome (Gino) Vitale are parties to a deed of acknowledgment and release dated 30 September 2013. Under the agreement and with effect from 30 June 2013, the Company and Haramont have

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

compromised a liability of $812,915 plus interest claimed by Haramont from the Company for $175,000. The circumstances surrounding the liability and the Company’s payment obligations are set out in Notes 21 and 25. The independent directors considered the compromise to be reasonable in the circumstances as if the Company and Haramont were dealing at arm’s length, so that shareholder approval was not required for the purposes of Chapter 2E of the Corporations Act.

NOTE 27: FINANCIAL RISK MANAGEMENT

This note presents information about the Group’s exposure to credit, liquidity and market risks, its objectives, policies and processes for measuring and managing risk and the management of capital.

The Group does not use any form of derivatives as it is not at a level of exposure that requires the use of derivatives to hedge its exposure. Exposure limits are reviewed by management on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Board of Directors of the Company has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Company and the Group through regular reviews of the risks.

The totals for each category of financial instruments, measured in accordance with AASB 139, as detailed in the accounting policies to these financial statements, are as follows:

Categories of financial instruments

Categories of financial instruments
Note Financial assets Cash and cash equivalents 9 Financial liabilities Borrowings–unsecured loan Loans from others Debentures 16	2013 2012 $ $ 382,355 609,491
	382,355 609,491
	4,118 200,000 175,000 - 700,000 -
	879,118 200,000

a. General objectives, policies and processes

In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

The principal financial instruments from which financial instrument risk arises:

• trade and other receivables - trade and other payables

• cash at bank - borrowings

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

The Board has overall responsibility for the determination of the Company’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure effective implementation of the objectives and policies to the Company’s finance function. The Company’s risk management policies and objectives are therefore designed to minimise the potential impact of these risks on the results of the Company where such impacts may be material.

Specific financial risk exposures and management

The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk, foreign currency risk and other price risk (commodity and equity price risk). There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and processes for managing or measuring the risks from the previous period.

b. Credit risks

Exposure to credit risk relating to financial assets arises from the potential non- performance by counter parties of the contract obligations that could lead to a financial loss to the Company. There is no material amount of collateral held as security at 30 June 2013.

Cash and cash equivalents

The Company limits its exposure to credit risk by only depositing cash at banks or financial institutions that have an acceptable credit rating.

Trade and other receivables

As the Company operates primarily in investment and exploration activities, it does not have trade receivables and therefore is not exposed to credit risk in relation to trade receivables. The Company, where necessary, establishes an allowance for impairment that represents its estimate of incurred losses in respect of other receivables and investments. Management does not expect any counterparty to fail to meet its obligations.

Exposure to credit risk

The carrying amount of the group’s financial assets represents the maximum credit exposure. The Company’s maximum exposure to credit risk at balance date is as follows:

Note Other receivables 10 c. Liquidity risk	2013 2012 $ $ 15,314 42,058
	15,314 42,058

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

The Company manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by continuously monitoring forecast and actual flows. The Company does not have any external borrowings.

The Company anticipates a need to raise additional capital in the next 12 months to meet forecast operational activities. The decision on how the Company will raise future capital will depend on market conditions existing at that time.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

Financial liability and financial asset maturity analysis

At 30 June 2013 Financial liabilities due for payment Payables and borrowings Total expected outflows At 30 June 2013 Financial assets– cash flows realisable Cash and cash equivalents Total anticipated inflows Net (outflow)/ inflow on financial instruments At 30 June 2012 Financial liabilities due for payment Payables and borrowings Total expected outflows Financial assets– cash flows realisable Cash and cash equivalents Total anticipated inflows Net (outflow)/ inflow on financial instruments	Within 1 year 1 to 5 years Over 5 years Total $ $ $ $ 1,159,449 - - 1,159,449
	1,159,449 - - 1,159,449
	Within 1 year 1 to 5 years Over 5 years Total $ $ $ $ 382,355 - - 382,355
	382,355 - - 382,355
	(777,094) - - (777,094)
	Within 1 year 1 to 5 years Over 5 years Total 438,420 - - 438,420
	438,420 - - 438,420
	609,491 - - 609,491
	609,491 - - 609,491
	171,071 - - 171,071

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Financial arrangements

At 30 June 2013: nil (2012: nil)

d. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimising the return.

i) Foreign exchange risk

Overseas transactions are negotiated in foreign currencies which give rise to assets and liabilities which are translated to Australian currency in accordance with the accounting policies set out in Note 1(j).

At balance date, there were no amounts receivable and payable in foreign currency and therefore the Group does not have any exposure to foreign currency risk.

ii) Interest rate risk

The Group is exposed to interest rate risk (primarily on its cash and cash equivalents), which is the risk that a financial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments. The Group does not use derivatives to mitigate these exposures.

The Company adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents on short term deposit at best available market interest rates.

Profile

At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:

At the reporting date the interest rate profile instruments was:	of the Company’s interest-bearing financial	of the Company’s interest-bearing financial
	Consolidated and Company
	carrying amount
	2013	2012
	$	$
Variable rate instruments
Financial assets–cash and cash equivalents	382,355	609,491

Fair value sensitivity analysis for variable rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss or through equity, therefore a change in interest rates at the reporting date would not affect profit or loss or equity.

Cash flow sensitivity analysis for variable rate instruments

The group has performed a sensitivity analysis relating to its exposure to interest rate risk at balance date.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2012.

30 June 2013 Variable rate instruments Unsecured loan 30 June 2012 Variable rate instruments Unsecured loan	Profit or loss Equity 100bp Increase 100bp decrease 100bp increase 100bp decrease
	$ $ $ $ 3,505 (3,505) 3,505 3,505 (8,791) 8,791 (8,791) 8,791 5,637 (5,637) 5,637 (5,637) (2,000) 2,000 (2,000) 2,000

• e. Fair values

The fair values of:

• Term receivables, government and fixed interest securities and bonds are determined by discounting the cash flows, at the market interest rates of similar securities, to their present value

• Other loans and amounts due are determined by discounting the cash flows, at market interest rates of similar borrowings, to their present value

• Other assets and other liabilities approximate their carrying value

There are no financial assets and financial liabilities readily traded on organised markets in standardised form.

Aggregate net fair values and carrying amounts of financial assets and financial liabilities at balance date:

Financial assets: Cash and cash equivalents Receivables Total financial assets Financial liabilities: Trade and other payables Borrowings Total financial liabilities	Carrying amount Net fair value 2013 2012 2013 2012 $ $ $ $ 382,355 609,491 382,355 609,491 15,314 42,058 15,314 42,058
	397,669 651,549 397,669 651,549
	280,331 238,420 280,331 238,420 879,118 200,000 879,118 200,000
	1,159,449 438,420 1,159,449 438,420

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Capital management

The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. The Group’s focus has been to raise sufficient funds through equity to fund exploration and evaluation activities. The Group monitors capital on the basis of the gearing ratio; however there are no external borrowings as at 30 June 2013.

There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting.

The Group is not subject to externally imposed capital requirements.

END OF NOTES TO FINANCIAL STATEMENTS (AUDITED)

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ DECLARATION

The directors declare that:

• a. The attached financial statements and associated notes are in accordance with the Accounting Standards and the Corporations Regulations.

• b. The attached financial statements and notes give a true and fair view of the financial position as at 30 June 2013 and the performance of the Group for the year ended on that date; and

• c. The financial statements and notes are in accordance with the Corporations Act 2001.

In the opinion of the directors there are reasonable grounds to believe the Group will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Board of Directors:

==> picture [118 x 75] intentionally omitted <==

……………………………….. Paul Piercy

Chairman

Perth, 14 October 2013

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INDEPENDENT AUDIT REPORT

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE GOVERNANCE STATEMENT

Introduction

Since the introduction of the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations ("ASX Guidelines" or “the Recommendations”), Quest Minerals Limited ("Company") has, in the opinion of the present Board of Directors, failed to adopt corporate governance policies and systems of control and accountability appropriate for a public listed company. In the opinion of the present Board, the policies and procedures summarised in previous annual reports issued by the Company amounted to nothing more than lip service. This much is clear from the remedial steps the Directors have deemed it necessary to take on a number of fronts since the present Board was constituted on 22 April 2013, details of which are specified in the accompanying financial statements.

As a result of the failure to implement basic corporate governance principles in the past, the Company has identified breaches of certain provisions of the Corporations Act and of the ASX Listing Rules. These breaches have been identified elsewhere in this Annual Report and communicated in writing to ASIC and ASX respectively. In the opinion of the Directors, it is likely that such departures from good governance practices have also resulted in the Company incurring material losses. By definition, this has diminished shareholder wealth and has resulted in a negative perception of the Company in financial markets, making it more difficult to attract capital at normal commercial terms.

The present Board has adopted ASX Guidelines and Recommendations as summarised in this report.

Notwithstanding the historical departures from good corporate governance principles identified in the financial statements, in the future the Company intends to follow each Recommendation where the Board has considered the Recommendation to be an appropriate benchmark for corporate governance practices, taking into account factors such as the size of the Company, the Board, resources available and activities of the Company. Where, after due consideration, the Company's corporate governance practices depart from the Recommendations, the Board offers disclosure of the nature of, and reason for, the adoption of its own practice. Since the reconstitution of the Board on 22 April 2013, the Company has resolved to adopt and monitor basic systems of control and accountability as the basis for the administration its corporate governance policies.

The Board believes it is important to ensure there are checks and balances, even though it has extremely limited human resources. It is recognised that such an environment heightens the risk of limited division of duties where the same person may initiate a transaction and authorise it. Wherever possible risk mitigation procedures have been adopted to protect both the Company’s assets and the individual or contracted services provider.

Notwithstanding its limited resources, the Board has implemented minimum procedures to administer the policies and procedures in a transparent fashion and with integrity, with the objective of pursuing the fundamental tenets of good corporate governance as applicable to a junior explorer.

Corporate Governance Council Recommendation 1 Lay Solid Foundations for Management and Oversight

Role of the Board of Directors

The Board has responsibility for protecting the rights and interests of Shareholders and is responsible for the overall direction, monitoring and governance of the Company. Responsibility for managing the business on a day-to-day basis has been delegated to the Managing Director. The Company has one executive director who is responsible for management of the Company’s day-to-day affairs. All other functions including management and financial accounting and reporting, accounts payable, tenement management and administration, company secretarial function and website management are provided by contracted service providers.

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CORPORATE GOVERNANCE STATEMENT

The Board is responsible for the overall corporate governance of the Company and its subsidiaries. Responsibilities and Functions of the Board are set out below:

• i. setting the strategic direction of the Company, establishing goals to ensure that these strategic objectives are met and monitoring the performance of management against these goals and objectives;

• ii. ensuring that there are adequate resources available to meet the Company's objectives;

• iii. appointing the Managing Director/Chief Executive Officer and evaluating the performance and determining the remuneration of senior executives, and ensuring that appropriate policies and procedures are in place for recruitment, training, remuneration and succession planning;

• iv. evaluating the performance of the Board and its Directors on an annual basis;

• v. determining remuneration levels of Directors;

• vi. approving and monitoring financial reporting and capital management;

• vii. approving and monitoring the progress of business objectives;

• viii. ensuring that any necessary statutory licences are held and compliance measures are maintained to ensure compliance with the law and licence(s);

• ix. ensuring that adequate risk management procedures exist and are being used;

• x. ensuring that the Company has appropriate corporate governance structures in place, including standards of ethical behaviour and a culture of corporate and social responsibility;

• xi. ensuring that the Board is and remains appropriately skilled to meet the changing needs of the Company;

• xii. ensuring procedures are in place for ensuring the Company's compliance with the law; and financial and audit responsibilities, including the appointment of an external auditor and reviewing the financial statements, accounting policies and management processes.

The Company has not adopted a formal Board Charter.

Board Processes

A standard agenda for the meetings has been determined to ensure certain standing information is addressed and other items which are relevant to reporting deadlines and or regular review are scheduled when appropriate. The agenda is regularly reviewed for relevance by the Chairman, the Managing Director and the Company Secretary.

Corporate Governance Council Recommendation 2 Structure the Board to Add Value

Board Composition

The relevant provisions in the Constitution and the Corporations Act determine the terms and conditions relating to the appointment and termination of Directors. All Directors, other than the Managing Director, are subject to re-election by rotation every three years.

On 6 June 2012, the Board resolved to form a Nomination and Remuneration Committee to oversee the nomination policy of the Company. The Committee consisted of 2 Non-executive Directors. Any changes to Directorships will be considered by the Committee subject to any applicable laws. Identification of potential Board candidates includes consideration of the skills, experience, personal attributes and capability to devote the necessary time and commitment to the role. After the reconstitution of the Board in April 2013, the need for a separate Committee was reconsidered, and it was resolved to return the functions of the Nomination and Remuneration Committee to the full Board. The Board believes that the Company is not of a sufficient size to warrant a separate committee and that the full Board is able to meet objectives of the best practice recommendations and discharge its duties in this area. The relevant experience of Board members is detailed in the Directors’ section of the Directors’ Report.

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CORPORATE GOVERNANCE STATEMENT

The Board consists of Non-executive Chairman Mr Paul Piercy, Executive Director Mr Jerome Vitale, and Non-executive Dr Dennis Gee.

The Constitution requires a minimum number of three Directors. The maximum number of Directors is fixed by the Board but may not be more than 9, unless the members of the Company, in general meeting, resolve otherwise. The skills, experience and expertise of all Directors is set out in the Directors’ section of the Annual Report.

Directors are expected to bring independent views and judgement to the Board’s deliberations, and it has been determined that Mr Paul Piercy, the Company’s Chairman satisfies the criteria for independence as outlined in recommendation 2.1 of the ASX Corporate Governance Principles. Dr Dennis Gee, although a non-executive director, is not considered independent because he provides geological consulting services to the Company.

The Board considers that given the size and scope of the Company's operations at present, it has the relevant experience in the exploration and mining industry and is appropriately structured to discharge its duties in a manner that is in the best interests of the Company and its Shareholders from both a long-term strategic and operational perspective.

Independent Chairman

The Chairman is considered to be an independent director and as such Recommendation 2.2 of the Corporate Governance Council has been complied with. The Board believes that Mr Piercy is an appropriate person for the position as Chairman because of his experience and proven track record as a public company director.

Roles of Chairman and Managing Director

The roles of Chairman and Managing Director are undertaken by different individuals, and as such the Company complies with Recommendation 2.3 of the Corporate Governance Council.

Evaluation of Board Performance

The Company does not have a formal process for the evaluation of the performance of the Board and as such does not comply with Recommendation 2.5 of the Corporate Governance Council. The Board is of the opinion that the competitive environment in which the Company operates will effectively provide a measure of the performance of the Directors, in addition the Chairman assesses the performance of the Board, individual directors and key executives on an informal basis.

Education

All Directors are members of their respective professional bodies and are encouraged to attend professional education courses relevant to their roles.

Independent Professional Advice and Access to Information

Each Director has the right to access all relevant information in respect of the Company and to make appropriate enquiries of senior management. Each Director has the right to seek independent professional advice at the Company’s expense, subject to the prior approval of the Chairman, which shall not be unreasonably withheld.

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CORPORATE GOVERNANCE STATEMENT

Corporate Governance Council Recommendation 3 Promote Ethical and Responsible Decision Making

The Board actively promotes ethical and responsible decision making.

Code of Conduct

The Board has adopted a Code of Conduct that applies to all employees, executives and Directors of the Company, and as such complies with Recommendation 3.1 of the Corporate Governance Council. This Code addresses expectations for conduct in accordance with legal requirements and agreed ethical standards. A copy of the Code is available on the Company’s website.

Diversity Policy

The Board recognises the benefits of promoting and encouraging diversity within the Company and its Controlled Entities and has adopted a Diversity Policy encompassing these principles.

The Company’s policy allows the Board to determine whether measureable objectives should be set based on the size and nature of the Company. The Board believes that the Company will not be able to set meaningful and measurable objectives in this area given the Company’s current size, nature and scope of activities. Notwithstanding this, the Company strives to provide opportunities for current and prospective employees and contracted service providers and consultants of all backgrounds in such a manner that best improves shareholder value and which reflects the values, principles and intention of the Company’s Diversity Policy.

For the 2013 financial year, the Company had no female employees or any females holding senior executive or board positions. The Company had one employed consultant during the year.

Corporate Governance Council Recommendation 4 Safeguarding Integrity in Financial Reporting

Audit Committee

The Board does not have a separate Audit Committee with a composition as suggested by Recommendations 4.1, 4.2 and 4.3 of the Corporate Governance Council. The full Board carries out the function of an audit committee. The Board believes that the Company is not of a sufficient size to warrant a separate committee and that the full Board is able to meet objectives of the best practice recommendations and discharge its duties in this area. The relevant experience of Board members is detailed in the Directors’ section of the Directors’ Report.

Financial Reporting

The Board relies on its Managing Director and contracted Company Secretary who acts effectively as Chief Financial Officer to monitor the internal controls within the Company. Financial performance, given that the Company is not in production or at project development stage, comprises cash management and corporate overhead cost control. These functions are monitored by the Managing Director who reports to the Board at the scheduled Board meetings.

Corporate Governance Council Recommendation 5 Make timely and balanced disclosure

The Board reviews the performance of the external auditor on an annual basis and meets with them during the year to review findings and assist with Board recommendations.

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CORPORATE GOVERNANCE STATEMENT

In the absence of a formal audit committee the Directors of the Company are available for correspondence with the auditor of the Company. The Company has received formal nomination for Grant Thornton Audit Pty Ltd to be appointed as external auditor. Subject to the present external auditor, Mr Graham Swan of Rothsay resigning prior to the AGM to be held in November 2013, ASIC approving the resignation and shareholders approving the appointment, Grant Thornton is expected to assume the role of external auditor as from the closure of the AGM.

Continuous Disclosure

The Board places a high priority on communication with Shareholders and is aware of the obligations it has, under the Corporations Act and ASX Listing Rules, to keep the market fully informed of information which is not generally available and which may have a material effect on the price or value of the Company's securities.

The Company has adopted policies which establish procedures to ensure that Directors and, where relevant, professional contracted service providers are aware of and fulfil their obligations in relation to the timely disclosure of material price sensitive information. A copy of the Company’s Disclosure Policy can be found on the Company’s website.

Continuous disclosure is discussed at all regular Board meetings and on an ongoing basis the Board ensures that all activities are reviewed with a view to the necessity for disclosure to security holders.

In accordance with ASX Listing Rules the Company Secretary has been appointed as the Company’s disclosure officer.

Corporate Governance Council Recommendation 6 Respect the Rights of Shareholders

Communications

The Board fully supports security holder participation at general meetings as well as ensuring that communications with security holders are effective and clear. This has been incorporated into a formal shareholder communication strategy, in accordance with Recommendation 6.1 of the Corporate Governance Council. A copy of the Company’s Shareholder Communication Policy is available on the Company’s website.

In addition to electronic communication via the ASX web site, the Company publishes all significant announcements together with all quarterly reports. These documents are available in both hardcopy on request and on the Company web site at www.questminerals.com.au

Shareholders are able to pose questions on the audit process and the financial statements directly to the independent auditor who attends the Company Annual General Meeting for that purpose.

Corporate Governance Council Recommendation 7 Recognise and manage risk

Risk Management Policy

The Board has adopted a risk management policy that sets out a framework for a system of risk management and internal compliance and control, whereby the Board delegates day-to-day management of risk to the Managing Director therefore complying with Recommendation 7.1 of the Corporate Governance Council. The Board is responsible for supervising management’s framework of control and accountability systems to enable risk to be assessed and managed. A copy of the Company’s Risk Management Policy can be found on the Company’s website.

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CORPORATE GOVERNANCE STATEMENT

The Company is committed to ensuring that sound environmental management and safety practices are maintained for its exploration activities. A copy of the Company’s Environmental Policy is available on the Company’s website. A copy of the Company’s Occupational Health and Safety Policy is available on the Company’s website.

The Company’s risk management strategy is evolving and will be an ongoing process and it is recognised that the level and extent of the strategy will develop with the growth and change in the Company’s activities.

Risk Reporting

As the Board has responsibility for the monitoring of risk management it has not required a formal report regarding the material risks and whether those risks are managed effectively therefore not complying with Recommendation 7.2 of the Corporate Governance Council. The Board believes that the Company is currently effectively communicating its significant and material risks to the Board and its affairs are not of sufficient complexity to justify the implementation of a more formal system for identifying, assessing monitoring and managing risk in the Company.

The Company does not have an internal audit function.

Managing Director Written Statement

The Board requires that the Managing Director, or if there is no person appointed to that position, an Executive Director, and another relevant Officer or holder of a Key Management position provide a written statement that the financial statements of the Company present a true and fair view, in all material aspects, of the financial position and operational results and have been prepared in accordance with Australian Accounting Standards and the Corporation Act. The Board also requires that the Managing Director, or if there is no person appointed to that position, an Executive Director, and another relevant Officer or holder of a Key Management position provide sufficient assurance that the declaration is founded on a sound system of risk management and internal control, and that the system is working effectively.

The declarations have been received by the Board, in accordance with Recommendation 7.3 of the Corporate Governance Council.

Corporate Governance Council Recommendation 8 Remunerate Fairly and Responsibly

Remuneration Committee

On 6 June 2012, the Board resolved to form a Nomination and Remuneration Committee to oversee the Remuneration Policy. The Committee is to consist of 2 Non-executive Directors. Prior to the formation of the Committee, the Board was responsible for establishing the Company’s remuneration policies and practices, and to ensure they match the Group’s objectives. After the reconstitution of the Board in April 2013, the need for a separate Committee was reconsidered, and it was resolved to return the functions of the Nomination and Remuneration Committee to the main Board. The Board believes that the Company is not of a sufficient size to warrant a separate committee and that the full Board is able to meet objectives of the best practice recommendations and discharge its duties in this area.

The Managing Director receives a salary package which may include performance based components are designed to reward and motivate. Non-executive Directors receive fees agreed on an annual basis by the Board.

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CORPORATE GOVERNANCE STATEMENT

The Board determines all compensation arrangements for Directors. It is also responsible for setting performance criteria, performance monitors, share option schemes, incentive performance schemes, superannuation entitlements, retirement and termination entitlements and professional indemnity and liability insurance cover.

The Board ensures that all matters of remuneration will continue to be in accordance with the Corporations Act requirements.

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES ABN 55 062 879 583

ASX ADDITIONAL INFORMATION

A. Distribution of equity securities

Distribution of Shareholders as at 23 October 2013:

1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over Total number of holders	Ordinary shares Partly paid shares Options 29/6/15 @$0.02 Options 30/4/16 @$0.012 3,975 - - - 486 - - - 113 - - - 343 - - - 309 4 1 4
	5,226 4 1 1

Total number of shares on issue 541,943,285 Number of holders of less than a marketable parcel 5,118 Percentage held by the 20 largest holders 69.50%

B. Substantial shareholders

As at 23 October 2013 the Company has the following Substantial Shareholders: Vladimir Nikolaenko 102,301,707 shares 18.88% Maxillion Limited 82,313,928 shares 15.19%

C.

Voting rights

Voting rights are one vote per ordinary share, with no voting rights attached to options.

D.

Twenty largest equity security holders

The names of the 20 largest shareholders as at 25 September 2013 are listed below:

Name Maxillion Limited KHV Holdings Pty Ltd John Wardman & Associates Pty Ltd Pacrim Mining Limited Pharaoh Nominees Pty Ltd Nefco Nominees Pty Ltd Natwest Securities Limited Mr Theodore Tindaro Marchese & Mrs Yvonne Margaret Marchese Droxford International Ltd ACT2 Pty Ltd Pershing Australia Nominees Pty Ltd Pacrim Mining Limited Mutual Holdings Pty Ltd Carrington Street Investments Pty Ltd Monacan Nominees Pty Ltd Pacrim Mining Limited Black Ridge Mining NL Middleton Nominees (SA) Pty Ltd SA Capital Funds Management Ltd Mr John Andrew Levings

Number held Percentage 82,313,908 15.189 70,000,000 12.916 25,000,000 4.613 21,260,000 3.923 21,215,757 3.915 20,188,628 3.725 19,650,000 3.626 18,800,000 3.469 17,686,092 3.263 15,000,000 2.768 15,000,000 2.768 7,000,000 1.292 7,000,000 1.292 6,654,931 1.228 6,027,579 1.112 6,000,000 1.107 5,555,555 1.025 5,160,000 0.952 3,606,395 0.665 3,548,000 0.655

376,666,845 69.503

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TENEMENT SCHEDULE

Project		Reference		QNL Interest		Status
Nigeria
Nigeria Exploration Licence		6181		100%		Certificate of Title
Nigeria Exploration Licence		6183		100%		Certificate of Title
Nigeria Exploration Licence		6431		100%		Certificate of Title
Nigeria Exploration Licence		7280		100%		Certificate of Title
Nigeria Exploration Licence		7281		100%		Certificate of Title
Nigeria Exploration Licence		7283		100%		Certificate of Title
Nigeria Exploration Licence		7848		100%		Certificate of Title
Nigeria Exploration Licence		7849		100%		Certificate of Title
Nigeria Exploration Licence		7850		100%		Certificate of Title
Nigeria Exploration Licence		7852		-		Notification of Grant
Nigeria Exploration Licence		7854		100%		Certificate of Title
Nigeria Exploration Licence		7859		-		Notification of Grant
Nigeria Exploration Licence		7886		100%		Certificate of Title
Nigeria Exploration Licence		9161		-		Notification of Grant
Nigeria Exploration Licence		9172		-		Notification of Grant
Nigeria Exploration Licence		9173				Notification of Grant
Western Australia
VictoryBore		E57/550		100%		Current
Perenjori		E70/2227		Earning80%		Current
Perenjori		E70/2858		Earning80%		Current
Perenjori		P70/1608		100%		Current
Perenjori		P70/1609		100%		Current

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