KINGSROSE MINING LIMITED — Annual Report 2012

Sep 6, 2012

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ACN 112 389 910

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Annual Financial Report 2012

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

CONTENTS

Directors’ Report	1
Auditor’s Independence Declaration	18
Consolidated Income Statement for the year ended 30 June 2012	19
Consolidated Statement of Comprehensive Income for the year ended 30 June 2012	20
Consolidated Statement of Financial Position as at 30 June 2012	21
Consolidated Statement of Cash Flows for the year ended 30 June 2012	22
Consolidated Statement of Changes in Equity for the year ended 30 June 2012	23
Notes to the Financial Statements for the year ended 30 June 2012	24
Directors' Declaration	75
Independent Audit Report	76

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT

The Directors submit their report of the “Consolidated Entity” or “Group”, being Kingsrose Mining Limited (“Kingsrose” or “the Company”) and its Controlled Entities for the year ended 30 June 2012.

DIRECTORS

The names 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.

Names, qualifications, experience and special responsibilities

John Morris – Non-Executive Chairman (Appointed 17 August 2007)

Mr. Morris has over 40 years experience in exploration, project development and management of public listed resource companies. He has held prior directorships in a number of gold and base metals public companies in Australia and overseas including Forsyth NL and Amerisur Resources Plc (formerly Chaco Resources Plc/Gold Mines of Sardinia Plc). Mr. Morris also serves on the Company’s Remuneration Committee.

Mr. Morris does not hold any other directorships of public companies.

Christopher Start – Managing Director (Appointed 1 July 2011)

Mr. Start was appointed General Manager of Kingsrose in March 2011. He was subsequently appointed Managing Director in July 2011. He graduated from RMIT as a Metallurgical Engineer with honours in 1988 and has over 24 years of experience in the mining industry. He has worked as a metallurgist, in management positions and as a consultant at a number of mine sites including Kidston, Murrin Murrin, Granny Smith and Boddington.

Mr. Start also has international experience working as the Processing Manager at Mt Muro gold and silver mine in Indonesia and as the General Manager at the Musselwhite gold mine in Canada. In addition to his extensive operational experience Mr. Start has several years of corporate experience with Dominion Mining and Australian Goldfields and has a Master of Science Degree in Mineral Economics.

Mr. Start does not hold any other directorships of public companies.

Timothy Spencer – Executive - Finance Director (Appointed 28 March 2009)

Mr. Spencer has over 18 years experience in the precious metals markets, from mining to refining and bullion distribution to in-depth precious metals market analysis, gained from working in various accounting, treasury and finance roles including two gold mining companies and a large gold refining and trading enterprise. Mr. Spencer holds an Economics degree (accounting major) from Monash University, Victoria and is a qualified CPA accountant. Until his resignation in June 2012, Mr. Spencer served on the Remuneration Committee.

Mr. Spencer does not hold any other directorships of public companies.

J. William (Bill) Phillips – Non-Executive Director (Appointed 12 January 2005)

Mr. Phillips has over 32 years experience in mining contracting and mine management, much of which has been gained in Western Australia. He is highly regarded as a leading specialist in underground narrow vein mining.

He has managed or been instrumental in the successful development of 16 mines either in the role of contractor or as owner/shareholder. Until May 2010 Mr. Phillips oversaw mining and production at Medusa Mining Limited’s Co-O gold mine and processing plant in the southern Philippines. Mr. Phillips also serves on the Remuneration Committee.

Mr. Phillips does not hold any other directorships.

Page 1

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

Peter Cook – Non-Executive Director (Appointed 1 October 2010 – Resigned 21 August 2012)

Mr. Cook is a Geologist and Mineral Economist and has considerable experience in the fields of exploration and project and corporate management of mining companies. He is the current Non-Executive Chairman of Metals X Limited, Pacific Niugini Limited and Aziana Limited. He is also a director of Westgold Resources Limited. From 21 June 2012 until his resignation, Mr. Cook also served on the Company’s Remuneration Committee.

During the past three years he has served as a director of the following public listed companies:

• Metals X Limited – appointed 23 July 2004

• Westgold Resources Limited – appointed 19 March 2007

• Pacific Niugini Limited – appointed 31 August 2009

• Aziana Limited – appointed 30 May 2011

Andrew P. Spinks – Non-Executive Director (Appointed 21 August 2012)

Mr. Spinks is a geologist with over 24 years professional experience in nickel, gold, coal, iron ore and diamonds in Australia and Africa. He has undertaken diverse roles from grass roots exploration through to senior management and consulting roles in exploration, project development and mining. He is a co-founder of Strategic Resource Management and was responsible for the strategy, target generation and acquisitions of that company. Mr. Spinks holds a B.App.Sc (Geol), Grad.Dip (Mining), W.A. Quarry Managers Certificate and is a member of the AusIMM. Mr. Spinks has been appointed a Member of the Remuneration Committee.

Mr Spinks is currently a director of Kibaran Resource Limited and Rarus Limited.

During the past three years he has served as a director of the following public listed companies:

• Central Iron Ore Limited (TSXV:CIO) – appointed 30 November 2009; resigned 30 November 2011

• Kibaran Resources Limited – appointed 20 July 2012

EXECUTIVE AND/OR KEY MANAGEMENT PERSONNEL

Herryansjah - President Director – Board of Directors, PT Natarang Mining

Mr. Herryansjah, an Indonesian citizen, is a geology graduate having over 26 years experience of gold and base metal exploration. He has held the post of Senior Geologist or Chief Geologist with a number of Australian and Indonesian mining companies in Indonesia. During this time he has overseen the implementation of numerous exploration programmes throughout Indonesia. He has had extensive experience in the process of permitting mining development projects as well as in the fields of environmental permitting and national affairs.

Terry Butler

Until his resignation in November 2011, Mr. Terry Butler was the Operations Manager for the Way Linggo Gold Project in Indonesia. He had extensive experience in the mining industry spanning 26 years in various senior management roles including mining, maintenance (fixed plant and mine fleet), processing and site management through to operations manager level. The majority of experience was gained with involvement in green field or new project work, from feasibility, commissioning and then to senior operational management roles in overseas locations.

Page 2

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

Ron Clarke

Mr. Clarke is the Operations Manager for the Way Linggo Project in Indonesia. He has held this position since December 2011. He has extensive experience gained over 35 years in the mining industry, having held various senior management positions and consultancy roles both within Australia and overseas.

He has held key managerial and operational positions during the processing and commissioning phases for various base metals and gold producers, including Resolute Limited, Hill 50 Gold, Harmony Gold Australia and BHP Billiton's Olympic Dam operations. More recently, Mr. Clarke was the consultant Processing Manager at Centamin plc in Egypt.

Jeannette Smith

Mrs. Smith has been the Company Secretary of Kingsrose Mining Limited for the past five years. She has over 30 years experience in the area of corporate administration. In 1981 she qualified as a Paralegal in the United States of America. She has been involved in the listing, compliance and administration of numerous public companies listed on the American, London and Australian Securities Exchanges.

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY

At the date of this report, the interests of the Directors in the shares and options of Kingsrose Mining Limited were:

		Unlisted
	Fully Paid	expiring
	Ordinary	(various)*
Director	Shares	$1.54
J.C. Morris	7,250,000	-
C.N. Start	-	3,000,000
T.G. Spencer	1,050,000	-
J.W. Phillips	16,150,000
P.G. Cook **	2,000,000	-
A.P. Spinks **	-	-

*In respect of 1m options: vesting date 17.09.2011; expiry date 17.09.2013. In respect of 1m options: vesting date 01.10.2012; expiry date 01.10.2014. In respect of 1m options: vesting date 01.10.2013; expiry date 01.10.2015.

**Resigned/Appointed 21 August 2012

DIVIDENDS

In accordance with its Dividend Policy, on 23 May 2012 the Company declared a maiden dividend of $0.04 cents per ordinary share to those shareholders registered on 19 June 2012. The unfranked dividend of $11,566,173 was paid to shareholders on 4 July 2012. The amount attributable to conduit foreign income was $0.02016 per share.

PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN THOSE ACTIVITIES

The principal activities during the year of the entities within the Group were production of gold and silver at the Way Linggo Gold Project in Sumatra, Indonesia. Exploration activities, primarily for gold and silver, continued during the year within the 10,000 hectare Way Linggo property whilst the SARINC zinc/lead tailings project in Sardinia, Italy was put on hold due to the complexity and marginality of the project combined with a lack of cooperation from the local authorities.

Page 3

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

REVIEW OF OPERATIONS

The financial year ended 30 June 2012 saw the Group expand its flagship Way Linggo Gold Project located in Sumatra, Indonesia. Further drilling at the Talang Santo vein system, discovered mid-2011, resulted in a maiden JORC resource statement being issued for it in December 2011. Ore production from the Way Linggo mine continued strongly although depletion of the pre-commissioning high-grade stockpile by December 2011 affected gold production in the second half of the reporting period. Gold production reached 37,650 ounces (2011: 27,056 ounces) with 432,754 ounces (2011: 318,869 ounces) of silver produced as a by-product. Cash operating costs were US$254 (2011: US$142) per gold ounce produced whilst total costs, including depreciation, amortisation and government royalties totalled US$541 (2011: US$421) per gold ounce (both cost per ounce figures include a silver by-product credit of US$309 (2011: US$323) per gold ounce).

Financial Results

The Group’s profit after tax for the year was $21,393,693 (2011: $14,905,273). The share of the profit after tax attributable to the owners of the Parent was $17,551,550 in the current year (2011: $12,244,784).

Review of Financial Condition

Liquidity and capital resources

Cash and cash equivalents as at 30 June 2012 totalled $30,125,139 (2011: $23,951,112).

Total Group assets grew to $94,072,454 as at 30 June 2012 (2011: $68,456,965), a 37% increase over the previous period. Net assets were $66,479,766 (2011: $50,280,884). The ratio of current assets to current liabilities changed from 2.50 in 2011 to 1.45 in 2012 due to the $11,566,173 dividend declared in May 2012. Investment in plant and equipment totalled $4,394,187 (2011: $6,966,136), $12,769,617 (2011: $8,101,562) was spent on exploration and evaluation activities and $416,631 (2011: $9,881,017) in repayment of borrowings and interest.

Shareholder Returns

The Company’s return to its shareholders, whilst not positive, was assisted by the maiden four cent dividend declared in May 2012 and outperformed its peers. The Company’s shareholder return declined by 11% during the reporting period as compared to the S&P/ASX All Ordinaries Gold Index which fell by 33% over the same 12 month period.

The following graph shows the closing price of the Company’s ordinary fully paid shares and listed options during the year ended 30 June 2012 [KRM – ordinary shares; KRMO – listed options]

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KRM/KRMO Price KRM equities versus ASX300 ASX 300 Index
1.70 6,000.00
1.50 5,500.00
1.30 5,000.00
1.10 4,500.00
0.90 4,000.00
0.70 3,500.00
0.50 3,000.00
1/07/11 1/09/11 1/11/11 1/01/12 1/03/12 1/05/12 1/07/12 1/09/12
KRM KRMO S&P ASX 300
----- End of picture text -----

Page 4

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no other significant changes in the state of affairs of the Group other than those referred to elsewhere in this Directors’ Report and in the Financial Statements and notes thereto.

SIGNIFICANT EVENTS AFTER BALANCE DATE

• On 4 July 2012, the Company’s $0.04 per share maiden, unfranked dividend, totaling $11,566,613, was paid to shareholders (it was declared on 23 May 2012).

• On 26 July 2012, the Company announced that it had commenced quotation to trade American Depositary Receipts (ADRs) on the US based exchange, OTCQX International, through the ADR program.

The ADRs will be tradable through licensed US brokers in the ordinary course of trading in the Over-TheCounter (OTC) Markets in the US. Each Kingsrose ADR is equivalent to five (5) ordinary shares in Kingsrose, as traded on the ASX. The Company’s OTCQX ticker symbol is KGRSY.

Kingsrose believes that the ADR listing will assist in attracting new investors to the Company and will help provide greater access to US capital markets.

Dahlman Rose & Co, LLC (Dahlman) has been appointed as the Company’s Principal American Liaison for the Company in connection with its listing on the OTCQX International. The Bank of New York Mellon is the depositary bank for the ADR program.

• On 21 August 2012, the Company announced the appointment of Mr. Andrew Spinks as a Non Executive Director of the Company. Full details on Mr. Spinks’ credentials and experience are located in the Directors’ section of this report. On the same day, Mr. Peter Cook announced his resignation as a Non Executive Director due to his increasing work commitments.

• Please refer to Securities Issued/Exercised during the Year section of this report for options issued and exercised subsequent to balance date.

There have been no other significant events, other than those mentioned in Note 27 to the Financial Statements that 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.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

Kingsrose is committed to growing through exploration and through the acquisition of new projects. The Company’s Board and management are confident that the Way Linggo property will yield further high grade epithermal vein discoveries to assist in increasing both the life and production level of the Project.

Over the next 1 – 3 years, the Company aims to continue:

• boosting production of gold and silver at the Way Linggo Project by bringing online new production areas, such as Talang Santo;

• continued exploration at Way Linggo to discover additional ore sources;

• assess potential growth opportunities with the focus being on primary gold projects with low entry level costs and potential to fast track to production.

Page 5

Kingsrose
Mining
Limited
Annual
Report Year
ended
30
June
2012

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**DIRECTORS’

REPORT
(cont’d)**

**ENVIRONMENTAL

REGULATION
AND
PERFORMANCE**

The
Group
strives
to
maintain
a
high
level
of
environmental
performance
and
is
subject
to
stringent
environmental regulation
in
respect
to
its
activities.

The
Directors
of
the
Company
are
not
aware
of
any
breach
of
environmental legislation
during
the
year
under
review.

EMPLOYEES

The
Group
had
760
full-­‐time
employees
as
at
30
June
2012
(2011:
603).

**SHARE

OPTIONS**

**(a) Unissued

shares**

As
at
the
date
of
this
report,
there
were
10,281,413
ordinary
shares
under
options
as
follows:

				Exercise	Vesting	%	Expiry
No. Listed		No.	Unlisted	Price	Date	vested	Date
		ESOP	Non-ESOP
1,206,413				$0.20	n/a	n/a	31-Dec-12
			1,500,000	$0.25	13-Oct-07	100%	31-Dec-12
		3,000,000		$1.54	17-Sep-11	33.3%	17-Sep-13
					1-Oct-12	33.3%	1-Oct-14
					1-Oct-13	33.3%	1-Oct-15
		150,000		$0.73	8-Mar-10	100%	8-Mar-15
		75,000		$1.59	21-Dec-10	100%	21-Dec-12
		2,000,000		$1.59	2-Dec-11	50%	2-Dec-13
					2-Dec-12	50%	2-Dec-14
		250,000		$1.42	22-Dec-11	100%	22-Dec-13
		1,000,000		$1.53	17-Dec-12	-	17-Dec-14
					17-Dec-13	-	17-Dec-15
			500,000	$1.53	22-Feb-12	100%	22-Feb-14
		500,000		$1.26	23-Jan-13	-	23-Jan-15
				$1.26	23-Jan-14	-	23-Jan-16
		100,000		$1.27	14-Feb-13	-	14-Feb-15

Option
holders
do
not
have
any
right,
by
virtue
of
the
options,
to
participate
in
any
share
issue
of
the
Company
or
any related
body
corporate.

Page
6

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

(b) Shares issued as a result of the exercise of options

During the financial year, employees and executives have exercised options to acquire 2,900,000 fully paid ordinary shares in the Company at a weighted average exercise price of $0.20 per share.

SECURITIES ISSUED/EXERCISED DURING THE YEAR

Issue # securities Issue price/ Issued to/ Allotment under date issued exerciseprice reason for issue ASX LR 7.1 ESOP Listed

Ordinary Shares Options issued over fully paid shares Option conversions Options issued subsequent to year end Options exercised subsequent to year end cancelled 23/11/11 * 1:2 non-renounceable

Nil 13-Jul-11 250,000 $1.58 Employee Yes No 22-Dec-11 1,000,000 $1.53 Employee Yes No From 01-Jul-11 21,393,790 $0.20 Listed options * Yes to 1,000,000 $0.14 Unlisted options Yes No 30-Jun-12 2,410,000 $0.25-$0.39 Unlisted options Yes No 23-Jul-12 500,000 $1.26 Unlisted options Yes No 14-Aug-12 100,000 $1.27 Unlisted Options Yes No 31-Jul-12 17,922 $0.20 Listed Yes 31-Jul-12 7,500 $0.20 Listed Yes 15-Aug-12 7,350 $0.20 Listed Yes 3-Sep-12 75,000 $0.20 Listed Yes rights issue(pursuant to IPO - November 2007)

INDEMNIFICATION OF DIRECTORS AND OFFICERS

An indemnity agreement has been entered into between the Company and each of the Directors named earlier in this report and with each full-time Officer, including persons who act as Directors on behalf of the Company on the Boards of any company in which the Company has a financial interest. Under the agreement, the Company has agreed to indemnify those officers against any claim or for any expenses or costs, to the extent permitted by law, which may arise as a result of work performed in their respective capacities. In addition, the agreement provides for the Company to procure and pay the premium for an insurance policy to cover, to the extent permitted by law, such claims and expenses, and to continue maintaining an insurance policy for a period of seven years after an officer has ceased to act in that capacity.

Page 7

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

INSURANCE OF DIRECTORS AND OFFICERS

The Company has paid an insurance premium in respect of a contract insuring each of the Directors of the Company named earlier in this report and the Officers of the Company against liabilities and expenses, to the extent permitted by law, arising from claims made against them in their capacity as Directors and Officers of the Company, other than conduct involving a wilful breach of duty in relation to the Company, viz

• (a) Willful breach of duty

• (b) A contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001.

During the financial year the Company has paid D&O insurance premiums of $22,250 in respect of liability of any current and future directors and officers of the Company.

DIRECTORS’ MEETINGS

During the financial year:

• Six Directors’ meetings were held. In addition to formal Board meetings, matters requiring Board approval were dealt with via circular resolutions: 13 circular resolutions were signed by all the Directors during the financial year.

• Three Remuneration Committee meetings were held: four circular resolutions were signed by all the Members during the financial year.

	Directors’ Meetings
	Number meetings held	Number meetings
Director	whilst a director	attended
	6	6
J.C. Morris	6	6
C.N. Start	6	6
T.G. Spencer	6	6
P.G. Cook *	6	6
J.W. Phillips	6	6
A.P. Spinks **	0	0

• Resigned 21 August 2012

• ** Appointed 21 August 2012

	Remuneration Committee Meetings	Remuneration Committee Meetings
	Number meetings held	Number meetings
	whilst a director	attended
Director
	3	3
J.C. Morris	3	3
J.W. Phillips	3	3
T.G. Spencer *	2	2
P.G. Cook **	1	1
A.P. Spinks ***	0	0

• Resigned 21 June 2012

• ** Appointed 21 June 2012 and resigned 21 August 2012

• *** Appointed 21 August 2012

Page 8

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

REMUNERATION REPORT (audited)

This report for the year ended 30 June 2012 outlines the remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C) of the Act.

The remuneration report is presented as follows:

1. Introduction

The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of the parent company.

For the purposes of this report, the term ‘executive’ includes the Chief Executive Officer (CEO), executive directors, senior executives, general managers and secretary of the Company and the Group.

Details of Directors and KMP of the Company and the Group are set out below:

		Date of	Date of
Name	Position	appointment	resignation
Directors
J.C. Morris	Non-Executive Chairman	17-Aug-07	-
C.N. Start	Managing Director *	17-Mar-11	-
T.G. Spencer	Finance Director	28-Mar-09	-
J.W. Phillips	Non-Executive Director	12-Jan-05	-
P.G. Cook	Non-Executive Director	1-Oct-10	21-Aug-12
Other Key Management	Personnel
Herryansyjah	President Director – PT Natarang Mining	27-Feb-09	-
T. Butler	Operations Manager (Way Linggo) – PT Natarang Mining	18-May-10	8-Nov-11
R. Clarke	Operations Manager (Way Linggo) – PT Natarang Mining	17-Dec-11	-

• Mr. C.N. Start was appointed as General Manager on 17 March 2011 and became the Managing Director on 1 July 2011.

Other than the resignation of P.G. Cook, there were no other changes to KMP after the reporting date and before the date the financial report was authorised for issue.

Page 9

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

REMUNERATION REPORT (audited) (cont’d)

2. Remuneration governance

The Board has established a formal Remuneration Committee that makes recommendations to the Board on the remuneration arrangements for non-executive directors (NED’s) and executives.

The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of NED’s and executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high performing director and executive team. Details of the nature and amount of emoluments of each director are disclosed elsewhere in the remuneration report.

The Board approves the remuneration arrangements of the CEO and executives and all awards made under the long term (LTI) plan. The Board also sets the aggregate remuneration of NED’s that is subject to shareholder approval.

Remuneration Committee

The Remuneration Committee comprises three independent NEDs.

The role of the Remuneration Committee is to assist the Board of Directors of the Company in fulfilling its corporate governance responsibilities with respect to remuneration by reviewing and making appropriate recommendations on:

• a) remuneration packages of executive directors, non-executive directors and senior executives; and

• b) employee incentive and equity-based plans including the appropriateness of performance hurdles and total payments proposed.

The Remuneration Committee has delegated decision making authority for some matters related to the remuneration arrangements for NEDs and executives and is required to make recommendations to the Board on other matters.

Specifically, the Board approves the remuneration arrangements of the CEO and other executives and all awards made under the long-term incentive (LTI) plan, following recommendations from the Remuneration Committee. The Board also sets the aggregate remuneration of NEDs, which is then subject to shareholder approval, and NED fee levels. The Remuneration Committee approves, having regard to the recommendations made by the CEO, the level of the Group short-term incentive (STI) pool.

The Remuneration Committee meets regularly through the year. The CEO attends certain remuneration committee meetings by invitation, where management input is required. The CEO is not present during any discussions related to his own remuneration arrangements.

Remuneration Strategy

The Company’s remuneration strategy is designed to attract, motivate and retain employees and NED’s by identifying and rewarding high performers and recognising the contribution of each employee to the continued growth and success of the Group.

The objective of the Remuneration Committee is to help the Board achieve its objective of ensuring the Company:

• Has coherent remuneration policies and practices to attract and retain executives and directors who will create value for shareholders;

• Offer competitive remuneration benchmarked against the external market;

• Observes those remuneration policies and practices; and

• Fairly and responsibly rewards executives having regard to the performance of the Company, the performance of the executives and the general pay environment.

Page 10

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

REMUNERATION REPORT (audited) (cont’d)

Remuneration structure

In accordance with best practice corporate governance, the structure of NED and executive remuneration is separate and distinct.

Use of remuneration consultants

To ensure the Remuneration Committee is fully informed when making remuneration decisions, it seeks external remuneration advice.

New legislation was introduced in 2011 that impacts how companies can seek advice, which includes a remuneration recommendation in relation to KMP remuneration. Therefore, in the 2012 financial year the Board underwent a formal appointment process and Guerdon Associates was appointed as the remuneration advisors to the Company.

In order to ensure the Remuneration Committee is provided with advice, and as required, remuneration recommendations, free from undue influence by members of the KMP to whom the recommendations may relate, the engagement of Guerdon Associates by the Remuneration Committee was based on an agreed set of protocols and would be followed by Guerdon Associates, members of the Remuneration Committee and members of the KMP.

During the 2012 financial year, Guerdon Associates provided the Company with:

• Insights on remuneration trends regulatory developments and shareholder views;

• Market data in relation to CEO and executive remuneration;

• Advice in relation to the share options plan and long-term share performance rights.

Remuneration Report approval at AGM for 2011 financial year

The Remuneration Report for the 2011 financial year received positive shareholder support at the 2011 AGM. Results were as follows:

 Open 0.59%  For 69.45%  Against 2.10%  Abstain 27.86%

Company performance and the link to remuneration

Short-term incentive (STI) payments are determined by the Remuneration Committee for submission to the Board of Directors for review and ultimate approval. The Remuneration Committee takes into account the performance of each key management individual as well as Group performance but do not apply a specific set of service and performance conditions. This approach is taken because the Group’s operations are considered to be highly variable, given its early growth stage, and a pre-determined, prescriptive list of service and performance would likely become redundant. STI payments, in general, do not exceed 10% of an individual’s fixed remuneration.

Options are issued with vesting periods, requiring the recipient of the options to complete a minimum period of employment with satisfactory performance before the options vest.

Satisfactory performance is determined by the Board of Directors in relation to senior executives and key management personnel. It is not based on a pre-agreed set of measurement parameters but takes into account the individual's performance in relation to the expectations of the Board of Directors, particularly comparing how well the individual has achieved the key responsibilities as detailed in that person's employment agreement and/or job description.

Page 11

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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DIRECTORS’ REPORT (cont’d)

REMUNERATION REPORT (audited) (cont’d)

The Company does not currently have a policy addressing the hedging of share and options granted to key management personnel as part of their remuneration.

Group Performance

The table below shows the performance of the Group (as measured by the Group’s EPS from continuing operations) since listing on the ASX on 7 December 2007.

Year	2008	2009	2010	2011	2012
EPS(cents/share)
- Basic	(17.40)	(4.20)	(3.18)	4.76	6.44
- Diluted	(17.40)	(4.20)	(3.18)	4.45	6.42
Share price	$0.25	$0.37	$1.04	$1.33	$1.15

The improvement in the return to shareholders is reflected through the earnings per share that has improved over the past five years. EPS grew by 44% in 2012 in comparison to the previous year (on a diluted basis).

3. Non-executive Director (NED) remuneration arrangements

Remuneration policy

The Company’s policy is to remunerate non-executive directors at market rates (for comparable companies) for time, commitment and responsibilities. Fees for non-executive directors are not linked to the performance of the Company, however, to align directors’ interests with shareholders’ interests, directors are encouraged to hold shares in the Company. The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually against fees paid to NED’s of comparable companies.

Payments to non-executive directors reflect the demands that are made on and the responsibilities of the NEDs. Nonexecutive directors’ fees and payments are reviewed annually by the Remuneration Committee. The Company’s constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time by a general meeting. The latest determination was at the 2008 Annual General Meeting (AGM) held on 25 November 2008 when shareholders approved an aggregate fee pool of $110,000 per year (excluding share-based payments).

An amount not exceeding the approved aggregate fee pool is then divided between the non-executive directors as agreed. Each non-executive director currently receives $30,000 for being a Director of the Company. They may also be remunerated at market rates for additional work undertaken as required on behalf of the Group.

The Board will seek any increase for the NED pool at the 2012 Annual General Meeting to $300,000 to cover the remuneration payable to the non-executive Chairman (previously an executive) as well as to allow for the appointment of additional NEDs if required and the adjusting of NED fees to reflect market rates.

4. Executive and Key Management Personnel (KMP) remuneration arrangements

Remuneration levels and mix

The Group aims to reward KMP with a level and mix of remuneration commensurate with their position and responsibilities within the Group and aligned with market practice. Senior management are typically remunerated with a base salary, statutory retirement benefits and share options. Details of these are disclosed in Table 1.

KMP remuneration and incentive policies and practices must be performance based and aligned with the Company’s vision, values and overall business objectives. The Company undertakes periodic remuneration reviews to determine the remuneration positioning against the market as well as individual performance and contribution.

Page 12

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

==> picture [25 x 21] intentionally omitted <==

DIRECTORS’ REPORT (cont’d)

REMUNERATION REPORT (audited) (cont’d)

Executive contractual arrangements

Remuneration arrangements for KMP are formalised in employment agreements and includes base pay, superannuation and long-term incentives through the issue of options. STI’s are not specified in the employment agreements.

Non-Executive Chairman

The Company commenced remunerating Mr. Morris as a non-executive Director on 1 December 2007 and thereafter as an executive Director from 1 May 2009 until 1 July 2011 when he again reverted to non-executive. The terms of employment were formalised on 1 October 2009 at which time Mr. Morris entered into a three-year contract with the Company. He receives a salary of $150,000 per annum plus statutory superannuation. One month’s notice by either party is required to terminate employment.

Managing Director

In March 2011 Mr. Start joined the Company as General Manager at which time he entered into a three-year contract with the Company. On 1 July 2011 he was appointed Managing Director of the Company. Under the terms of his contract, which was amended in August 2012, he receives a salary of $300,000 per annum and statutory superannuation. He also receives a vehicle allowance of up to $20,000 per annum.

Finance Director - Executive

In February 2009 Mr. Spencer entered into a three-year contract with the Company and receives an annual salary of $250,000 per annum and statutory superannuation. His contract was renewed in August 2012, but made retrospective to February 2012, for an indefinite period. He also receives a vehicle allowance of up to $20,000 per annum.

Non-Executive Directors

As Non-Executive Directors, Mr. Cook and Mr. Phillips are each paid Director’s fees of $30,000 per annum.

Non-Executive Directors are paid consulting fees for time spent on Company business, including reasonable expenses incurred by them on business of the Company, details of which are contained in the Remuneration Table.

Board of Directors - PT Natarang Mining

Mr. Herryansjah is employed under an Indonesian employment contract with no fixed term. He receives an annual salary of US$250,000, which is equivalent to $242,272. One month’s notice is required by either party to terminate employment.

Operations Managers – Way Linggo

In May 2010, Mr. Terry Butler was appointed Operations Manager of the Company’s subsidiary, PT Natarang Mining (PTNM), at which time he entered into a one year contract. His contract was subsequently renewed for a further year. His annual salary was $300,000 per annum. He resigned on 8 November 2011.

In December 2011, Mr. Ron Clarke was appointed Operations Manager of PTNM at which time he entered into a oneyear renewable contract. His annual salary is $275,000. He was also granted 1,000,000 unlisted options under the Company’s Employee Share Option Plan. The options were issued at an exercise price of $1.53 and are subject to the following vesting periods:

• 500,000 options will vest on 17 December 2012 with an expiry date of 17 December 2014

• 500,000 options will vest on 17 December 2013 with an expiry date of 17 December 2015

Page 13

Kingsrose
Mining
Limited
Annual
Report Year
ended
30
June
2012

==> picture [26 x 21] intentionally omitted <==

**DIRECTORS’

REPORT
(cont’d)**

**REMUNERATION

REPORT
(AUDITED)
(cont’d)**

Table
1:
Remuneration
of
key
management
personnel
of
the
Company
and
the
Group
for
the
year
ended
30
June
2012

Performance Share,based related payments $ $ $ $ $ $ $ $ $ $ $ % % ExecutiveDirectors C.N.Start(i) 300,000 30,000 3,996 , 15,775 , , , , 793,593 1,143,364 3% 69% T.G.Spencer 247,662 25,000 2,125 , 15,775 , , , , , 290,562 9% , Sub$totalExecutiveDirectors 547,662 55,000 6,121 , 31,550 , , , , 793,593 1,433,926 , Non,ExecutiveDirectors J.C.Morris 145,000 , , , 13,050 , , , , , 158,050 , , J.W.Phillips 25,000 , , 93,032 , , , , , , 118,032 , , P.G.Cook 25,000 , , 75,800 2,250 , , , , , 103,050 , , Sub$totalNon$ExecutiveDirectors 195,000 , , 168,832 15,300 , , , , , 379,132 , OtherKMP Herryansjah 188,972 , 10,991 , , , , , , , 199,963 , , R.Clarke(ii) 145,803 , 3,690 , 2,230 , , , , 198,794 350,517 , 57% T.Butler(iii) 100,000 , 1,419 , , 150,000 , , , , 251,419 , , Shares Options++ Total Share,basedpayments Superannuation Incentive plans Long service leave ShortTerm Postemployment Termination benefits LongTerm Salaryand fees Cashbonus+ Non,monetary benefits ConsultingFees Sub$totalOtherKMP 434,775 , 16,100 , 2,230 150,000 , , , 198,794 801,899 TOTAL 1,177,437 55,000 22,221 168,832 49,080 150,000 , , , 992,387 2,614,957	ShortTerm	ShortTerm	ShortTerm	ShortTerm	Postemployment	Termination benefits	LongTerm	LongTerm	Share,basedpayments	Share,basedpayments	Total	Performance related	Share,based payments
	$ Salaryand fees	$ Cashbonus+	$ Non,monetary benefits	$ ConsultingFees	$ Superannuation	$	$ Incentive plans	$ Long service leave	$ Shares	$ Options++	$	%	%
(i)AppointedManagingDirector1July2011 (ii)Appointed17December2011 (iii)Resigned8November2011 +Detailsofperformanceconditionsforthecashbonusarestatedinsection2oftheRemunerationReport.Allamountshavevestedandwerepaidduringtheyear.Therewerenoforfeituresduringtheyear. ++Detailsofperformanceconditionsfortheoptionsarestatedinsection2oftheRemunerationReport.Theamountincludedasremunerationrelatingtooptionsisnotrelatedtoorindicativeofthebenefit(ifany)thattheindividualmay ultimatelyrealise.ThefairvalueoftheseoptionsasattheirdateofgrantwasdeterminedinaccordancewithAASB2“ShareBasedPayments”applyingvaluationmodels.Detailsoftheassumptionsunderlyingthevaluationsaresetout inNote23totheFinancialStatements.

Page
14

Kingsrose
Mining
Limited
Annual
Report Year
ended
30
June
2012

==> picture [26 x 21] intentionally omitted <==

**DIRECTORS’

REPORT
(cont’d)**

**REMUNERATION

REPORT
(AUDITED)
(cont’d)**

**Table

2:
Remuneration
of
key
management
personnel
of
the
Company
and
the
Group
for
the
year
ended
30
June
2011**

Executive Directors J.C. Morris (i) T.G. Spencer Sub-total Executive Directors Non-Executive Directors J.W. Phillips P.G. Cook (ii) M.J. Andrews (iii) Sub-total Non-Executive Directors Other KMP Herryansjah C.N. Start (iv) T.Butler *Sub-total Other KMP TOTAL	Short Term	Short Term	Short Term	Short Term	Post employment	Termination benefits	Long Term	Long Term	Share-based payments	Share-based payments	Total	Share-based payments
	$ Salary and fees	$ Cash bonus	$ Non-monetary benefits+	$ Consulting Fees	$ Superannuation	$	$ Incentive plans	$ Long service leave	$ Shares	$ Options++	$	%
	140,000 - - - 12,600 - - - - - 152,600 - 204,250 - 1,041 - 15,200 - - - - - 220,491 -
	344,250 - 1,041 - 27,800 - - - - - 373,091 -
	20,000 - - 97,048 - - - - - - 117,048 - 15,000 - - 44,200 1,350 - - - - - 60,550 - 9,462 - - - - - - - - - 9,462 -
	44,462 - - 141,248 1,350 - - - - - 187,060 -
	121,310 ' 7,357 ' ' ' ' ' ' ' 128,667 ' 87,500 ' ' ' 4,433 ' ' ' ' 357,439 449,372 80% 269,750 ' ' ' ' ' ' ' ' ' 269,750 '
	478,560 - 7,357 - 4,433 - - - - 357,439 847,789
	867,272 - 8,398 141,248 33,583 - - - - 357,439 1,407,940
(i)Changedtonon.executive1July2011 (ii)Appointed1October2010 (iii)Resigned21December2010 (iv)AppointedGeneralManager17March2011;AppointedDirector1July2011 +AmountsrepresenttheannualchargeforLifeInsurancecoverprovidedforT.G.SpencerandemployercontributiontosocialsecurityprogramforHerryansjah. ++Detailsofperformanceconditionsfortheoptionsarestatedinsection2oftheRemunerationReport. Noelementsofremunerationareperformancebased.

Page
15

Kingsrose
Mining
Limited
Annual
Report Year
ended
30
June
2012

==> picture [26 x 21] intentionally omitted <==

**DIRECTORS’

REPORT
(cont’d)**

**REMUNERATION

REPORT
(AUDITED)
(cont’d)**

**Equity

Instruments**

Table&3:&Compensation&options&granted&to&directors&and&other&key&management&personnel&during&the&year&(Consolidated)

Equity Instruments	Equity Instruments	Equity Instruments
Table3:Compensationoptionsgrantedtodirectorsandotherkeymanagementpersonnelduringtheyear(Consolidated)
Executives R.Clarke	Noofoptions Grantdate Fairvalueper optionatgrant date Exerciseprice peroption Vestingdate/ Firstexercise date Expirydate/ Lastexercise date Granted TermsandconditionsforeachGrant	Vestedno.of options %ofoptions vested Vested
	500,000 21/Dec/11 $0.42 $1.53 17/Dec/12 17/Dec/14 500,000 21/Dec/11 $0.67 $1.53 17/Dec/13 17/Dec/15 1,000,000	/ 0% / 0% /
Therewerenoforfeituresduringtheyear.

There)were)no)forfeitures)during)the)year.

Table4:Valueofoptionsgranted,exercisedandlapsedduringtheyear Valueofoptions Valueofoptions exercised Valueofoptions lapsed Remuneration consistingof grantedduring duringthe duringthe optionsforthe theyear year year year $ $ $ % Directors J.Morris ; 2,240,500 ; ; T.Spencer ; 1,238,000 ; ; Executives R.Clarke 543,000 ; ; 57%		Table5:Sharesissuedonexerciseofoptions(Consolidated) Thefollowingcompensationoptionswereexercisedduringthefinancialyear: Shares Paidper Unpaidper Issued share share # $ $ Directors J.Morris 1,900,000 $0.23 ; T.Spencer 1,000,000 $0.14 ; Total 2,900,000

End
of
Remuneration
Report.

Page
16

Kingsrose
Mining
Limited
Annual
Report Year
ended
30
June
2012

==> picture [25 x 21] intentionally omitted <==

**DIRECTORS’

REPORT
(cont’d)**

**AUDITOR’S

INDEPENDENCE
DECLARATION
AND
NON-­‐AUDIT
SERVICES**

The
auditor’s
independence
declaration
for
the
year
ended
30
June
2012
is
on
page
18.
This
declaration
forms
part
of the
Directors’
Report.

**NON-­‐AUDIT

SERVICES**

The
Directors
are
satisfied
that
the
provision
of
non-­‐audit
services
is
compatible
with
the
general
standard
of independence
for
auditors
imposed
by
the
Corporations
Act
2001.
The
nature
and
scope
of
each
type
of
non-­‐audit service
provided
means
that
auditor
independence
was
not
compromised.

Details
of
amounts
paid
or
payable
to
the
auditor
for
non-­‐audit
services
provided
during
the
year
are
detailed
in
Note 28
of
the
financial
statements.

This
report
is
signed
for
and
on
behalf
of
the
Directors
in
accordance
with
a
resolution
of
the
Directors.

==> picture [104 x 64] intentionally omitted <==

Timothy
G.
Spencer Finance
Director

Perth,
6
September
2012

Page
17

==> picture [102 x 62] intentionally omitted <==

Auditor’s Independence Declaration to the Directors of Kingsrose Mining Limited

In relation to our audit of the financial report of Kingsrose Mining Limited for the financial year ended 30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

==> picture [149 x 52] intentionally omitted <==

G H Meyerowitz Partner 6 September 2012

Liability limited by a scheme approved under Professional Standards Legislation

GHM:MJ:Kingsrose:2012:009

18

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

==> picture [25 x 21] intentionally omitted <==

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2012

		2012	2011
	Note	$	$
Continuing operations
Sale ofgoods	5(a)	71,743,929	45,240,223
Other revenue	5(a)	1,518,319	491,347
Total revenue		73,262,248	45,731,570
Cost of sales	5(b)	(31,526,655)	(20,790,133)
Gross profit		41,735,593	24,941,437
Other income	5(c)	1,295,063	12,190
Administration expenses	5(d)	(6,407,259)	(4,279,058)
Exploration and evaluation expenditure		(129,501) (138,946)	(568,684)
Other expenses	5(e)		(3,084,766)
Finance costs	5(f)	(30,017)	(599,810)
Profit from continuingoperations before income tax		36,324,933	16,421,309
Income tax expense	6(a)	(14,931,240)	(1,760,333)
Profit from continuing operations after income tax		21,393,693	14,660,976
Discontinued operations
Income from discontinued operations after income tax	15(a)	-	244,297
Netprofit for theyear		21,393,693	14,905,273
Profit for the year is attributable to:
Owners of theparent		17,551,550	12,244,784
Non-controllinginterests		3,842,143	2,660,489
		21,393,693	14,905,273
Earnings per share from continuing operations attributable to the ordinary equity holders of the parent:
		Cents	Cents
Basic earnings per share – cents per share	7	6.44	4.76
Diluted earnings per share – cents per share	7	6.42	4.45
Earnings per share attributable to the ordinary equity holders of the parent:
Basic earnings per share – cents per share	7	6.44	4.85
Diluted earnings per share – cents per share	7	6.42	4.54

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

Page 19

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

==> picture [25 x 21] intentionally omitted <==

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012

	2012 2011
	$ $
Net profit for the year	21,393,693 14,905,273
Other comprehensive income/(loss)
Foreign currency translations	619,913 (5,164,423)
Income tax	- -
Other comprehensive income/(loss) for theyear, net of tax	619,913 (5,164,423)
Total comprehensive income/(loss) for theyear	22,013,606 9,740,850
Total comprehensive income/(loss) for the year is attributable to:
Owners of the parent	18,048,909 8,094,203
Non-controllinginterests	3,964,697 1,646,647
	22,013,606 9,740,850

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

Page 20

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012

Note Current Assets Cash and cash equivalents 9 Trade and other receivables 10 Inventories 11 Other Total Current Assets Non-Current Assets Other receivables 10 Plant and equipment 12 Mine properties and development 13 Exploration and evaluation assets 14 Deferred tax assets 6(d) Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables 16 Interest-bearing liabilities 17 Income tax payable 6(d) Provisions 18 Total Current Liabilities Non-Current Liabilities Trade and other payables 16 Interest-bearing liabilities 17 Deferred tax liabilities 6(d) Provisions 18 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to equity holders of the parent Contributed equity 19 Reserves 20 Retained earnings/(Accumulated losses) Non-controllinginterests TOTAL EQUITY	2012	2011
	$	$
	30,125,139 2,776,239 4,334,366 457,722
		23,951,112
		1,907,461
		4,593,606
		231,549
	37,693,466	30,683,728
	1,607,114 10,103,953 27,090,027 17,151,051 426,843
		809,232
		10,634,842
		18,095,382
		8,233,781
		-
	56,378,988	37,773,237
	94,072,454	68,456,965
	22,315,071 312,666 2,962,048 433,348
		10,882,191
		296,146
		1,233,485
		168,045
	26,023,133	12,579,867
	- 181,995 - 1,387,560
		4,010,325
		379,993
		423,718
		782,178
	1,569,555	5,596,214
	27,592,688	18,176,081
	66,479,766	50,280,884
	62,144,725 139,458 254,324
		57,066,067
		(2,339,739)
		(5,632,387)
	62,538,507	49,093,941
	3,941,259	1,186,943
	66,479,766	50,280,884

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

Page 21

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

==> picture [25 x 21] intentionally omitted <==

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2012

Cash flows from operating activities Receipts from customers Payment to suppliers and employees VAT refund received Interest received Interest paid Income tax paid Net cash flows from operating activities Cash flows from investing activities Payments for plant and equipment Payments for mine properties and development Payments for exploration and evaluation expenditure Buyback of third party's royalty entitlement Proceeds from sale of financial assets held for trading Proceeds from sale of plant and equipment Net cash flows used in investing activities Cash flows from financing activities Proceeds from issue of shares/options Repayment of borrowings Repayment of hire purchases Net cash flows from/(used in) financing activities Net increase in cash and cash equivalents	Note	2012 2011
		$ $
		65,575,345 57,652,436 (30,103,591) (21,654,231) 1,216,663 - 1,463,214 412,650 (25,196) (914,818) (14,148,303) -
	21(a)	23,978,132 35,496,037
		(4,394,187) (6,966,136) (5,369,761) (1,512,660) (12,769,617) (8,101,562) (278,500) (262,668) - 2,143,451 157,796 54,743
		(22,654,269) (14,644,832)
		5,078,658 4,511,399 - (8,520,000) (391,435) (446,199)
		4,687,223 (4,454,800)
		6,011,086 16,396,405 23,951,112 7,833,315 162,941 (278,608)
Cash and cash equivalents at beginning of the year
Effects of exchange rate changes on cash held Cash and cash equivalents at end of the year
	9	30,125,139 23,951,112

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

Page 22

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

==> picture [26 x 21] intentionally omitted <==

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012

Note At 1 July 2010 Net profit for the year Other comprehensive loss for the year Total comprehensive income/(loss) for the year Transactions with owners in their capacity as owners: Issue of share capital Proceeds from exercise of options Share-based payments At 30 June 2011 Net profit for the year Other comprehensive income for the year Total comprehensive income/(loss) for the year Transactions with owners in their capacity as owners: Proceeds from exercise of options Share-based payments Dividends 8 Transfers At 30 June 2012	Equity attributable to Equity Holders of the Parent Issued Capital Option Premium Reserve General Reserve Foreign Currency Translation Reserve Retained Earnings / (Accumulated Losses) Subtotal Non- Controlling Interests Total $ $ $ $ $ $ $ $
	50,889,668 3,427,450 - (2,076,643) (17,877,171) 34,363,304 (459,704) 33,903,600
	- - - - 12,244,784 12,244,784 2,660,489 14,905,273 - - - (4,150,581) - (4,150,581) (1,013,842) (5,164,423)
	- - - (4,150,581) 12,244,784 8,094,203 1,646,647 9,740,850 1,665,000 - - - - 1,665,000 - 1,665,000 4,511,399 - - - - 4,511,399 - 4,511,399 - 460,035 - - - 460,035 - 460,035
	57,066,067 3,887,485 - (6,227,224) (5,632,387) 49,093,941 1,186,943 50,280,884 - - - - 17,551,550 17,551,550 3,842,143 21,393,693 - - - 497,359 - 497,359 122,554 619,913
	- - - 497,359 17,551,550 18,048,909 3,964,697 22,013,606 5,078,658 - - - - 5,078,658 - 5,078,658 - 1,883,712 - - - 1,883,712 - 1,883,712 - - - - (11,566,713) (11,566,713) (1,210,381) (12,777,094) - - 98,126 - (98,126) - - -
	62,144,725 5,771,197 98,126 (5,729,865) 254,324 62,538,507 3,941,259 66,479,766

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

Page 23

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

==> picture [25 x 21] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012

1. CORPORATE INFORMATION

The financial report of Kingsrose Mining Limited (“Kingsrose” or the “Company”) and its controlled entities (the “Group”) for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of the Directors on 6 September 2012.

Kingsrose Mining Limited (the Parent) is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. Kingsrose Mining Limited is the ultimate holding company.

The nature of the operations and principal activities of the Group are described in the Directors’ Report.

The address of the registered office of the Company is Suite 9, Level 2, 12-14 Thelma Street, West Perth, WA 6005.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.

The financial report has been prepared on a historical cost basis and is presented in Australian dollars.

For the purpose of preparing the financial report, the Company is a for-profit entity.

(a) Compliance with IFRS

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

(b) New accounting standards and interpretations

(i) Changes in accounting policies and disclosures

From 1 July 2011, the Group has adopted the following Standards and Interpretations, mandatory for annual periods beginning on or after 1 July 2011. Adoption of these standards and interpretations did not have any effect on the financial position or performance of the Group.

• AASB 124 (Revised) Related Party Disclosures (December 2009)

• AASB 2009-12 Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052]

• AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASBs 1, 7, 101, 134 and Interpretation 13]

• AASB 2010-5 Amendments to Australian Accounting Standards [AASBs 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042]

• AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASBs 1 & 7]

(ii) Accounting standards and interpretations issued but not yet effective

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended 30 June 2012. These are outlined in the following table. The impact on adoption of these new and revised standards and interpretations has not been determined by the Group.

Page 24

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

==> picture [26 x 21] intentionally omitted <==

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 9	Financial Instruments	AASB 9 includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Recognition and Measurement). These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes from AASB 139 are described below. (a) Financial assets are classified based on (1) the objective of the entity’s business model for managing the financial assets; (2) the characteristics of the contractual cash flows. This replaces the numerous categories of financial assets in AASB 139, each of which had its own classification criteria. (b) AASB 9 allows 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. (c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. (d) Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows: ►The change attributable to changes in credit risk are presented in other comprehensive income (OCI) ►The remaining change is presented in profit or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss. Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB 2009-11 and superseded by AASB 2010-7 and 2010-10.	1 January 2015	1 July 2015

Page 25

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 10	Consolidated Financial Statements	AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements_dealing with the accounting for consolidated financial statements and Interpretation 112_Consolidation – Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control.	1 January 2013	1 July 2013
AASB 12	Disclosure of Interests in Other Entities	AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.	1 January 2013	1 July 2013
AASB 13	Fair Value Measurement	AASB 13 establishes a single source of guidance under Australian Accounting Standards for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under Australian Accounting Standards when fair value is required or permitted by Australian Accounting Standards. Application of this definition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.	1 January 2013	1 July 2013

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 119 (Revised)	Employee Benefits	The main amendments to the standard relating to defined benefit plans are as follows :-  Elimination of the option to defer the recognition of actuarial gains and losses (the ‘corridor method’);  Remeasurements (essentially actuarial gains and losses) to be presented in other comprehensive income;  Past service cost will be expensed when the plan amendments occur regardless of whether or not they are vested; and  Enhanced disclosures for Tier 1 entities. The distinction between short-term and other long-term employee benefits under the revised standard is now based on expected timing of settlement rather than employee entitlement. The revised standard also requires termination benefits (outside of a wider restructuring) to be recognised only when the offer becomes legally binding and cannot be withdrawn.	1 January 2013	1 July 2013
AASB 2009-11	Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12]	These amendments arise from the issuance of AASB 9_Financial Instruments_that sets out requirements for the classification and measurement of financial assets. The requirements in AASB 9 form part of the first phase of the International Accounting Standards Board’s project to replace IAS 39_Financial Instruments: Recognition and Measurement_. This Standard shall be applied when AASB 9 is applied.	1 January 2013	1 July 2013

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2010-7	Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023, & 1038 and interpretations 2, 5, 10, 12, 19 & 127]	The requirements for classifying and measuring financial liabilities were added to AASB 9. The existing requirements for the classification of financial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for financial liabilities the change in fair value is accounted for as follows: ►The change attributable to changes in credit risk are presented in other comprehensive income (OCI) ►The remaining change is presented in profit or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.	1 January 2013	1 July 2013
AASB 2010-8	Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112]	These amendments address the determination of deferred tax on investment property measured at fair value and introduce a rebuttable presumption that deferred tax on investment property measured at fair value should be determined on the basis that the carrying amount will be recoverable through sale. The amendments also incorporate_SIC-21 Income Taxes – Recovery of_ _Revalued Non-Depreciable Assets_into AASB 112.	1 January 2012	1 July 2012
AASB 2011-7	Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangement Standards	Consequential amendments to AASB 127_Separate Financial Statements_and AASB 128_Investments in_ Associates_as a result of the adoption of AASB 10_Consolidated Financial Statements, AASB 11_Joint_ Arrangements_and AASB 12_Disclosure of Interests in Other Entities.	1 January 2013	1 July 2013
AASB 2011-8	Amendments to Australian Accounting Standards arising from the Fair Value Measurement Standard	Consequential amendments to existing Australian Accounting Standards as a result of the adoption of AASB 13_Fair Value Measurement_.	1 January 2013	1 July 2013

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2011-9	Amendments to Australian Accounting Standards - Presentation of Items of Other Comprehensive Income [AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]	This Standard requires entities to group items presented in other comprehensive income on the basis of whether they might be reclassified subsequently to profit or loss and those that will not.	1 July 2012	1 July 2012
AASB 2012-2	Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities	AASB 2012-2 principally amends AASB 7 Financial Instruments: Disclosures to require disclosure of information that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities, on the entity’s financial position.	1 January 2013	1 July 2013
AASB 2012-3	Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities;	AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address 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.	1 January 2014	1 July 2015

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

Reference	Title	Summary	Application date of standard	Application date for Group
Annual Improvements 2009–2011 Cycle	Annual Improvements to IFRSs 2009–2011 Cycle	This standard sets out amendments to International Financial Reporting Standards (IFRSs) and the related bases for conclusions and guidance made during the International Accounting Standards Board’s Annual Improvements process. These amendments have not yet been adopted by the AASB. The following items are addressed by this standard: IFRS 1 First-time Adoption of International Financial Reporting Standards  Repeated application of IFRS 1  Borrowing costs IAS 1 Presentation of Financial Statements  Clarification of the requirements for comparative information IAS 16 Property, Plant and Equipment  Classification of servicing equipment IAS 32 Financial Instruments: Presentation  Tax effect of distribution to holders of equity instruments IAS 34 Interim Financial Reporting  Interim financial reporting and segment information for total assets and liabilities	1 January 2013	1 July 2013
AASB 2012-5	Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle; and	AASB 2012-5 makes amendments resulting from the 2009-2011 Annual Improvements Cycle. The Standard addresses a range of improvements, including the following: • repeat application of AASB 1 is permitted (AASB 1); and • clarification of the comparative information requirements when an entity provides a third balance sheet (AASB 101 Presentation of Financial Statements).	1 January 2013	1 July 2013

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(c) Principles of consolidation

The consolidated financial statements comprise the financial statements of Kingsrose Mining Limited and its controlled entities, referred to collectively throughout these financial statements as the “Group”.

Controlled entities are consolidated from the date on which control commences until the date that control ceases.

The financial statements of the controlled entities are prepared for the same reporting period as the parent company using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The balances and effects of transactions between controlled entities included in the consolidated financial statements have been fully eliminated.

Non-controlling interests are allocated their share of net profit or loss after tax in the income statement and are presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the parent.

Losses are attributed to the non-controlling interest even if that results in a deficit balance.

(d) Foreign currency translation

(i) Functional and presentation currency

Both the functional and presentation currency of Kingsrose Mining Limited and its controlled entities are Australian dollars ($) other than its Indonesian subsidiary. The Indonesian subsidiary’s functional currency is United States dollars which is translated to the presentation currency (see (iii) below).

(ii) Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All exchange differences in the consolidated financial statement are taken to the statement of comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(iii) Translation of Group Companies’ functional currency to presentation currency

The results of the Indonesian subsidiary are translated into Australian dollars (presentation currency) as at the date of each transaction. Assets and liabilities are translated at exchange rates prevailing at reporting date.

Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity.

On consolidation, exchange differences arising from the translation of the net investment in the Indonesian subsidiary and of the borrowings that form part of the net investment in the Indonesian subsidiary are taken to the foreign currency translation reserve. If the Indonesian subsidiary was sold, the exchange differences would be transferred out of equity and recognised in the income statement.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(e) Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership in the product have passed to the buyer and can be reliably measured.

Interest revenue

Revenue is recognised as interest accrues using the effective interest method.

(f) Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(g) Trade and other receivables

Trade receivables from gold and silver sales are recorded at fair value of the sales proceeds and are to be settled within two trading days from date of invoice.

Other receivables are recorded at original invoiced amount less an allowance for impairment.

An impairment provision is recognised when there is evidence that the Group will not be able to collect all amounts due according to the original term of receivables. Financial difficulties of the debtor or default payments are considered objective evidence of impairment. Bad debts are written off when identified.

(h) Inventories

Inventories comprising gold bullion, gold in circuit and stockpiles of unprocessed ore, are valued at the lower of weighted average cost and net realisable value. Silver obtained as a result of the production process to extract gold is not carried as inventories as they are treated as by-products.

Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to gold bullion, gold in circuit and items of inventory on the basis of weighted average costs.

Inventories of consumable supplies and spare parts expected to be used in production are valued at the lower of weighted average cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(i) Derivative financial instruments

Derivative financial instruments are used by the Group to manage exposures to exchange rates and the Group does not apply hedge accounting. These derivatives are stated at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. Changes in fair value are recognised immediately as income or expense in the income statement.

(j) Investments and other financial assets

Classification

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, and financial assets held for trading. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

Subsequent measurement

(i) Financial assets classified as held for trading

Investments and financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are categorised as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired or originated. Designation is re-evaluated at each reporting date, but there are restrictions on reclassifying to other categories.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.

Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of making a profit. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on financial assets held for trading are recognised in profit or loss and the related assets are classified as current assets in the statement of financial position.

(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. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position.

(iii) Fair value

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active or there are no quoted prices for the instrument, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

(iv) Impairment

The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(k) Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the property, plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in the income statement as incurred.

Items of property, plant and equipment are depreciated using the straight line or diminishing value method at a rate of 5% to 25% per annum, depending on the item of property, plant and equipment.

The asset’s residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

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

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected to arise from the continued use of the asset.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period the item is derecognised.

Impairment

Property, plant and equipment are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value-in-use’ (being the net present value of expected cash flows of the relevant cash generating unit) and ‘fair value less costs to sell’.

In determining value-in-use, future cash flows are based on:

• a mine plan based on estimates of the quantities of ore reserves and/or mineral resources for which there is a high degree of confidence of economic extraction;

• future production levels;

• future commodity prices; and

• future cash costs of production.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(l) Mine properties and development

Mine properties and development represent the acquisition costs and/or accumulation of exploration, evaluation and development expenditure in respect of areas of interest in which mining has commenced. When further development expenditure is incurred in respect of mine property after the commencement of production, such expenditure is carried forward as part of the mine properties and development only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production.

Amortisation is provided on a production output basis, proportional to the depletion of the mineral resource expected to be ultimately economically recoverable.

Impairment

The carrying value of capitalised mine development expenditure is assessed for impairment whenever facts and circumstances suggests that the carrying amount of the asset may exceed its recoverable amount.

The recoverable amount of capitalised mine development expenditure is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

Impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Any impairment losses are recognised in profit or loss.

(m) Exploration and evaluation assets

Exploration and evaluation expenditure is carried forward as an asset where:

• (i) such costs are expected to be recouped through successful development and exploration of the area of interest or, by its sale; or

• (ii) exploration activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in relation to the area are continued.

Accumulated costs in relation to an abandoned area are written off in full in the year in which the decision to abandon the area is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. When the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then exploration and evaluation expenditure and any subsequent expenditure within the area of interest are capitalised as mine properties and development.

(n) Impairment of assets

At each reporting date, the Group reviews the carrying value of its assets for impairment. An impairment loss is recognised of the amount in which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash flows from other assets or groups of assets (cash-generating units).

(o) Trade and other payables

Trade and other payables are carried at amortised cost. Due to their short term nature, they are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 14-30 days of recognition.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(p) Interest-bearing liabilities

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans and borrowings.

Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as through the amortisation process.

Borrowing costs

Borrowing costs are recognised as an expense when incurred, except where the borrowing costs incurred are directly associated with the construction, purchase or acquisition of a qualifying asset, in which case the borrowing costs are capitalised as part of the cost of the asset.

(q) Employee benefits

Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, long service leave and other long-term service benefits.

Short-term obligations

Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits due to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are due to be paid when the liability is settled.

Long-term obligations

The only long-term employee benefits within the Group relates to PTNM employees. These benefits are unfunded. The liability recognised is the present value of the defined project benefit obligation at the balance sheet date adjusted for unrecognised actuarial gains or losses and past service costs. The obligation is calculated by independent actuaries using the projected unit credit method and independent assumptions. The present value of the obligations is determined by discounting the estimated future obligation.

Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains and losses at the end of the previous reporting year exceed the greater of 10% of the higher of the present value of the benefits obligation (before deducting plan assets) or the fair value of plan assets at that date. Such actuarial gains or losses are recognised as income or expense on a straight-line basis over the expected average remaining working lives of the employees. Past service costs arising from the introduction of the defined benefit plan or changes in the benefits payable of an existing plan are amortised over the period until the benefits concerned become vested.

Share-based payment

The Company provides benefits to its employees (including KMP and eligible employees of the Group) in the form of share-based payments via the Kingsrose Mining Limited Employee Share Option Plan (ESOP), whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).

The Company also makes share-based payments to consultants, contractors and advisors, whereby those parties render services in exchange for shares or rights over shares, granted at the sole discretion of the Company (equitysettled transactions).

The cost of 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 using a Black-Scholes based model, further details of which are provided in Note 23. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions) if applicable.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(q) Employee benefits (cont’d)

The cost of equity-settled transactions with non-employees is measured by reference to the fair value of the goods and services received unless this cannot be reliably measured, in which case these are measured at the fair value of the equity instruments granted.

Equity-settled transactions granted by the Company to employees of subsidiaries are recognised in the Company’s separate financial statements as an additional investment in the subsidiary with a corresponding credit to equity. As a result, the expense recognised by the Company in relation to equity-settled transactions only represents the expense associated with grants to employees of the Company. The expense recognised by the Group is the total expense associated with all such awards.

At each reporting date, the Group revises its estimate of the number of equity-settled transactions that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.

(r) Leases

Finance leases, which transfer to the Group substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the facility.

(s) Income tax and other taxes

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period's taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

• When the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• When the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(s) Income tax and other taxes (cont’d)

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized, except:

• When the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• When the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Other taxes

Revenues, expenses and assets are recognised net of the amount of GST/VAT except:

• When the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable;

• Receivables and payables, which are stated with the amount of GST/VAT included.

The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis and the GST/VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST/VAT recoverable from, or payable to, the taxation authority.

Page 38

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(t) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs.

(u) Provisions for decommissioning and restoration costs

The Group is required to decommission and rehabilitate mines at the end of their producing lives to a condition acceptable to the relevant authorities.

The expected cost of any approved decommissioning and rehabilitation program, discounted to its present value, is provided when the related environmental disturbance occurs. The cost is capitalised when it gives rise to future benefits, whether the rehabilitation activity is expected to occur over the life the operation or at the time of closure. The capitalised cost is amortised over the life of the operation and the increase in the net present value of the provision for the expected cost is included in financing expenses over the life of the mine. Expected decommissioning and rehabilitation costs are based on the discounted value of the estimated future cost of detailed plans prepared for each site. Where there is a change in the expected decommissioning and restoration costs, the value of the provision and any related assets are adjusted and the effect is recognised in profit and loss on a prospective basis over the remaining life of the operation.

(v) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(w) Earnings/(loss) per share

Basic earnings/(loss) per share is calculated as net profit/(loss) attributable to members of the parent, 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/(loss) per share is calculated as net profit/(loss) attributable to members of the parent, 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

• 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.

Page 39

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(x) Operating segments

The Group identifies its operating segments based on the internal reports that are reviewed and used by the Board of Directors and executive management team (chief operating decision makers) in assessing performance and determining the allocation of resources.

The Group identified two operating segments by nature of product, namely gold and zinc.

(y) Significant accounting judgements, estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

(i) Impairment of assets

The recoverable amount of a Cash Generating Unit (CGU) is determined as the higher of value in use and fair value less costs to sell.

The future recoverability of the CGU is dependent on a number of factors, including the level of proved, probable and inferred mineral resources, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. Given the nature of the Group mining activities, future changes in long term assumptions upon which these estimates are based, may give rise to material adjustments to the carrying value of the CGU.

To the extent that the CGU is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made.

(ii) Provisions for decommissioning and restoration costs

Decommissioning and restoration costs are a normal consequence of mining and the majority of this expenditure is incurred at the end of a mine’s life. In determining an appropriate level of provision consideration is given to the expected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of the mine), and the estimated future level of inflation.

The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates.

Changes to any of the estimates could result in significant changes to the level of provisioning required, which would in turn impact future financial results.

(iii) Share-based payments

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black & Scholes based model, with the assumptions detailed in Note 25. The accounting estimates and assumptions relating to equitysettled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual report period but may impact expenses and equity.

Page 40

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(z) Discontinued operations

A discontinued operation is a component of the entity that has been disposed of or classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the income statement and the assets and liabilities are presented separately on the face of the statement of financial position.

(aa) Comparatives

Where necessary, comparatives have been reclassified and repositioned for consistency with current year’s disclosures.

Page 41

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise receivables, payables, finance leases, cash and short-term deposits.

Risk exposures and responses

The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security.

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

The Board reviews and agrees policies for managing each of these risks as summarised below.

Primary responsibility for identification and control of financial risks rests with the Board of Directors because, due to the size of the Company, there is currently no financial risk management committee.

(i) Interest rate risk

The Group's exposure to market interest rates relates primarily to the Group's cash holdings and interest-bearing liabilities. At the reporting date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk:

interest rate risk:
		2012	2011
		$	$
Financial Assets
Cash and cash equivalents		30,125,139	23,951,112
Financial Liabilities
Interest-bearingliabilities		-	-
Net exposure		30,125,139	23,951,112

The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions and the mix of fixed and variable interest rates. The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. The 2% increase and 2% decrease in rates is based on management’s assessment of the reasonably possible changes over a financial year.

Page 42

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)

Risk exposures and responses (cont’d)

(i) Interest rate risk (cont’d)

At 30 June 2012, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows:

	Post Tax Profit Other Comprehensive Income
	Higher/(Lower) Higher/(Lower)
	2012 2011 2012 2011
Judgements of reasonably possible movements:
	$ $ $ $
+2%(200 basispoints)	421,752 335,316 - -
-2% (200 basis points)	(421,752) (335,316) - -

(ii) Foreign currency risk

The Group has transactional currency exposures as a result of significant operations in Indonesia. As 100% of sales are denominated in United States Dollars (US$) and large purchases of goods and services are denominated in Indonesian Rupiah (IDR) and US$, the Group’s income statement and statement of financial position can be affected significantly by movements in the A$/IDR and A$/US$ exchange rates. The Group seeks to mitigate the effect of its foreign currency exposure by actively monitoring foreign exchange movements and their impact on the Group’s budgeted future cash flows and future net asset positions denominated in foreign currencies. There are also minor purchases of goods and services denominated in Euros (EUR); however the exposure to foreign exchange movements is minimal.

At 30 June 2012, the Group had the following exposure to US$, IDR and EUR foreign currencies:

	2012	2011 2012	2011 2012	2011
	US$	US$ IDR	IDR EUR	EUR
	A$	A$ A$	A$ A$	A$
Financial Assets
Cash and cash equivalents	4,491,507	3,935,036 840,882	299,828 2,995	1,611
Trade and other receivables	-	- 3,938,087	1,911,216 28,986	37,073
	4,491,507	3,935,036 4,778,969	2,211,044 31,981	38,684
Financial Liabilities
Trade and otherpayables	(2,346,990)	(551,910) (1,502,237)	(1,282,249) (12,728)	(46,628)
Interest-bearingliabilities	(389,966)	(605,359) (104,695)	(70,779) -	-
	(2,736,956)	(1,157,269) (1,606,932)	(1,353,028) (12,728)	(46,628)
Net exposure	1,754,551	2,777,767 3,172,037	858,016 19,253	(7,944)

Page 43

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)

Risk exposures and responses (cont’d)

(ii) Foreign currency risk (cont’d)

At 30 June 2012, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

	Post Tax Profit Other Comprehensive Income	Post Tax Profit Other Comprehensive Income
	Higher/(Lower) Higher/(Lower)
	2012	2011 2012 2011
Judgements of reasonably possible movements:
	$	$ $ $
A$/US$+10%	(111,653)	(176,767) - -
A$/US$-10%	136,465	216,049 - -
A$/IDR +10%	(201,857)	(54,601) - -
A$/IDR -10%	246,714	66,734 - -
A$/EUR +10%	(1,225)	506 - -
A$/EUR -10%	1,497	(618) - -

The IDR movements in profit in 2012 are more sensitive than in 2011 due to the higher level of IDR cash, receivables and payables at balance date.

Significant assumptions used in the foreign currency exposure sensitivity analysis include:

• Reasonably possible movements in foreign exchange rates were determined based on a review of the last two years historical movements and economic forecaster’s expectations.

• The reasonably possible movement of 10% was calculated by taking the USD spot rate as at balance date, moving this spot rate by 10% and then re-converting the USD into AUD with the “new spot-rate”. This methodology reflects the translation methodology undertaken by the Group.

• The translation of the net assets in subsidiaries with a functional currency other than AUD has not been included in the sensitivity analysis as part of the equity movement.

• The net exposure at balance date is representative of what the Group was and is expecting to be exposed to in the next twelve months from balance date.

(iii) Liquidity risk

Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet their obligations to repay their financial liabilities as and when they fall due.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and finance leases.

The Group monitors on a regular basis rolling forecasts of liquidity on the basis of expected cash flow.

The following table reflects the liquidity risk arising from the financial liabilities held by the Group at balance date. The contractual maturity represents undiscounted gross amounts.

Page 44

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)

Risk exposures and responses (cont’d)

(iii) Liquidity risk (cont’d)

	Maturity Analysis
	2012 2011
	Within 1 1 to 5 After 5 Within 1 1 to 5 After 5
	year years years Total year years years Total
	$ $ $ $ $ $ $ $
Financial Liabilities Trade and other payables Interest-bearing liabilities - Finance lease liabilities
	(18,097,539) - - (18,097,539) (4,866,705) - - (4,866,705)
	(330,901) (186,025) - (516,926) (322,791) (389,861) - (712,652)
	(18,428,440) (186,025) - (18,614,465) (5,189,496) (389,861) - (5,579,357)

(iv) Credit risk exposure

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other receivables. The Group’s exposure to credit risk arises from potential default of the counterparty, with the maximum exposure equal to the carrying amount of these assets as indicated in the statement of financial position.

The Group does not hold any credit derivatives to offset its credit exposure. The Group trades only with recognised, credit worthy third parties and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. Receivable balances are monitored on an ongoing basis with the result that the Group does not have a significant exposure to bad debts.

Cash

Cash is held with several reputable financial institutions assigned A or greater credit ratings by Standards and Poor’s.

Trade Receivables

While the Group has policies in place to ensure that sales of its products are made to customers with an appropriate credit history, it does have a concentration of credit risk in relation to its gold and silver sales due to dependence for a significant volume of its sales revenues on a few principal buyers. The Group has in place polices that aim to ensure that sales transactions are limited to high credit quality customers and that the amount of credit exposure to any one customer is limited as far as is considered commercially appropriate. Sales are settled within two trading days from invoice date, minimising credit exposure.

Since the Group trades only with recognised credit worthy third parties, there is no requirement for collateral.

There are no past due or material impaired receivables at balance date.

(v) Fair values

The fair values of all financial assets and liabilities approximate their carrying amounts at balance date.

Page 45

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

4. OPERATING SEGMENTS

Identification of reportable segments

• The Group has identified its operating segments based on internal reports that are reviewed and used by the Board and executive management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

• The Group has identified that its operating segments are best presented by commodity as the Group’s risk and rate of return are affected predominantly by the end product, namely gold and silver, and zinc. PT Natarang Mining (PTNM), operator of the Way Linggo Project, is the primary entity that produces gold whilst SARINC srl is the primary entity that is evaluating the SARINC Zinc Tailings Retreatment Project.

• Discrete financial information about each of these operating segments is reported to the Board and executive management team on a monthly basis.

Types of products

• The Group produces gold bullion at its Way Linggo Project in Indonesia and is evaluating a project in Italy that will produce a zinc based concentrate.

Accounting policies

• The accounting policies used by the Group in reporting segments internally are the same as those contained in Note 2 to the financial statements.

• Segment profit/(loss) include foreign exchange movements on intercompany loans and external finance costs that relate directly to segment operations.

• Unallocated corporate costs are non-segmented expenses such as head office expenses and finance costs that do not relate directly to segment operations.

• Income tax expense is calculated based on the segment operating net profit/(loss). In the previous year, income tax expense has not been calculated for the reported segments as both segments have made operating losses.

Major customers

• Major customers to which the Group provides goods that are more than 10% of external revenue are as follows:

follows:	follows:
2012		2011
	% of External	% of External Revenue
Revenue	Revenue Revenue
$	% $	%
Customer A 64,695,355	90% 37,764,852	83%
Customer B -	- 5,302,572	12%

Page 46

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

4. OPERATING SEGMENTS (cont’d)

4. OPERATING SEGMENTS (cont’d)
	Year ended 30 June 2012			Year ended 30 June 2011
		Unallocated l			Unallocated Items Total
	ld il i			ld l
	Go & Sver Znc	Items Tota		Go & Siver Zinc
	$ $	$ $		$ $	$ $
Revenue
External sales - gold (a)	60,473,405 -	- 60,473,405		36,421,375 -	- 36,421,375
External sales – silver(a)	11,270,524 -	- 11,270,524		8,818,848 -	- 8,818,848
Total segment revenue	71,743,929 -	- 71,743,929		45,240,223 -	- 45,240,223
Interest revenue	- -	1,518,319 1,518,319		- -	491,347 491,347
Total revenue	71,743,929 -	1,518,319 73,262,248		45,240,223 -	491,347 45,731,570
Segment profit/(loss) before income tax	38,249,392 (88,968)	- 38,160,424		18,522,627 (580,598)	- 17,942,029
Interest revenue	- -	1,518,319 1,518,319		- -	491,347 491,347
Corporate costs	- -	(3,353,810) (3,353,810)		- -	(1,942,994) (1,942,994)
Finance costs	- -	- -		- -	(69,073) (69,073)
Profit/(Loss) before income tax	38,249,392 (88,968)	(1,835,491) 36,324,933		18,522,627 (580,598)	(1,520,720) 16,421,309
Income tax expense	(14,931,240) -	- (14,931,240)		(1,760,333) -	- (1,760,333)
Netprofit/(loss) for theyear	23,318,152 (88,968)	(1,835,491) 21,393,693		16,762,294 (580,598)	(1,520,720) 14,660,976
Depreciation and amortisation	9,051,995 6,135	18,882 9,077,012		7,206,005 593	5,078 7,211,676

(a) Revenue from external customers by geographical locations is detailed below. Revenue is attributed to geographic location based on the location of customers.

			2012 2011
			$ $
United Kingdom			70,944,022 39,937,651
Indonesia			799,907 5,302,572
Total external sales revenue			71,743,929 45,240,223

Page 47

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

4. OPERATING SEGMENTS (cont’d)
	Year ended 30 June 2012			Year ended 30 June 2011
		Unallocated l			Unallocated Items Total
	ld & il i			ld & il i
	Go Sver Znc	Items Tota		Go Sver Znc
	$ $	$ $		$ $	$ $
Segment operating assets	66,833,928 51,379	- 66,885,307		48,495,274 10,352	- 48,505,626
Unallocated assets	- -	26,760,304 26,760,304		- -	19,951,339 19,951,339
Deferred tax assets	426,843 -	- 426,843		- -	- -
Total assets	67,260,771 51,379	26,760,304 94,072,454		48,495,274 10,352	19,951,339 68,456,965
Mine development, exploration and capital expenditure
	24,445,583 -	31,343 24,476,926		19,933,594 -	53,215 19,986,809
Segment operating liabilities	(15,393,373) (12,728)	- (15,406,101)		(17,012,047) (46,628)	- (17,058,675)
Unallocated liabilities	- -	(12,186,587) (12,186,587)		- -	(693,688) (693,688)
Deferred tax liabilities	- -	- -		(423,718) -	- (423,718)
Total liabilities	(15,393,373) (12,728)	(12,186,587) (27,592,688)		(17,435,765) (46,628)	(693,688) (18,176,081)

The analysis of location of non-current assets is as follows:

The analysis of location of non-current assets is as follows:
			2012 2011
			$ $
Australia			64,563 52,102
Indonesia			56,311,334 37,710,783
Italy			3,091 10,352
Total non-current assets			56,378,988 37,773,237

Page 48

Kingsrose
Mining
Limited
Annual
Report Year
ended
30
June
2012

==> picture [25 x 21] intentionally omitted <==

**NOTES

TO
THE
FINANCIAL
STATEMENTS
FOR
THE
YEAR
ENDED
30
JUNE
2012
(cont’d)**

		2012 2011 $ $
5. REVENUES AND EXPENSES
		60,473,405 36,421,375 11,270,524 8,818,848 71,743,929 45,240,223 1,518,319 491,347 73,262,248 45,731,570 19,381,136 15,215,598 1,633,250 1,315,019 5,501,911 3,787,324 3,540,505 3,406,903 1,469,853 (2,934,711) 31,526,655 20,790,133 58,396 5,685 1,236,563 - 104 6,505 1,295,063 12,190 4,488,951 3,801,574 34,596 17,449 1,883,712 460,035 6,407,259 4,279,058 - 263,407 - 2,726,720 - 94,639 138,946 - 138,946 3,084,766 - 33,073 - 505,392 25,196 32,354 25,196 570,819 4,821 28,991 30,017 599,810
	(a) Revenue
	Sale of goods
	Gold
	Silver
	Other revenue
	Interest
	Total revenue
	(b) Cost of sales
	Mine production costs
	Royalties
	Depreciation
	Amortisation
	Inventorymovements
	Total cost of sales
	(c) Other income
	Gain on disposal of plant and equipment
	Net gain on foreign exchange
	Sundryincome
	Total other income
	(d) Administration expenses
	Corporate costs
	Depreciation
	Share-basedpayments
	Total administration expenses
	(e) Other expenses
	Loss on sale of financial assets held for trading
	Net loss on foreign exchange
	Non-current assets written off
	Sundryexpenses
	Total other expenses
	(f) Finance costs
	Borrowing costs
	Loans from related parties
	Finance chargespayable under finance leases
	Unwindingof discount on rehabilitationprovision
	Total finance costs

Page
49

Kingsrose
Mining
Limited
Annual
Report Year
ended
30
June
2012

==> picture [25 x 21] intentionally omitted <==

**NOTES

TO
THE
FINANCIAL
STATEMENTS
FOR
THE
YEAR
ENDED
30
JUNE
2012
(cont’d)**

	2012 2011
	$ $
5. REVENUE AND EXPENSES (cont’d)
(g) Depreciation and amortisation
Plant and equipment Mine properties Total depreciation and amortisation	5,536,507 3,804,773 3,540,505 3,406,903
	9,077,012 7,211,676
Included in:
Cost of sales	9,042,416 7,194,227
Administration expenses	34,596 17,449
Total depreciation and amortisation	9,077,012 7,211,676
(h) Employee benefits expense
- Wages and salaries	8,624,091 5,439,619
- Defined contribution superannuation expense	77,602 69,711
- Share-based payments	1,883,712 460,035
- Other employee benefits	733,017 417,822
Total employee benefits expense	11,318,422 6,387,187
6. INCOME TAX
(a) Income tax expense
The components of income tax expense are:
Income Statement
Current income tax
Current income tax charge	15,792,972 1,336,615
Deferred income tax
Relatingto origination of temporarydifferences	(861,732) 423,718
Income tax expense reported in the income statement	14,931,240 1,760,333
(b) Amounts charged or credited directly to equity
Deferred income tax related to items charged/(credited)directlyto equity	- -
Income tax expense reported in equity	- -

Page
50

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

						2012	2011
						$	$
	6. (c)	INCOME TAX (cont’d)
		Numerical reconciliation of accounting profit to tax expense
	A reconciliation between tax expense and the accounting profit before income tax multiplied by the entity’s applicable income tax rate is as follows:
	Accounting profit before income tax					36,324,933	16,665,606
	At the entity's Australian statutory income tax rate of 30% (2011: 30%)					(1,043,773)	(702,989)
	At the entity's Indonesian statutory income tax rate of 35% (2011: 35%)					13,922,646	6,737,789
	At the entity's Italian statutory income tax rate of 27.5% (2011: 27.5%)					6,927	(66,530)
	Overprovision in prior year					-	(5,344)
	Non-deductible expenses/(Non-assessable income)					917,523	(1,989,993)
	Income tax benefits not recognised/(recognised)					99,094	(2,212,600)
	Indonesian withholding tax on dividend from subsidiary not assessable in Australia
						1,028,823	-
	Aggregate income tax expense					14,931,240	1,760,333
	(d) Recognised deferred tax assets and liabilities
							2011 Deferred Income Tax $ - (423,718) - - - (423,718) 1,760,333
			2012 2012			2011
			Current Income Tax Deferred Income Tax			Current Income Tax
			$ $			$
	At 1 July		(1,233,485) (423,718)			-
	Charged to income		(15,792,972) 861,732			(1,336,615)
	Charged to equity		- -			-
	Payments		14,148,303 -			-
	Foreign exchange translation(loss)/gain		(83,894) (11,171)			103,130
	At 30 June		(2,962,048) 426,843			(1,233,485)
	Income tax expense in income statement		14,931,240

Page 51

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

6. INCOME TAX (cont’d)

	6.	INCOME TAX(cont’d)
				BALANCE SHEET
				2012 2011
				$ $
	Deferred income tax at 30 June relates to the following:
	Deferred tax assets:
	Provisions			751,767 442,245
	Plant and equipment			816,831 514,137
	Finance leases			108,736 78,383
	Capital raising expenses			- 3,446
	Unrealised foreign exchange movements			9,856 -
	Australian losses available for offset against future taxable income			2,147,458 2,037,638
	Gross deferred tax assets			3,834,648 3,075,849
	Deferred tax liabilities:
	Accrued income			(54,963) (23,609)
	Mine development			(1,182,323) (1,404,532)
	Gross deferred tax liabilities			(1,237,286) (1,428,141)
	Net deferred tax assets			2,597,362 1,647,708
	Unrecognised net deferred tax assets			(2,170,519) (2,071,426)
	Net deferred tax assets/(liabilities)			426,843 (423,718)

Tax losses

The Group has Australian carried forward tax losses of $7,158,193 (tax effected at 30%, $2,147,458) as at 30 June 2012 (2011: $6,792,127 (tax effected at 30%, $2,037,638)). In view of the Group's Australian trading position, the Directors have not included this tax benefit in the Group's statement of financial position. A tax benefit will only be recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Unrecognised temporary differences

At 30 June 2012, there are no unrecognised temporary differences associated with the Group’s investments in subsidiaries as the Group has no liability for additional taxation should unremitted earnings be remitted (2011: $nil).

Tax consolidation

The Company and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 27 February 2009. The Company and its wholly-owned Australian controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the separate taxpayer within group approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.

The Company and its wholly-owned Australian controlled entities in the tax consolidated group have not entered into a tax funding arrangement or a tax sharing agreement.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

7. EARNINGS PER SHARE

The following reflects the income and share data used in the basic and dilutive earnings per share computations:

	2012 2011
	$ $
(a) Earnings per share
The following reflects the income used in the calculation of basic and diluted earnings per share computations:
Net profit from continuing operations attributable to ordinary equity holders of theparent
	17,551,550 12,000,487
Profit attributable to discontinued operations attributable to ordinary equityholders of theparent
	- 244,297
Netprofit attributable to ordinaryequityholders of theparent	17,551,550 12,244,784
(b) Weighted average number of shares	No. of shares No. of shares
Weighted average number of ordinary shares for basic earnings per share
	272,603,195 252,200,579
Effect of dilution:
Share options	601,974 17,686,795
Weighted average number of ordinary shares adjusted for the effect of dilution
	273,205,169 269,887,374

(c) Information on the classification of securities

Options

Options granted to employees (including KMP) as described in Note 23 are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent they are dilutive.

Details of shares and options issued between the reporting date and the date of completion of these financial statements are described in Note 27.

8. DIVIDENDS PAID AND PROPOSED

Dividends declared during the year on ordinary shares: Unfranked dividend for 2012 of 4 cents per share, payable on 4 July 2012 (2011: Nil) 11,566,713 -

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

	2012 2011
	$ $
9. CASH AND CASH EQUIVALENTS Current Cash at bank and in hand Short-term deposits	15,225,139 8,951,112 14,900,000 15,000,000
	30,125,139 23,951,112

Terms and conditions

(a) Cash at bank and short-term deposits earn interest at floating rates based on bank deposit rates.

(b) The Group has to maintain a minimum cash balance of $4,000,000 as part of the Credit Suisse International pre-paid silver transaction entered into in December 2010 (refer to Note 16(c) for details).

10. TRADE AND OTHER RECEIVABLES

Current Trade receivables(a) Other receivables(b) Non-Current Other receivables (b)	2,301 12,317 2,773,938 1,895,144
	2,776,239 1,907,461
	1,607,114 809,232

Terms and conditions

(a) Details of the terms and conditions of trade receivables are set out in Note 2(g).

(b) Other receivables consist primarily of VAT recoverable from PTNM operations which can be recovered within 7 to 24 months.

11. INVENTORIES

Current Ore stockpiles at cost Gold in circuit at cost Gold bullion at cost Consumables and spares at cost	162,082 2,013,850 172,875 285,886 1,025,424 408,638 2,973,985 1,885,232 4,334,366 4,593,606

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

	2012 2011 $ $ 18,075,984 11,866,455 (9,197,286) (3,964,983)
12. PLANT AND EQUIPMENT Non-Current Plant and Equipment Cost Accumulated depreciation Net carryingamount Leased Equipment Cost Accumulated depreciation Net carryingamount Capital Work in Progress Cost Total Plant and Equipment Movements in Plant and Equipment Plant and Equipment Carryingamount at 1 July Additions Transfer from capital work inprogress Disposals Depreciation charge for theyear Foreign exchange translationgain/(loss) Carryingamount at 30 June Leased Equipment Carryingamount at 1 July Additions Disposals Depreciation charge for theyear Foreign exchange translationgain/(loss) Carryingamount at 30 June Capital Work in Progress Carryingamount at 1 July Additions Transfer toplant and equipment Disposals Foreign exchange translationgain/(loss) Carrying amount at 30 June
	8,878,698 7,901,472
	1,344,672 1,130,228 (785,102) (368,034)
	559,570 762,194
	665,685 1,971,176
	10,103,953 10,634,842
	7,901,472 8,342,552 2,463,985 4,561,781 3,320,360 274,124 (92,995) (55,643) (5,126,160) (3,449,715) 412,036 (1,771,627)
	8,878,698 7,901,472
	762,194 139,395 177,642 1,060,278 (6,405) - (410,347) (355,058) 36,486 (82,421) 559,570 762,194 1,971,176 - 1,930,202 2,410,096 (3,320,360) (274,124) - - 84,667 (164,796) 665,685 1,971,176

Page 55

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

	2012	2011 $ 21,265,360 (3,169,978)
	$
13. MINE PROPERTIES AND DEVELOPMENT Non-Current Cost Accumulated amortisation Movements in Mine Properties and Development Carryingamount at 1 July Additions(i) Transfer from exploration and evaluation assets Expenditure written off Amortisation charge for theyear Change in rehabilitationprovision Foreign exchange translationgain/(loss) Carrying amount at 30 June	33,984,497 (6,894,470)
	27,090,027	18,095,382
	18,095,382 5,369,761 6,227,227 - (3,540,505) 50,485 887,677	22,469,879 3,440,328 - (93,795) (3,406,903)
		59,165
		(4,373,292)
	27,090,027	18,095,382

(i) Included in the amount capitalised during the previous year ended 30 June 2011 were the costs of a net smelter return royalty bought back from Aurora Gold Limited for $1,927,669. The Company paid cash of $262,668 and allotted 1,500,000 ordinary fully paid shares in the capital of Kingsrose as the consideration. Refer to Note 19(i) for further details.

14. EXPLORATION AND EVALUATION ASSETS

Non-Current At cost Movements in Exploration and Evaluation Assets Carryingamount at 1 July Additions Transfer to mineproperties and development Foreign exchange translationgain/(loss) Carrying amount at 30 June	17,151,051 8,233,781
	8,233,781 1,558,196 14,535,336 7,532,878 (6,227,227) - 609,161 (857,293)
	17,151,051 8,233,781

Page 56

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

15. DISCONTINUED OPERATIONS

During the year ended 30 June 2010, the Company reached an agreement with Reed Resources Limited for the termination of their Joint Venture Agreement (Comet Vale) for consideration of cash amounting to $1,000,000 by 31 October 2009, another $1,000,000 in cash in exchange for the Company’s mining equipment by 30 June 2010 and a $2,000,000 equivalent in Reed Resources Limited shares by 2 June 2010.

The sale of the Comet Vale joint venture operation was completed on 31 May 2010, resulting in a net gain on disposal after income tax of $3,181,889. Subsequent to the disposal of this operation, proceeds from the sale of the ore stockpile on hand at 30 June 2010 of $1,358,504 was recognised during the year ended 30 June 2011. Details of the disposal and sale of ore stockpile are presented below:

the disposal and sale of ore stockpile are presented below:
	2011
	$
(a) Financial performance of the Comet Vale joint venture operations for the year until disposal
Revenue	1,358,504
Expenses	(1,114,207)
Gross profit	244,297
Gain on disposal	-
Income from discontinued operations before income tax	244,297
Income tax expense	-
Income from discontinued operations after income tax	244,297
Earnings per share (cents per share):
Basic earnings per share from discontinued operations	0.09
Diluted earnings per share from discontinued operations	0.09
(b) Cash flow information of Comet Vale joint venture operations until disposal
Operatingactivities	1,350,048
Net cash inflow	1,350,048

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

	2012 2011 $ $ 4,119,562 2,991,390 1,161,321 1,717,403 249,062 157,912 12,567,594 - 4,217,532 6,015,486
16. TRADE AND OTHER PAYABLES Current Trade creditors(a) Accruals Sundrycreditors(a) Dividendpayable(b) Unearned revenue(c) Non-Current Unearned revenue (c)
	22,315,071 10,882,191
	- 4,010,325

Terms and conditions

• (a) Trade and sundry creditors are normally settled in accordance with the terms of trade.

• (b) Dividend payable to Kingsrose’s shareholders ($11,566,711) and PTNM’s minority shareholder ($1,000,883) is due on 4 July 2012.

• (c) On 20 December 2010, PTNM entered into a 2-year silver forward structure whereby PTNM agreed to sell a total of 480,120 silver ounces over 24 months from March 2011 and received the total advance proceeds of the total sales (US$12,896,000 or equivalent to A$13,000,000) in December 2010.

17. INTEREST-BEARING LIABILITIES

Current Finance lease liabilities(a),26(c) Non-Current Finance lease liabilities (a), 26(c)	312,666	296,146
	181,995
		379,993

Terms and conditions

• (a) The lease liabilities have an average term of 3 and 4 years with the option to purchase the assets at the completion of the lease term at a nominal value. The lease liabilities are secured by the assets leased.

18. PROVISIONS

Current Employee entitlements Other Non-Current Employee entitlements(a) Rehabilitation(b)	292,657 168,045 140,691 -
	433,348 168,045
	1,007,497 473,916 380,063 308,262
	1,387,560 782,178

The nature of the provisions is described in Note 2(q) and 2(u).

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

18. PROVISIONS (cont’d)

(a) The non-current provision for employee entitlements relates to provision for Indonesian employee termination benefits. The provision for employee termination benefits recognised is based on independent actuarial valuation reports. The calculation is based on the following assumptions:

	2012	2011
	$	$
Discount rate	7.5% per annum	8.5% per annum
Salaryincrease	9% per annum	10% per annum
Normal retirement age	60 years	of age
Mortality	Indonesia Mortality	Table 1999 (TM II)

The following tables summarise the amount recognised in the statement of financial position and the components of net benefit expense recognised in the income statement:

Benefit Liability Present value of defined benefit obligation Unfunded obligation Unrecognised actuarial losses(net) Movements in Benefit Liability At 1 July Net benefits expense Benefitspaid Foreign exchange translation(gain)/loss At 30 June Net Benefit Expense Current service cost Interest cost Amortisation of unrecognised actuarial losses	2012 $	2011 $
	1,094,294	602,810
	1,094,294 (86,797)	602,810
		(128,894)
	1,007,497	473,916
	473,916 552,837 (4,960) (14,296)	299,245 260,005 (22,244)
		(63,090)
	1,007,497	473,916
	461,624 80,056 11,157	232,545 27,441 19
	552,837	260,005

(b) The rehabilitation provision represents the present value of rehabilitation costs relating to mine site, which is expected to be incurred over the life of the mine. However, the timing of rehabilitation expenditure is dependent on the life of the mine which may vary in future.

Movements in Rehabilitation Provision At 1 July Provision recognised duringtheyear(net) Utilised duringtheyear Unwindingof discount Foreign exchange translation(gain)/loss At 30 June	2012 $	2011 $
	308,262 50,485 (169) 4,821 16,664	283,972 - -
		88,156
		(63,866)
	380,063	308,262

Page 59

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

19. CONTRIBUTED EQUITY

19. CONTRIBUTED EQUITY
	2012 2012	2011	2011
	$ Number	$	Number
Ordinary Shares
Issued and fully paid	62,144,725 282,210,845	57,066,067	264,407,055
Movements in ordinary shares on issue
At 1 July	57,066,067 264,407,055	50,889,668	241,433,060
Shares issued in settlement of royalty (i)	- -	1,665,000	1,500,000
Exercise of options – listed	4,278,758 21,393,790	3,091,799	15,458,995
Exercise of options – unlisted	799,900 3,410,000	1,419,600	6,015,000
At 30 June	62,144,725 289,210,845	57,066,067	264,407,055

(i) On 23 September 2010, 1,500,000 fully paid ordinary shares were allotted to Harmony Gold Mining Co Limited's fully owned subsidiary, Aurora Gold Limited (AGL), to relinquish and terminate AGL's right to receive royalty under a 1995 Royalty Agreement. The shares were issued within the discretionary capacity of the Board under ASX Listing rule 7.1.

Terms and conditions

Holders of ordinary shares have the right to receive dividends as declared and, in the event of winding up of 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 the holder to one vote, either in person or by proxy, at a meeting of the Company.

Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par share values. Accordingly, the Company does not have authorised capital or par value in respect of its issued shares.

Escrow restrictions

There are no escrow restrictions on securities in the Company.

Options on issue

The total number of options on issue as at 30 June 2012 is 9,789,185 (2011: 33,092,975).

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

19. CONTRIBUTED EQUITY (cont’d)

Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future developments of the business. Capital, in this context, consists of debt, which includes trade and other payables, interest-bearing liabilities, cash and cash equivalents and equity.

The Board’s focus has been to raise sufficient funds through equity to fund exploration, evaluation and development activities. There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

The table below summarises the components of capital managed by the Group.

The table below summarises the components of capital managed by the Group.
	2012 2011
	$ $
Total borrowings *	22,809,732 15,568,655
Less: Cash and cash equivalents	(30,125,139) (23,951,112)
Net debt	(7,315,407) (8,382,457)
Total equity	66,479,766 50,280,884
Total capital	59,164,359 41,898,427
Gearing ratio	- -

• includes trade and other payables and interest-bearing liabilities

The Group’s gearing ratio is monitored and maintained at a level that is appropriate for its growth plans. A specific maximum target gearing ratio has not been set by the Board.

20. RESERVES

Nature and purpose of reserves

Option premium reserve

The option premium reserve is used to record the value of options provided to shareholders and share-based payments provided to employees including key management personnel as part of their remuneration.

General reserve

The general reserve is used to record the portion of PTNM’s accumulated profits required to be set aside in accordance with the prevailing laws and regulations in Indonesia.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record exchange gains or losses on borrowings that form part of the Company’s net investments in foreign operations.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

21. STATEMENT OF CASH FLOWS RECONCILIATION (a) Reconciliation of net profit after income tax to net cash flows from operating activities Net profit after income tax Adjustments for: Depreciation of plant and equipment Amortisation of mine properties Unrealised net foreign exchange (gain)/loss Share-based payments Gain on disposal of plant and equipment Non-current assets written off Exploration and evaluation expenditure classified under investing activities Loss on held for trading financial assets Change in assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories (Increase)/decrease in derivative financial instruments (Increase)/decrease in other assets (Increase)/decrease in deferred tax assets Increase/(decrease) in trade and other payables Increase/(decrease) in income tax payable Increase/(decrease) in provisions Increase/(decrease) in deferred tax liabilities Net cash flows from operating activities (b) Non-cash investing and financing activities Settlement of third party's royalty entitlement with shares (refer Note 19) Acquisition of assets by means of finance leases (refer Note 12)	2012 2011
	$ $
	21,393,693 14,905,273 5,536,507 3,804,773 3,540,505 3,406,903 (2,737,262) 2,343,691 1,883,712 460,035 (58,396) (5,685) - 94,639 129,501 568,684 - 263,407 (1,680,519) (1,078,623) 259,240 (2,913,813) - 24,175 (226,173) (158,151) (426,843) - (5,760,878) 11,927,976 1,728,563 1,233,485 820,200 195,550 (423,718) 423,718
	23,978,132 35,496,037
	- 1,665,000 177,642 1,060,278

Page 62

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

	2012 2011
	$ $
22. PARENT ENTITY DISCLOSURES
Current Assets	26,695,741 23,792,492
Non-Current Assets	42,610,427 26,932,564
Total Assets	69,306,168 50,725,056
Current Liabilities	(12,433,394) (1,085,152)
Non-Current Liabilities	- -
Total Liabilities	(12,433,394) (1,085,152)
Net Assets	56,872,774 49,639,904
Issued Capital	62,144,725 57,066,067
Accumulated Losses	(11,043,148) (11,313,648)
Option Premium Reserve	5,771,197 3,887,485
Total Shareholder's Equity	56,872,774 49,639,904
Profit of the parent entity	11,837,213 9,099,870
Total comprehensive income of the parent entity	11,837,213 9,099,870

Kingsrose has not entered into any guarantees in relation to the debts of its controlled entities.

There are no contractual commitments for acquisition of plant and equipment and contingent liabilities for the Company at balance date.

23. SHARE-BASED PAYMENTS

(a) Recognised share-based payment expenses

The expense recognised for employee services received during the year was $1,833,712 (2011: $460,035). The share-based payment plan is described below.

(b) Employee Share Option Plan

The Company has a share-based payment Employee Share Option Plan (“ESOP”) which was approved by shareholders in general meeting in May 2008. It was renewed by shareholders at the Annual General Meeting held on 9 November 2010.

The terms of the options issued under the ESOP are described below:

Expiry Date - The Option will expire at 5.00 pm Western Standard Time on expiry dates stated above.

Exercise Price - Unless otherwise determined by the Board pursuant to clause 6 of the ESOP, the Exercise Price of each Option will be the Market Value of a Share when the Board resolves to offer the Options. Market Value means the weighted average closing sale price of the Shares recorded on the ASX over the last five trading days on which sales of the Shares were recorded preceding the day on which the Board resolves to invite an Application for an Option plus a 15% premium.

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Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

23. SHARE-BASED PAYMENTS (cont’d)

(b) Employee Share Option Plan (cont’d)

Unlisted Options - The Option will not be listed for quotation on the ASX or any other stock exchange. The Options will only be transferrable to the extent permitted by the Scheme.

Exercise of Options - If any Performance Criteria are imposed on a Holder, that Holder may only exercise their Options upon satisfaction of the Performance Criteria and prior to the Expiry Date .

Notwithstanding the above, all Options may be exercised:

• during a Takeover Period; or

• in the Board's absolute discretion, in the event of the death or Permanent Disablement of an Eligible Employee.

Allotment of Shares - All Shares allotted upon the exercise of Options will be of the same class and rank equally in all respects with other Shares in the Company.

Reconstruction of capital - In the event that, prior to the expiry of any Options, there is a reconstruction (including consolidation, subdivision, reduction, return or pro-rata cancellation) of the issued capital of the Company, then the number of Options to which each Holder is entitled or the Exercise Price or both will be reconstructed in the manner required by the Listing Rules.

No Rights of Participation - There are no participating rights or entitlements inherent in the Options and the holders will not be entitled to participate in new issues of capital which may be offered to Shareholders during the currency of the Options.

If there is a bonus issue (Bonus Issue) to Shareholders, the number of Shares over which an Option is exercisable will be increased by the number of Shares which the holder would have received if the Option had been exercised before the record date for the Bonus Issue (Bonus Shares). The Bonus Shares must be paid up by the Company out of profits or reserves (as the case may be) in the same manner as was applied in the Bonus Issue, and upon issue will rank equally in all respects with the other Shares on issue as at the date of issue of the Bonus Shares.

In the event of any reconstruction (including consolidation, sub-division, reduction or return) of the issued capital of the Company prior to the Expiry Date, all rights of an Option holder are to be changed in a manner consistent with the Listing Rules .

In the event that the Company makes a pro rata issue of securities, the exercise price of the Options will be adjusted in accordance with the formula set out in Listing Rule 6.22.2.

(c) Summary of options granted during the year

The following table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options issued during the year.

The following table illustrates the number and options issued during the year.	weighted average exercise price (WAEP) of, and movements in, share
	2012 2012 2011 2011 Number WAEP Number WAEP
Outstanding at the beginning of the year Granted during the year Exercised during the year Lapsed/cancelled during the year Outstanding at the end of the year Exercisable at the end of the year	11,585,000 1.07 13,075,000 0.44 1,750,000 1.54 5,825,000 1.55 (4,610,000) 0.23 (6,815,000) 0.23 (250,000) 1.58 (500,000) 1.52
	8,475,000 1.61 11,585,000 1.07
	4,225,000 1.05 6,335,000 0.26

The outstanding balance as at 30 June 2012 is represented by the following table:

Page 64

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

23. SHARE-BASED PAYMENTS (cont’d)

(c) Summary of options granted during the year (cont’d)

(c) Summary of options granted during the year (cont’d)	(c) Summary of options granted during the year (cont’d)	(c) Summary of options granted during the year (cont’d)	(c) Summary of options granted during the year (cont’d)	(c) Summary of options granted during the year (cont’d)
					Number of options at beginning of year Options granted Options exercised Options lapsed / cancelled Number of options On issue Vested
Grant date Issue date Vesting date Expiry date Exercise price
Directors
3-Oct-07	3-Oct-07	3-Oct-07	3-Dec-12	$0.25	3,500,000	-	(2,000,000)	-	1,500,000*	1,500,000*
16-Feb-09	18-Feb-09	18-Feb-09	18-Feb-14	$0.14	1,000,000	-	(1,000,000)	-	-	-
17-Mar-11	17-Mar-11	17-Sep-11	17-Sep-13	$1.54	1,000,000	-	-	-	1,000,000	1,000,000
17-Mar-11	17-Mar-11	1-Oct-12	1-Oct-14	$1.54	1,000,000	-	-	-	1,000,000	-
17-Mar-11	17-Mar-11	1-Oct-13	1-Oct-15	$1.54	1,000,000	-	-	-	1,000,000	-
Commissioner
22-Feb-12	22-Feb-12	22-Feb-12	22-Feb-14	$1.53	-	500,000	-	-	500,000	500,000
Employees
8-Mar-10	8-Mar-10	8-Mar-10	8-Mar-15	$0.73	150,000	-	-	-	150,000	150,000
21-Dec-10	21-Dec-10	21-Dec-10	21-Dec-12	$1.59	75,000	-	-	-	75,000	75,000
2-Jun-11	2-Jun-11	2-Dec-11	2-Dec-13	$1.59	250,000	-	-	-	250,000	250,000
2-Jun-11	2-Jun-11	2-Dec-12	2-Dec-14	$1.59	250,000	-	-	-	250,000	-
2-Jun-11	2-Jun-11	2-Dec-11	2-Dec-13	$1.59	250,000	-	-	-	250,000	250,000
2-Jun-11	2-Jun-11	2-Dec-12	2-Dec-14	$1.59	250,000	-	-	-	250,000	-
2-Jun-11	2-Jun-11	2-Dec-11	2-Dec-13	$1.59	500,000	-	-	-	500,000	250,000
2-Jun-11	2-Jun-11	2-Dec-12	2-Dec-14	$1.59	500,000	-	-	-	500,000	-
22-Jun-11	22-Jun-11	22-Dec-11	22-Dec-13	$1.42	250,000	-	-	-	250,000	250,000
13-Jul-11	13-Jul-11	13-Jul-12	13-Jan-14	$1.58	-	125,000	-	(125,000)	-	-
13-Jul-11	13-Jul-11	13-Jul-13	13-Jan-15	$1.58	-	125,000	-	(125,000)	-	-
21-Dec-11	22-Dec-11	17-Dec-12	17-Dec-14	$1.53	-	500,000	-	-	500,000	-
21-Dec-11	22-Dec-11	17-Dec-13	17-Dec-15	$1.53	-	500,000	-	-	500,000	-
Consultants
13-Jul-09	13-Jul-09	13-Jul-09	13-Jul-14	$0.39	250,000	-	(250,000)	-	-	-
13-Jul-09	13-Jul-09	13-Jul-09	13-Jul-14	$0.39	160,000	-	(160,000)	-	-	-
29-Dec-09	29-Dec-09	29-Dec-10	29-Dec-12	$0.20	1,200,000	-	(1,200,000)	-	-	-
* Former director					11,585,000 1,750,000 (4,610,000) (250,000) 8,475,000 4,225,000

Page 65

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

23. SHARE-BASED PAYMENTS (cont’d)

(c) Summary of options granted during the year (cont’d)

• Weighted average remaining contractual life – The weighted average remaining contractual life for the share options outstanding as at 30 June 2012 is 1.87 years (2011: 2.11 years).

• Range of exercise price – The range of exercise prices for ESOP options outstanding at the end of the year was $0.25 to $1.59 (2011: $0.14 to $1.59).

• Weighted average fair value – The weighted average fair value of options granted during the year was $1.54 (2011: $1.55).

• Option pricing model – The fair value of equity share options granted is estimated at the date agreement was reached to grant the options using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options are granted. The following table lists the inputs to the model used for the year ended 30 June 2012:

Granted Granted Granted Granted Granted
13-Jul-11 13-Jul-11 21-Dec-11 21-Dec-11 22-Feb-12
ESOP ESOP ESOP ESOP 15% Facility
Number of optionsgranted 125,000 125,000 500,000 500,000 500,000
Dividendyield 0.00% 0.00% 0.00% 0.00% 0.00%
Shareprice at date ofgrant $1.39 $1.39 $1.46 $1.46 $1.41
Exerciseprice $1.58 $1.58 $1.53 $1.53 $1.53
Volatility 50.00% 77.00% 51.00% 69.00% 55.00%
Risk free rate 4.35% 4.35% 3.20% 3.06% 4.07%
Expirationperiod 2years 2years 2years 2years 2years
Expirydate cancelled cancelled 17-Dec-14 17-Dec-15 22-Feb-14
Black-Scholes valuation $0.36 $0.69 $0.42 $0.67 $0.28

Page 66

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

23. SHARE-BASED PAYMENTS (cont’d)

(d) Key Management Personnel options

During the year, 1,000,000 unlisted options were issued to key management personnel under the Company’s Employee Share Option Plan at a price of $1.53 each. The options are subject to the following vesting periods:  In respect of 500,000 options – vesting date 17 December 2012; expiry date 17 December 2014; and  In respect of 500,000 options – vesting date 17 December 2013; expiry date 17 December 2015.

The outstanding balance of options on issue at balance date relating to key management personnel is disclosed in Note 25(c).

24. RELATED PARTIES

(a) Interests in controlled entities

Kingsrose Mining Limited has interests in the following controlled entities:

Entity	Place of		Percentage Holding
	Incorporation	2012	2011
MM Gold Pty Ltd	Australia (WA)	100%	100%
Natarang Offshore Pty Ltd	Australia (WA)	100%	100%
PT Natarang Mining	Indonesia (JAK)	85%	85%
Kingsrose Tanggamus Pty Ltd	Australia (WA)	100%	100%
SARINC UK Ltd	England and Wales (UK)	100%	100%
SARINC srl	Sardinia (IT)	100%	100%

(b) Key management personnel

Details of transactions with Key Management Personnel are disclosed in Note 25.

Page 67

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

25. KEY MANAGEMENT PERSONNEL DISCLOSURES

(a) Details of Key Management Personnel

		Date of	Date of
Name	Position	appointment	resignation
Directors
J.C. Morris	Non-Executive Chairman	17-Aug-07	-
C.N. Start	Managing Director *	17-Mar-11	-
T.G. Spencer	Finance Director	28-Mar-09	-
J.W. Phillips	Non-Executive Director	12-Jan-05	-
P.G. Cook	Non-Executive Director	1-Oct-10	-
Other Key Management	Personnel
Herryansyjah	President Director - PTNM	27-Feb-09	-
R. Clarke	Operations Manager (Way Linggo) - PTNM	17-Dec-11	-
T. Butler	Operations Manager (Way Linggo) - PTNM	18-May-10	8-Nov-11

• Mr C.N. Start was appointed as General Manager on 17 March 2011 and became the Managing Director on 1 July 2011.

(b) Compensation of Key Management Personnel

(b) Compensation of Key Management Personnel
	2012 2011
	$ $
Short term benefits	1,423,490 1,016,918
Post employment benefits	49,080 33,583
Termination benefits	150,000 -
Share-basedpayments	992,387 357,439
Total	2,614,957 1,407,940

Page 68

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

25. KEY MANAGEMENT PERSONNEL (cont’d)

(c) Option holdings of Key Management Personnel

				Net change other^ Balance at 30 June 2012 Not vested and not exercisable Vested and exercisable
	30-Jun-12	Balance at 1 July 2011 Granted as remuneration	Options exercised
	Directors
	J.C. Morris	1,900,000 -	(1,900,000)	- - - -
	C.N. Start(i)	3,000,000 -	-	- 3,000,000 2,000,000 1,000,000
	T. G. Spencer	1,000,000 -	(1,000,000)	- - - -
	J.W. Phillips	3,000,000 -	-	(3,000,000) - - -
	P.G. Cook	- -	-	- - - -
	Other KMP
	Herryansjah	- -	-	- - - -
	R. Clarke(ii)	- 1,000,000	-	- 1,000,000 1,000,000 -
	T. Butler(iii)	- -	-	- - - -
		8,900,000 1,000,000	(2,900,000)	(3,000,000) 4,000,000 3,000,000 1,000,000

(i) Appointed Managing Director 1 July 2011 ^ These represent change by virtue of sale on the market.

(ii) Appointed 17 December 2011

(iii) Resigned 8 November 2011

			Options exercised Net change other ^ Balance at 30 June 2011 Not vested and not exercisable Vested and exercisable
	30-Jun-11	Balance at 1 July2010 Granted as remuneration
	Directors
	J.C. Morris	1,500,000	- - 400,000 1,900,000 - 1,900,000
	T. G. Spencer	1,000,000	- - - 1,000,000 - 1,000,000
	J.W. Phillips	3,000,000	- - - 3,000,000 - 3,000,000
	P.G. Cook (i)	-	- - - - -
	M.J. Andrews (ii)	1,000,000	- - (1,000,000) - - -
	Other KMP
	Herryansjah	-	- - - - - -
	C.N. Start (iii)	- 3,000,000 - - 3,000,000 3,000,000 -
	T. Butler	- - - - - - -
		6,500,000 3,000,000 - (600,000) 8,900,000 3,000,000 5,900,000

^ These represent change by virtue of resignation or acquisition from the (i) Appointed 1 October 2010 market. (ii) Resigned 21 December 2010

(iii) Appointed 17 March 2011

All options are exercisable as soon as they are vested, unless otherwise stated.

Page 69

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

25. KEY MANAGEMENT PERSONNEL (cont’d)

(d) Ordinary shares held by Key Management Personnel

	Balance				Balance
30-Jun-12	held at	Granted as	On exercise of	Net change	held at
	1 July 2011	remuneration	options	other^	30 June 2012
Directors
J.C. Morris	5,350,000	-	1,900,000	-	7,250,000
C.N. Start(i)	-	-	-	-	-
T.G. Spencer	1,000,000	-	1,000,000	(750,000)	1,250,000
**J.W. Phillips **	16,150,000	-	-	-	16,150,000
P.G. Cook	4,000,000	-	-	(2,000,000)	2,000,000
Other KMP
Herryansjah	-	-	-	-	-
R. Clarke(ii)	-	-	-	-	-
T. Butler(iii)	-	-	-	-	-
	26,500,000	-	2,900,000	(2,750,000)	26,650,000
(i)Appointed ManagingDirector 1 July2011		^ These represent change byvirtue of sale on the market.
(ii) Appointed 17 December 2011
(iii) Resigned 8 November 2011

	Balance						Balance
30-Jun-11	held at	Granted as		On exercise of		Net change	held at
	1 July2010	remuneration		options		other ^	30 June 2011
Directors
J.C. Morris	5,250,000		-		-	100,000	5,350,000
T.G. Spencer	1,000,000		-		-	-	1,000,000
J.W. Phillips	16,150,000		-		-	-	16,150,000
P.G.Cook (i)	-		-		-	4,000,000	4,000,000
M.J. Andrews (ii)	16,150,000		-		-	(16,150,000)	-
Other KMP
Herryansjah	-		-		-	-	-
C.N. Start (iii)	-		-		-	-	-
T. Butler	-		-		-	-	-
	38,550,000		-		-	(12,050,000)	26,500,000

^ These represent change by virtue of appointment, resignation or (i) Appointed 1 October 2010 acquisition from the market. (ii) Resigned 21 December 2010

(iii) Appointed 17 March 2011

Page 70

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

25. KEY MANAGEMENT PERSONNEL (cont’d)

(e) Loans from Key Management Personnel

Details of aggregate loans from key management personnel are as follows:

	Balance at beginning of period Additions Repayments / Adjustments	Balance at end of period Number in group
			Interest Charged Interest Paid
Total	$ $ $	$	$ $
2012	- - -	- -	- -
2011	7,516,908 - (7,516,908)	- 6	505,392 (849,391)

Terms and conditions of loans from key management personnel

All loans from key management personnel are unsecured and interest-bearing.

Loan from Directors

• (i) Mr. Phillips made a loan to the Company in the amount of $1,200,000 on 30 June 2010. The loan bears interest at 6% per annum and is repayable by 31 December 2010, following extension from the initial repayment date of 30 September 2010. Principal and interest totalling $1,236,000 was repaid in full during the year ended 30 June 2011.

• (ii) As part of the Way Linggo Gold Project acquisition, a loan of $4,623,848 from Singapore Mining Ventures Pte Ltd (“SMV”), a company controlled by Dr. Andrews, to PTNM was documented in a Loan Arrangements Deed. This Deed provided that on repayment of the above mentioned sum, $1,000,000 is to be repaid by SMV to Goldcrest Pty Ltd, a company controlled by Mr. Morris and $2,626,940 to be paid to Icon Enterprises Limited (“Icon”). The SMV loan is required to be paid by PTNM from surplus operating cash flows. Principal and interest totalling $5,217,224 was fully repaid to respective companies during the year ended 30 June 2011.

• (iii) $186,985 loan from Dr. Andrews, Director of PTNM, was detailed in the same Deed and on the same terms noted above. Principal and interest totalling $211,233 was repaid in full during the year.

• (iv) $909,060 loan from Icon was detailed in the same Deed and on the same terms noted above. Messrs. Phillips and Morris are Directors of Icon and Dr. Andrews is the General Manager. Principal and interest totalling $1,026,948 was repaid in full during the year ended 30 June 2011.

• (v) $268,657 loan from PT Promincon Indonesia, a company controlled by Messrs. Andrews and Phillips, was detailed in the same Deed and on the same terms noted above. Principal and interest totalling $303,497 was repaid in full during the year ended 30 June 2011.

Loan from other KMP

A $328,358 loan from Mr. Herryansjah, President-Director of PTNM, was detailed in the same Deed and on the same terms noted above. Principal and interest totalling $371,397 was repaid to Mr. Herryansjah during the year ended 30 June 2011.

(f) Other transactions and balances with key management personnel and their related parties

Consulting Services

Mr. Phillips, an independent non-executive director of the Company, received $93,032 (2011: $97,048) consulting fees during the year for professional services provided to the Group outside his normal Board duties. These fees were paid at normal commercial terms. No balance was outstanding at 30 June 2012 and 30 June 2011.

Mr. Cook, an independent non-executive director of the Company, received $75,800 (2011: $44,200) consulting fees during the year for professional services provided to the Group outside his normal Board duties. These fees were paid at normal commercial terms. At 30 June 2012, $2,860 was owing to Mr. Cook (30 June 2011: Nil).

Page 71

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

25. KEY MANAGEMENT PERSONNEL (cont’d)

(f) Other transactions and balances with key management personnel and their related parties (cont’d)

Consulting Services (cont’d)

Minelogix Pty Ltd, an entity related to Mr. Start, received $4,113 for consulting services provided to the Group during the year (2011: $Nil). No balance was outstanding at 30 June 2012 and 30 June 2011.

Mining Services

Westralmen Pty Ltd, an entity related to Mr. Phillips, received $190,000 fees for mining services provided to the Group during the year (2011: $380,000). These fees were paid at normal commercial terms. At 30 June 2012 no amount was owing to Westralmen Pty Ltd (2011: $69,667).

26. COMMITMENTS AND CONTINGENCIES

(a) Royalties

As part of the acquisition of the Way Linggo Project, the Company, through its wholly owned subsidiaries MM Gold Pty Ltd (“MMG”) and Natarang Offshore Pty Ltd (“NOPL”), inherited various project royalty commitments. These are summarised as follows:

• One tonnage or net profit royalty – calculated with reference to the Company’s ownership percentage of PTNM (currently 85%) by 10% of ore tonnes treated by 1.5% of the gold price if principal source of revenue derived by PTNM arises from sale of gold or 5% of net profit if the sale of gold does not provide the principal source of revenue.

• One product (net smelter return) royalty – calculated with reference to the Company’s ownership percentage of PTNM (currently 85%) of 2% of the value of gold and silver bullion production.

In relation to the product (net smelter return) royalty, the Company had the right to buy back the first 250,000 ounces of gold produced from the Project area by the payment of US$300,000. During the year, the Company has exercised that right and paid cash of US$300,000 (A$278,500).

PTNM is obligated to pay gold and silver royalties to the Indonesian government, calculated at 2% of the value of gold and silver bullion production.

(b) Divestment

The Company is obligated to offer for sale equity tranches in PTNM which if taken up would result in the Company’s share of PTNM reducing down to 49% over a five year period in accordance with a divestment schedule outlined in PTNM’s Contract of Works Agreement (CoW) with the Indonesian government. Each tranche is to be offered for sale at a fair market price to either an Indonesian government body or an Indonesian national. According to Article 24 in the CoW, the Company’s obligation to offer for sale equity in PTNM will commence in March 2016 (six years after the commencement of production). The Ministry of Energy and Minerals has indicated to the Company various (earlier) timetables that it thinks should apply, however the Company’s believes it is in a strong position to follow the CoW timetable and is currently waiting formal advice from the Ministry to confirm this.

Page 72

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

26. COMMITMENTS AND CONTINGENCIES (cont’d)

(c) Leasing Commitments

Operating lease commitments – Group as lessee

The Group has entered into commercial leases for property rental. These leases have an average life of between one and two years with renewal options included in the contracts.

and two years with renewal options included in the contracts.
	2012 2011
	$ $
Payable within one year	50,848 121,897
Payable after oneyear but not more than fiveyears	- 49,013
Total minimum lease payments	50,848 170,910

Finance lease commitments – Group as lessee

The Group has entered into finance leases for various plant and equipment. These leases have an average remaining life of between one and three years with the option to purchase the assets at the completion of the lease term at a nominal value.

	2012 2011
	$ $
Payable within one year	330,901 322,791
Payable after oneyear but not more than fiveyears	186,025 389,861
Total minimum lease payments	516,926 712,652
Less: Future finance charges	(22,265) (36,513)
Present value of minimum leasepayments	494,661 676,139
Included in the financial statements as interest-bearing liabilities (Note 17):
Current	312,666 296,146
Non-current	181,995 379,993
	494,661 676,139

(d) Contingent Liabilities

There are no significant contingent liabilities at balance date.

Page 73

Kingsrose Mining Limited Annual Report Year ended 30 June 2012

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2012 (cont’d)

27. SUBSEQUENT EVENTS

• On 4 July 2012, the Company’s $0.04 per share maiden, unfranked dividend declared on 23 May 2012, totaling $11,566,613, was paid to shareholders.

• On 23 July 2012, 500,000 unlisted options were issued to an employee under the Company’s Employee Share Option Plan at an exercise price of $1.26 each. 250,000 options will vest on 23 January 2013 with an expiry date of 23 January 2015 and 250,000 options will vest on 23 January 2014 with an expiry date of 23 January 2016.

• On 26 July 2012, the Company announced that it had commenced quotation to trade American Depositary Receipts (ADRs) on the US based exchange, OTCQX International, through the ADR program.

• On 31 July 2012, 25,422 listed options were exercised at a price of $0.20 each. *

• On 14 August 2012, 100,000 unlisted options were issued to an employee under the Company’s Employee Share Option Plan at an exercise price of $1.27 each. The options will vest on 14 February 2013 with an expiry date of 14 February 2015.

• On 15 August 2012, 7,350 listed options were exercised at a price of $0.20 each. *

• On 3 September 2012, 75,000 listed options were exercised at a price of $0.20 each. *

• Options issued pursuant to 1:2 Non-renounceable Rights Issue (pursuant to IPO dated November 2007).

28. AUDITOR’S REMUNERATION

The auditor of Kingsrose Mining Limited is Ernst & Young (Australia).

	2012	2011
	$	$
Amounts received or due and receivable byErnst & Young (Australia)for:
(i) An audit or review of the financial report of the entity and any other entity in the consolidated group		99,840
	102,290
(ii)Tax services	18,500	-
	120,790	99,840
Amounts received or due and receivable by related practices of Ernst & Young (Australia)for:
(i) An audit or review of the financial report of the entity and any other entity in the consolidated group
	48,454	67,300
(ii)Tax services	-	2,532
	48,454	69,832

Page 74

Kingsrose
Mining
Limited
Annual
Report Year
ended
30
June
2012

==> picture [25 x 21] intentionally omitted <==

**DIRECTORS’

DECLARATION**

In
accordance
with
a
resolution
of
the
Directors
of
Kingsrose
Mining
Limited,
I
state
that:

• (1) In
  the
  opinion
  of
  the
  Directors:

• (a) the
  financial
  statements
  and
  notes
  of
  the
  consolidated
  entity
  are
  in
  accordance
  with
  the Corporations
  Act
  2001,
  including:

  • (i) giving
    a
    true
    and
    fair
    view
    of
    the
    consolidated
    entity’s
    financial
    position
    as
    at
    30
    June
    2012 and
    of
    its
    performance
    for
    the
    year
    ended
    on
    that
    date;
    and

  • (ii) complying
    with
    the
    Australian
    Accounting
    Standards
    (including
    the
    Australian
    Accounting Interpretations)
    and
    Corporations
    Regulations

• (b) the
  financial
  statements
  and
  notes
  also
  comply
  with
  International
  Financial
  Reporting
  Standards
  as disclosed
  in
  Note
  2(a).

• (c) there
  are
  reasonable
  grounds
  to
  believe
  that
  the
  Company
  will
  be
  able
  to
  pay
  its
  debts
  as
  and
  when they
  become
  due
  and
  payable.

• (2) This
  declaration
  has
  been
  made
  after
  receiving
  the
  declarations
  required
  to
  be
  made
  to
  the
  Directors
  in accordance
  with
  section
  295A
  of
  the
  Corporations
  Act
  2001
  for
  the
  financial
  year
  ended
  30
  June

On
behalf
of
the
Board

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Timothy
G.
Spencer Finance
Director

Perth,
6
September
2012

Page
75

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Independent auditor's report to the members of Kingsrose Mining Limited

Report on the financial report

We have audited the accompanying financial report of Kingsrose Mining Limited, which comprises the consolidated statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards .

Auditor's responsibility

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

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

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

Independence

In conducting our audit we have complied with the independence requirements of the Corporations Act 2001 . We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report.

Liability limited by a scheme approved under Professional Standards Legislation

GHM:MJ:Kingsrose:2012:010

76

Opinion

In our opinion:

• a. the financial report of Kingsrose Mining Limited is in accordance with the Corporations Act 2001 , including:

• i giving a true and fair view of the consolidated entity's financial position as at 30 June 2012 and of its performance for the year ended on that date; and

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

• b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 9 to 16 of the Directors' Report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Kingsrose Mining Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001 .

Ernst & Young

==> picture [148 x 52] intentionally omitted <==

G H Meyerowitz Partner Perth 6 September 2012

GHM:MJ:Kingsrose:2012:010

77