MAGONTEC LIMITED

==> picture [525 x 46] intentionally omitted <==

AUDITED ANNUAL REPOR T

For 12 Months Ended 31 Dec 2013

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

1. CORPORATE INFORMATION

The consolidated financial statements of Magontec Limited and its controlled subsidiaries as listed in NOTE 25 herein (collectively, the Group) for the year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors on 27 February 2014. Magontec Limited is a company limited by shares incorporated in Australia. The shares are publicly traded on the Australian Stock Exchange under the trading code "MGL".

2. GLOSSARY OF ENTITIES REFERRED TO IN THIS REPORT

Formal Name of Entity	Description of Entity	Referred to As
Magontec Limited	The ultimate parent/holding company of the Group	Parent Company, the
		Company or "MGL"
Advanced Magnesium Limited	Former name of Magontec Limited	Advanced Magnesium Limited
Advanced Magnesium Technologies Pty	Wholly owned subsidiary of MGL that acts as the administrative operating entity.	Advanced Magnesium
Limited		Technologies Pty Limited
Henan Keweier Alloy Materials Co Ltd	Joint venture entity in Henan Province China in which the Company had a 53% interest.	HNKWE
	Disposal of that interest was approved by shareholders at the 2013 Annual General Meeting
	held on 17 May 2013.
KWE(HK) Investment Development Co	Substantial shareholder in Magontec Limited. Mr Zhong Jun Li a director of Magontec	KWE(HK)
Ltd	Limited is also a director and substantial shareholder of KWE(HK) Investment Development
	Co Ltd. It is via this entity that Magontec Limited had made a loan to HNKWE (repaid in
	2013).
Varomet Holdings Limited	The holding company that owns the Group's operating businesses at Bottrop (Germany),	VHL
	Xian (PRC) and Suzhou (PRC). In turn, Magontec Limited owns all of the ordinary shares
	issued by Varomet Holdings Limited.
Straits Mine Management Pty Limited	The company from which Magontec Limited acquired the Magontec group of companies on 4	SMM
	July 2011.
	The purchase was made using a combination of shares valued at $2,227,454 and a
	Convertible Loan Note No.1 having a face value of $3,368,047.
	At the time of the purchase, Varomet Holdings Limited owed certain monies to SMM.
	Upon restructure of this debt (announced on 8 June 2012) $5,115,152 was forgiven, and
	Convertible Loan Note No. 2 issued having a face value of $3,500,000 leaving a residual
	debt owing of $2,100,046.
	Convertible Loan Notes Nos. 1 and 2 and the residual debt owing to SMM of $2,100,046
	were the subject of the debt restructure announced on 25 November 2013.
Qinghai Salt Lake Magnesium Co.	A wholly owned subsidiary of Qinghai Salt Lake Industries Co. Limited (a company listed on	QSLM
Limited	the Shenzhen Securities Exchange) and a shareholder in MGL to the extent of 29.64% at the
	date of this report.
Magontec Xian Co Ltd.	The wholly owned entity that owns the Group's operations in Xian, PRC	MAX
Magontec GmbH	The wholly owned entity that owns the Group's operations in Bottrop, Germany	MAB
Magontec SuZhou Co Ltd	The wholly owned entity that owns the Group's operations in Suzhou, PRC	MAS
Magontec Shanxi Company Limted	The joint venture operations in Jishan, Shanxi province PRC	MAY
Magontec SRL	The wholly owned entity that owns the Group's operations in Santana, Romania	MAR
Magontec Qinghai Co. Ltd.	The wholly owned entity that owns the Group's operations in Qinghai, PRC	MAQ

2. ROUNDING ERRORS

The tables in this report may indicate apparent errors to the extent of one unit (being $1,000) in -

the addition of items comprising total and sub totals; and
the comparative balances of items from the financial accounts for the period ended 31 December 2012.

Such differences arise from the process of -

converting foreign currency amounts to two decimals in AUD; and
subsequent rounding of the AUD amounts to one thousand dollars.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 1

EXECUTIVE CHAIRMAN’S REPORT

Summary

In the 30 months since the acquisition of the Magontec assets, management has been focussed on developing a robust operating base and a sound financial footing upon which the Company can go forward. 2013 has been a year of significant and positive progress on both fronts.

In 2012 a restructuring program was outlined to shareholders that included relocation and rationalisation of operating assets in Europe and China and an ambitious re-financing program to fund capacity expansion in China and margin improvement across our business.

In 2013 the Company has achieved its short-term goals in establishing two profitable new operating businesses in Romania (Mg Alloy recycling and Mg anode manufacturing) and raising sufficient capital to fund its expansion plans in Qinghai Province, PRC.

Over the same period management has significantly improved the competitiveness of the German Mg recycling operation and continues to benefit from robust demand for titanium anodes in targeted markets. In China we have relocated the Mg anode manufacturing operation to our Xian site and moved the focus of our primary Mg alloy manufacturing from Xian to Jishan in Shanxi Province.

The 2013 financial result includes a number of expensed “one-off” costs associated with relocating equipment as well as ramping up production. This particularly applies to the European Mg anode business now located in Santana, Romania. In the second quarter of 2013 production machinery was re-located from Germany and installed at Santana. In the third and fourth quarters new employees were engaged and trained.

In China domestic primary Mg alloy sales have been relatively robust however export sales from China to Europe and North America have again encountered very strong price discounting from Chinese competitors. Magontec’s Chinese Mg anode business has also experienced price discounting and lost a significant order in the first quarter of 2013.

Despite these circumstances both Chinese businesses managed to show an improvement year on year at the gross profit line, largely a result of management efforts to reduce costs. Through 2014 the PRC team will be upgrading anode manufacturing equipment in Xian and by the second half of the year will have the benefit of a more competitive Mg anode manufacturing facility to chase lost and new volumes.

The critical challenge for the Chinese primary Mg alloy team will be to further reduce production costs at the Jishan facility. While the facility has significant production capacity and is situated adjacent to a regular and predictable supply of pure magnesium, the need for regular minor repairs has caused periods of downtime through 2013. In March and April of this year there will be a major equipment upgrade to address these reliability issues and improve safety.

The markets for magnesium alloy products remain extremely competitive. Magontec’s results in 2013 reflect both this high level of price competitiveness and the costs of repositioning the Company to improve margins in the future. The most significant element of Magontec’s expansion and margin improvement strategy is a USD11 million investment in a magnesium alloy cast house at Golmud in Qinghai Province, PRC. This will provide the Company with access to high volumes of raw material for Mg alloying activities and is also likely to increase volumes of scrap Mg material for recycling at Magontec plants in China, Germany and Romania.

Importantly, the commencement of production at the Qinghai cast house is expected to enable Magontec to address its underperforming PRC primary Mg alloy manufacturing activities, in particular its competitiveness in international markets.

2013 Financial Report

This Annual Report is the first full 12-month reporting period since the change from a 30 June reporting date to 31 December. The Profit & Loss table included in this Annual Report shows (as required by Accounting Standards) the comparison between the six months to 31 December 2012 and the 12 months to 31 December 2013. So that shareholders can understand the true nature of the changes to the Profit & Loss we have included in this commentary a comparison between the 12-month periods to 31 December for both 2012 and 2013.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

	31-Dec-13 31-Dec-12 % Change(1)
Sale of goods Cost of sales	$'000 $'000 128,631 125,288 3% (118,773) (118,056) (1%)
Gross profit	9,858 7,232 36%
Other Income Interest Expense Impairment of inventory, receivables & other financial assets Travel accommodation and meals Research, development, licensing and patent costs Promotional activity Information technology Personnel Depreciation & Amortisation Office Expenses Corporate Foreign exchange gain/(loss) Other operating costs	1,086 6,592 (84%) (973) (2,912) 67% (459) (4,079) 89% (645) (705) 8% (551) (564) 2% (62) (106) 41% (395) 0 (4,732) (5,917) 20% (1,717) (1,480) (16%) (249) (556) 55% (2,622) (3,192) 18% 2,252 (319) 0
Profit/(Loss) before income tax expense from continuing operations	792 (6,004)
Income tax (expense)/benefit	(25) 1,492
Profit/(Loss) after income tax benefit from continuing operations	767 (4,512)

Note 1. Black = Positive effect on Profit: Red = Negative effect on Profit

The 2012 figures include consolidation of 100% of the HNKWE profit and loss account for the 6 months to 30 June 2012 from which date consolidation of HNKWE ceased. Whilst this means that the configuration of the business during 2012 is different to that prevailing through 2013, the comparison is nonetheless valid because it highlights the reasons for the strategic initiatives implemented over the past 18 months.

The year-on-year comparison shows a 36% improvement in Gross Profit and the impact of management efforts to rein in costs despite a very busy schedule. Interest costs have reduced by 67%, reflecting the impact of capital raised in 2012 and the cancellation of repayments to Straits Resources following the debt renegotiation, and personnel costs fell by over $1.5 million as the high restructuring costs of 2012 fell away in 2013.

Shareholders will be disappointed to see that the operating profit (after excluding foreign exchange gains) was another negative figure. This is principally the result of low profitability in Magontec’s largest business, the manufacture and global trade in primary magnesium alloys. In this report there is significant comment on primary alloys and the strategy that the Company has adopted to address the problem.

Nonetheless there has been a sharp improvement in underlying operating profit after the effects of foreign exchange movements and one-off costs, largely associated with relocating the European anode business. Our expectation is that this will improve in 2014 as the one-off costs decline and the newly established businesses begin to generate cash and net profit contribution.

==> picture [388 x 194] intentionally omitted <==

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

After excluding from the reported net profit after tax (the left hand bar in the chart above) unrealised foreign exchange gains and depeciation, the approximate implied cash generated in the business is $257,000. To this figure we have added certain one-off costs netted off against other noncash items to provide an approximate measure of the underlying net cash generated in the year. On this basis, just under $500,000 of cash has been generated from activity on revenue account. We analyse the accounts in this fashion because all of our activities are offshore, in China, Germany and Romania. Every year we are likely to have a sizeable foreign exchange impact.

The Comprehensive Income shows the full impact of foreign exchange effects on the Magontec balance sheet. As the Australian Dollar has struggled to maintain the levels of 2012 the benefits of an offshore investment are more evident. Over the last 12 months the Australian Dollar has declined by 16.5% against the Chinese Yuan and by nearly 17% against the Euro, dramatically improving the A$ carrying value of Magontec’s offshore assets.

While these gains represent real value and display the benefits of investing offshore they can obscure the actual performance of the operating businesses.

Over the last 18 months there has been a very substantial change in Magontec’s financial circumstances. In late 2012 the company had high levels of debt and was loss making in many of its operations. In November 2012 the Company announced a rights issue to raise $11 million through the issue of 220.5 million shares at 5c with two free attaching options (441 million). The options were exercisable on 3 January 2014 and raised a further $6.57 million. The cost of the capital raising associated with the rights issue and option exercise was just 0.6% of funds raised.

Over the period since July 2012 the Company successfully renegotiated its debt obligations to Straits Resources, the vendor of Varomet Holdings (the holding company for the Magontec assets), including debt forgiveness of $5m in December 2012, debt repayment of $4.1m ($2m in December 2012 and $2.1m in January 2013) and conversion of Convertible Loan Notes with a Face Value of $6.898m into equity.

As at 3 January 2014 the Company has no outstanding options or capital instruments other than fully paid ordinary shares. Magontec has reduced its net debt to equity level at 3 January 2014 (after the conversion of listed options) to 14.07% and has sufficient cash and undrawn facilities to fund its USD11m investment obligation in the Qinghai magnesium alloy cast house (refer NOTE 24b).

==> picture [347 x 154] intentionally omitted <==

As we move into a more profitable phase, Magontec finds itself in a position to make minor investments in its businesses and management information systems to further improve competitiveness. The Company has also looked at the potential for small add-on acquisitions to entrench strong market positions around the world and continues to invest in new technologies and product development to raise margins and returns.

OPERATIONS

Production (‘000 metric	tonnes)
	CY 2012 CY 2013
Asia Mg alloy	27.0 mt 26.6 mt
Europe Mg alloy	10.5 mt 12.9 mt
Global Mg anodes	1.7 mt 1.4 mt
Total	39.2 mt 40.9 mt

Europe

Magontec operates two businesses in Europe; the manufacture of Cathodic Corrosion Protection (CCP) products (magnesium and titanium anodes) for supply to the water heater industry and the recycling of magnesium alloys. The company now operates these businesses on two sites at Bottrop in Germany and at Santana in Romania. The German subsidiary also sells magnesium alloys manufactured by Magontec’s Chinese subsidiary into Europe and North America from Bottrop.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

==> picture [347 x 173] intentionally omitted <==

Over the last 12 months, the Romanian business has been the location of considerable activity. In the period under review monthly magnesium alloy recycling volumes have grown from 127 metric tonnes (mt) a month to full capacity at over 330 mt a month. Throughout this early phase management has focussed on production efficiency and providing new employees with the skills and expertise to operate a magnesium recycling facility. In this start-up period there has been only one minor lost-time injury.

As the European die casting customer base establishes increasing capacity in the Eastern Europe region the opportunity for Magontec Romania to investigate new capacity becomes very compelling. This business has improved from a small loss at the gross profit line in 2012 to become a strong contributor to overall Group profitability.

Having successfully established the recycling operation in late 2012 the focus of attention in 2013 shifted to the relocation of existing magnesium CCP manufacturing assets from Germany to Romania, the engagement and training of new employees in our Romanian factory and the commencement of production.

The logistics required to successfully execute this transfer included building a significant stockpile of product in Germany in the six months to 30 June 2013, negotiating redundancy packages with German employees and relocating staff from Germany to Romania for training purposes. The costs of this exercise, around A$659,000, have been fully expensed through 2013 and the overall European CCP business generated a much-improved gross profit in the period.

Looking forward we expect to see further improvements in productivity and volumes in Romania as our European CCP sales and marketing teams offer a more competitive product. The quality of Magontec CCP products is extremely well regarded and it is gratifying to see new contracts being won in Europe and the Middle East in competition against Chinese and other Eastern European suppliers on the basis of both price and quality.

==> picture [53 x 69] intentionally omitted <==

The Bottrop site in Germany remains a very significant magnesium alloy recycling centre, the head office for all of our European and North American operations including sales, marketing and administration, as well as the location of Magontec’s very successful titanium anodes business.

Over the last 12 months there has been a considerable focus on streamlining production processes to cut costs and increase competitiveness. While Magontec is the largest magnesium alloy recycler in Europe it has suffered in recent years from competitive pressures, an excessive inventory overhang and some outmoded work practices. This resulted in a significant loss at the EBIT level in 2012.

In 2013 Bottrop management and staff have led an impressive turnaround in profitability that we expect to continue into 2014. The Bottrop team have been able to extract substantial productivity improvements from installed capacity, increasing the volume of output and significantly reducing unit costs.

In Germany and Romania Magontec have two highly competitive magnesium alloy recycling operations that are now well positioned to increase volumes when production from the Company’s new Qinghai cast house comes on stream.

==> picture [53 x 57] intentionally omitted <==

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

The remaining CCP activity in Germany is the titanium anode business. This is a highly specialised product targeted at sophisticated water heater manufacturers. The market for these products is growing, as water heater efficiency and water quality become increasingly important factors for the consumer. Manufacturers who use this product typically incorporate pumps and sophisticated measurement devices and are looking for greater longevity for these “high-end” products.

Magontec European market share in the magnesium alloy recycling business, following the commencement of the Romanian business has risen from 28% to around 45%. Conversely Magontec’s primary magnesium alloy market share (alloys traded into Europe from Magontec’s Chinese factories) has fallen in the same period. In the anode business Magontec has a market share in Europe and the Middle East of around 29% successfully competing against a large group of Chinese importers (about 30% market share) and other European competitors.

Europe Outlook

Over the next 12 months the European business has a very full schedule. Following on from the successful introduction of process changes in 2013 the management team has presented proposals for further upgrades and efficiency measures for recycling processes and technology in Germany and Romania.

Our German business will begin to receive the first shipments of Magontec’s proprietary high-temperature magnesium alloy, AE44-2, for scrap recycling as another major European OEM begins to manufacture modest volumes of an important new application in the automotive sector. The primary AE44-2 alloy will be shipped from Magontec’s specialty metals centre in Xian. Three OEMs are now requesting supply of AE44-2 for new projects to be rolled out over the next six years and our sales team expects other OEMs and Tier One companies to look closely at this product.

In Romania there are also opportunities for growth as Magontec’s key customer base relocates to the eastern European region. Recycling is a highly regional business and sensitive to logistical costs. Having made the investment in Romania with a single furnace in 2012 Magontec is now operating at full capacity and supplying an increasing number of customers. In the early part of 2014 the Company will examine the opportunity to increase capacity.

The outlook is also positive for the European anode businesses. The traditional magnesium anode business, now established on a more competitive footing, will seek to open up wholesale markets and other distribution channels, initially in the German-speaking markets but in future in other European markets.

While growing markets and making businesses more competitive is the focus of most management attention, understanding and addressing threats from regulatory change can often be a more complex challenge. Magontec’s titanium anode business was faced with a major challenge when a critical component was banned from use in the water heater industry. The ban, due to come into effect in 2014, required the Magontec R&D team at Bottrop to find and test a new material, submit the material to the European authorities for their approval and find a supplier to manufacture the new component. The completion of this extremely complex and important task will ensure that the titanium anode remains a strong contributor to Magontec profits in 2014 and beyond and underlines the importance and competence of our research teams.

Asia

Magontec operates three businesses in China located in Xian (Shaanxi), Jishan (Shanxi) and Suzhou (Jiangsu) producing magnesium anodes and specialist magnesium alloys, primary magnesium alloys and recycled magnesium alloys respectively.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

China remains the centre of the magnesium world producing around 82% of total world production of pure magnesium. It is not possible to be in the volume magnesium alloy manufacturing and recycling business without having a competent and comprehensive presence in this market. Today Magontec remains one of the top three producers in China and the largest exporter of magnesium alloys. Notwithstanding the benefits of being a leading company in this sector over the last 12 years, China continues to present both challenges and opportunities.

As we have described at length over the last few quarters, the absence of robust regulatory and tax oversight allows many local competitors to export magnesium alloy ingots under different cost structures. This was our major challenge in 2012 and 2013 and appears likely to continue to challenge us in 2014. There is no simple short-term solution except to continue to reduce costs and market the benefits of a large, competent and transparent manufacturer to our customers. However, price is the first determinant in most businesses and certainly the key consideration among our biggest consumer group, the global automotive industry.

As Magontec suffers a regulatory disadvantage to Chinese-owned magnesium alloy manufacturers we have chosen to deal with this issue by addressing the source of our primary Mg alloy material and the structure of our Chinese business. We currently operate from a low cost-base manufacturing facility and manage that asset with Magontec staff and operating procedures; we are developing a new long-term high-volume manufacturing facility that will be owned and controlled by Magontec; we have closed 2 casting lines in our highcost Xian alloy plant (maintaining capacity for specialist alloys and some customers). We have entered into a commercial partnership with Qinghai Salt Lake Magnesium Co Ltd (QSLM) who is constructing the World’s largest pure magnesium manufacturing smelter. QSLM have invested $11 million into Magontec since August 2012 and are currently our largest shareholder with a 29.64% equity stake in the Company as at the date of this report.

While we have reduced our alloy manufacturing cost base over the last 12 months by more than 9%, this has been insufficient to date to entirely bridge the gap between our price and the price of our competitors in export markets. Nonetheless we maintain a high market share in this market segment. In the domestic markets, where the regulatory disadvantage is not so evident, our sales have been strong and we have enjoyed the benefits of growing demand for magnesium alloys in electronics and automotive products manufactured in China.

In the electronics industry scrap rates of up to 70% are not unusual while automotive scrap rates are about 40% of the original material. Projected growth in the market for smart phones and tablets augurs well for both primary Mg alloy sales and recycling contracts as does the growing presence and success of European and Japanese automotive manufacturers in China.

A key issue for our Chinese business has been the operational efficiency of our major primary magnesium alloy foundry at Jishan. There have been periods of disruption in the last 12 months requiring us to invest in new furnaces and machinery to raise productivity. As the new manager of this facility Magontec has also spent time training staff to ensure that working conditions and operating procedures are safe and properly adhered to. As I have discussed in previous Shareholder Notes, the Board and management of Magontec takes the safety of its employees very seriously.

Over the last 12 months there were two accidents in our major Chinese primary Mg alloy plant that resulted in the hospitalisation of an employee. I am pleased to say that both employees will make a full recovery and return to work. The causes of the accidents were the result of faulty operating procedures in one instance and a machinery fault in the other. Management in China have been very focussed on this issue and have worked under difficult conditions to achieve a safe operating environment.

While Magontec’s Chinese primary magnesium alloy business is working its way through the difficult issues discussed above, the Mg alloy recycling operation, based at Suzhou on China’s east coast, continues to operate at full capacity. Recycling is an integral part of the magnesium alloy industry and the development of new magnesium markets in China provides industry participants with opportunities to develop new recycling operations.

Magontec is already a major magnesium alloy recycler in China but to maintain our strong position in the Chinese domestic primary Mg alloy market it is important that we continue to grow our recycling capacity. Most Chinese customers bundle primary Mg alloy supply and scrap recycling into a single contract. The growth of magnesium alloy consumption in China is producing greater demand for scrap recycling. In 2014 we expect to see new recycling plants emerge in southern China, currently a source of scrap for our Suzhou plant.

In Asia, Magontec holds around 20% of the primary and recycled Mg alloy market share into the Chinese electronics industry and a smaller share into the automotive industry. Market shares into other Asian countries range between 15% and 100%.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

Our higher value-adding business in China, as in Europe, is the magnesium anode (CCP) business. Anodes are supplied to the water heater manufacturers and are designed to avoid corrosion within steel water storage tanks. Our Chinese business, based in Xian, has struggled to maintain its historical market share through 2013 and the loss of a major contract in January last year put this business unit under considerable pressure.

In late 2012 the operation was moved from a rented facility to our wholly owned factory in Xian, which helped to cushion the blow from the contract loss. Over the last 12 months our Chinese colleagues have worked hard to bring costs down through increased automation and other process efficiencies. Despite the sharp decline in volumes this business unit improved its gross profit through the period. Capital investment in automation over the last 12 months and changed work practices are expected to deliver further improvements in profitability in 2014, assisted in no small part by regaining a portion of the contracts lost in early 2013.

Asia Outlook

The outlook for Magontec’s primary magnesium alloy operations is very much bound up in the Qinghai Project, which is discussed below. Magontec already has a major investment in China in this industry and is about to make a further investment in Qinghai. It continues to be the leading exporter of magnesium alloys from China despite the issues discussed. In the last few months we have seen an increase in prices as the removal of the export tax has decreased the opportunity for tax avoidance among international traders, although margins remain very challenging.

==> picture [435 x 235] intentionally omitted <==

==> picture [497 x 58] intentionally omitted <==

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

The long-term and macro outlook for primary magnesium alloy sales in China and into international markets from China is very positive. Magnesium is a metal that experiences year on year growth in demand above GDP levels. CM Group, a leading industrial research house, estimate that the compound annual growth rate for pure magnesium over the next 9 years will be 7.2%, principally driven by magnesium alloys used in the automotive industry.

Qinghai Project

In June 2012 Magontec entered into a Cooperation Agreement with the Qinghai Salt Lake Magnesium Co Ltd (QSLM) based in Golmud, Qinghai Province, PRC. As a part of this agreement Magontec undertook to initiate a rights issue to raise capital to finance a magnesium alloy cast house to be sited adjacent to the Qinghai 100,000 metric tonnes per annum electrolytic pure magnesium smelter, under construction at Golmud.

For its part QSLM undertook to subscribe to the Magontec capital raising and to seek a 30% shareholding in Magontec. The rights issue and associated option exercise were completed in early January 2014 and QSLM is now Magontec’s largest shareholder holding just under the 30% threshold agreed to by shareholders and Australia’s Foreign Investment Review Board (FIRB) in November 2011.

Magontec and QSLM are now in the final stages of negotiating three agreements covering the lease of property in Qinghai, an operating agreement to assist the two parties to work together on the Qinghai site and an off-take price agreement that defines the price at which Magontec will acquire from QSLM liquid pure magnesium for its alloying cast house. The framework for these agreements was laid down in the Cooperation Agreement together with another key component of the agreement that commits QSLM to provide Magontec with exclusive access to liquid pure magnesium from the Qinghai electrolytic smelter.

The Qinghai project is now well underway. The electrolytic cell house has been constructed and most of the 68 electrolytic cells have been installed. The electricity transformer building is completed and connected to the grid that will deliver power from hydro and solar energy generators, making Qinghai the World’s lowest CO2 footprint magnesium producer. Still under construction at the close of 2013 were the brine purification unit, the dehydration plant and the cast house itself. While the cast house is a relatively simple construction task the dehydration unit is more complex.

QSLM have delivered a timetable to Magontec that indicates the commencement of equipment installation in the Qinghai cast house later this year and the production of initial quantities of magnesium alloy for delivery to Magontec customers by the end of 2014. This is an ambitious timetable and Magontec will provide regular updates to shareholders through the year on the progress of this important project.

Over the last 18 months Magontec has discussed the Qinghai project with its major customers in Europe and the US. The response has been extremely encouraging. The prospect of a new large volume supply of environmentally clean magnesium is a very positive prospect for OEMs and Tier 1 die casters.

Research and Development

Magontec has three R&D facilities, at Bottrop in Germany, at Xian in China and at Melbourne in Australia. The focus of each centre is slightly different.

The main research centre for the CCP (anode) business is in Bottrop where Magontec engages four scientists developing new products, re-engineering existing products and calibrating Magontec anodes and water heater dimensions to ensure the maximum efficiency in our customers’ products.

Over the last 12 months, in addition to its critical work on titanium anode parts, the anodes team has focussed on an area of increasing concern for water heater manufacturers and consumers the World over – the safety and purity of water stored in water heater containers. European legislation is becoming increasingly onerous on measures to combat waterborne diseases such as Legionella, demanding regular inspections and record keeping.

The development of new magnesium alloy products and technologies is of critical importance to Magontec. The magnesium alloy industry produces high volume but relatively low value-add products for automotive, power tool and electronics die cast manufacturers. Through technological development Magontec and its predecessor companies, Norsk Hydro, Advanced Magnesium and the CAST Cooperative Research Centre in Australia, have sought to develop proprietary higher value alloys.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

In 2013 Magontec, in partnership with RMIT, Monash University, The University of Queensland and two major European OEM’s, was awarded over $0.5M by the Australian Research Council to continue its world leading research into magnesium alloys over the next three years. The total investment into this program, including contributions from Magontec and the two OEMs, is expected to total around $1M. The direct involvement of OEM’s in Magontec’s alloy development programs is of crucial importance to ensure rapid commercialisation of these products.

During 2013-14 a new alloy product called MicroZir™, the result of previous Australian R&D investment, has been brought into production and initial customer responses have been very positive. This opens up a new product segment for Magontec in high performance applications.

Magnesium Markets

China remains the World’s largest manufacturer of pure magnesium contributing about 600,000 metric tonnes in 2012 or 82% of the total global supply. Production in the rest of world has steadily declined since 1990 although has been stable at around 100,000 metric tonnes over the last three years. It is expected that China will remain the World’s largest producer by some considerable margin for the foreseeable future. The Qinghai smelter from which Magontec will be the exclusive magnesium alloy supplier, will add 100,000 in 2014/2015 and expects to add up to another 350,000 metric tonnes at some time in the future.

==> picture [324 x 160] intentionally omitted <==

Productive capacity of pure magnesium in China is estimated by CMGroup to be around 30% greater than current demand (compared to more than 70% in aluminium and 80% in steel!). While many plants are registered as operable the growth of environmental oversight and the price of labour and energy makes some of these operators very marginal economic entities. The most competitive pure magnesium manufacturers are integrated with coke making companies. Coke production generates an off-gas that is effectively free to an associated industrial application. Magontec’s principal primary magnesium alloy plant is supplied with pure magnesium that uses offgas from an associated coke manufacturing plant and uses the same off-gas for its own alloying activities. In 2013 the decline in demand for Chinese steel saw a drop in coke demand and a reduction in off-gas. Sourcing energy from other supplies at these times can be expensive.

In January 2013 the Chinese Government dropped the 10% export tax on magnesium alloys as a part of its on-going efforts to promote magnesium consumption in international markets. There can be little doubt that China intends to maintain its position as the World’s leading magnesium producer and is every bit as focussed on transforming the pollution metrics of the industry. A recent study commissioned by the International Magnesium Association revealed that the average Chinese magnesium plant produces over 26 metric tonnes of CO2 for every tonne of magnesium produced. This compares with about 12 tonnes of CO2 for every tonne of aluminium. The cause of this high CO2 output is the high use of large quantities of coal in Pidgeon Process plants. This is an early 20th Century technology that uses high labour inputs in a country where labour costs are rising quickly. In Qinghai the new Magontec cast house will receive material that will have a CO2 footprint of around 7 tonnes of CO2 per tonne of magnesium produced.

The change in the export tax had an immediate impact on headline prices but little effect on margins or volumes. Through the year the price of pure magnesium has declined from ¥17,000 to around ¥15,500. The price of primary magnesium alloys in the domestic Chinese and international markets are theoretically benchmarked to this price although the price of alloys into international markets has generally been heavily discounted to the domestic Chinese price and the relationship between pure and alloy magnesium has not been so strong in recent years.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

Looking forward we expect the price of pure magnesium to continue to trade in the range of ¥15,000 to ¥17,000 impacted by seasonal events such as the autumn and spring holidays and the annual August shut down. As pure magnesium is often a by-product of coke manufacturing for the steel industry, prices for energy, a key cost of pure magnesium production, tend to reflect steel production volumes and associated coke and coal demand and prices.

==> picture [319 x 159] intentionally omitted <==

Magontec is a buyer of pure magnesium and not a producer and has a relatively low exposure to this volatility. In the longer-term we expect the volume from the Qinghai project to have a fundamental impact on pure magnesium pricing volatility, the structure of the downstream value-adding industry and the consistency and reliability of the magnesium product supply chain.

A second and longer-term influence on magnesium demand is the price of aluminium, also shown in the chart above. Magnesium and aluminium are often interchangeable in the medium-term for many typical automotive and electronics applications. If the price of one metal remains at a significant premium to the other for a prolonged period then die casters are able to switch to the cheaper metal. Die casters require on average 20% more aluminium to make the same volume of parts as can be made from an equivalent volume of magnesium, so at current prices magnesium remains competitively priced.

Health, Safety and Employees

Magontec is a significant employer in Europe and China. Over the period to 31 December 2013 there was a decrease in employee numbers in Germany reflecting the transfer of some businesses to Romania. There was also a sharp decline in employees in Xian as the primary alloy manufacturing activities were wound down in that city.

==> picture [47 x 136] intentionally omitted <==

Employees
	Total as at 31 Males as at Total as at Females as
	31 Dec 2013 31 Dec 2013 at 31 Dec 2013	Dec 2012
Bottrop, Germany	74 10 84	100
Santana, Romania	57 5 62	62
Suzhou, PRC	61 6 67	67
Jishan, PRC	96 33 129	117
Xian, PRC	105 19 124	124
Sydney, Australia (HO)	2 1 3	3
Total	395 74 469	473

Employees in all of our factories are trained in safe work practices and the Board and Management monitor accidents and near misses on a monthly basis. As we have discussed earlier in this report there were two accidents in 2013 that caused injury to employees requiring hospital attention. In managing the safety of our workplaces we have to be mindful of equipment maintenance as well as employee training. The company consistently reviews its workplace safety practices and seeks to maintain the same high levels of safety for all employees in Asia and in Europe.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

EXECUTIVE CHAIRMAN’S REPORT (Cont…)

==> picture [358 x 175] intentionally omitted <==

Conclusion

Over the last 12 months we have witnessed the emergence of a much stronger group of businesses in Magontec. We have continued to invest in new equipment and restructuring to improve future performance and profitability. The restructuring of the European anode business alone cost the company $659,000.

The returns from the investment in the anode business will emerge through 2014 as the returns from the investment in the Romanian alloy business drove improved underlying profitability in 2013. Our employees have worked extremely hard to put changes in place across all of our businesses and they are to be congratulated on their success.

In China we have a year of extremely hard work ahead to install the new Qinghai cast house and bring it into production. This will require many trips to China by staff from Xian and Bottrop as well as from Sydney, bringing Magontec expertise to Qinghai to build a state of the art magnesium alloy cast house.

Over the last 18 months we have been able to put in place a strong financial platform for Magontec and to improve operational efficiencies in many of its businesses. The benefits flowing from the reconstruction of the Company in 2013 are expected to continue to create a profitable and growing business for shareholders in the years ahead.

Finally I would like to thank the Directors of Magontec for their contribution in 2013. The Board of Magontec is much changed from 12 months ago with the addition of two new non-executive directors. It is a measure of the quality of the strategic plan and its execution that Magontec is able to attract such an experienced and professional group of individuals to serve as Directors of the Company.

==> picture [87 x 49] intentionally omitted <==

NICHOLAS ANDREWS EXECUTIVE CHAIRMAN February 2014

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

CORPORATE GOVERNANCE STATEMENT

A summary of the Group’s main corporate governance practices, as well as any disclosures required by the Australian Securities Exchange’s second edition “Corporate Governance Principles” (as amended on 30 June 2010) is set out below.

Composition of the board

The Board reviews the mix of experience, expertise and other qualities of the Directors. In addition to its current skills base, the Board might seek new Directors with understanding of industrial marketing and manufacturing processes and other relevant skills. If a vacancy occurs on the Board, or if the size of the Board is to be increased, the Board will identify the experience, expertise and other qualities sought and identify appropriate candidates. The Remuneration and Appointments (REM) Committee considers these matters in concert with the Board.

There is no requirement in the Company’s Constitution or the Corporations Act that compels a director to retire upon reaching the age of seventy years.

Board responsibilities

The Directors are responsible for protecting the rights and interests of the Shareholders through the development of sound strategies, ensuring their implementation, and by the development of an integrated framework of controls over the Group’s resources, functions and assets and properly accounting for its liabilities.

The Board’s responsibilities include:

Steering strategic directions and establishing goals for management.
Monitoring performance against these goals and objectives.
Ensuring there are strong business controls and ethical standards of behaviour.
Appointing the Chief Executive Officer or equivalent, evaluating performance and determining the remuneration of the Chief Executive Officer and senior executives.
Ensuring the significant risks facing the business have been identified and appropriate and adequate control monitoring and reporting mechanisms are in place.
Ensuring there are policies and procedures for recruitment, training, remuneration and succession planning.
The Board has delegated responsibilities for day to day operation and administration of the Group to the Executive Chairman and key management personnel.
Consideration of reports from the Executive Chairman regarding management of material business risks.

The Board has received assurance from the Executive Chairman and Chief Financial Officer that the declaration provided in accordance with s295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

Gender Composition

Refer table in Executive Chairman's address at page 11 under the heading 'Health, Safety and Employees'.

Committees of the Board

The Board of MGL has established and continues to operate the following committees:

Finance, Audit and Compliance Committee (FAC) chaired by Mr Shaw with Messrs Kaye and Li as members; and
Remuneration and Appointments Committee (REM) chaired by Mr Kaye with Messrs Shaw and Li as members.

The committee terms of reference outline committee responsibilities and are available on request.

Membership and attendance at Board Committees is detailed in the Directors’ Report.

Independence of directors

It is important to have a Board of an effective composition, size and commitment to adequately discharge its responsibilities and duties. At the date of this report the Board comprises the Executive Chairman, three Non-Executive Directors and two Independent Directors. The Directors generally meet monthly and as required by special matters.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

CORPORATE GOVERNANCE STATEMENT (Cont….)

Internal controls framework and risk management

The Board is responsible for the overall business control framework, but recognises that cost-effective control systems will not necessarily preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated a business control framework designed to safeguard the Group’s assets and interests and to ensure the integrity of reporting. In addition, the Board constantly monitors the operational and financial aspects of the Group’s activities. Through the Finance and Audit Committee, the Board considers the recommendations and advice of external auditors and other external advisors on the operational and financial risks that face the Group.

The Business Control Framework identifies risk management as a key area which is subject to regular reporting to the Board. In addition, the Board investigates ways of enhancing existing risk management strategies, including appropriate segregation of duties, and the employment and training of suitably qualified and experienced personnel.

ASX Second Edition “Corporate Governance Principles and Recommendations” (as amended on 30 June 2010)

The following recommendations are made under the above guidelines.

Recommendation 2.2

The chair should be an independent director

Recommendation 3.2

Companies should establish a policy concerning (employment) diversity.

Recommendation 2.3

The roles of chair and chief executive officer should not be exercised by the same individual.

Recommendation 3.3

Disclose measurable objectives for achieving gender diversity.

Recommendation 2.4

The board should establish a nomination committee.

The board is highly cognisant of its fiduciary and corporate governance responsibilities to shareholders. MGL is a capital constrained company in the process of reworking its business strategy as it heads to its goal of building a profitable global magnesium products manufacturing and distribution business.

There is a small team of core executives whose primary tasks are the successful commercialisation of the Group’s proprietary technologies and intense management (including re-working) of the Group’s magnesium alloy production facilities within the constraint of limited funding. It is a management challenge quite different from the challenges confronting a large established business. The act of judiciously allocating funding to the prime business tasks and management practices is one that requires careful balance.

The current corporate governance practices have been undertaken only after due consideration of this balance.

Remuneration

The overall role of the Remuneration & Appointments Committee is to ensure that Group remuneration policies and practices are consistent with the Group’s goals and objectives. Written detailed terms of reference have been completed.

The remuneration of individual Directors and key management personnel is presented in the Directors’ Report and in NOTE 4 to the financial statements.

Independent professional advice

When Board members require advice, it is sought as advice for the full Board which will normally be arranged by the Executive Chairman at the request of the Board. Each member has unrestricted access to that advice and may suggest issues on which such advice should be sought.

However, if an individual Director requires separate advice concerning the proper performance of his or her duties in relation to the Group’s operations or undertakings then, with the prior approval of the Executive Chairman, that Director may seek that advice at the Company’s expense. A copy of the advice received by the Director must be made available to all members of the Board.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

CORPORATE GOVERNANCE STATEMENT (Cont….)

Performance assessment

The Board reviews Key Performance Indicators (KPIs) for the Executive Chairman and the Management Team set on an annual basis. These annual KPIs are mutually agreed by the employee and his/her supervisor. The KPIs reflect the employee’s ability to add value to the entity by ensuring productive gains such as increasing efficiencies, reduction in costs and increased profitability by maximising sales volumes and margins on sale revenues. Variable and long term incentives will only be paid if set objectives are achieved.

Non-Executive Directors do not receive any performance incentive payments.

External Auditor

The appointment of the external auditor, the audit fee, and any questions of resignation or dismissal are considered first by the FAC Committee. The FAC Committee then conveys its recommendation to the full Board. Our current external auditor was first appointed in 2008.

It is the policy of our auditor to rotate audit engagement partners conducting the audit on listed companies at least every five years. During the year ended 31 December 2013 the audit engagement partner at Camphin Boston, responsible for the Company's group audit, was altered.

Code of Conduct

As well as behaving according to the laws, rules and regulations of various governing bodies, MGL requires all Board members, employees and consultants to behave according to the general principles expressed in the next paragraph. The principles are founded in the core values of honesty, integrity and respect for people.

All directors, managers and staff are expected to act with the utmost integrity and objectivity, in their dealings with each other, competitors, suppliers, customers and the community, striving at all times to enhance the reputation and performance of the business. Every employee has a nominated supervisor to whom they may refer any issues arising from their employment.

The requirement to comply with these ethical standards is taken as a matter of course and is emphasised to all employees.

Continuous disclosure and shareholder communication

The Group has a written continuous disclosure policy.

The Company Secretary is responsible for communications with the Australian Securities Exchange (ASX), including compliance with the ASX continuous disclosure requirements. These responsibilities are specified in the Company Secretary’s written position description. The charter of the Finance, Audit and Compliance Committee also specifically includes the review of compliance with ASX and legal requirements.

Through regular shareholder communications such as the Annual Report, Half Year Report, Quarterly Cashflow Reports, and periodic ASX reports, the Board informs shareholders of significant developments affecting the Group. All company announcements are immediately posted on the company website. Shareholders are explicitly encouraged to attend general meetings in notices of meeting.

Dealing in shares

The Group has a formal share dealing policy for all employees, consultants and Directors. This policy reinforces the restrictions in the Corporations Act 2001 with respect to insider trading and use of price sensitive information. Under the terms of the policy applicable to Group staff, the Company's securities may only be sold or purchased outside the restricted period. The restricted period occurs during the following times:

Two weeks prior to a Board Meeting.
One month prior to the release of Half Year and Full Year Results to the ASX.
The period 3 weeks prior to the announcement of a capital raising by the Group to the date of allotment of shares under such capital raising.
One week prior to the release of Quarterly Cashflow Reports to the ASX.

If an individual needs to deal in the restricted period because of a special need they are required to contact the Company Secretary prior to entering into the transaction so that Management can determine whether the proposed dealing would be prohibited under the Corporations Act 2001.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT

The Directors of Magontec Limited submit herewith the Annual Financial Report of the Group for the twelve month period ended 31 December 2013. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

The names and particulars of the Directors of the Company at the date of signing this Report are:

MR NICHOLAS ANDREWS	Executive Chairman
BEc., MAICD.	Mr Andrews has held a variety of positions in the Australian financial sector. Mr Andrews has spent 10 years with a global
	investment bank in management and sales in London and Sydney, 11 years as an institutional equities investor in large and
	small cap securities in Australia and five years providing corporate advice to small cap companies before joining Magontec in
	2009.
MR KANG MIN XIE	Non-executive Director (appointed 29 November 2012)
	Mr Xie holds a Bachelor of Engineering (Mining) degree from Chongqing University. Mr Xie joined the Qinghai Salt Lake
	group of companies in 1984. Over the last 29 years he has held a variety of positions in the group including senior roles in the
	Technology and Development subsidiaries. In 2007 Mr Xie was appointed Deputy General Manager of the Qinghai Salt Lake
	Industry Co Ltd (QSLI) and Vice President in 2008. In 2009 Mr Xie became a Director of QSLI and in 2011 Chairman of the
	Qinghai Salt Lake Magnesium Co Ltd, an 89% owned subsidiary of QSLI and a
	29.64% shareholder in Magontec Limited as at the date of this report.
MR ZHONGJUN LI	Non-executive Director (re-appointed 29 November 2012)
	Member of the Remuneration & Appointments Committee
	Member of Finance, Audit & Compliance Committee
	Mr. Li graduated from Wuhan University of Technology. He worked in the auto industry (manufacturing design) for 10 years.
	For more than 10 years he has owned and operated a metal recycling business (with a focus on magnesium). His experience
	and knowledge of the China metals market and understanding of the business practices in China is an important adjunct to
	the Company to further its magnesium production and marketing endeavours in China.
MR ROBERT SHAW	Independent Director (re-appointed 22 November 2011)
BE,MBA, MPA, F.A.I.C.D., JP	Chairman of Finance, Audit & Compliance Committee
	Member of the Remuneration & Appointments Committee
	Mr Shaw has extensive experience in business management in both an Executive and Non-Executive capacity. He has
	specialist skills in finance and financial analysis, audit committees and corporate governance. He is a Non-Executive Director
	of Credit Corp (CCP) where he is Chairman of the Audit Committee.
MR ROBERT KAYE	Independent Director (appointed 16 July 2013)
LLB, LLM (Hons)	Chairman of Remuneration & Appointments Committee
	Member of the Remuneration & Appointments Committee
	Mr Kaye is a senior counsel in NSW who has given legal and strategic advice and acted for many public and private
	financial institutions and commercial enterprises. Mr Kaye is currently the Chairman of Paperlinx Limited.
MR ANDRE LABUSCHAGNE	Non-executive Director (Appointed 22 January 2014)
BComm	Mr Labuschagne is the Executive Chairman of Straits Resources Limited, a significant shareholder in Magontec.
	Mr Labuschagne is an experienced mining executive with a career spanning more than 20 years, primarily in the
	gold industry in various executive roles in South Africa, PNG, Fiji and Australia for a number of leading gold
	companies, including Emperor Gold Mines, DRD Gold and Anglo Gold Ashanti.
	Mr Labuschagne was previously Managing Director of ASX-listed gold company, Norton Gold Fields Limited.
	Straits Resources Limited is a substantial shareholder in Magontec Limited. As at the date of this report it owns 15.59% of the
	ordinary shares of MGL.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT

The names and particulars of the Directors who served during the year but who, at the date of signing this Report, no longer serve in the capacity of Director:

MR GUENTER FRANKE

Non-executive Director (appointed 3 August 2011 and resigned 16 July 2013)

Mr Franke formally retired from the position of Managing Director Magontec Limited on 28 February 2013. In the period from 1 July 2012 to 28 February 2013 he was on leave and did not occupy an executive position. Mr Franke has been an employee of Magontec (previously Norsk Hydro Magnesiumgesellschaft GmbH) since 1975. In 1996 Mr Franke was appointed to the role of Managing Director and held that position for 16 years prior to 30 June 2012.

Directors who held office during and since the end of the financial year were:

Mr Nicholas Andrews
Mr Kang Min Xie
Mr Zhongjun Li
Mr Robert Shaw
Mr Günter Franke- resigned 16 July 2013
Mr Robert Kaye - appointed 16 July 2013
Mr Andre Labuschagne - appointed 22 January 2014

Directorships of other listed companies

Directors who have held a Directorship position in another publicly listed company in the three years immediately before the end of the financial year is:

Mr Robert Shaw is a Non-Executive Director of Credit Corp Group Limited
Mr Robert Kaye is Chairman of Paperlinx Limited
Mr Andre Labuschagne is Executive Chairman of Straits Resources Limited

Company Secretary Mr JD Talbot B Bus (Acctg), CPA

Mr Talbot joined MGL in February 2008. Prior to 2008 he was engaged as a financial consultant in the corporate finance field. Prior to 2000 he was a senior executive with the Commonwealth Bank of Australia.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT (Cont….)

Principal activitie s

The principal activities of the consolidated entity during the course of the financial year consisted of:

Manufacturing and selling generic and specialist magnesium alloys for profit;
Manufacture and distribution of magnesium and titanium cathodic corrosion protection products (anodes);
Researching and developing new proprietary magnesium alloys and technologies;
Research and development of cathodic corrosion protection products (CCP); and
Creating markets for new magnesium alloys and technologies by supporting demonstration trials and programs for developing new applications.

Directors' meetings

The following table sets out the number of directors meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member).

Board Meetings	Committee Meetings Attended
Director Attended Held	FAC Held REM Held
• Mr Nicholas Andrews 9 9 • Mr Kang Min Xie 5 9 • Mr Zhongjun Li 9 9 • Mr Robert Shaw 9 9 • Mr Robert Kaye(3) 5 9 • Mr Andre Labuschagne(1) 9 • Mr Günter Franke(2) 5 9	1 2 1 3 2 2 3 2 3 3 2 2 3 3 1 2 2 3 2 3 2 3
1 Appointed 22 January 2014 2 Resigned 16 July 2013

3 Appointed 16 July 2013

Directors’ shareholdings

The following table sets out the relevant interest (direct and indirect) of each serving director in shares, debentures, and rights or options in shares or debentures of the Company or a related body corporate as at the date of this report.

Director	Security	Number of shares as at
	type	Date of this Report
• Mr Nicholas Andrews	Ordinary shares	18,993,502
• Mr Kang Min Xie
• Mr Zhongjun Li(1)	Ordinary shares	56,197,298
• Mr Robert Shaw	Ordinary shares	400,000
• Mr Robert Kaye
• Mr Andre Labuschagne
• Mr Günter Franke	Ordinaryshares	536,615

1 Refer NOTE 27 for further detail of holdings at 31 December 2013

REMUNERATION REPORT

This remuneration report for the year ended 31 December 2013 outlines the remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations.

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. Directors and executives who have a direct reporting responsibility to the Executive Chairman are deemed to be such individuals.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT (Cont….)

REMUNERATION REPORT (Cont…)

The remuneration report is presented under the following sections:

Individual key management personnel disclosures
Remuneration at a glance
Board oversight of remuneration
Non-executive director remuneration arrangements
Executive remuneration arrangements
Group performance and the link to remuneration
Executive contractual arrangements
Equity instruments disclosures

1. INDIVIDUAL KEY MANAGEMENT PERSONNEL (KMP) DISCLOSURES

Details of KMP are set out below and their remuneration detailed in the table on Page 21.

Key management personnel

(i) Directors as at 31 December 2013

Mr K Xie

Mr Z Li

Mr R Shaw

Mr R Kaye - appointed 16 July 2013

Mr Andre Labuschagne - appointed 22 January 2014

Mr G Franke - resigned 16 July 2013

(ii) Executives (Being the Executive Chairman and his direct reports)

Mr N Andrews - Executive Chairman

Mr Christoph Klein-Schmeink President Magontec Europe & North America

Mr Xunyou Tong President Magontec Asia

Mr J Talbot - Chief Financial Officer and Company Secretary

2. REMUNERATION AT A GLANCE

Remuneration strategy

The Group uses a combination of cash and non-cash mechanisms to remunerate KMP as a means of preserving its limited cash resources. At the Company’s 2011 Annual General Meeting shareholders approved a plan for the issue of shares to the executives of the Group.

3. BOARD OVERSIGHT OF REMUNERATION

Remuneration Committee

The remuneration committee is responsible for making recommendations to the board on the remuneration arrangements for non-executive directors (NEDs) and executives.

The remuneration committee assesses the appropriateness of the nature and amount of remuneration of NEDs and executives on a periodic basis by reference to relevant employment market conditions, with the overall objective of ensuring maximum benefit from the retention of its directors and executive team.

Remuneration approval process

The board approves the remuneration arrangements of the Executive Chairman and executives and all issue of options under the Employee Share Option Plan following recommendations from the remuneration committee.

Remuneration structure

The structure of NED and executive remuneration is a separate and distinct process.

4. NON-EXECUTIVE DIRECTOR REMUNERATION ARRANGEMENTS

Remuneration Policy and Structure

The remuneration of NEDs consists of directors’ fees. Options may only be issued to a Director pursuant to the Employee Share Option Plan if the issue complies with the requirements (if any) of the Corporations Act and the ASX Listing Rules.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT (Cont….)

REMUNERATION REPORT (Cont…)

The aggregate amount of Non-Executive Directors’ fees is approved by Shareholders and is currently limited to $600,000 per annum. Any increase must be approved by Shareholders. The Board decides how that aggregate or a lesser amount is divided between the Directors.

Within the constraint of the aggregate $600,000 fees approved by Shareholders for Non-Executive Directors (NEDs), the Board has set compensation at $35,000 per annum for each Non Executive Director (inclusive of any payments for superannuation).

5. EXECUTIVE REMUNERATION ARRANGEMENTS

The Board of Directors’ policy on remuneration is as follows:

When an executive or an employee is recruited, the Group’s aim is to reward its staff at market rates within the manufacturing technology industry as determined and in consultation with a remuneration specialist;
The individual’s package is flexible and can incorporate salary sacrifice components making the individual’s package tax effective;
The aim of the remuneration policy is to retain key employees and to align employee interests with Group performance and Shareholders’ interests;
An Employee Share Option Plan (ESOP) was established in October 2005 and modified at the 2010 AGM.
An Executive Securities Issue Plan (ESIP) was approved by shareholders at the 2011 AGM.

The ESOP & ESIP are utilised to

a. motivate key management personnel (KMP) to originate and innovate strategies for growth;
b. reward KMP for the satisfaction of positive strategic and financial outcomes; and
c. provide an adjunct to cash remuneration to preserve cash resources.

Staff remuneration has three components:

a. Base or fixed remuneration;
b. Variable (at risk) performance (there were no bonuses awarded under this criterion during the year); and
c. A long-term incentive in the form of options and/or share issues approved by shareholders.

Each KMP has a set of key performance indicators (KPIs) mutually agreed by the employee and the Executive Chairman/Board (as appropriate) on an annual basis. The KPIs reflect the employee’s ability to add value to the entity and increase shareholder wealth by such things as ensuring productive gains such as increasing efficiencies, reduction in costs and increased profitability by maximising sales volumes and margins on sale revenues. Variable and long term incentives will only be paid if set objectives are achieved.

Shares were issued to Mr Tong (and other non KMP executives) in the period ended 31 December 2013 in terms of the approval given by shareholders under resolution 8 of the 2011 Annual General Meeting.

Following the acquisition of the Magontec group of companies in July 2011, the Group entered into employment contracts with the Executive Chairman and the Chief Financial Officer. These employment contracts expire on 30 June 2014. Employment contracts for senior executives in Germany and China are conducted under local laws.

This Board Policy will be reviewed periodically by the Remuneration and Appointments Committee. Where appropriate, recommendations to the Board for variations will be made.

Structure

The Group’s limited resources mean that its remuneration structures must be simple. The arrangements therefore must balance ease of administration with appropriate reward. Any non-cash mechanisms are confined to shares and options. Complex remuneration packages involving after tax benefits are avoided. The issue of shares will be in terms of resolutions put to shareholders. Only a limited number of KMP are eligible for the issue of options under the Employee Share Option Plan (ESOP). Technical services tend to be required by the Group on an irregular basis. There is a reliable base of technical consultants on which the Group can call when the need arises. This avoids the cost of maintaining permanent resources.

The executive remuneration framework consisted of the following components:

fixed cash component;
non cash component; and
post-employment benefits (superannuation and certain social benefits for Chinese personnel).

Remuneration for KMP in the reporting period to 31 December 2013 is shown in the table below.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT (Cont….)

REMUNERATION REPORT (Cont…)

Key Management Personnel Remuneration 1-Jan-13 to 31-Dec-13

Salary &	Termination	Super & Other	Equity & Other Non Cash Benefits	Date Shares Issued	Total
Allowances	Payment	Statutory Benefits	Motor Vehicle &
			Other
			Shares Options Allowances
$	$	$	$ $ $		$
275,226	-	25,114	- - -	-	300,341

246,299	-	14,874	- - 25,774	-	286,947
236,605	-	12,551	17,025 - -	1-Jul-13	266,181
229,355	-	20,929	- - -	-	250,284
-	-	-	- - -	-	-
35,000	-	-	- - -	-	35,000
32,110	-	2,890	- - -	-	35,000
16,042	-	-	- - -	-	16,042
13,125	-	-	64,725 - -	-	77,850
1,083,762	-	76,358	81,750 - 25,774		1,267,644

Key management personnel are defined as Directors, the Executive Chairman and those who have a direct

reporting responsibility to the Executive Chairman

(1) Appointed 16 July 2013.
(2) Mr G Franke - appointed as Managing Director on 4 July 2011. Ceased to serve in this executive role on 30 June 2012 pending formal retirement on 28 February 2013. Resigned from position of Non Executive Director on 16 July 2013.

Fixed Cash Remuneration

Executive contracts of employment do not include any guaranteed base pay increases.

Value of Options Issued To Key Management Personnel

No options were issued to KMP during the current financial period.

Value of Options – Basis of Calculation

Under the Employee Share Option Plan approved on 4 October 2005, options allowing subscription of up to 5% of the issued share capital of MGL are available for issue to employees, with options over a further 5% of the issued share capital in the future based on performance.

The options granted to employees on 16 August 2010 vested on 16 February 2012 and expired 3 years from issue on 16 August 2013. As there are no options remaining unexercised at 31 December 2013 no valuation has been performed.

Notes 5 and 27 provide details of options awarded and vested.

6. GROUP PERFORMANCE AND THE LINK TO REMUNERATION

During the reporting period ended 31 December 2013 the focus of the Company’s management resources is descibed in the Executive Chairman's address. In summary, resources have been directed to the following high level tasks;

retructure and redirect manufacturing resources to improve production efficiencies;
manage Renounceable Rights issue including conversion of attaching listed options;
rationalise inventories;
planning for the installation of manufacturing plant and equipment at Golmud;
initial marketing of potential production output from the new Golmud plant;
monitoring manufacturing operations at all centres with a view to efficiency improvements; and
negotiating the groups debt position and working capital requirements among other financial imperatives.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT (Cont….) REMUNERATION REPORT (Cont…)

Rewards will be directed to those personnel who can directly or indirectly further the Group’s objectives of

cost efficiency;
market development; and
strategic development.

7. EXECUTIVE CONTRACTUAL ARRANGEMENTS

Remuneration arrangements for KMP whose employment is current as at 31 December 2013 are provided below.

Personnel
Position
Remuneration(1) Notice Period For Termination
Other Provisions
Mr N Andrews
Executive Chairman
$300,341
6 months’pay
Employee initiated – 6 months
$286,947
Employer initiated - 12 months
12 months’pay
Employee initiated – 12 months
Mr X Tong
$266,181
Employer initiated - 10 months
10 months’pay
Employee initiated – 10 months
Mr J Talbot
Chief Financial Officer
$250,284
6 months’pay
Eligible for participation in ESOP
Employee initiated – 6 months
Mr G Franke(3)
Chief Operating Officer
$77,850
Eligible for participation in ESIP
& ESOP(2)
Employer initiated – period to 30 June 2014
or as per contract
Eligible for participation in ESIP
& ESOP(2)
Eligible for participation in ESIP
& ESOP(2)
Mr C Klein-
Schmeink
Employer initiated – period to 30 June 2014
or as per contract
President Magontec
Europe & North America
Payment In Lieu
of Notice
President Magontec Asia

Notes

1. Total cost to the Group for the reporting period ended 31 December 2013.

2. ESIP = Executive Securities Issue Plan; ESOP = Employee Share Option Plan

3. Mr Franke retired from executive duties on 30 June 2012, departed from his executive role on 28 February 2013 and resigned as a Director on 16 July 2013.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT (Cont….)

Review of Statement of Profit and Loss and Other Comprehensive Income		SUMMARY CONSOLIDATED	SUMMARY CONSOLIDATED
		12 months to	6 months to
		31-Dec-13	30-Jun-12
		$'000	$'000
Sales revenue	2(a)	128,631	61,607
Cost of sales	2(b)	(118,773)	(58,431)
Gross profit		9,858	3,176
Other income	2(c)	1,086	5,469
Impairment of inventory, receivables & other financial assets		(459)	(686)
Interest expense		(973)	(1,223)
Foreign exchange gain/(loss)		2,252	(178)
Expenses		(10,973)	(5,703)
Profit/(Loss) before income tax expense from continuing operations		792	855
Income tax (expense)/benefit		(25)	92
Profit/(Loss) from continuing operations after income tax		767	947
Loss after income tax expense from discontinued operations		(10)	(7)
Profit/(Loss) after income tax expense		756	940
Other Comprehensive Income - that may later emerge in the Profit and Loss Statement
Net income/(expense) reflecting through Reserve accounts		2,871	(278)
Total Comprehensive Income		3,627	662
Total Comprehensive Income for the year is attributable to
Minority interests		-	4
Members of the parent entity		3,627	658

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT (cont….)

Review of Balance Sheet Assets Cash and cash equivalents Receivables Inventory Property, plant & equipment Prepayments and other Total Liabilities Trade and other Payables Bank/Institutional Loans Provisions Borrowings from/payables to related parties Owing to Straits Mine Management Pty Ltd Other Total Net Assets	CONSOLIDATED
	31-Dec 31-Dec
	2013 2012
	$'000 $'000

	7,375 13,540
	28,402 22,991
	24,466 25,727
	16,479 14,001
	6,058 5,429
	82,780 81,688

	17,358 19,804
	18,121 21,030
	10,007 9,529
	- 49
	3,104 10,968
	- -
	48,590 61,380

	34,190 20,308

Summary of Cashflow Opening Cash Balance Inflows Receipts from customers Interest received Movement in security deposits Bank Debt Net capital raised from issue of the Company's shares New equity in Magontec Shanxi Company Limited joint venture Outflows Payments to suppliers and employees Interest expense Taxation Movement in security deposits Net cash out on purchase/disposal of fixed assets Group Information Technology software Loans from/ (repayments to) related parties Bank Debt Principal reduction on debt owing to Straits Mine Management Pty Ltd Net Cash Inflows/ (Outflows) Closing Cash Balance	CONSOLIDATED
	12 months to 6 months to
	31-Dec-13 31-Dec-12
	$'000 $'000
	13,540 4,775

	124,428 62,917
	261 14
	- -
	- -
	4,498 10,721
	- 455

	(127,598) (59,681)
	(973) (610)
	(261) (71)
	- (11)
	(1,433) (1,589)
	(129) (27)
	(49) (140)
	(2,909) (2,324)
	(2,000) (890)

	(6,165) 8,765
	7,375 13,540

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

DIRECTORS' REPORT (Ccont….)

Dividends

The Directors have not recommended payment of a dividend and no dividends have been paid or declared since the end of the previous financial year.

Susequent Events

Subsequent events are detailed in NOTE 31.

Future developments

Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations are likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report.

Non audit services

Camphin Boston (the Group's auditors) provided tax and other services during the financial year. Aggregate fees for non audit services paid in the financial year were $17,523.

Auditor’s independence declaration

The Auditor’s independence declaration is included on page 26 of the annual report

Indemnification of officers and auditors

The Group paid premia to insure certain officers of the Company and related bodies corporate in relation to performance of their duties as officers of the Company. The officers of the Group covered by this insurance include directors or secretaries of controlled entities.

The Company has not otherwise, during or since the financial year except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.

On behalf of the Board of Directors

==> picture [122 x 38] intentionally omitted <==

==> picture [255 x 80] intentionally omitted <==

MR N ANDREWS MR R SHAW EXECUTIVE CHAIRMAN NON-EXECUTIVE DIRECTOR

Signed on the 27 February 2014 in accordance with a resolution of the Directors made pursuant to Section 298(2) of the Corporations Act 2001.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

==> picture [142 x 29] intentionally omitted <==

AUDITOR’S INDEPENDENCE DECLARATION

The Board of Directors Magontec Limited Level 8, 139 Macquarie St Sydney NSW 2000

Dear Board Members

We hereby declare, that to the best of our knowledge and belief, during the financial year ended 31 December 2013 there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

Name of Firm:

Camphin Boston Chartered Accountants

Name of Partner:

==> picture [97 x 34] intentionally omitted <==

_____ Justin Woods

Address:

Sydney

Dated this 27[th] February 2014

==> picture [106 x 37] intentionally omitted <==

Level 9, 5 Elizabeth Street SYDNEY NSW 2000 GPO BOX 3403 SYDNEY NSW 2001 T (02) 9221 7022 F (02) 9221 7080 E [email protected]

W www.camphinboston.com.au ABN 69 688 697 499

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec-13

FINANCIAL REPORT FOR THE YEAR ENDED 31 December 2013

CONSOLIDATED STATEMENT OF PROFIT & LOSS and OTHER COMPREHENSIVE INCOME	CONSOLIDATED STATEMENT OF PROFIT & LOSS and OTHER COMPREHENSIVE INCOME	Page 28
CONSOLIDATED BALANCESHEET		Page 29
CONSOLIDATED STATEMENT OFCHANGES IN EQUITY		Page 30
CONSOLIDATED CASHFLOWSTATEMENT		Page 31
NOTESTO THE FINANCIAL STATEMENTS
Note	Contents
1	Summary of accounting policies	Page 32
2	Results from operations	Page 38
3	Income taxes	Page 40
4	Key management personnel remuneration	Page 42
5	Share based payment schemes	Page 43
6	Remuneration of auditors	Page 44
7	Current trade and other receivables	Page 45
8	Current inventories	Page 45
9	Other current assets	Page 45
10	Non-current trade and other receivables	Page 45
11	Other non-current financial assets	Page 46
12	Property, plant and equipment	Page 46
13	Intangibles	Page 47
14	Current trade and other payables	Page 47
15	Borrowings	Page 48
16	Current provisions	Page 48
17	Borrowings from/payables to related parties	Page 49
18	Non-current provisions	Page 49
19	Share capital	Page 50
20	Reserves	Page 51
21	Accumulated losses	Page 52
22	Earnings/(Loss) per share	Page 52
23	Contingent liabilities and contingent assets	Page 52
24	Capital and leasing commitments	Page 53
25	Controlled entities	Page 54
26	Segment information	Page 55
27	Related party disclosures	Page 56
28	Notes to the cash flow statement	Page 59
29	Financial instruments	Page 60
30	Parent entity information	Page 64
31	Subsequent events	Page 66
32	Additional company information	Page 66
DIRECTORS’DECLARATION		Page 67
AUDITREPORT		Page 68

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

CONSOLIDATED STATEMENT OF PROFIT & LOSS and OTHER COMPREHENSIVE INCOME

NOTE 12 months to 6 months to 31 Dec 2013 31 Dec 2012 $'000 $'000 Sale of goods 2(a) 128,631 61,607 Cost of sales 2(b) (118,773) (58,431) Gross profit 9,858 3,176 Other income 2(c) 1,086 5,469 Interest expense (973) (1,223) Impairment of inventory, receivables & other financial assets 2(d) (459) (686) Travel accommodation and meals (645) (281) Research, development, licensing and patent costs (551) (204) Promotional activity (62) (17) Information technology (395) - Personnel (4,732) (2,755) Depreciation & amortisation (1,717) (697) Office expenses (249) (274) Corporate (2,622) (1,473) Foreign exchange gain/(loss) 2,252 (178) Other operating costs - -	NOTE 12 months to 6 months to 31 Dec 2013 31 Dec 2012 $'000 $'000 Sale of goods 2(a) 128,631 61,607 Cost of sales 2(b) (118,773) (58,431) Gross profit 9,858 3,176 Other income 2(c) 1,086 5,469 Interest expense (973) (1,223) Impairment of inventory, receivables & other financial assets 2(d) (459) (686) Travel accommodation and meals (645) (281) Research, development, licensing and patent costs (551) (204) Promotional activity (62) (17) Information technology (395) - Personnel (4,732) (2,755) Depreciation & amortisation (1,717) (697) Office expenses (249) (274) Corporate (2,622) (1,473) Foreign exchange gain/(loss) 2,252 (178) Other operating costs - -
Profit/(Loss) before income tax expense/benefit from continuing operations 792 855
Income tax (expense)/benefit 3(a) (25) 92
Profit/(Loss) after income tax expense/benefit from continuing operations 767 947
Loss after income tax expense from discontinued operations 2(e) (10) (7)
Profit/(Loss) after income tax expense/benefit including discontinued operations 756 940
Other Comprehensive Income - that may later emerge in the Profit and Loss Statement Exchange differences taken to reserves in equity – translation of overseas entities 20 2,652 327 Other Comprehensive Income - that will not emerge in the Profit and Loss Statement Movement in various actuarial assessments 20 219 (605)
Total Comprehensive Income for the year	3,627 662
Profit/(Loss) after income tax expense for the year (incl discontinued operations) attributable to Minority interests - 2 Members of the parent entity 756 939 Total 756 940 Comprehensive Income for the year attributable to Minority interests - 4 Members of the parent entity 3,627 658 Total Comprehensive Income for the year 3,627 662 Profit/(Loss) per share: Profit/(Loss) after income tax expense for the year (Including Discontinued Operations) Members of the parent entity - Basic (cents per share) 22 0.115 0.221 Members of the parent entity - Diluted (cents per share)(1) 22 0.070 0.168 Profit/(Loss) after income tax expense for the year (Excluding Discontinued Operations) Members of the parent entity - Basic (cents per share) 22 0.116 0.222 Members of the parent entity - Diluted (cents per share)(1) 22 0.071 0.169 Notes
	- 2
	756 939
	756 940

	- 4
	3,627 658
	3,627 662

1. Calculated on basis of vested options being exercised - being 392,936,667 unexercised listed options and 21,251,263 unlisted options in Convertible Loan Note issued to SMM.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

BALANCE SHEET

BALANCE SHEET
	NOTE	CONSOLIDATED
		31-Dec	31-Dec
		2013	2012
		$'000	$'000
Current assets
Cash and cash equivalents	29(d)	7,375	13,540
Trade & other receivables	7	28,402	22,991
Future income tax benefit		-	-
Inventory	8	24,466	25,727
Other	9	773	125
Total current assets		61,017	62,382
Non-current assets
Other receivables	10	444	476
Other financial assets	11	-	-
Property, plant & equipment	12	16,479	14,001
Future income tax benefit	3(b)	1,586	1,642
Intangibles	13	3,255	3,186
Other		-	-
Total non-current assets		21,763	19,305
TOTAL ASSETS		82,781	81,687
Current liabilities
Trade & other payables	14	17,358	19,804
Borrowings	15	21,225	21,030
Borrowings from/payables to related parties	17	-	49
Provisions	16	1,692	2,704
Total current liabilities		40,275	43,586
Non-current liabilities
Other payables		-	-
Borrowings	15	-	-
Borrowings from/payables to related parties	17	-	-
Owing to Straits Mine Management Pty Ltd	15	-	10,968
Provisions	18	8,315	6,826
Other		-	-
Total non-current liabilities		8,315	17,794
TOTAL LIABILITIES		48,590	61,380
NET ASSETS		34,191	20,307
Equity attributable to members of MGL
Share capital	19	55,145	44,915
Reserves	20	5,853	2,955
Accumulated (losses)/profits	21	(27,268)	(28,023)
Equity attributable to minority interests
Share capital	19	463	456
Reserves	20	-	2
Accumulated (losses)/profits	21	(2)	2
Total equity		34,191	20,307

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

STATEMENT OF CHANGES IN EQUITY

Balance at 30-Jun-12 Profit/(Loss) attributable to members ofparent entity	Share Capital	$'000 Retained Earnings	$'000 Foreign Currency Translation Reserve	$'000 Capital Reserve	$'000 Actuarial Reserve	$'000 Expired Options Reserve	$'000 Minority Interests	$'000 Total Equity
	$'000 $'000 Options Valuation Ordinary
	33,810 25 - -	(28,962) 939	(506) -	2,750 -	(621) -	1,612 -	2 -	8,110 939
Profit/(Loss) attributable to minorityinterests	- -	-	-	-	-	-	2	2
Other	- -	-	-	-	-	-	-	-
Comprehensive income	- -	-	327	-	(605)	-	-	(278)
Issue of Shares	11,080 -	-	-	-	-	-	-	11,080
Minority share capital Balance at 31-Dec-12	- -	-	-	-	-	-	455	455
	44,890 25	(28,023)	(179)	2,750	(1,226)	1,612	458	20,307

Balance 1-Jan-13 Profit/(Loss) attributable to members ofparent entity	44,890 25	(28,023)	(179)	2,750	(1,226)	1,612	458	20,307
	- -	756	-	-	-	-	-	756
Profit/(Loss) attributable to minorityinterests	- -	-	-	-	-	-	-	-
Other	- -	(1)	-	-	-	-	4	2
Comprehensive income	- -	-	2,652	-	219	-	-	2,871
Expired Options	- (25)	-	-	-	-	25	-	-
Issue of shares	10,254 -	-	-	-	-	-	-	10,254
Minority share capital Balance 31-Dec-13	- -	-	-	-	-	-	-	-
	55,145 -	(27,268)	2,473	2,750	(1,007)	1,637	462	34,191

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

CASHFLOW STATEMENT FOR THE YEAR ENDED 31 December 2013

		CONSOLIDATED	CONSOLIDATED
		12 months to	6 months to
		31-Dec-13	31-Dec-12
		$'000	$'000
		Inflows/	Inflows/
		(Outflows)	(Outflows)
Cash flows from operating activities
Receipts from customers		124,428	62,917
Payments to suppliers and employees		(127,598)	(59,681)
Interest received		261	14
Interest expense		(973)	(610)
Taxation		(261)	(71)
Net cash (used)/generated in operating activities	28	(4,143)	2,569
Cash flows from investing activities
Movement in security deposits		-	(11)
Net cash out on purchase/disposal of fixed assets		(1,433)	(1,589)
Group Information Technology software		(129)	(27)
Other		-	-
Net cash provided by/(used in) investing activities		(1,563)	(1,627)
Cash flows from financing activities
Loans from/ (repayments to) related parties		(49)	(140)
Principal reduction on debt owing to Straits Mine Management Pty Ltd		(2,000)	(890)
Bank Debt		(2,909)	(2,324)
Net capital raised from issue of the Company's shares		4,498	10,721
New equity in Magontec Shanxi Company Limited joint venture		-	455
Net cash provided by financing activities		(460)	7,822
Net increase/(decrease) in cash and cash equivalents		(6,165)	8,765
Cash and cash equivalents at the beginning of the reporting period		13,540	4,775
Cash and cash equivalents at the end of the reporting period		7,375	13,540

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF ACCOUNTING POLICIES

Statement of Compliance

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

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

The audited accounts were authorised for issue by the Directors on 27 February 2014.

Change in financial year end date

Magontec Limited (MGL) changed its financial year end date from 30 June to 31 December as announced to the ASX on 18 May 2012. The change synchronised MGL’s financial reporting with that of its operating subsidiaries in China, Germany, Cyprus and Romania as well as facilitating the delivery of consistent reporting to shareholders and other stakeholders. The first reporting period of MGL under the new reporting date was in respect of the six months ended 31 December 2012. As such, the 2013 Profit and Loss covering a 12 month period is compared against the 2012 Profit and Loss covering a 6 month period.

Adoption of new and revised Accounting Standards

The Group has adopted all new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2013. The more significant changes and their impact are:

IFRS 10 Consolidated Financial Statements (2011)

IFRS 10 introduces a new control model that focuses on whether the Group has power over an investee, rights to variable returns from its investment with the investee and ability to affect those returns. Management have reviewed the classification of subsidiaries under these new requirements and no impact to the financial statements has resulted.

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

Items within Other Comprehensive Income have been classified between items that may subsequently be reclassified to profit & loss and those that will not be reclassified.

IAS 19 Employee Benefits (2011)

Net interest expense (income) on the net defined benefit liability (asset) is calculated for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. The method of calculating interest did not result in a material difference to the amounts recorded.

Basis of Preparation

The financial report has been prepared on an accruals basis and is based on historical cost, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

Going Concern

The financial report has been prepared on a going concern basis as the Directors do not believe there is any intention or necessity to close the current operations or cease trading within twelve months from the reporting date.

The factors considered by the Directors in making this assessment, included:

• the broad business base (including alloy production, sacrificial anodes and recycling) and reduced dependence on commercialisation of technologies;

• focus on resource allocation and redirection to improve production efficiencies; and

• development of the Company’s pivotal project in Qinghai Province PRC.

The Directors and management are unable to predict the Group's achievement of future outcomes with any degree of certainty.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF ACCOUNTING POLICIES (Cont…)

Significant Accounting Policies

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash in banks, at call and on deposit.

(b) Employee benefits

Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured at the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date.

Contributions by the Group to superannuation plans on behalf of Australian employees are expensed when incurred. Provision is made for any long term pension obligations the Group has to employees in foreign jurisdictions. The required amount of the provision is actuarially assessed having regard to such matters as future interest rates, the date at which pension payments might commence and the likely period over which pensions may be paid.

(c) Financial assets

Subsequent to initial recognition, investments in subsidiaries are measured at cost less any allowance for impairment.

Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Receivables

Trade receivables and other receivables are recognised initially at their fair values and subsequently at amortised cost less impairment.

(d) Financial instruments issued by the Company

Debt and equity instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.

Transaction costs on the issue of equity instruments

Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

==> picture [47 x 147] intentionally omitted <==

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 33

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF ACCOUNTING POLICIES (Cont…)

(e) Foreign currency

Foreign currency transactions

All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items are translated at the year end exchange rate. Non-monetary items measured at fair value are reported at the exchange rate prevailing at the date when the fair value was determined.

Exchange differences are recognised in profit or loss in the period in which they arise except that exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the net investment in a foreign operation, are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.

Foreign operations

On consolidation, the assets and liabilities of the consolidated entity’s overseas operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are recognised in the foreign currency translation reserve, and recognised in profit or loss on disposal of the foreign operation.

(f) Goods and Services Tax and Value Added Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) or value added tax (VAT) for certain foreign jurisdictions, except where the GST or VAT is not recoverable from the relevant tax authority. In these circumstances the GST or VAT is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.

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

(g) Impairment of assets

At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If any such indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated entity estimates the recoverable amount of the cashgenerating unit to which the asset belongs.

(h) Income tax

Current Tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability to the extent that it is unpaid.

Deferred Tax

Deferred tax assets and liabilities are ascertained based on temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period(s) when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/consolidated entity intends to settle its current tax assets and liabilities on a net basis.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF ACCOUNTING POLICIES (Cont…)

Current and Deferred Tax for the Period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

Tax Consolidation

The parent Company and all its wholly-owned Australian subsidiary are part of a tax-consolidated group under Australian tax consolidation legislation. Magontec Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the taxconsolidated group using the ‘stand-alone taxpayer’ approach. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group).

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in Note 3 to the financial statements. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

(i) Intangible assets

Patents, Trademarks and Licences Patents, trademarks and licences are recorded at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and impairment losses. Such intangibles are also subject to the impairment tests as outlined in (g) above.

Research and Development Costs

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

(j) Inventories

Inventories are measured at the lower of cost and net realisable value. Costs are assigned to inventory on hand by the method most appropriate to each particular class of inventory, being valued on a first in first out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

(k) Leases

Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

Lease incentives

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis over the life of the lease term.

(l) Non-current assets held for sale

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. The sale of the asset (or disposal group) is expected to be completed within one year from the date of classification.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF ACCOUNTING POLICIES (Cont…)

(m) Payables

Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services.

(n) Presentation currency

The presentation currency of the Group is Australian dollars.

(o) Principles of consolidation and investments in subsidiaries

The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 ‘Consolidated and Separate Financial Statements’. A list of subsidiaries appears in Note 25 to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Similarly, any excess of the fair market value over the cost of acquisition is recognised as a discount upon acquisition.

The consolidated financial statements include the information and results of each subsidiary from the date on which the company obtains control and until such time as the company ceases to control such entity.

In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full.

(p) Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

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

Depreciation is provided on plant and equipment and is calculated on a straight line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The assets’ estimated useful lives and residual values is reviewed, and adjusted if appropriate, at the end of each annual reporting period.

The weighted average useful life applied to plant and equipment is 15 years.

(q) Provisions

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

(r) Revenue recognition

Sale of goods

Revenue from the sale of goods is recognised when the consolidated entity has transferred to the buyer the significant risks and rewards of ownership of the goods.

Rendering of services

Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract.

Interest revenue

Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF ACCOUNTING POLICIES (Cont…)

(s) Share-based payments

Equity-settled share-based payments granted after 7 November 2002 that were unvested as of 1 July 2005, are measured at fair value at the date of grant. Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight- line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest. For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

(t) Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in this note, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both the current and future periods.

Material examples of management applying critical accounting judgements and key sources of estimation uncertainty include: • actuarial assessment of future pension liabilities;

value of trade debtors; and • valuation of intellectual property acquired with the Magontec group of companies in July 2011.

(u) New Accounting Standards for Application in Future Periods

The AASB has issued new and amended standards and interpretations that have mandatory application dates for future reporting periods. The Group has not early adopted any of these standards. New standards that will be significant to the Group in future years include:

AASB 9 Financial Instruments, effective from 1 Jan 2015

The new AASB 9 introduce new classification and measurement requirements for financial instruments. The significant impact to the group will be the classification of financial assets must be reassessed and they will either be measured at either amortised cost or fair value.

2011 – 4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements, effective 1 July 2013

Amendments were made to accounting standards to remove duplication of information regarding key management personnel in the related party note. This information will continue to be disclosed in the key management personnel remuneration report.

(v) Recognition of Cash Government Grant

A cash Government grant is recognised as revenue when irrevocably received.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2 RESULTS FROM OPERATIONS

(a) Sales Revenue – continuing operations: Alloys Anodes Other (b) Cost of Sales – continuing operations: Alloys Anodes Other (c) Other Income in Comprehensive Income Statement Interest revenue Prior year income Gain/(Loss) on disposal of fixed asset Gain on Debt Forgiveness(1) Reversal of accrued supplier invoices not submitted Non operating revenue Other(2)	CONSOLIDATED
	12 months to 6 months to
	31-Dec-13 31-Dec-12
	$'000 $'000

	108,710 51,672
	19,921 9,753
	- 182
	- -
	128,631 61,607


	(103,520) (51,426)
	(15,253) (7,404)
	- 399

	(118,773) (58,431)

	261 14
	40 -
	(67) -
	- 5,115
	297 -
	282 -
	274 340
	1,086 5,469

(1) Debt restructuring as announced to ASX on 29 October 2012

(2) In the 2012 Report the 'Other' figure was reported to be $303,538. The difference of $36,348 is a foreign exchange loss now appearing in the category 'Foreign exchange gain/(loss)'.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2 RESULTS FROM OPERATIONS(Cont….)

	CONSOLIDATED
12 months to 6 months to 31-Dec-13 31-Dec-12 (d) Significant expenses in Comprehensive Income Statement (not detailed elsewhere) $'000 $'000 Personnel Costs Consultancies (258) (191) Shares issued under Executive Share Plan (80) (106) Equity settled staff termination payment - (252) Others staff termination payments (271) (136) Director's fees (99) (35) Miscellaneous staff on-costs (7) (7) Others staff payments (3,912) (1,967) Other Costs Asset impairment expense(1) (459) (686) Interest to related party (2) - (510) Amended income tax returns (re withholding tax) 2008-2010 Magontec GmbH - (203) Note 1 - Asset impairment expense Write down of Trade Debtors (459) - Impairment of loan to KWE(HK) - (101) - (585) *Total* (459) (686) Note 2 - $500,000 of this expense relates to the gross up of Convertible Loan Note No. 2 associated with the Debt restructuring as announc 29 October 2012. Impairment of amount due from buyer of Group's interest in HNKWE (Refer to ASX announcement 10th May 2012)	12 months to 6 months to
	31-Dec-13 31-Dec-12
	$'000 $'000

	(258) (191)
	(80) (106)
	- (252)
	(271) (136)
	(99) (35)
	(7) (7)
	(3,912) (1,967)

	(459) (686)
	- (510)
	- (203)

	(459) -
	- (101)
	- (585)
	(459) (686)

Note 2 - $500,000 of this expense relates to the gross up of Convertible Loan Note No. 2 associated with the Debt restructuring as announced to ASX on 29 October 2012.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

(e) (Loss)/Profit after income tax expense from discontinued operations Gross profit Other income Promotional activity Travel accommodation and meals Research, development, licensing and patent costs Other operating costs Corporate Profit/(Loss) before income tax expense/benefit from discontinued operations Other Comprehensive Income - that may later emerge in the Profit and Loss Statement Exchange differences taken to reserves in equity – translation of overseas entities Total Comprehensive Income for the year	CONSOLIDATED
	12 months to 6 months to 31-Dec-13 31-Dec-12 $'000 $'000
	- - - - - - - - - - - (7) (10) -
	(10) (7)

	4 -
	(7) (7)

In the financial year 2010-11 operations at both AMT Europe GmbH and AMT North America Inc ceased. AMT North America Inc was officially dissolved on 18 May 2011 and an official resolution was passed on 30 June 2011 to dissolve AMT Europe GmbH with its provisional year of liquidiation ending on 9 September 2012.

NOTE 3 INCOME TAXES

The aggregate amount of income tax attributable to the financial year differs from the amount calculated on the profit.

(a) Income tax recognised in profit and loss Tax expense comprises: Current tax expense – Australian entities Tax reimbursement/ (payment) – foreign subsidiaries Total tax benefit/(expense) Attributable to: Continuing operations Discontinued operations Profit/(Loss) from continuing operations Profit/(Loss) from discontinued operations Profit/(Loss) from total operations Nominal Income tax benefit/(expense) calculated at 30% Nominal income tax benefit reduced by Tax reimbursement/ (payment) – foreign subsidiaries The prima facie income tax expense on pre-tax accounting profit/(loss) from operations reconciles to the income tax expense in the financial statements as follows: Permanent differences - Tax effect of income and expenses in P & L not being assessable or deductible for tax purposes. Timing differences - Tax effect of income and expenses in P & L being assessed or deducted for tax purposes at a different incidence Tax benefit/(expense) on recognition or reversal of deferred tax balances - foreign subsidiaries	CONSOLIDATED
	12 months to 6 months to 31-Dec-13 31-Dec-12 $'000 $'000

	- - 190 468

	(215) (376)
	(25) 92

	(25) 92 - -
	(25) 92

	792 855 (10) (7)
	781 849
	(234) (255)

	(476) (493) 685 839
	(25) 92

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS NOTE 3 INCOME TAXES (Cont….)

(b) Future Income tax benefit Current Non Current Total	31-Dec 31-Dec 2013 2012 $'000 $'000 CONSOLIDATED
	- - 1,586 1,642
	1,586 1,642

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable income under Australian tax law. There has been no change in the corporate tax rate when compared with the previous report.

Tax Consolidation

Relevance of tax consolidation to the consolidated entity

The parent Company and its wholly-owned Australian subsidiary have formed a tax-consolidated group with effect from 1 February 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Magontec Limited. The members of the tax-consolidated group are identified at Note 25.

Nature of tax funding arrangements and tax sharing agreements

Entities within the tax-consolidated group ensure that inter company transactions are conducted at fair market value and at arm’s length.

(c) Unrecognised deferred tax balances The following deferred tax assets have not been brought to account as assets: Deferred Tax Asset (DTA) on pre-tax consolidation revenue losses DTA on post-tax consolidation revenue losses DTA on capital losses These are based on the following tax losses: Tax losses – revenue pre-tax consolidation Tax losses – revenue post-tax consolidation Tax losses – capital	PARENT ENTITY CONSOLIDATED
	31-Dec 31-Dec 2013 2012 $'000 $'000
	81,581 81,581 35,792 35,766 29,019 29,019
	146,392 146,366
	271,936 271,936 112,052 113,235 96,731 96,731
	480,720 481,903

The benefit from the Australian deferred tax asset in respect of unused tax losses will only be obtained if:

(a) the tax consolidated group derives future Australian assessable income of a nature and amount sufficient to enable the benefits to be realised; (b ) the consolidated group continues to comply with the conditions for deductibility imposed by the tax law; and

(c) no changes in tax legislation adversely affect the consolidated group in realising the benefit of the losses.

No deferred tax asset has been brought to account as an asset because it is not probable that taxable profit will be available against which such an asset could be utilised.

Unused tax losses incurred after the formation of the former Advanced Magnesium Limited (the former name of Magontec Limited) consolidated group are $112,051,922. These losses will be fully available to offset future taxable income to the extent MGL continues to satisfy the loss integrity rules (i.e. Continuity of Ownership Test and Same Business Test).

Based on testing performed by MGL and its advisors, these losses should satisfy the loss integrity rules as at 31 December 2013.

Unused tax losses incurred prior to the formation of the former Advanced Magnesium Limited (the former name of Magontec Limited) consolidated group were $271,936,272. These losses will be subject to restricted use (Available Fraction rules).

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3 INCOME TAXES (Cont….)

These restrictions on use are in addition to the loss integrity rules. Broadly, the Available Fraction rules limit the amount of losses that can be used each year by applying the following formula:

Available Fraction x Taxable income for year = Pre consolidation losses available for use for year

Based on testing performed by MGL and its advisors, MGL’s pre consolidation losses should satisfy the loss integrity rules at 31 December 2013 subject to further testing and continued compliance with loss integrity rules. No detailed Available Fraction calculations have been performed as at 31 December 2013, however it is unlikely that the Available Fraction applying to pre-consolidation tax losses will be greater than 0.2.

The Australian tax consolidated entity has not paid income tax up to 31 December 2013 and neither is any assessment expected to be received which will result in a tax liability for the period to 31 December 2013. Accordingly, there are no franking credits available for distribution in the year ending 31 December 2013.

Tax outside of Australian tax consolidation regime

The Group has overseas entities which are not subject to Australian tax consolidation and are therefore not sheltered by Australian tax losses. Those entities may incur income tax based on local corporate tax law and are subject to the local jurisdiction.

NOTE 4

KEY MANAGEMENT PERSONNEL (KMP) REMUNERATION

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

Short term employee benefits Termination benefits Post-employment benefits Motor vehicle Equity based payment(1) Total Remuneration KMP	CONSOLIDATED
	12 months to 6 months to 31-Dec-13 31-Dec-12 $'000 $'000
	1,084 606 - - 76 561 26 25 82 312
	1,268 1,505

Note 1 - Shares issued under employee Retentions Rights Scheme approved by shareholders at 2011 AGM

Individual directors and executives compensation disclosures

Information regarding individual directors' and executives' compensation and some equity instruments disclosures as required by Corporations Regulations 2M.3.03 is provided in the remuneration report section of the directors’ report.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 5 SECURITY-BASED PAYMENT SCHEMES

a Employee Share Option Plan (ESOP)

On 4 October 2005 an ESOP was approved by shareholders. Options allowing subscription of up to 5% of the issued share capital of Magontec Limited are available for issue to employees, with options over a further 5% of the issued share capital in the future based on performance.

There were no options issued or exercised during the year.

At 31 December 2013 there were no options that remained unforfeited. All unforfeited and unexercised options expired on 16 August 2013.

The following table reconciles the outstanding share options granted under the ESOP at the beginning and end of the financial year.

Balance at beginning of the financial year 1,300,000 $0.100 Granted during the financial year - - Forfeited during the financial year (i) - - Exercised during the financial year (ii) - - Expired during the financial year (iii) (1,300,000) - Balance at end of the financial year (iv) - - Exercisable at end of the financial year (v) - - Dec 2013 Weighted average exercise price Number of options	Dec 2012 Weighted average exercise price Number of options
	1,300,000 $0.100 - - - - - - - -
	1,300,000 $0.100
	1,300,000 $0.100

(i) Forfeited during the financial year

Under the terms of the ESOP, employees leaving the MGL Group have 30 days from the date of termination to exercise their options holding (if any), or they are forfeited.

(ii) Exercised during the relevant financial year
(iii) Expired during the financial year

(iv) Balance at end of the financial year

All of the share options outstanding at 31Decmber 2012 had an exercise price of $0.10 and remaining

contractual life of 228 days

(v) Exercisable at end of the financial year

As at 31 December 2013, all options had expired unexercised.

b Executives' Securities Issue Plan (ESIP)

At the 2011 Annual General meeting of the Company held on 22 November 2011 and in terms of Resolution 8(a) shareholders approved a plan – referred to as the Executives Securities Issue Plan (ESIP) - for the issue of shares to Executives of the Company and its wholly owned subsidiaries. The ESIP provided for three components.

1. Short term rewards .

2. Retention rights scheme – a scheme designed to ensure the retention of five key executives within the Magontec group of companie supon its acquisition by the former Advanced Magnesium Limited. Retention Rights entitlements are equivalent to one-year’s salary (prevailing as at the date of the 2011 AGM) for each of these executives. Shares issued under this scheme are linked to the profitability of MGL over the next four years and will be priced at the 10-day VWAP of the Company’s shares in the period prior to the date of grant of each award as follows:

a minimum award of 10% was made on the day following the 2011 AGM;
dependent on profitability of the Company, additional awards will be made on each of 1 July 2012, 1 July 2013, and 1 July 2014 but in any 11xevent a minimum award of 10% of the total award will be made on each of these dates; and
any residual Retention Rights outstanding on 1 July 2015 will be awarded on that date.

3. Long term incentive scheme.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 5 SECURITY-BASED PAYMENT SCHEMES (Cont…)

Eligible Participants in Executives' Securities Issue Plan	Eligible Participants in Executives' Securities Issue Plan
Potential Participants	Position In Company	Eligibility	Eligibility	Eligibility
		2011	2012	2013
Nicholas William Andrews	Executive Chairman	Eligible	Eligible	Eligible
John David Talbot	CFO and Company Secretary	Eligible	Eligible	Eligible
Guenter Franke	Formerly Chief Operating Officer	Eligible	Not Eligible	Not Eligible
Christoph Klein-Schmeink	President Magontec Europe & North America	Eligible	Eligible	Eligible
Martin Tauber	Project Manager	Eligible	Eligible	Eligible
Patrick Look	CFO Magontec GmbH	Eligible	Eligible	Eligible
Xunyou Tong	President Magontec Asia	Eligible	Eligible	Eligible

Shares Issued Under Executives' Securities Issue Plan to 31-Dec-13	Shares Issued Under Executives' Securities Issue Plan to 31-Dec-13
Participant Nicholas William Andrews John David Talbot Guenter Franke Christoph Klein-Schmeink Martin Tauber Patrick Look Xunyou Tong Total shares issued	200,000 Short term rewards 200,000 Short term rewards 94,670 Retention rights scheme 45,462 Retention rights scheme 63,288 Retention rights scheme 26,969 Retention rights scheme 63,507 Retention rights scheme 693,895 2,009,849 1,124,556 Component of ESIP 677,186 1,173,221 3,584,101 1,141,542 3,584,101 No. Of Ordinary Shares Issued 1,141,542 As at 31-Dec-13 677,186 No. Of Ordinary Shares Issued 3,584,101 11,821,322 3,584,101 3,633,521 536,615 Value Of Ordinary Shares Issued to 31-Dec-13 As at 31-Dec-12 1,987,815 16,618,115

Shares Issued Under Executives' Securities Issue Plan to 31-Dec-13

Participant
Nicholas William Andrews
John David Talbot
Guenter Franke
Christoph Klein-Schmeink
Martin Tauber
Patrick Look
Xunyou Tong
Total shares issued

200,000 Short term rewards
200,000 Short term rewards
94,670 Retention rights scheme
45,462 Retention rights scheme
63,288 Retention rights scheme
26,969 Retention rights scheme
63,507 Retention rights scheme
693,895
2,009,849
1,124,556
Component of
ESIP
677,186
1,173,221
3,584,101
1,141,542
3,584,101
No. Of Ordinary Shares
Issued
1,141,542
As at 31-Dec-13
677,186
No. Of Ordinary Shares
Issued
3,584,101
11,821,322
3,584,101
3,633,521
536,615
Value Of
Ordinary
Shares Issued
to 31-Dec-13
As at 31-Dec-12
1,987,815
16,618,115

NOTE 6 REMUNERATION OF AUDITORS

ON OF AUDITORS Group auditor - Audit or review of the financial report - Accounting/taxation services Auditors of subsidiaries - Audit or review of the financial reports	CONSOLIDATED
	12 months to 6 months to
	31-Dec-13 31-Dec-12
	$'000 $'000

	81 66
	18 14

	15 29
	114 110

The auditor of Magontec Limited is Camphin Boston Chartered Accountants. Magontec GmbH, Magontec Xian Co Limited and Magontec Romania are all audited by relevant local auditors who supply information as requested by the Group Auditor Camphin Boston.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7

CURRENT TRADE AND OTHER RECEIVABLES

7 ENT TRADE AND OTHER RECEIVABLES
Trade receivables(1) Allowance for doubtful debts Net GST/VAT recoverable Security deposits Derivatives fair value adjustment Owing by KWE(HK) Other receivables due to operating entities Other Total receivables	CONSOLIDATED
	31-Dec 31-Dec 2013 2012 $'000 $'000
	27,372 20,071 (755) -
	26,616 20,071
	- 539 597 598 11 34 - 1,612 1,084 - 94 136
	1,786 2,920

	28,402 22,991

(1) Trade receivables represent 77.67 days sales (59.46 days sales in 2012)

NOTE 8 CURRENT INVENTORIES

Inventory of finished alloy at cost Provision for Inventory loss Net value of finished goods inventory Raw materials Work in progress Current inventories at net realisable value	CONSOLIDATED
	31-Dec 31-Dec 2013 2012 $'000 $'000
	16,497 17,725 (287) (52)
	16,210 17,673 7,655 6,720 601 1,334
	24,466 25,727

NOTE 9 OTHER CURRENT ASSETS

Other Prepayments

CONSOLIDATED
31-Dec	31-Dec
2013	2012
$'000	$'000
773	125
773	125

NOTE 10

NON CURRENT TRADE AND OTHER RECEIVABLES

10 CURRENT TRADE AND OTHER RECEIVABLES
Amount due from HNKWE Pension asset Security deposits and prepayments	CONSOLIDATED
	31-Dec 31-Dec 2013 2012 $'000 $'000
	- 3 442 470 2 2
	444 476

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 11

OTHER NON-CURRENT FINANCIAL ASSETS

CONSOLIDATED
31-Dec	31-Dec
2013	2012
$'000	$'000
-	-
-	-

NOTE 12 PROPERTY PLANT & EQUIPMENT

12 ERTY PLANT & EQUIPMENT
Gross carrying amount Balance at 1 July 2012 Additions Acquired with acquisition of Magontec companies Disposal of HNKWE assets Disposals/ Write Offs Net foreign currency exchange differences Balance at 31 December 2012 Additions Write Offs Disposals Net foreign currency exchange differences Balance at 31 December 2013 Accumulated depreciation/ amortisation and impairment Balance at 1 July 2012 Disposals/ Write Offs Acquired with acquisition of Magontec companies Disposal of HNKWE assets Depreciation expense Net foreign currency exchange differences Balance at 31 December 2012 Disposals Write Offs Depreciation expense Net foreign currency exchange differences Balance at 31 December 2013 Net Book Value As at 31 Dec 12 Net Book Value As at 31 Dec 13	CONSOLIDATED
	$'000 $'000 $'000 Land & Buildings Plant and equipment Total
	13,032 19,397 32,428 308 927 1,234 - - - - - - - (12) (12) 325 745 1,071
	13,664 21,057 34,721 675 703 1,379 - (1,119) (1,119) - (1,574) (1,574) 2,900 4,293 7,194
	17,240 23,361 40,602

	5,117 14,202 19,319 - 12 12 - - - - - - 165 415 580 141 669 809
	5,422 15,298 20,720 - (1,562) (1,562) - (1,079) (1,079) 368 1,224 1,592 1,207 3,244 4,451
	6,997 17,125 24,123

	8,242 5,759 14,001 10,243 6,236 16,479

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13 INTANGIBLES Gross carrying amount Balance at 31-Dec-12 Disposals/ Write Offs Net foreign currency exchange differences Additions Balance at 31-Dec-13 Accumulated depreciation/ amortisation and impairment Balance at 31-Dec-12 Disposals/ Write Offs Depreciation/amortisation expense Net foreign currency exchange differences Balance at 31-Dec-13 Net book value at 31-Dec-13	CONSOLIDATED
	$'000 $'000 $'000 Indefinite Life(1) Finite Life Total
	2,800 870 3,670 - - - - 271 271 - 129 129
	2,800 1,270 4,070

	- 484 484 - - - - 125 125 - 207 207
	- 816 816

	2,800 455 3,255

Note 1 Patents in relation to "Correx" and AE44

The Board believes both products enjoy a margin of technical superiority over possible alternatives. AE44 is a magnesium alloy that continues to be developed by the Group. Its qualities have application in specific automotive high temperature parts. The Group continues to develop this family of alloys and continues to protect its inventions through patent applications and other means. The annuity income from both products provides high gross margins. There is no sign of the assumptions on which the initial valuations were made breaking down. Expectations for the AE44 alloy are for greater applications as "light weighting" and environmental factors assume greater importance in the automotive sector.

NOTE 14

CURRENT TRADE AND OTHER PAYABLES

Trade creditors(1) Net GST/VAT payable Excess payment by QSLM for subscription to Magontec options maturing 3 January 2014. Other creditors and accruals Accrued audit fees	CONSOLIDATED
	31-Dec 31-Dec
	2013 2012
	$'000 $'000
	14,111 18,008
	279 -
	53 -
	2,896 1,752
	19 44
	17,358 19,804

(1) Trade creditors represent 43.36 days cost of goods sold (56.24 days cost of goods sold in 2012) & 40.04 days sales (53.34 days sales in 2012)

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 15 BORROWINGS

31-Dec 31-Dec 31-Dec 2013 2013 2013 $'000 Bank & Institutional Borrowings Notes Magontec GmbH (Bank Loan)(4) 29(g) 9,258 30-Jun-14 3.24% Magontec GmbH (Bank Loan)(4) 29(g) 3,270 30-Jun-14 3.01% Magontec GmbH (Factoring Facility)(4) 1,354 30-Nov-14 1.99% Magontec Xian Limited (Bank Loan) 4,224 1-Apr-14 6.50% Magontec Xian Limited (Bank Loan) - - - Magontec SRL (Finance Lease) 16 30-Jun-15 8.79% Total Bank Borrowings 18,121 Current Borrowings Bank borrowings as above 18,121 - - Owing to Straits Mine Management Pty Ltd(2) 2,100 3-Jan-14 - Convertible Loan Note 2 - Straits Mine Management Pty Ltd(3) 1,004 3-Jan-14 - Other Current Borrowings - - - Total Current Borrowings 21,225 Non Current Borrowings Bank borrowings as above - - - Owing to Straits Mine Management Pty Ltd - - - Convertible Loan Note 1 - Straits Mine Management Pty Ltd - - - Convertible Loan Note 2 - Straits Mine Management Pty Ltd - - - Total Non Current borrowings - CONSOLIDATED Maturity Date Interest pa(1)	C	ONSOLIDATED
	31-Dec	31-Dec 31-Dec
	2012	2012 2012
	$'000	Interest Maturity
		pa(1) Date

	9,074	30-Jun-14 2.53%
	8,562	30-Jun-14 2.71%
1,354 30-Nov-14 1.99%	0	- -
4,224 1-Apr-14 6.50%	2,372	9-Nov-13 6.42%
- - -	1,021	12-Apr-13 6.40%
16 30-Jun-15 8.79%	0	- -
18,121	21,030

18,121 - -	21,030	- -
2,100 3-Jan-14 -	-	- -
1,004 3-Jan-14 -	-	- -
- - -	-	- -
21,225	21,030

- - -	-	- -
- - -	4,100	31-Dec-14 -
- - -	3,368	1-Jul-14 -
- - -	3,500	24-Dec-15 -
-	10,968

(1) Interest rate is the rate applying at the end of the relevant reporting period and is expressed as compounding annually in arrears.

(2) This debt was repaid on 3 January 2014 from proceeds of conversion of listed options.

(3) This debt was converted to ordinary shares in Magontec Limited on 3 January 2014.

(4) These borrowings are secured by a charge over MAB's trade debtors and inventory. Trade debtors are charged to the extent of €6,559,115 ($10,120,529).

NOTE 16 CURRENT PROVISIONS

Provision for Annual Leave Provision for Income Tax Payable Provision for Loss on Interest rate swap Other Current Provisions	CONSOLIDATED
	31-Dec 31-Dec
	2013 2012
	$'000 $'000
	310 806
	202 494
	1,029 1,377
	151 27
	1,692 2,704

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17 BORROWINGS FROM/PAYABLES TO RELATED PARTIES

NOTE 17 BORROWINGS FROM/PAYABLES TO RELATED PARTIES
	Notes	CONSOLIDATED
		31-Dec	31-Dec
		2013	2012
		$'000	$'000
Owing to KWE (HK) Limited by MGL		-	49
		0	49

NOTE 18 NON-CURRENT PROVISIONS Provision for redundancy Provision for defined benefit pensions Other provisions Reconciliation of the defined benefit obligation Defined benefit obligation beginning of year Current service cost Interest cost Total benefits paid - actual Foreign currency exchange rate changes Experience adjustments (gains)/ losses Actuarial (gains)/ losses due to change of assumptions Defined benefit obligation end of year
	CONSOLIDATED
	31-Dec 31-Dec 2013 2012 $'000 $'000
	- - 8,121 6,676 195 149
	8,315 6,826

	Year Ended Year Ended 31-Dec-13 31-Dec-12 Actual Expected $'000 $'000
	6,676 5,469 167 85 269 107 (259) (55) 1,445 191 (176) 878 0 0
	8,121 6,676

The extent of the Provision for the Defined Benefit Obligation is assessed annually based on actuarial calculations which take into account such matters as -

number of participants in the plan;
likely retirement salaries of participants in the pension plan;
their life expectancy beyond retirement; and
implied interest earnings on the extent of the fund

Increasing interest rates will act to decrease the Provision. The converse is also true. In the context of falling interest rates in Europe (where the beneficiaries of this pension plan are domiciled) there has been upward pressure on the Provision. Other factors (including the AUD-EUR exchange rate) have brought the overall provision up as at 31 Dec 2013.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19 SHARE CAPITAL

Opening balance Shares issued to staff (Guenter Franke)(2) Issue of shares to Executives of Magontec Limited(3) Capital subscribed (net of costs) to Nov 2012 rights issue Issue of securities in repect of conversion of listed options Issue of securities to SMM in respect of conversion of Convertible Loan Notes Payment by Qinghai Salt Lake Magnesium Company Limited of balance owing (net of costs) Various costs associated with above issues Share capital on issued ordinary shares 813,588,666 (2012: 428,097,560) Shares to to be issued to staff (Guenter Franke) requiring shareholder approval(1) ESOP options expiring 16 August 2013 Capital subscribed (net of costs) to Nov 2012 rights issue for which shares are to issued QSLM monies received for conversion of options in respect of shares issued post 31 December 2013 Subscriptions in respect of conversion of listed options for which securities are to be issued Share capital attributable to members of MGL Share capital attributable to minority interest Total share capital	CONSOLIDATED
	31-Dec 31-Dec 2013 2012 $'000 $'000
	33,971 33,810 65 - 36 - 11,027 - 963 106 5,908 - - 53 (371) -
	51,597 33,971 - 252 - 24 - 10,667 3,000 - 548 -
	55,145 44,915 463 456
	55,608 45,371

(1) At 31-Dec-12 this was the balance of shares to be issued to Guenter Franke upon his retirement (28 February 2013) in terms of entitlement under Resolution 8(b) of the Company's 2011 AGM held 22 Nov 2011

(2) Mr Franke subsequently elected to take $187,633 as a cash payment

(3) Shares issued in terms of entitlement under Resolution 8(b) of the Company's 2011 AGM held 22 Nov 2011

A reconciliation of the movement in fully paid ordinary shares at the line in Note 19 'Share capital on issued ordinary shares 813,588,666 (31 December 2012: 428,097,560) is set out below

Fully paid ordinary shares Balance at beginning of financial year Expenses of various issues Issue of shares to Executives of Magontec Limited Issue of securities under 2012 Rights issue Issue of securities in repect of conversion of listed options Issue of securities to SMM(1) in respect of conversion of Convertible Loan Notes	CONSOLIDATED / PARENT ENTITY	CONSOLIDATED / PARENT ENTITY
	No. $'000 31-Dec-2013	No. $'000 31-Dec-2012
	428,097,560 33,971 - (371) 4,796,793 100 220,531,254 11,027 48,125,841 963 112,037,218 5,908	425,007,674 33,810 - - 3,089,886 160 - - - - - -
	813,588,666 51,597	428,097,560 33,971

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Share options

All share options carry no rights to dividends and no voting rights until paid for by conversion into ordinary shares. Further details of the share-based payment schemes are contained in NOTE 5 to the financial statements.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20 RESERVES

Capital reserve Balance at beginning of financial year(1) Balance at end of financial year Foreign currency translation reserve Balance at beginning of financial year Movement in VHL Consolidated accounts Balance at end of financial year Actuarial Reserves Balance at beginning of financial year Derivatives Deferred tax assets Employee pensions Balance at end of financial year Expired Options Reserve Balance at beginning of financial year ESOP options expiry Balance at end of financial year Total reserves Reserves attributable to minority interests Reserves attributable to members of MGL Total reserves Other Comprehensive Income - that may later emerge in the Profit and Loss Statement Exchange differences taken to reserves in equity – translation of overseas entities Movement in various actuarial assessments Total Other Comprehensive Income Represented By- Movement in Foreign currency translation reserve Movement in Actuarial Reserves	CONSOLIDATED
	31-Dec 31-Dec
	2013 2012
	$'000 $'000
	2,750 2,750
	2,750 2,750

	(179) (506)
	2,652 327
	2,473 (179)

	(1,226) (621)
	(107) 298
	176 (904)
	150 -
	(1,007) (1,227)

	1,612 1,612
	25 -
	1,637 1,612
	5,853 2,957

	- 2
	5,853 2,955
	5,853 2,957

	- -
	2,652 327
	219 (605)
	2,871 (278)

	2,652 327
	219 (605)
	2,871 (278)

Notes

The capital reserve is a historical reserve from 2002 that arose after calculation of the outside equity interest in the (as it then was) Australian Magnesium Investments Pty Ltd consolidated entity.

The foreign currency translation reserve is a result of translating overseas subsidiaries from their functional currency to the presentation currency of Australian dollars. The expired options reserve captures the balance of unexercised options on their expiry date from the appropriate share capital account. The actuarial reserve represents the cumulative amount of actuarial gains / (losses) on the Group's unfunded defined benefit pension obligation that needs to be recognised in “Other comprehensive income” (OCI).

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21

ACCUMULATED LOSSES

Balance at beginning of financial year Adjustment to opening balance Profit/(Loss) attributable to members of the parent entity Profit/(Loss) attributable to minority interests Total accumulated losses Accumulated losses attributable to members of Magontec Limited Accumulated losses attributable to minority interests Total accumulated losses	CONSOLIDATED
	31-Dec 31-Dec
	2013 2012
	$'000 $'000
	(28,021) (28,962)
	(5) -
	756 939
	- 2
	(27,270) (28,021)

	(27,268) (28,023)
	(2) 2
	(27,270) (28,021)

NOTE 22 EARNINGS/(LOSS) PER SHARE

NOTE 22 EARNINGS/(LOSS) PER SHARE
	CONSOLIDATED
	12 months to	12 months to
	31-Dec-13	31-Dec-12
	cents per share	cents per share
Basic earnings/(loss) per share (including Discontinued Operations):	0.115	0.221
Diluted earnings/(loss) per share (including Discontinued Operations):	0.070	0.168
Basic earnings/(loss) per share (excluding Discontinued Operations):	0.116	0.222
Diluted earnings/(loss) per share (excluding Discontinued Operations):	0.071	0.169

The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted loss per share are as follows:

Profit/(Loss) after income tax expense/benefit including discontinued operations Members of the parent entity Profit/(Loss) after income tax expense/benefit from continuing operations Members of the parent entity Weighted average number of ordinary securities on issue (for basic earnings calculation) Unlisted employee options expiring 16 Aug 2013 Listed Options exercisable on or before 3 January 2014 Unlisted options in Con Loan Note No. 1 issued to SMM expiring 1 July 2014 Unlisted options in Con Loan Note No. 2 issued to SMM expiring 28 November 2015 Weighted average number of ordinary securities on issue (for diluted earnings calculation)	CONSOLIDATED
	12 months to 12 months to
	31-Dec-13 31-Dec-12
	$'000 $'000
	756 939

	767 945

	659,044,011 425,461,081
	- 1,300,000
	392,936,667 -
	- 61,237,218
	21,251,263 70,000,000
	1,073,231,941 557,998,299

Note: The earnings per share calculation in the 2012 Annual Report mistakenly omitted the options inherent in the two Convertible Loan Notes.

NOTE 23

CONTINGENT LIABILITIES AND CONTINGENT ASSETS

There are no contingent liabilities for the group as at 31 December 2013.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

NOTES TO THE FINANCIAL STATEMENTS

NOTE 24 CAPITAL AND LEASING COMMITMENTS

a Operating Lease Arrangements (contractual lease payments to lease expiry the Group is obligated to make)

Nature of Lease Date of First Unexpired Lease Payments Lease Payments Current Year Lease Date of Last Frequency of	Nature of Lease Date of First Unexpired Lease Payments Lease Payments Current Year Lease Date of Last Frequency of
Lease P Lease Oblii Due Beyond 12 Mh i Due Within 12 Mh i (2013) Lease P Payment Per F Lease P Lease P
ayment gaton onts (e beyond 31-Dec- onts (e year ended 31-Dec- ayments requency (AUD) ayment ayments
14) 14)

MAB company car (BOT-KS 911) 17-Apr-12 16-Apr-15 Monthly $968 $11,613 $11,613 $3,871 $15,484
MAB company car (BOT-F 1107) 11-May-12 10-May-16 Monthly $684 $8,202 $8,202 $11,620 $19,823
MAB company car (BOT-OX 40) 19-Mar-10 18-Mar-14 Monthly $674 $8,092 $2,023 - $2,023
MAB wheel loader 20-Jun-13 31-Jan-17 Monthly $2,989 $35,868 $35,868 $74,725 $110,592
MAB anode workshop 1-Jun-04 31-May-14 Monthly $17,744 $212,930 $106,465 - $106,465
Car lease Audi 25-Jun-11 25-Jun-15 Monthly $889 $10,665 $10,665 $5,333 $15,998
MAY plant and equipment lease 1-Jul-12 30-Jun-17 Monthly $22,898 $274,777 $274,777 $709,841 $984,618
MAS Plant lease 1-Jan-13 31-Dec-13 Semi Annual $73,494 $146,988 - - -
Total	$709,135 $449,613 $805,389 $1,255,003

MAB = Magontec GmbH (Bottrop Germany) MAY = Magontec Shanxi Company Limted MAS = Magontec SuZhou Co Ltd

Non-cancellable operating lease payments Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years	CONSOLIDATED
	31-Dec 31-Dec
	2013 2012
	$'000 $'000
	450 467
	805 964
	- -
	1,255 1,431

Note: The amounts in the Table immediately above in respect of the period ended 31 December 2012 differ to the values in the 2012 Annual Report. The calculations in the 2012 Annual Rreport failed to take account of the last two leases in the schedule of Operating Lease Arrangements shown above.

b Capital Expenditure Commitments

On 10 June 2012, the Company entered into an agreement with Qinghai Salt Lake Magnesium Company Limited (QSLM) to construct plant and equipment for an alloy manufacturing operation at Golmud in Qinghai province in the People's Republic of China. Magontec will own and operate the magnesium alloy production plant and equipment to be installed in a building owned by QSLM adjacent to the Qinghai electrolytic magnesium smelter.

The plant and equipment is expected to cost approximately USD11m (AUD12.32m). Approximately USD3.5m (AUD3.92m) is expected to be incurred in the last quarter of 2014.

The residual expenditure will be incurred in 2015 and will be funded from a combination of -

cash resources of AUD7.38m as at 31 Dec 2013;
additional net cash (after debt repayment) of AUD3.50m received on 3 January 2014 from conversion of options;
• cash generated from operations;
the undrawn component of existing debt facilities (currently AUD1.99m); and
new debt facilities currently under negotiation.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 53

NOTES TO THE FINANCIAL STATEMENTS

NOTE 25

CONTROLLED ENTITIES

a Consolidated Controlled Entities

Name of entity	Ownership	Country of	Ownership	Ownership
	Entity	Incorporation	interest	interest
			31-Dec-2013	31-Dec-2012
Parent entity
Magontec Limited (a)		Australia	100%	100%
Directly Controlled Subsidiaries Of Parent
Advanced Magnesium Technologies Pty Ltd (a)	Magontec Limited	Australia	100%	100%
AML China Ltd (b)	Magontec Limited	China	100%	100%
Varomet Holdings Limited	Magontec Limited	Cyprus	100%	100%
Magontec Qinghai Co. Ltd.	Magontec Limited	China	100%	NA
Indirectly Controlled Subsidiaries of Parent- Level 1
Magontec Xian Co Ltd.	Varomet Holdings Limited	China	100%	100%
Magontec GmbH	Varomet Holdings Limited	Germany	100%	100%
Magontec SuZhou Co Ltd	Varomet Holdings Limited	China	100%	100%
Indirectly Controlled Subsidiaries of Parent- Level 2
Magontec Shanxi Company Limted (c)	Magontec Xian Co Ltd.	China	70%	NA
Magontec SRL(d)	Magontec GmbH	Romania	100%	100%

(a) Entities included in the Australian tax consolidated Group.

(b) Dormant from 30 June 2012

(c) Joint venture entity through which alloying operations are conducted at Shanxi . The joint venture arrangements provide, that from 1 January 2013, 100% of the benefits and responsibilities of transactions on revenue account accrue to Magontec Xian Co Ltd. The Group's joint venture partner maintains an entitlement to return of its original capital contribution.

(d) During the year ownership of Magontec SRL was transferred from Varoment Holdings Ltd to Magontec GmbH.

b Corporate Structure

==> picture [474 x 229] intentionally omitted <==

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

MAGONTEC Group - Ownership Structure 31 December 2013
Magontec Limited
(Australia)
100% 100% 100%
Advanced Varomet
Admin Technologies Pty Magnesium Holdings Limited (Cyprus)
Entities Limited
(Australia)
Magontec Qinghai
Co Ltd (China)
100% 100%
Operating Magontec GMBH Magontec
Entities 100% (Germany) SuZhou Co. Ltd.(China)
100%
70%
Magontec Shanxi Magontec Xian Magontec SRL
Company Limited Co Ltd. (Romania)
(China) (China)
----- End of picture text -----

c Acquisition of Controlled Entities

There was no acquisition made during the relevant period.

d Disposal of Controlled Entities

There was no disposal made during the relevant period.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 54

NOTES TO THE FINANCIAL STATEMENTS

NOTE 26 SEGMENT INFORMATION

Identification of reportable segments

The consolidated entity comprises the entities as described in NOTE 25 a and b,

In respect of the period to 31 December 2013, segment information is presented in respect of two main departments within the company.

Administrative Entities (Magontec Limited, Advanced Magnesium Technologies Pty Ltd and Varomet Holdings Limited).
Operating Entities (as described in the chart at NOTE 25b 'Corporate Structure')

Types of products and services

The principal operating activities comprise:

Magnesium alloy production
Magnesium alloy recycling
Cathodic corrosion production

Accounting policies and inter-segment transactions

The accounting policies used by the Group in reporting segments internally are the same as those contained in Note1 to the accounts.

SEGMENT INFORMATION Sale of goods Less Inter-company sales Sales as per Comprehensive Income Statement Cost of sales Less Inter-company sales Cost of Sales as per Comprehensive Income Statement Other income Foreign exchange gain/loss EBITDA(1) Interest expense Depreciation and amortisation Income tax expense/reimbursement Other Comprehensive Income Total Comprehensive Income for the year Profit/(Loss) before income tax expense Operating expenses excluding interest, taxation, depreciation and amortisation Profit/(Loss) after income tax expense including discontinued operations Movement in various actuarial assessments Exchange differences taken to reserves in equity – translation of overseas entities	31-Dec-13 31-Dec-13 31-Dec-13 $'000 $'000 $'000 Operating Units 12 months to TOTAL Admin Units 12 months to 12 months to	31-Dec-12 31-Dec-12 31-Dec-12 $'000 $'000 $'000 TOTAL Admin Units 6 months to Operating Units 6 months to 6 months to
	- 147,064 147,064 - (18,433) (18,433)	- 87,608 87,608 - (26,001) (26,001)
	- 128,631 128,631 - (137,207) (137,207) - 18,433 18,433	- 61,607 61,607 - (84,433) (84,433) - 26,002 26,001
	- (118,773) (118,773) 222 864 1,086 2,334 (82) 2,252 (1,554) (8,171) (9,725)	- (58,431) (58,431) 5,136 297 5,433 (100) (78) (178) (2,304) (3,358) (5,662)
	1,002 2,469 3,471 - (973) (973) (1) (1,716) (1,717)	2,732 36 2,768 (510) (712) (1,223) - (697) (697)
	1,001 (220) 781 (114) 89 (25)	2,222 (1,373) 849 - 92 92
	888 (132) 756	2,222 (1,281) 940

	- 219 219 552 2,100 2,652	- (605) (605) (584) 910 327
	1,440 2,187 3,627	1,638 (976) 661

(1) Earnings before interest, taxation, depreciation and amortisation

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 55

NOTES TO THE FINANCIAL STATEMENTS NOTE 26 SEGMENT INFORMATION(Cont…)

Segment Disclosures by Product & Services Alloys Other Segment Assets Segment assets Eliminations Assets as per Consolidated Balance Sheet Segment Liabilities Segment liabilities Eliminations Liabilities as per Consolidated Balance Sheet Segment Disclosures Acquisition of segment fixed assets Non-cash share based payments Provisioning - Inventory Increase/(Decrease) - Doubtful debts Increase/(Decrease) Total Sales (including discontinued operations) Anodes	12 months 12 months 12 months	6 months 6 months 6 months
	to to to	to to to
	31-Dec-13 31-Dec-13 31-Dec-13	31-Dec-12 31-Dec-12 31-Dec-12
	$'000 $'000 $'000	$'000 $'000 $'000
	TOTAL Operating Admin Units	Admin Units TOTAL Operating Units
	Units

	33 110,611 110,644	- 51,672 51,672

	- 16,933 16,933	- 9,753 9,753
	- 1,054 1,054	348 (166) 182

	33 128,598 128,631	348 61,259 61,607

	31-Dec-13 31-Dec-13 31-Dec-13	31-Dec-12 31-Dec-12 31-Dec-12
	$'000 $'000 $'000	$'000 $'000 $'000
	TOTAL Admin Units Operating	TOTAL Operating Units Admin Units
	Units

	45,134 90,465 135,598	47,431 81,852 129,283
	(39,148) (13,669) (52,818)	(35,532) (12,064) (47,596)
	5,986 76,795 82,781	11,898 69,788 81,687

	19,111 76,645 95,756	26,680 71,480 98,161
	(15,597) (31,569) (47,166)	(14,951) (21,829) (36,781)
	3,514 45,076 48,590	11,728 49,651 61,380

	- 1,378 1,378	- 4,769 4,769
	80 - 80	- 84 84

	- - -	(72) - (72)
	- - -	- - -

NOTE 27

RELATED PARTY DISCLOSURES

a Equity interests in related parties

Equity interest in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in NOTE 25 to the financial statements.

b Transactions with Key Management Personnel

Details of key management personnel compensation are disclosed in NOTE 4 to the financial statements.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 56

NOTES TO THE FINANCIAL STATEMENTS

NOTE 27 RELATED PARTY DISCLOSURES(Cont…)

Key Management Personnel Equity Holdings
Fully paid ordinary shares of Magontec Limited - 31 Dec 2013
	Balance @	Granted as	Received on		Acquired On	Total balance	Balance held
	1/01/13	remuneration	exercise	of	Market or Under	(held directly	nominally
			options		23 Nov 12	and indirectly) @	(indirectly)
					RightsIissue	31/12/13
	No.	No.		No.	No.	No.	No.
Mr Z Li(1)	56,197,298	-		-	-	56,197,298	55,797,298
Mr N Andrews(2)	7,122,562	-		-	3,956,980	11,079,542	7,495,441
Mr R Shaw	100,000	-		-	100,000	200,000	-
Mr G Franke(3)	536,615	-		-	-	536,615	-
Mr C Klein-Schmeink	1,141,542	-		-	-	1,141,542	-
Mr X Tong	1,173,221	814,594		-	-	1,987,815	-
Mr J Talbot	4,000,768	-		-	-	4,000,768	-
	70,272,006	814,594		-	4,056,980	75,143,580	63,292,739

(1) 55,797,298 shares held via KWE (HK) Investment Development Co Limited and 400,000 shares are held personally

(2) 7,495,441 shares are held via DEWBERRI PTY LIMITED as trustee for Andrews Superannuation Fund and 3,584,101 are held personally (3) Retired 28 February 2013

Fully paid ordinary shares of Magontec Limited - 31 Dec 2012

Mr Z Li(1) Mr N Andrews(2) Mr R Shaw Mr G Franke Mr C Klein-Schmeink Mr X Tong Mr J Talbot	Acquired On Received on Granted as Balance @	Balance held Total balance
	Market or Under Sh Ph exercise of i remuneration 1/07/12	nominally idil (held directly d idil
	are urcase Plan optons	(nrecty) an nrecty) @ 31/12/12

	No. No. No. No. No. No.
	56,197,298 - - - 56,197,298 55,797,298
	7,122,562 - - - 7,122,562 3,538,461
	100,000 - - - 100,000 -
	536,615 - - - 536,615 -
	287,820 853,722 - - 1,141,542 -
	284,520 888,701 - - 1,173,221 -
	4,000,768 - - - 4,000,768 -
	68,529,583 1,742,423 - - 70,272,006 59,335,759

(1) 55,797,298 shares held via KWE (HK) Investment Development Co Limited and 400,000 shares are held personally

(2) 3,538,461 shares are held via DEWBERRI PTY LIMITED as trustee for Andrews Superannuation Fund and 3,584,101 are held personally

Share options of Magontec Limited - 31 Dec 2013

	Bal @	Bal vested	Exercised /	Net other	Bal @	Bal vested @	Vested but not	Vested and	Options
	1/01/13	@ 1/01/13	Lapsed	change(1)	31/12/13	31/12/13	exercisable	exercisable	vested
									during year
	No.	No.	No.	No.	No.	No.	No.	No.	No.
Key Management	Personnel
Mr N Andrews	-	-	-	7,913,960	7,913,960	7,913,960	-	7,913,960	7,913,960
Mr R Shaw	-	-	-	200,000	200,000	200,000	-	200,000	200,000
Mr J Talbot	600,000	600,000	600000	-	-	-	-	-	-
Other Personnel
Dr T Abbott	300,000	300,000	300,000	-	-	-	-	-	-
Mr S Erickson	200,000	200,000	200,000	-	-	-	-	-	-
Mr J Bolstad	200,000	200,000	200,000	-	-	-	-	-	-
	1,300,000	1,300,000	1,300,000	8,113,960	8,113,960	8,113,960	-	8,113,960	8,113,960

(1) An entitlement acquired on 3 January 2013 as a result of investments in the Company's Rights Issue

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 57

NOTES TO THE FINANCIAL STATEMENTS

NOTE 27 RELATED PARTY DISCLOSURES(Cont…)

Share options of Magontec Limited - 31 Dec 2012

	Bal @ 1/07/12	Bal vested @	Exercised /	Net other		Bal @	Bal vested @	Vested but not		Vested and	Options	Options
		1/07/12	Lapsed	change		31/12/12	31/12/12	exercisable		exercisable	vested during
											year
	No.	No.	No.		No.	No.	No.		No.	No.		No.
Key Management	Personnel
Mr J Talbot	600,000	600,000	-		-	600,000	600,000		-	600,000		600,000
Other Personnel
Dr T Abbott	300,000	300,000	-		-	300,000	300,000		-	300,000		300,000
Mr S Erickson	200,000	200,000	-		-	200,000	200,000		-	200,000		200,000
Mr J Bolstad	200,000	200,000	-		-	200,000	200,000		-	200,000		200,000
	1,300,000	1,300,000	-		-	1,300,000	1,300,000		-	1,300,000	1,300,000

All options outstanding at 31 Dec 2012 (1,300,000) were issued on 16 August 2010 under the Employee Share Option Plan. They vested on 16 February 2012 and can be exercised at any time from the vesting date to 16 August 2013.

d Group Entity

The parent entity is Magontec Limited. Members of the group are set out in Note 25.

Transactions during the financial year between group entities included:

Investment in controlled entities;
Repayment of interest free funds from controlled entitles to the parent entity; and
Incurring expenditure on behalf of other entities for office rental and related costs, travel costs, seconded employees and other sundry costs. (The entity is fully reimbursed for these costs on an actual cost basis).

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 58

NOTES TO THE FINANCIAL STATEMENTS

NOTE 28 NOTES TO THE CASH FLOW STATEMENT

Reconciliation of cash and cash equivalents

	CONSOLIDATED	CONSOLIDATED
12	months to	6 months to
	31-Dec-13	31-Dec-12
	$'000	$'000

	CONSOLIDATED	CONSOLIDATED
	12 months to 6 months to
	31-Dec-13 31-Dec-12
	$'000 $'000

Cash on hand Cash at bank Bank accepted bills Total cash and cash equivalents Cash balances not available for use Reconciliation of profit/(loss) for the period to net cashflows from operating activities Profit/(Loss) after income tax expense/benefit including discontinued operations Movement in Current Assets Movement in Trade & other receivables Movement in Inventory Movement in Prepayments Movement in Other Current Assets Movement in Current Liabilities Movement in Trade & other payables Movement in Borrowings Movement in Provisions Movement in other Current Liabilities Prima facie net operating cash flow Adjustments to prima facie operating cash flows Add non cash outflows implied by movement in other Current Liabilities Deduct non cash inflows implied by movement in other Current Liabilities Add non cash outflows implied by movement in other Current Assets Deduct non cash inflows implied by movement in other Current Assets Deduct non cash income in P & L after tax Add non cash expenses in P & L after tax Movement in Current Liabilities taken to Finance & Investing cash flows Movement in Non Current Liabilities taken to Operating cash flows Movement in Current Assets taken to Finance & Investing cash flows Movement in Non Current Assets taken to Operating cash flows Net cash from operating activities For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks and investments in money market instruments. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:
		- -
		7,375 13,541
		- -
		7,375 13,541

		756 940
		- -
		(5,411) 3,014
		1,260 (2,524)
		(649) 530
		- -

		(2,446) 3,105
		195 (5,691)
		(1,012) (100)
		(49) (140)
		(7,356) (867)

		3,665 645
		(4,555) (499)
		124 -
		(23) (214)
		(9,822) (6,889)
		10,866 4,561
		2,958 5,832
		- -
		- -
		- -
		(4,143) 2,569

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 59

NOTES TO THE FINANCIAL STATEMENTS

NOTE 29

FINANCIAL INSTRUMENTS

(a) Capital Risk Management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the potential future return to stakeholders through the development and marketing of the Group’s technologies and its production facilities.

The capital structure of the Group consists of cash and cash equivalents, equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses as disclosed in NOTE 19, NOTE 20 and NOTE 21 respectively and debt funding provided by Chinese and European banks (NOTE 15).

The group’s main financial risk management issues are:

ensuring the integrity of debtors;
planning for production capacity expansion in China; and
continued availability of debt funding.

The Group operates globally, primarily through subsidiary companies established in the markets in which the Group trades. None of the Group’s entities are subject to externally imposed capital requirements.

(b) Financial risk management objectives

The magnesium alloy industry operates with a disparity of trade terms on the purchase of production inputs (generally not better than 15 days) and the sale of output (up to 120 days). The Group’s senior management effort is aimed at firstly, arranging funding for working capital and secondly, negotiating with purchasers and buyers, the best available terms. The magnesium industry currently does not have the scale where derivative risk instruments are available.

The Group’s senior management team co-ordinates access to domestic and international financial markets and monitors and manages the financial risks relating to the operations of the Group in line with the Group’s policies. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

The consolidated entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

(c) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.

(d) Categories and maturity profile of financial instruments and interest rate risk

The following table details the consolidated entity’s exposure to interest rate risk as at 31 December 2013.

31 December 2013

Variable interest	Fixed interest	Non interest	Total
rate	rate	bearing


$'000	$'000	$'000	$'000
7,373	-	3	7,375
-	-	28,402	28,402
-	-	-	-
-	-	-	-
-	-	773	773
7,373	-	29,178	36,551
- 18,121 - - -	- - - - -	17,358 - - - -	17,358 18,121 - - -
-	-	3,104	3,104
18,121	-	20,462	38,583

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013 Page 60

NOTES TO THE FINANCIAL STATEMENTS

NOTE 29 FINANCIAL INSTRUMENTS(Cont…)

The following table details the consolidated entity’s exposure to interest rate risk as at 31 December 2012. 31 December 2012

31 December 2012
Financial assets: Notes % Cash and cash equivalents 2.39% Trade & other receivables (net of provision for loss) - Loan owing by KWE (HK) - Receivable in respect of sale of HNKWE - Other - Financial liabilities: Trade & other payables - Current Borrowings 15 3.23% Bank accepted bills issued to suppliers 15 - Current Borrowings from/payables to related parties 15 - Non Current Borrowings - Non Current Borrowings from/payables to related parties - Non Current Owing to Straits Mine Management Pty Ltd 15 - Weighted average effective interest rate	$'000 Variable interest rate	$'000 Fixed maturity dates	$'000 Non interest bearing	$'000 Total
	13,540 - - - -	- - - - -	- 22,991 1,612 - (1,487)	13,540 22,991 1,612 - (1,487)
	13,540	-	23,116	36,655
	- 21,030 - - - - -	- - - - - - -	19,804 - - 49 - - 10,968	19,804 21,030 - 49 - - 10,968
	21,030	-	30,821	51,851

(e) Market risk

Refer comments under headings a and b of NOTE 29.

(f) Foreign currency risk management

The Group has exposure to four main currencies – the United States Dollar (USD), the Euro (EUR), the Chinese Yuan (RMB) and the Romanian Leu (RON).

The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows.

Cash and cash equivalents Trade and other receivables Trade and other payables Borrowings Other Total	Foreign Currency Assets & Liabilities	Foreign Currency Assets & Liabilities
	Liabilities	Assets
	31 Dec 2013	31 Dec 2013
	$'000 $'000	$'000 $'000
		5,692 2,450 28,527 17,362
	20,273 12,201 18,121 21,030
	- -	18,426 24,540
	38,394 33,231	52,645 44,352

The Group undertakes sales transactions denominated in RMB, USD and EUR and incurs manufacturing input costs denominated in EUR, RMB and RON. Additionally certain Head Office overheads are incurred in AUD and the Group reports in AUD. The objective over the period to 30 June 2014 is to centralise treasury risk and cash management so that foreign exchange risk washes through to a single point.

The task ahead is to -

refine our data gathering systems to identify both the nature of the risk (working capital of fixed assets) and the relevant currency;
determine a global hedge strategy; and
specify hedge settlement and management systems.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 61

NOTES TO THE FINANCIAL STATEMENTS

NOTE 29 FINANCIAL INSTRUMENTS(Cont…)

Foreign currency sensitivity analysis

The following table details the Group’s sensitivity to a 10% increase and 10% decrease in the Australian Dollar against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates over the medium term. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes loans to foreign operations within the Group where the denomination of the loan is in a currency other than the currency of the lender or the borrower.

A positive number in the table below indicates an increase in profit or a decrease in loss and other equity where the Australian Dollar strengthens against the respective currency. A negative number in the table below indicates a decrease in profit or an increase in loss and other equity where the Australian Dollar weakens against the respective currency.

		Notes	USD impact	USD impact
			Consolidated
			31 Dec 2013	31 Dec 2012
			$'000	$'000
Effect on Loss of a	10% increase in USD rate	(i)	26		43
Effect on Loss of a	10% decrease in USD rate		(26)		(43)
			EUR impact
			Consolidated
			31 Dec 2013	31 Dec	2012
			$'000		$'000
Effect on Loss of a	10% increase in EUR rate	(ii)	841		500
Effect on Loss of a	10% decrease in EUR rate		(841)		(500)
			RMB impact
			Consolidated
			31 Dec 2013	31 Dec	2012
			$'000		$'000
Effect on Loss of a	10% increase in RMB rate	(iii)	874		736
Effect on Loss of a	10% decrease in RMB rate		(874)		(736)
			RON impact
			Consolidated
			31 Dec 2013	31 Dec	2012
			$'000		$'000
Effect on Loss of a	10% increase in RON rate	(iv)	(317)		(167)
Effect on Loss of a	10% decrease in RON rate		317		167

A positive number in the above table represents a reduction in the operating loss

(i) Exposure to USD is represented by net assets of USD232,202 in respect of period ended 31-Dec-13 (exposure on net assets of USD417,510 in period ended 31Dec-12)

(ii) Exposure to EUR is represented by net assets of EUR5,452,388 in respect of 31-Dec-13 (exposure on net assets of EUR4,055,699 in 31-Dec-12)

(iii) Exposure to RMB is represented by net assets of RMB47,261,005 in respect of 31-Dec-13 (exposure on net assets of RMB48,116,970 in 31-Dec-12)

(iv) Exposure to RON is represented by net liabilities of RON9,155,169 in respect of 31-Dec-13 (exposure on net liabilities of RON5,820,763 in 31-Dec-12)

The Group’s sensitivity to foreign currency has increased during the current period due to increased holdings of cash and other assets essentially in China.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 62

NOTES TO THE FINANCIAL STATEMENTS

NOTE 29 FINANCIAL INSTRUMENTS(Cont…)

(g) Capital Management and Interest rate risk management

The consolidated entity has bank loans outstanding of $12,527,588 (refer Note 15) owing to Commerzbank. The arrangements under which these facilities operate are due for review on 30 Jun 2014. As at 31 Dec 2013 the Company was in breach of certain covenants under which the facilities are governed. As a result of recent discussions with Commerzbank, Magontec management is comfortable that availability of the facilities to the review date is not threatened. However, the breach has resulted in an increase in the interest rate applying to the debt. Magontec management is also confident, that with improving performance of its operations at Magontec GmbH (Bottrop, Germany), Commerzbank will be positively inclined to a renewal of the facilities post 30 Jun 2014.

Interest rate risk may arise in the proper management of surplus funds. Maintenance of sound forward budgets will assist the appropriate nomination of the duration of invested funds.

(h) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of as far as possible dealing with creditworthy counterparties – an ideal not always possible in a product development environment. The use of collateral or other contributions can act as a means of mitigating the risk of financial loss from defaults. Credit exposure is controlled by limits that are continually reviewed. The Group’s alloy sales to European customers are, for the most part, centralised through Magontec GmbH in Bottrop Germany. Magontec GmbH has insurance cover in place to cover its exposure to debtors secured under the Commerzbank facility. The Insured percentage cover for “named” debtors is 90% and for “unnamed” debtors is 80% but with individual claims in respect of "unnamed" debtors limited to EUR 10,000.

The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

(i) Liquidity risk management

The consolidated entity manages liquidity risk by maintaining adequate cash reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

(j) Fair value of financial instruments

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 63

NOTES TO THE FINANCIAL STATEMENTS NOTE 30

==> picture [59 x 35] intentionally omitted <==

PARENT ENTITY INFORMATION (MAGONTEC LIMITED) STATEMENT OF COMPREHENSIVE INCOME

Sale of goods Cost of sales Gross profit Other income Interest expense Impairment of inventory, receivables & other financial assets Travel accommodation and meals Research, development, licensing and patent costs Promotional activity Information technology Personnel Depreciation & amortisation Office expenses Corporate Foreign exchange gain/(loss) Other operating costs	PARENT ENTITY
	12 months to 6 months to
	31-Dec-13 31-Dec-12
	$'000 $'000

	- -
	- -
	- -

	314 61
	- -
	(2,816) (1,223)
	(28) (4)
	- -
	(1) -
	(16) -
	(84) (359)
	- -
	(1) (1)
	(381) (452)
	- -
	1,054 (24)
Profit/(Loss) before income tax expense/benefit from continuing operations	(1,959) (2,002)
Income tax (expense)/benefit	- -
Profit/(Loss) after income tax expense/benefit from continuing operations	(1,959) (2,002)
Loss after income tax expense from discontinued operations	- -
Profit/(Loss) after income tax expense/benefit including discontinued operations	(1,959) (2,002)
Other Comprehensive Income - that may later emerge in the Profit and Loss Statement Exchange differences taken to reserves in equity – translation of overseas entities Other Comprehensive Income - that will not emerge in the Profit and Loss Statement Movement in various actuarial assessments
	- -
	- -
	- -
	- -
Total Comprehensive Income for the year	(1,959) (2,002)
Profit/(Loss) after income tax expense for the year (incl discontinued operations) attributable to Minority interests Members of the parent entity Total Comprehensive Income for the year attributable to Minority interests Members of the parent entity Total Comprehensive Income for the year
	- -
	(1,959) (2,002)
	(1,959) (2,002)

	- -
	(1,959) (2,002)
	(1,959) (2,002)

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 64

NOTES TO THE FINANCIAL STATEMENTS

NOTE 30 PARENT ENTITY INFORMATION (MAGONTEC LIMITED) (Cont…)

ALANCESHEET Cash and cash equivalents Trade & other receivables Owing by KWE(HK) Future income tax benefit Other Total current assets Non-current assets Other receivables Inter Company Loan Receivables (net of provisioning) Investment in shares of subsidiaries (net of provisioning) Other financial assets Future income tax benefit Intangibles Other Total non-current assets Total assets Current liabilities Trade & other payables Borrowings Borrowings from/payables to related parties Provisions Total current liabilities Non-current liabilities Borrowings from/payables to related parties Owing to Straits Mine Management Pty Ltd Provisions Other Total non-current liabilities Total liabilities Net assets Equity attributable to members of MGL Share capital Reserves Accumulated losses Equity attributable to minority interests Share capital Reserves Accumulated losses Total equity	PARENT ENTITY
	31-Dec 31-Dec
	2013 2012
	$'000 $'000

	1,668 11,053
	1,743 1,625
	- -
	- -
	11 -
	3,422 12,678

	- -
	11,910 7,871
	6,574 5,596
	- -
	- -
	- -
	- -
	18,484 13,466
	21,906 26,145

	72 464
	1,004 -
	- 49
	77 -
	1,154 513

	- -
	- 6,868
	- -
	(793) 2,512
	(793) 9,380
	360 9,894

	21,546 16,251

	52,145 44,915
	1,637 1,612
	(32,236) (30,277)

	- -
	- -
	- -
	21,546 16,251

BALANCE SHEET

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 65

NOTES TO THE FINANCIAL STATEMENTS

NOTE 30 PARENT ENTITY INFORMATION (MAGONTEC LIMITED) (Cont…)

Contingent liabilities

The parent entity had no contingent liabilities as at 31 December 2013.

Capital commitments - Property, plant and equipment

The parent entity had no capital commitments for property, plant and equipment as at 31 December 2013.

Significant accounting policies

The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1.

NOTE 31

SUBSEQUENT EVENTS

1 On 3 January 2014 ordinary shares were issued upon conversion of options in terms of the Company's Renounceable Rights programme under the Prospectus dated 23 November 2012 and conversion of the residual Convertible Loan Note held by SMM. As a result of this activity the share register at the date of this report is as follows -

report is as follows -
- Ordinary shares on issue 31 December 2013 - Total ordinary shares on issue at the date of this report. - Ordinary shares issued upon conversion of listed options in terms of the Company's 23 November 2012 Renounceable Rights programme. - Ordinary shares issued to SMM upon conversion of the residual balance of Convertible Loan Note No. 2.	280,203,903 21,251,263 813,588,666
	1,115,043,832

2 On 7 January 2014 the Company made a principal reduction of $2,100,046 to fully clear all debt owing to SMM.

NOTE 32

ADDITIONAL COMPANY INFORMATION

Magontec Limited (MGL) is a listed public company and is incorporated in Australia. The MGL Group operates globally with subsidiaries in Australia, North America Europe and China.

Registered Office and Principal place of business

Office 10, Level 8 139 Macquarie St Sydney, NSW 2000 Tel: 61 2 8231 7085 Fax: 612 9252 8960

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 66

DIRECTORS’ DECLARATION

The Directors declare that the financial statements and notes thereto, set out on pages 27 to 66:

(a) in the Directors’ opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable;
(b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and give a true and fair view of the financial position and performance of the Group; and
(c) the Directors have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Board of Directors

==> picture [121 x 38] intentionally omitted <==

==> picture [255 x 80] intentionally omitted <==

MR N ANDREWS MR R SHAW EXECUTIVE CHAIRMAN NON-EXECUTIVE DIRECTOR 27 February 2014

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 67

INDEPENDENT AUDIT REPORT

==> picture [143 x 29] intentionally omitted <==

AUDIT REPORT TO THE MEMBERS OF MAGONTEC LIMITED

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGONTEC LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Magontec Limited and Controlled Entities, which comprises the consolidated balance sheet as at 31 December 2013, and the consolidated statement of profit & loss and other comprehensive income, statement of changes in equity and cash flow statement for the year ended on that date, a statement of accounting policies, other explanatory notes and the directors’ declaration.

Directors’ Responsibility for the Financial Report

The directors of Magontec Limited are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that compliance with the Australian equivalents to International Financial Reporting Standards (IFRS) ensures that the financial report, comprising the financial statements and notes, complies with IFRS.

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 Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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 control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Level 9, 5 Elizabeth Street SYDNEY NSW 2000 GPO BOX 3403 SYDNEY NSW 2001

T (02) 9221 7022 F (02) 9221 7080 E [email protected] W www.camphinboston.com.au ABN 69 688 697 499

==> picture [106 x 37] intentionally omitted <==

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec-13

INDEPENDENT AUDIT REPORT

==> picture [143 x 28] intentionally omitted <==

AUDIT REPORT TO THE MEMBERS OF MAGONTEC LIMITED (cont)

Auditor’s Opinion

In our opinion:

(a) the financial report of Magontec 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 31 December 2013 and of its performance for the year ended on that date; and
(ii) complying with Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 18 to 22 of the directors’ report for the year ended 31 December 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Magontec Limited for the year ended 31 December 2013 complies with section 300A of the Corporations Act 2001.

Camphin Boston Chartered Accountants

==> picture [97 x 34] intentionally omitted <==

Justin Woods Partner

Level 9, 5 Elizabeth Street, Sydney NSW 2000

Dated: 27 February 2014

Level 9, 5 Elizabeth Street SYDNEY NSW 2000 GPO BOX 3403 SYDNEY NSW 2001 T (02) 9221 7022 F (02) 9221 7080 E [email protected] W www.camphinboston.com.au ABN 69 688 697 499

==> picture [106 x 37] intentionally omitted <==

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec-13

SHAREHOLDER INFORMATION

Class: Ordinary share fully paid

ASX Code: MGL Voting Rights: Voting rights of members are governed by the Company’s constitution. In summary, every member present in person or by proxy, attorney or representative has one vote on a show of hands and one vote for each share on a poll.

Twenty Largest Holders of Ordinary Shares as at 31 December 2013

ty Largest Holders of Ordinary Shares as at 31 December 2013	ty Largest Holders of Ordinary Shares as at 31 December 2013

Name of Holder Substantial Shareholders 1 QINGHAI SALT LAKE MAGNESIUM 2 STRAITS MINE MANAGEMENT PTY 3 KWE (HK) INVESTMENT 4 CITICORP NOMINEES PTY LIMITED 5 JP MORGAN NOMINEES AUSTRALIA Other Shareholders 6 NATIONAL NOMINEES LIMITED 7 OPTIMIST INTERNATIONAL 8 MRS DAWN PATRICIA DAVIS 9 HSBC CUSTODY NOMINEES 10 MR NICHOLAS WILLIAM ANDREWS 11 DALSIZ PTY LTD 12 MRS PAMELA ELIZABETH DRABSCH 13 MR DAVID ALOYSIUS DRABSCH 14 MR JOHN DAVID TALBOT 15 MR GUENTER FRANKE 16 MILSTERN ENTERPRISES PTY LTD 17 BRIAN GORMAN SELF MANAGED SUPER FUND PTY LTD 18 MR PETER FABIAN HELLINGS & MRS JACQUELINE KIM GUN HELLINGS 19 MR IANAKI SEMERDZIEV 20 MRS THERESE MARY DUGGAN Total	No. Of Shares Percentage 180,535,784 22.19 152,536,385 18.749 55,797,298 6.858 52,551,234 6.459 46,392,120 5.702 27,914,624 3.431 15,527,722 1.909 13,246,710 1.628 12,422,112 1.527 11,079,542 1.362 5,700,000 0.701 4,800,000 0.59 4,533,335 0.557 4,000,767 0.492 3,633,521 0.447 3,530,958 0.434 3,502,778 0.431 3,050,000 0.375 2,770,000 0.34 2,744,311 0.337
	606,269,201 74.519

Distribution of Shareholders as at 31-Dec-2013

ers as at 31-Dec-2013
Number Held 1-1000 1001-5000 5001-10000 10001-100000 100001 and over TOTAL	Holders No. of Securities 10,443 3,574,491 2,078 4,614,959 464 3,752,547 1,484 46,598,241 418 755,048,428 14,887 813,588,666	Percentage 0.44 0.57 0.46 5.73 92.80
		100.00

As at 31-Dec-2013 a marketable parcel of securities ($500) is a holding of at least 20,000 securities (1). 1. Based on a closing share price o $0.025

Issued Capital and Securities		On	Issue at 31 Dec 13
Ordinary Shares fully paid			813,588,666
Listed Options exercisable on or before 3 Jan	2014		392,936,667	280,203,903 options converted to shares on 3 Jan 2014
Unlisted options inherent in Convertible Loan	Note		21,251,263	Fully converted	to shares on 3 Jan 2014
Unlisted Employee Options			0
Share Registry: Boardroom Pty Limited	Postal:		Local:		International
Address: Level 7, 207 Kent Street	GPO Box	3993,	Tel: 1300 737 760		Tel: +61 2 9290 9600
SYDNEY, NSW 2000	SYDNEY	2001	Fax: 1300 653 459		Fax: +61 2 9279 0664
					Website:www.boardroomlimited.com.au

MAGONTEC LIMITED | ANNUAL REPORT 31 Dec 2013

Page 70

LAST	PAGE		LAST	PAGE
LAST	PAGE		LAST	PAGE
LAST	PAGE		LAST	PAGE
LAST	PAGE		LAST	PAGE
LAST	PAGE		LAST	PAGE
LAST	PAGE		LAST	PAGE
	**MAGONTEC LIMITED	**	ANNUAL REPORT	31-Dec-13

AI assistant

MAGONTEC LIMITED — Annual Report 2013

65327_rns_2014-02-26_6724ae44-0dae-42bc-bcf1-9c21eae09082.pdf

AUDITED ANNUAL REPOR T

For 12 Months Ended 31 Dec 2013