Lachlan Star Limited — Interim / Quarterly Report 2014

May 14, 2014

LACHLAN STAR LIMITED

ABN 88 000 759 535

UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS for the three and nine months ended 31 March 2014

The accompanying unaudited consolidated interim financial statements for the three and nine months ended 31 March 2014 have been prepared by management. Readers are cautioned that these financial statements contain forwardlooking information as described in the associated Management Discussion & Analysis. All amounts are stated in Australian dollars, except as otherwise stated.

LACHLAN STAR LIMITED 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

CONTENTS
Consolidated Statement of Profit or Loss and Other Comprehensive Income	3
Consolidated Statement of Financial Position	4
Consolidated Statement of Changes in Equity	5
Consolidated Statement of Cash Flows	6
Notes to the Consolidated Financial Statements	7-26

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LACHLAN STAR LIMITED 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Revenue from continuing operations Revenue Finance income Expenses Cost of sales Other expenses from ordinary activities Corporate compliance and management Cost of and fair value adjustment to derivatives Share based payments expense Occupancy costs Foreign exchange gain / (loss) New venture expenditure written off Other expenses Finance expense Fair value (loss) / gain on deferred consideration (Loss) before income tax Income tax benefit / (expense) (Loss) for the period Other comprehensive income for the period net of income tax Items that may be reclassified to profit or loss Exchange difference on translation of foreign operations Total comprehensive income for the period Basic (loss) per share (cents per share) Diluted (loss) per share (cents per share)	3 months ended 9 months ended Restated Restated 31-Mar-14 31-Mar-13 31-Mar-14 31-Mar-13 $000 $000 $000 $000 23,478 17,576 73,571 55,448 17 29 23 143
	23,495 17,605 73,594 55,591 (23,065) (20,056) (70,678) (64,971) (399) (605) (1,293) (1,558) (838) - (804) - 54 (1) (263) (14) (3) (17) (45) (40) 744 (433) 876 (1,658) (3) (70) (7) (209) (14) (50) (72) (222) (642) (768) (1,782) (971) (7) 480 186 562
	(678) (3,915) (288) (13,490) - 197 (126) 3,390
	(678) (3,718) (414) (10,100) (1,230) (318) (133) (1,281)
	(1,908) (4,036) (547) (11,381)
	(0.5) (4.1) (0.3) (11.3) (0.5) (4.1) (0.3) (11.3)

The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the notes to the consolidated interim financial report.

For the restated consolidated statements of profit or loss and other comprehensive income for the three and nine months ending 31 March 2013 refer to Note 1 (ii)(iii) and Note 13 (iii) and (iv).

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LACHLAN STAR LIMITED 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes Current assets Cash and cash equivalents Trade and other receivables 4 Derivatives Inventories 5 Total current assets Non-current assets Trade and other receivables Inventories Exploration and evaluation Mine development properties Property, plant and equipment 7 Goodwill Deferred tax asset Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity 8 Reserves Accumulated losses Total equity	Restated Restated 31 March 30 June 30 June 2014 2013 2012 $000 $000 $000 2,175 2,811 17,412 4,152 3,883 3,630 81 - - 14,580 13,782 8,341
	20,988 20,476 29,383
	257 491 435 2,924 6,428 5,891 2,775 2,775 2,771 22,876 21,681 30,464 24,870 25,351 13,474 - - 189 2,816 2,976 9,117
	56,518 59,702 62,341
	77,506 80,178 91,724
	19,047 24,786 20,191 10,455 13,068 5,343
	29,502 37,854 25,534
	10,716 13,767 1,384 5,725 5,943 6,087
	16,441 19,710 7,471
	45,943 57,564 33,005
	31,563 22,614 58,719
	224,389 215,076 204,436 7,264 7,214 117 (200,090) (199,676) (145,834)
	31,563 22,614 58,719

The consolidated statement of financial position should be read in conjunction with the notes to the consolidated interim financial report.

For the 30 June 2012 restated consolidated statement of financial position refer to Note 1 (ii)(iii) and Note 13 (i).

For the 30 June 2013 restated consolidated statement of financial position refer to Note 1 (ii)(iii) and Note 13 (ii).

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LACHLAN STAR LIMITED 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Balance at 1 July 2012 (Restated) Other comprehensive income Loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners: Shares issued on exercise of options Shares issued as credit fee Share issue costs Share based payments Balance at 31 March 2013 (Restated) Balance at 1 July 2013 (Restated) Other comprehensive income Loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners: Shares issued for cash Share issue costs Share based payments Balance at 31 March 2014	Share based Foreign Contributed Accumulated payments exchange equity losses reserve reserve Total $000 $000 $000 $000 $000
	204,436 (145,834) 425 (308) 58,719 - - - (1,281) (1,281) - (10,100) - - (10,100)
	- (10,100) - (1,281) (11,381) 6,289 - - - 6,289 193 - - - 193 (48) - - - (48) 309 - (294) - 15
	211,179 (155,934) 131 (1,589) 53,787
	215,076 (199,676) 129 7,085 22,614 - - - (133) (133) - (414) - - (414)
	- (414) - (133) (547) 9,684 - - - 9,684 (451) - - - (451) 80 - 183 - 263
	224,389 (200,090) 312 6,952 31,563

The consolidated statement of changes in equity should be read in conjunction with the notes to the consolidated interim financial report.

For the restated consolidated statement of changes in equity refer to Note 1 (ii)(iii) and Note13 (vii).

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LACHLAN STAR LIMITED 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CASH FLOWS

Cash flows from operating activities Receipts from customers and GST recovered Payments to suppliers and employees Interest received Interest paid Net cash inflows / (outflows) from operating activities Cash flows from investing activities Payments for exploration and evaluation Payments for mine development Payments for acquisition of property, plant and equipment Net cash flows used in investing activities Cash flows from financing activities Proceeds from issue of ordinary shares Proceeds from exercise of share options Repayment of borrowings Receipt of borrowings Payment of share issue costs Net cash (outflows) / inflows from financing activities Net increase / (decrease) in cash and cash equivalents Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period	3 months ended 9 months ended Restated Restated 31-Mar-14 31-Mar-13 31-Mar-14 31-Mar-13 $000 $000 $000 $000 23,332 17,450 72,464 54,242 (18,691) (18,098) (62,341) (63,250) 18 58 24 251 (465) (293) (1,605) (478)
	4,194 (883) 8,542 (9,235)
	- (2) - (4) (3,361) (4,341) (10,408) (8,099) (842) (15,317) (2,925) (23,640)
	(4,203) (19,660) (13,333) (31,743)
	- - 9,684 - - - - 6,289 (2,331) (1,978) (5,833) (5,154) - 18,161 779 25,584 (20) (25) (450) (48)
	(2,351) 16,158 4,180 26,671
	(2,360) (4,385) (611) (14,307) (88) (1) (25) (2) 4,623 7,489 2,811 17,412
	2,175 3,103 2,175 3,103

The consolidated statement of cashflows should be read in conjunction with the notes to the consolidated interim financial report.

For the restated consolidated statements of cash flows for the three and nine months ending 31 March 2013 refer to Notes 1 (ii)(iii) and Note 13 (v) and (vi).

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

1. SUMMARY OF ACCOUNTING POLICIES

(i) Basis of preparation of financial report and statement of compliance

Lachlan Star Limited (“Lachlan” or the “Company”) is a public company incorporated and domiciled in Australia and listed on the Australian Securities Exchange (“ASX”) and the Toronto Stock Exchange (“TSX”). These consolidated interim financial statements of the Company and its controlled entities ("group" or "consolidated entity") for the period ended March 31, 2014 are general purpose financial statements prepared in accordance with applicable accounting standards including AASB 134 ‘Interim Financial Reporting’, Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’) and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Compliance with AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.

These consolidated interim financial statements do not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the group as in the full financial report. It is recommended that these interim consolidated financial statements be read in conjunction with the annual financial report for the year ended June 30, 2013, and any public announcements made by the Company during the period ended March 31, 2014 in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules.

These consolidated interim financial statements have been prepared on an historical cost basis, except for available-for-sale financial assets and derivative financial instruments which have been measured at fair value. All amounts are presented in Australian dollars unless stated otherwise.

Going concern

This financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. As at March 31, 2014 the consolidated entity had cash reserves of $2.18 million and a net current asset deficiency of $8.51 million, having recorded a net loss after tax for the three months ended March 31, 2014 of $0.68 million and a net loss after tax for the nine months ended March 31, 2014 of $0.41 million. The consolidated entity had net cash inflows from operating activities for the three months ended March 31, 2014 of $4.19 million and net cash inflows from operating activities for the nine months ended March 31, 2014 of $8.54 million. Notwithstanding the above, the financial report has been prepared on a going concern basis, which the directors consider to be appropriate, based on:

• (i) the expectation that the operating subsidiary will be able to maintain its creditor holding periods in Chile;

• (ii) on February 13, 2013 the Company drew down a CDN$5 million Facility with Sprott of which CDN$0.5 million was repaid on October 9, 2013. The terms of the Facility, which was due for repayment on February 13, 2014, have been amended such that the remaining Facility of CDN$4.5 million will be partly repaid over the 12 months commencing March 31, 2014 by the payment of 12 monthly principal repayments of CDN$187,500, the repayment of CDN$1 million by September 30, 2014, and the payment of an extension fee; and

• (iii) the expectation that the Company, if required, would be able to raise additional funds through debt, asset sales, or equity.

The directors believe that the group will be successful in implementing initiatives (i) and (iii) as required and, accordingly, have prepared the financial statements on a going concern basis. Notwithstanding this belief, as there is a risk that the group may not be successful in implementing its initiatives or the implementation of alternative options which may be available to the group, this constitutes a material uncertainty which may cast a significant doubt about the group's ability to continue as a going concern and therefore whether it will realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report. No adjustments have been made relating to the recoverability or classification of recorded assets and liabilities that might be necessary should the group not continue as a going concern.

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

1. SUMMARY OF ACCOUNTING POLICIES (continued)

(i) Basis of preparation of financial report and statement of compliance (continued)

Rounding of amounts

The Company is a company of the kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission relating to the rounding off of amounts in the financial report. Amounts in the financial report have been rounded-off to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

Use of estimates and judgements

The preparation of the financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year and judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements, are:

(i) Provisions

The consolidated entity has recognised a provision for environmental restoration. This provision has been measured based on management’s estimates of the probable amount of resources that will be required to settle the obligation and the timing of settlement. Such estimates are subjective and there may be a future need to revise the book value of the provision as a result of changes in estimates.

(ii) Exploration and evaluation expenditure

Expenditure which does not form part of the cash generating units assessed for impairment has been carried forward on the basis that exploration and evaluation activities 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 continuing. Exploration expenditure incurred that does not satisfy the policy stated above is expensed in the period in which it is incurred. Exploration expenditure that has been capitalised which no longer satisfies the policy stated above is written off in the period in which the decision is made.

(iii) Functional currency

Companies in the consolidated entity have to determine their functional currencies based on the primary economic environment in which each entity operates. In order to do that management has to analyse several factors, including which currency mainly influences sales prices of product sold by the entity, which currency influences the main expenses of providing services, in which currency the entity has received financing, and in which currency it keeps its receipts from operating activities.

For subsidiaries Compania Minera Dayton (“CMD”) and Dayton Chile Exploraciones Mineras Limitada (“DCEM”) the above indicators are mixed and the functional currency is not obvious. Management used its judgement to determine which factors are most important and concluded the US dollar is the functional currency for those companies. For Lachlan Star Limited and its other subsidiaries management have determined that the Australian dollar is the functional currency for those companies given their revenue and expenditure is mostly in Australian dollars.

(iv) Recovery of ounces of gold in leach pad inventories

Management has estimated the recovery of gold in the leach pad at the CMD Gold Mine based on recovery rates experienced after the September 2000 shutdown. Management evaluate this estimate on an ongoing basis for any changes that may result in adjustments to the financial statements.

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

2. SUMMARY OF ACCOUNTING POLICIES (continued)

(i) Basis of preparation of financial report and statement of compliance (continued)

(v) Reserve estimates

Reserves are estimates of the amount of product that can be economically and legally extracted from the consolidated entity's properties. In order to calculate reserves, estimates and assumptions are required about a range of geological, technical and economic factors. Estimating the quality and/or grade of reserves requires the size, shape and depth of ore bodies to be determined by analysing geological data such as drilling samples. This process may require complex and difficult geological judgements and calculations to interpret the data. The group is required to determine and report ore reserves in Australia under the principles incorporated in the Australasian Code for Reporting of Mineral Resources and Ore Reserves 2012, known as the JORC Code. The JORC Code requires the use of reasonable investment assumptions to calculate reserves.

As the economic assumptions used to estimate reserves change from period to period, and as additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the group's financial results and financial position in a number of ways, including recognition of deferred tax on mineral rights, deferred mining expenditure and capitalisation of mine development costs, impairment and units of production method of depreciation and amortisation.

(vi) Income taxes

The consolidated entity is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the provision for income taxes. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The group estimates its tax liabilities based on the group's understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

In addition, the group will recognise deferred tax assets relating to carried forward tax losses to the extent it is believed there will be sufficient future taxable profits against which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of a subsidiary, which is not part of the tax consolidated group, to be able to satisfactorily substantiate its tax losses at the time they are recouped. It is believed the subsidiary tax losses can be substantiated.

(vii) Impairment

AASB 136 requires a company to make a formal estimate of recoverable amount of an asset if an indicator of impairment is present. A number of primary indicators of impairment in respect of the Company’s CMD Gold Mine assets were considered at March 31, 2014 and it was concluded that mining assets did not need be tested for impairment at that date as there were no indicators of impairment.

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

1. SUMMARY OF ACCOUNTING POLICIES (continued)

(ii) Adoption of new and revised Accounting Standards

In the nine months ended March 31, 2014 the group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after July 1, 2013. The accounting policies adopted are consistent with those of the previous financial year other than as set out below:

• (i) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 are effective July 1, 2013 on a prospective basis. AASB 13 provides a single framework for measuring fair value based on assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. The adoption of AASB 13 did not require any adjustment to the valuation techniques used by the Company to measure fair value and did not result in any measurement adjustments at July 1, 2013.

• (ii) AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in Other Entities , revised AASB 127 Separate Financial Statements, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards and AASB 2012-10 Amendments to Australian Accounting Standards - Transition guidance and other Amendments are effective July 1, 2013. AASB 10 requires consolidation of an investee only if the investor possesses power over the investee, has exposure to variable returns from its involvement with the investee, and has the ability to use its power over the investee to affect its returns. The Company has determined that the adoption of AASB 10 has not resulted in any change in the consolidation status of any of its subsidiaries. AASB 12 sets out the required disclosures for entities reporting under AASB 10, and replaces the disclosure requirements currently found in AASB 128. Application of this standard by the consolidated entity will not affect any of the amounts recognised in the financial statements, but may impact the type of information disclosed in relation to the consolidated entity's investments.

• (iii) IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine and AASB 2011-12 Amendments to Australian Accounting Standards arising from IFRIC 20 are effective July 1, 2013. IFRIC 20 (applied in Australia as Interpretation 20) sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine. It states that these costs can only be recognised as an asset if they can be attributed to an identifiable component of the ore body, the costs relating to the improved access to that component can be measured reliably and it is probable that future economic benefits associated with the stripping activity (improved access to the ore body) will flow to the entity. The costs will be amortised over the life of the identified component of the ore body. This is different to the consolidated entity's previous accounting policy which was to capitalise stripping costs based on a combined pit waste-to-ore stripping ratio and amortise the costs over the life of the mine. IFRIC 20 has been applied prospectively to the Company’s production stripping costs incurred on or after 1 July 2012. Capitalised deferred stripping costs that are not related to an identifiable component of an orebody at June 30, 2012 have been written off against opening retained earnings.

The financial effect of these accounting policy changes on the previously presented financial statements as at July 1, 2012, March 31, 2013, and June 30, 2013 are set out in Note 13 to these financial statements. For the nine months ended 31 March 2013 the adoption of this interpretation has increased the unaudited CMD Gold Mine gross operating loss by US$2.08 million and reduced cash costs by US$18 per ounce. For the three months ended March 31, 2013 the adoption of this interpretation has increased the unaudited CMD Gold Mine gross operating loss by US$2.34 million and reduced cash costs by US$67 per ounce.

For the nine months ended March 31, 2014 the adoption of this interpretation has increased expenditure on mine development properties by US$2.45 million and increased the CMD net profit before tax by US$0.99 million. For the three months ended March 31 2014 the adoption of this interpretation has increased expenditure on mine development properties by US$0.90 million and reduced the CMD net profit before tax by US$0.27 million.

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

1. SUMMARY OF ACCOUNTING POLICIES (continued)

(ii) Adoption of new and revised Accounting Standards (continued)

• (iv) Revised AASB 119 Employee Benefits , AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements are effective July 1, 2013. Benefits are classified as long-term benefits if payments are not expected to be made within the next 12 months. The Company has reviewed the classification of its benefits and determined no adjustments to the existing classifications are required. The standard also introduces a number of additional disclosures for defined benefit liabilities/assets and could affect the timing of the recognition of termination benefits.

2. CONTINGENT ASSETS AND LIABILITIES

A mining contractor has submitted a claim against a subsidiary for compensation as a result of their mining contract not being renewed in August 2013. The subsidiary considers this an ambit claim and has submitted a strong and well-founded response, the purpose of which is to obtain a favourable ruling that completely rejects the former contractor´s claim.

There have been no other changes of a material nature in contingent liabilities or contingent assets since the last annual reporting date.

3. SUBSEQUENT EVENTS

No matter or circumstance has arisen since March 31, 2014 that in the opinion of the directors has significantly affected, or may significantly affect in future financial years:

(i) the consolidated entity’s operations, or

• (ii) the results of those operations, or (iii) the consolidated entity’s state of affairs

4. TRADE AND OTHER RECEIVABLES

Trade and other receivables at March 31, 2014 include $3.89 million for VAT and the sale of gold, all of which has been received subsequent to period end.

5. INVENTORIES

Inventories at March 31, 2014 include $0.92 million relating to doré produced but not sold, and to which title passed to Johnson Matthey on April 4, 2014.

6. RELATED PARTY DISCLOSURES

The consolidated entity recharged $1,890 and was charged $10,242 on an arm’s length basis during the March 2014 quarter to / from Nevada Iron Limited, a company of which Mr Michael McMullen is Chairman, for office rent, administration staff, and car parking. Mr McMullen resigned as a director of Lachlan Star Limited on April 6, 2014.

Other than this, the consolidated entity did not have any transactions with related parties during the quarter other than remuneration to directors and their related parties. Lachlan Star Limited is the ultimate parent entity.

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

7. PROPERTY PLANT AND EQUIPMENT

PROPERTY PLANT AND EQUIPMENT
Cost: 1 July 2013 Effect of movements in exchange rates Additions 31 March 2014 Accumulated depreciation: 1 July 2013 Depreciation charge for period Effect of movements in exchange rates 31 March 2014 Carrying amount at beginning of period (Restated) Carrying amount at end of period Cost: 1 July 2012 Effect of movements in exchange rates Additions 30 June 2013 Accumulated depreciation: 1 July 2012 Depreciation charge for period Impairment loss Effect of movements in exchange rates 30 June 2013 Carrying amount at beginning of period Carrying amount at end of period (Restated)	Fixture and fittings Vehicles Land and buildings Mine plant Total $000 $000 $000 $000 $000 588 51 86 46,831 47,556 (6) (1) (1) (480) (488) - - - 2,925 2,925
	582 50 85 49,276 49,993
	154 51 - 22,000 22,205 33 - - 3,102 3,135 (2) (1) - (214) (217)
	185 50 - 24,888 25,123
	434 - 86 24,831 25,351
	397 - 85 24,388 24,870
	463 40 35 17,269 17,807 61 11 9 4,967 5,048 64 - 42 24,595 24,701
	588 51 86 46,831 47,556
	105 40 - 4,188 4,333 30 - - 5,569 5,599 - - - 11,423 11,423 19 11 - 820 850
	154 51 - 22,000 22,205
	358 - 35 13,081 13,474
	434 - 86 24,831 25,351

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

8. CONTRIBUTED EQUITY

CONTRIBUTED EQUITY
Ordinary shares 1 July 2013 Issue of shares for cash Share based payments Costs of issue of shares 31 March 2014 1 July 2012 Issue of shares for cash Costs of issue of shares Exercise of share options Share based payments 30 June 2013	Number $000 99,107,273 215,076 47,500,000 9,684 725,000 80 - (451)
	147,332,273 224,389
	86,380,017 204,436 7,265,000 3,919 - (72) 5,240,576 6,289 221,680 504
	99,107,273 215,076

The following unissued ordinary shares of the Company were under option at period end.

Expiry date Exercise price	Number 01/07/13 Issued Expired /cancelled Number 31/3/14
20/12/13 $1.20 20/12/13 $1.50 26/08/13 $1.20 25/11/13 $1.20 25/11/13 $1.50 25/11/14 $1.50 03/04/14 CDN$1.60 28/11/14 $1.50 22/05/15 $2.10 22/05/15 $2.50 02/10/15 CDN$0.30 06/11/15 CDN$0.30 29/11/15 $0.25	166,669 - (166,669) - 166,669 - (166,669) - 5,970,900 - (5,970,900) - 650,000 - (650,000) - 150,000 - (150,000) - 50,000 - - 50,000 329,250 - - 329,250 75,000 - (75,000) - 100,000 - - 100,000 100,000 - - 100,000 - 432,870 - 432,870 - 1,097,561 - 1,097,561 - 1,550,000 - 1,550,000
	7,758,488 3,080,431 (7,179,238) 3,659,681

9. SEGMENT INFORMATION

( a) Description of segments

The consolidated entity reports one segment, being gold mining, exploration and evaluation, and corporate to the chief operating decision maker, being the board of Lachlan Star Limited, in assessing performance and determining the allocation of resources. In determining operating segments, the consolidated entity has had regard to the information and reports the chief operating decision maker uses to make strategic decisions regarding resources.

( b) Segment information provided to the board of directors

The board of directors assesses the performance of the segment based on financial performance indicators. Financial information for the segment is set out below:

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

9. SEGMENT INFORMATION (continued)

Reconciliation of unaudited CMD Gross Operating Profit / (Loss) to unaudited Consolidated (Loss) Before Income Tax

		3 months ended March31,2014	3 months ended March 31, 2013 (restated)
CMD Gross Operating (Loss) (unaudited)	US$000	(262)	(2,876)
A$ / US exchangerateforthe period		0.896	1.039
CMDGross Operating (Loss) (unaudited)	A$000	(292)	(2,766)
Inventory adjustments	A$000	2,250	2,129
Depreciationand amortisation	A$000	(1,870)	(2,136)
Foreignexchange gain/ (loss)	A$000	744	(433)
Revaluationofdeferred consideration	A$000	(7)	480
Netfinance expense	A$000	(297)	(168)
New venture expenditurewrittenoff	A$000	(3)	(70)
Cost of and fair value adjustments to derivatives	A$000	(838)	-
Other head officerelated costs	A$000	(365)	(951)
Consolidated (Loss) Before Income Tax (unaudited)	A$000	(678)	(3,915)

		9 months ended March31,2014	9 months ended March 31, 2013 (restated)
CMD Gross Operating Profit / (Loss) (unaudited)	US$000	5,945	(9,024)
A$ / US exchangerateforthe period		0.921	1.039
CMD Gross Operating Profit / (Loss) (unaudited)	A$000	6,452	(8,683)
Inventory adjustments	A$000	1,054	4,277
Depreciationand amortisation	A$000	(5,768)	(5,594)
Foreignexchange gain/ (loss)	A$000	876	(1,658)
Revaluationofdeferred consideration	A$000	186	562
Netfinance expense	A$000	(602)	(54)
New venture expenditure written off	A$000	(7)	(210)
Cost of and fair value adjustments to derivatives	A$000	(804)	-
Other head officerelated costs	A$000	(1,675)	(2,130)
Consolidated (Loss) Before Income Tax (unaudited)	A$000	(288)	(13,490)

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LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

9. SEGMENT INFORMATION (continued)

Reconciliation of cash cost (US$/oz) per ounce to unaudited Cost of Sales

		3 months ended March 31,2014	3 months ended March 31, 2013 (restated)
Cashcost perounce	US$	782	1,172
Ounces produced		15,747	10,892
Cashcosts	US$000	12,317	12,770
A$ / US exchangerateforthe period		0.896	1.039
Cashcosts	A$000	13,743	12,291
Inventory adjustments	A$000	452	(467)
Depreciation and amortization	A$000	1,870	2,136
Waste costs expensed and amortised	A$000	5,964	5,632
Royalties	A$000	490	304
Other	A$000	29	37
Copper/ silver netrevenue	A$000	517	123
Cost ofsales (unaudited)	A$000	23,065	20,056

		9 months ended March 31,2014	9 months ended March 31, 2013 (restated)
Cashcost perounce	US$	849	1,044
Ounces produced		51,363	34,983
Cash costs	US$000	43,590	36,506
A$ / US exchangerateforthe period		0.914	1.039
Cashcosts	A$000	47,686	35,141
Inventory adjustments	A$000	(1,121)	(1,059)
Depreciationand amortization	A$000	5,768	5,594
Waste costs expensed and amortised	A$000	15,092	23,209
Royalties	A$000	1,435	1,481
Other	A$000	205	192
Copper/ silver netrevenue	A$000	1,613	413
Cost ofsales (unaudited)	A$000	70,678	64,971

The consolidated entity derives 100% of its revenue from the sale of metals to one customer in one geographic region, Chile. The geographic location of non-current assets, other than deferred tax, is set out in the table below:

out in the table below:
Chile Australia	31 March 2014 $000 30 June 2013 $000 50,921 53,932 2,779 2,794
	53,700 56,726

15

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

10. CHANGES IN ESTIMATES

(i) Site restoration

Provision for the cost of site restoration is recognised at the time that an environmental disturbance occurs or a constructive obligation is determined. Costs included in the provision encompass all closure and rehabilitation activity expected to occur progressively over the life of the operation and at the time of closure in connection with disturbances as at the reporting date. Estimated costs included in the determination of the provision reflect the risks and probabilities of alternative estimates of cash flows required to settle the obligation. The expected rehabilitation costs are estimated based on the cost of external contractors performing the work or the cost of performing the work internally depending on management’s intention.

The timing of the actual rehabilitation expenditure is dependent upon a number of factors including the currently approved life of the CMD Gold Mine and changes in local environmental regulations. Expenditures may occur before and after closure and can continue for an extended period of time depending on rehabilitation requirements. The site restoration provision is measured at the expected value of future cash flows, discounted to their present value. The unwinding of the discount is included in finance costs and results in an increase in the amount of the provision.

The provision is updated each quarter for the effect of a change in the discount rate and exchange rate, when applicable, and the change in estimate is added or deducted from the related asset and depreciated prospectively over the asset’s useful life. Significant judgements and estimates are involved in forming expectations of future activities and the amount and timing of the associated cash flows. Those expectations are formed based on existing environmental and regulatory requirements or, if more stringent, those of the consolidated entity’s environmental policies that give rise to a constructive obligation.

Non-current Opening Effect of movements in exchange rates Accretion Change in estimate Change in discount rate Closing	9 months 12 months 31 March 2014 30 June 2013 $000 $000 5,035 5,007 (57) 496 - 37 - (682) - 177
	4,978 5,035

16

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

10. CHANGES IN ESTIMATES (continued)

• (ii) Deferred consideration

In November 2010 the Company reached agreement with the five shareholders of Oro Chile LLC (“the Vendors”) to acquire 100% of DMC Newco Pty Ltd (“DMC Newco”), a company that in turn owned 100% of two Chilean companies, Compañía Minera Dayton (“CMD”) and Dayton Chile Exploraciones Mineras Limitada (“DCEM”). CMD and DCEM collectively own a 100% interest in the Compañía Minera Dayton Gold Mine located in Andacollo, approximately 350km north of Santiago in Chile (“CMD Gold Mine”). The transaction settled on 24 December 2010. The consideration for the purchase included deferred consideration payments payable in accordance with a Deferred Consideration Agreement relating to the achievement of specified gold production, which may become payable. The payment terms are as follows:

• a) 2.5% of the value of the gold produced from the existing open pit inventory contained within the pit designs and other specific deposits with mineralisation that may be economically exploited using open pit methods (the “Mineral Inventory” collectively) between 1 January 2011 and the Payment End Date, being the later of (i) 31 December 2014, or (ii) the end of the thirtieth full month following the end of the month in which the Company (or its successor in interest) has completed the mining of all of the estimated reserves contained, as of 24 December 2010, within the pits the subject of the Deferred Consideration Agreement provided that if such date is after 31 December 2014 due to any action or circumstance that was not willingly and knowingly caused by the Company, the Payment End Date shall be 31 December 2014; and

• b) 25% of the value of the gold produced from the Mineral Inventory between 1 January 2011 and the Payment End Date over and above 119,000 ounces

The movement in deferred consideration, classified under Borrowings in the Statement of Financial Position, is shown below:

movement in deferred consideration, classified ion, is shown below:	under Borrowings in the Statem
Opening Fair value gain Repayment of borrowings Accretion Foreign exchange Other Closing Current Non-current	9 months 12 months 31 March 2014 30 June 2013 $000 $000 306 1,387 (186) (670) (12) (724) 4 189 (11) 44 - 80
	101 306
	101 262 - 44
	101 306

11. CAPITAL COMMITMENTS

There were no capital commitments at period end.

17

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

12. FINANCIAL RISK MANAGEMENT

Fair values

The carrying amounts consolidated financial assets and financial liabilities shown in the statement of financial position approximate their fair values. Disclosure of fair value measurements by level of fair value measurement hierarchy is as follows:

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

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

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

The following table presents the group’s financial assets and liabilities measured and recognised at fair value.

March 31, 2014	Level 1	Level 2	Level 3	Total
	$000	$000	$000	$000
Financial assets
Derivatives	-	81	-	81
Financial liabilities
Borrowings	-	-	101	101
June 30, 2013	Level 1	Level 2	Level 3	Total
	$000	$000	$000	$000
Financial liabilities
Borrowings	-	-	306	306

Contingent consideration payable for the CMD Gold Mine has a fair value determined using discounted cash flow analysis and is included in level 3 borrowings. The following table presents the change in this instrument:

March 31, 2014 Opening balance 1 July 2013 Fair value gain Repayment of borrowings Accretion Foreign exchange Closing balance June 30, 2013 Opening balance 1 July 2012 Fair value gain Repayment of borrowings Accretion Foreign exchange Other Closing balance	Contingent consideration Total $000 $000 306 306 (186) (186) (12) (12) 4 4 (11) (11) 101 101 Contingent consideration Total $000 $000 1,387 1,387 (670) (670) (724) (724) 189 189 44 44 80 80 306 306

18

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

13. CHANGES IN ACCOUNTING POLICIES

The International Accounting Standards Board published IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine on 19 October 2011 , applicable in Australia as Interpretation 20 . The interpretation, which is applicable to the Company for the financial period commencing July 1, 2013, sets out the accounting for overburden waste removal (stripping) costs in the production phase of a surface mine. The main requirements of the interpretation are as follows:

• Waste removal costs (stripping costs) incurred in the production phase of a surface mine are accounted for in accordance with IAS 2 Inventories to the extent they relate to current period production.

• Production stripping costs are recognized as a non-current asset (“stripping activity asset”) if all the following criteria are met (i) it is probable that future economic benefits will flow to the entity (ii) the entity can identify the component of the ore body to which access has been improved (iii) the costs incurred can be measured reliably. The stripping activity asset is amortised over the useful life of the component of the ore body to which access has been improved.

• When the costs of a stripping activity asset versus current period inventory are not separately identifiable, costs are allocated based on a production method.

• Application of the interpretation is on a prospective basis, with transitional adjustments being recognized in opening retained earnings.

The interpretation must be applied retrospectively and the group has to write off existing stripping cost asset balances to retained earnings on the date of transition, unless they relate to an identifiable component of the ore body. Management has determined that $3.99 million of stripping costs capitalized at July 1, 2012, being the statement of financial position as at the beginning of the immediately preceding comparative period, cannot be attributed to an identifiable component of an ore body.

The impact of this change in accounting policy on the financial statements as at the beginning of the immediately preceding comparative period, for the prior year end, and for the comparative periods for the 3 and 9 months ending March 31, 2013 is as follows:

19

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

13. CHANGES IN ACCOUNTING POLICIES (continued)

• (i) Consolidated Statement of Financial Position

Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Trade and other receivables Inventories Mine development properties Property, plant and equipment Exploration and evaluation Goodwill Deferred tax asset Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity	Adjustment for Audited change in accounting Restated 30 June 12 policy 30 June 12 $000 $000 $000 17,412 - 17,412 3,630 - 3,630 8,441 (100) 8,341
	29,483 (100) 29,383
	435 - 435 5,983 (92) 5,891 34,452 (3,988) 30,464 13,474 - 13,474 2,771 - 2,771 189 - 189 8,459 658 9,117
	65,763 (3,422) 62,341
	95,246 (3,522) 91,724
	20,191 - 20,191 5,343 - 5,343
	25,534 - 25,534
	1,384 - 1,384 6,087 - 6,087
	7,471 - 7,471
	33,005 - 33,005
	62,241 (3,522) 58,719
	204,436 - 204,436 117 - 117 (142,312) (3,522) (145,834)
	62,241 (3,522) 58,719

20

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

13. CHANGES IN ACCOUNTING POLICIES (continued)

• (ii) Consolidated Statement of Financial Position

Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Trade and other receivables Inventories Mine development properties Property, plant and equipment Exploration and evaluation Deferred tax asset Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity	Adjustment for Audited change in accounting Restated 30 June 13 policy 30 June 13 $000 $000 $000 2,811 - 2,811 3,883 - 3,883 13,782 - 13,782
	20,476 - 20,476
	491 - 491 6,428 - 6,428 24,865 (3,184) 21,681 22,167 3,184 25,351 2,775 - 2,775 2,976 - 2,976
	59,702 - 59,702
	80,178 - 80,178
	24,786 - 24,786 13,068 - 13,068
	37,854 - 37,854
	13,767 - 13,767 5,943 - 5,943
	19,710 - 19,710
	57,564 - 57,564
	22,614 - 22,614
	215,076 - 215,076 7,941 (727) 7,214 (200,403) 727 (199,676)
	22,614 - 22,614

21

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

13. CHANGES IN ACCOUNTING POLICIES (continued)

(iii) Consolidated Statement of Profit or Loss and Other Comprehensive Income

Revenue from continuing operations Revenue Finance income Expenses Cost of sales Other expenses from ordinary activities Corporate compliance and management Share based payments expense Occupancy costs Foreign exchange (loss) New venture expenditure written off Other expenses Finance expense Fair value gain on deferred consideration (Loss) before income tax Income tax benefit (Loss) for the period Other comprehensive income for the period net of income tax Items that may be reclassified to profit or loss Exchange difference on translation of foreign operations Total comprehensive income for the period	3 months ended Adjustment for Original change in accounting Restated 31 Mar 13 policy 31 Mar 13 $000 $000 $000 17,576 - 17,576 29 - 29
	17,605 - 17,605 (17,815) (2,241) (20,056) (605) - (605) (1) - (1) (17) - (17) (433) - (433) (70) - (70) (50) - (50) (768) - (768) 480 - 480
	(1,674) (2,241) (3,915) 197 - 197
	(1,477) (2,241) (3,718) (342) 24 (318)
	(1,819) (2,217) (4,036)

22

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

13. CHANGES IN ACCOUNTING POLICIES (continued)

(iv) Consolidated Statement of Profit or Loss and Other Comprehensive Income

9 months ended

	9 months ended
Revenue from continuing operations Revenue Finance income Expenses Cost of sales Other expenses from ordinary activities Corporate compliance and management Share based payments expense Occupancy costs Foreign exchange (loss) New venture expenditure written off Other expenses Finance expense Fair value gain on deferred consideration (Loss) before income tax Income tax benefit (Loss) for the period Other comprehensive income for the period net of income tax Items that may be reclassified to profit or loss Exchange difference on translation of foreign operations Total comprehensive income for the period	Adjustment for Original change in accounting Restated 31 Mar 13 policy 31 Mar 13 $000 $000 $000 55,448 - 55,448 143 - 143
	55,591 - 55,591 (63,173) (1,798) (64,971) (1,558) - (1,558) (14) - (14) (40) - (40) (1,658) - (1,658) (209) - (209) (222) - (222) (971) - (971) 562 - 562
	(11,692) (1,798) (13,490) 3,390 - 3,390
	(8,302) (1,798) (10,100) (1,369) 88 (1,281)
	(9,671) (1,710) (11,381)

23

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

13. CHANGES IN ACCOUNTING POLICIES (continued)

• (v) Consolidated Statement of Cash Flows

Cash flows from operating activities Receipts from customers and GST recovered Payments to suppliers and employees Interest received Interest paid Net cash (outflows) from operating activities Cash flows from investing activities Payments for exploration and evaluation Payments for mine development Payments for acquisition of property, plant and equipment Net cash flows used in investing activities Cash flows from financing activities Repayment of borrowings Receipt of borrowings Payment of share issue costs Net cash flows from financing activities Net (decrease) in cash and cash equivalents Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period	3 months ended Adjustment for Original change in accounting Restated 31 Mar 13 policy 31 Mar 13 $000 $000 $000 17,450 - 17,450 (17,566) (532) (18,098) 58 - 58 (293) - (293)
	(351) (532) (883)
	(2) - (2) (4,873) 532 (4,341) (15,317) - (15,317)
	(20,192) 532 (19,660)
	(1,978) - (1,978) 18,161 - 18,161 (25) - (25)
	16,158 - 16,158
	(4,385) - (4,385) (1) - (1) 7,489 - 7,489
	3,103 - 3,103

24

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

13. CHANGES IN ACCOUNTING POLICIES (continued)

(vi) Consolidated Statement of Cash Flows

Cash flows from operating activities Receipts from customers and GST recovered Payments to suppliers and employees Interest received Interest paid Net cash (outflows) from operating activities Cash flows from investing activities Payments for exploration and evaluation Payments for mine development Payments for acquisition of property, plant and equipment Net cash flows used in investing activities Cash flows from financing activities Proceeds from exercise of share options Repayment of borrowings Receipt of borrowings Payment of share issue costs Net cash flows from financing activities Net (decrease) in cash and cash equivalents Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period	9 months ended Adjustment for Original change in accounting Restated 31 Mar 13 policy 31 Mar 13 $000 $000 $000 54,242 - 54,242 (63,692) 442 (63,250) 251 - 251 (478) - (478)
	(9,677) 442 (9,235)
	(4) - (4) (7,657) (442) (8,099) (23,640) - (23,640)
	(31,301) (442) (31,743)
	6,289 - 6,289 (5,154) - (5,154) 25,584 - 25,584 (48) - (48)
	26,671 - 26,671
	(14,307) - (14,307) (2) - (2) 17,412 - 17,412
	3,103 - 3,103

25

LACHLAN STAR LIMITED NOTES TO THE 31 MARCH 2014 UNAUDITED INTERIM FINANCIAL STATEMENTS

13. CHANGES IN ACCOUNTING POLICIES (continued)

• (vii) Consolidated Statement of Changes in Equity

Balance at 1 July 2012 (Audited) Change in accounting policy IFRIC 20 Balance at 1 July 2012 (Restated) Balance at a 31 March 2013 (Original) Change in accounting policy IFRIC 20 Balance at 31 March 2013 (Restated) Balance at 1 July 2013 (Audited) Change in accounting policy IFRIC 20 Balance at 1 July 2013 (Restated)		Contributed Accumulated Share based payments Foreign exchange equity losses reserve reserve Total $000 $000 $000 $000 $000 204,436 (142,312) 425 (308) 62,241 - (3,522) - - (3,522)
		204,436 (145,834) 425 (308) 58,719
		211,179 (150,614) 131 (1,677) 59,019 - (5,320) - 88 (5,232)
		211,179 (155,934) 131 (1,589) 53,787
		215,076 (200,403) 129 7,812 22,614 - 727 - (727) -
		215,076 (199,676) 129 7,085 22,614

26