MEC RESOURCES LIMITED - Annual Report 2016

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2016 ANNUAL REPORT

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Corporate Directory

Directors

H Goh Non-Executive Chairman D L Breeze Executive Director K O Yap Non-Executive Director D Ambrosini Executive Director

Registered Office

Chairman’s Report	1
Company Focus and Developments	2
Directors’ Report	10
Auditor’s Independence Declaration	22
Corporate Governance Statement	23
Statement of Proft or Loss and Other
Comprehensive Income	24
Statement of Financial Position	25
Statement of Changes in Equity	26
Statement of Cash Flows	27
Notes to the Financial Statements	28
Directors’ Declaration	60
Independent Auditor’s Report	61
Additional Securities Exchange
Information	63

14 View Street NORTH PERTH WA 6006

Principal Business Address 14 View Street NORTH PERTH WA 6006 Telephone: (08) 9328 8477 Facsimile: (08) 9328 8733 [email protected] www.mecresources.com.au

Auditor

HLB Mann Judd Level 4 130 Stirling Street PERTH WA 6000

Share Registry

Advanced Share Registry Ltd 110 Stirling Highway NEDLANDS WA 6009

Australian Securities Exchange Listing

Australian Securities Exchange Limited (Home Exchange: PERTH, Western Australia) ASX Code: MMR

Australian Business Number

44 113 900 020

Chairman’s Report

Dear Shareholder

Welcome to MEC Resources Limited’s 2016 Annual Report. Firstly, I wish to thank shareholders for their support of the Company during this year’s shareholder share purchase plan. Your support is assisting the Company’s assets progress in a dynamic market.

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The year 2016 has been challenging for MEC and its subsidiaries due to the depressed oil prices. However, signs of a recovery in the market provides encouragement for the development of the Company’s assets; the oil price has increased some 70% in the year to $46/bbl from its low point of $26/bbl in February.

through Advent Energy’s RL1 permit and brings the highway to within 4.5km of our Weaber gas wells in the Northern Territory. Its promised upgrade would provide much needed stimulus to the region north and east of Kununurra in Western Australia. Potential projects to benefit include the planned Project Sea Dragon aquaculture development, the expanded Ord River irrigation scheme, and the potential development of our Weaber Gas Field in RL1. We strongly encourage the elected Government to rapidly develop this crucial infrastructure by this investment in the north of Australia that was initiated through the Northern Australia Infrastructure Facility, especially including the upgrade of the Keep River Road. Advent Energy is working towards developing the Weaber gas field, which comprises 45.8 BCF natural gas at the 3C (contingent resources) level.

A deepening and dramatic development of the east coast gas crisis has been reported during the year, with the Australian Energy Market Operator warning that the developed gas reserves in eastern and south-eastern Australia can only meet forecast demand until 2019. With the NSW onshore gas industry in turmoil and the declining reserves in the Bass Strait and Cooper Basin, we are proud and enthusiastic that Advent Energy is pushing ahead with a focussed seismic campaign around a key potential drilling prospect in PEP11, in the offshore Sydney Basin.

Demonstrating Advent Energy’s commitment to the north of Australia and the importance of the continuation of Government investment in this region, a Letter Of Intent was signed with Northern Minerals for the potential supply of gas to their proposed Browns’ Range heavy rare earth elements project.

Supporting the ongoing investment in the PEP11 project, the east coast gas prices have recently hit staggering prices, due to gas shortages as a result of winter temperatures and LNG exports from Gladstone, Queensland. Spot prices on wholesale markets in Sydney have reached nearly $29 per gigajoule, as reported in the Australian Financial Review (1st July 2016). This augurs well for continued interest in PEP11 and its potential exploitation and shows the urgent need for development of further gas resources in the east of Australia.

I would like to thank you once again for your support during the 2015-16 financial year. Over the next 12 months we will continue to work hard to strengthen the assets of the company.

Yours faithfully

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Mr Hock Goh Chairman

MEC Resources 2016 ANNUAL REPORT

Company Focus and Developments

MEC Resources’ investment capital is targeted for new and emerging companies in which investments have the potential to yield significant returns in energy and mineral resources.

The Company is registered by the Australian Federal Government as a Pooled Development Fund (“PDF”) enabling most MEC shareholders to receive tax free capital gains on their shares and tax free dividends.

MEC’s current major investment lies in Advent Energy Ltd, an unlisted oil and gas exploration and development company with onshore and offshore exploration and near term development assets around Australia.

MEC’s investment focus:

Advent Energy

Western Australia / Northern Territory – Onshore Bonaparte Basin

MEC Resources’ investee Advent Energy Ltd (“Advent”), through wholly owned subsidiary Onshore Energy Pty Ltd, holds 100% of each of EP 386 and RL 1 in the onshore Bonaparte Basin in northern Australia. The Bonaparte Basin is a highly prospective petroliferous basin, with significant reserves of oil and gas. Most of the basin is located offshore, covering 250,000 square kilometres, compared to just over 20,000 square kilometres onshore. The Bonaparte Basin is currently Australia’s third most prolific offshore hydrocarbonproducing basin (after the Northern Carnarvon and Gippsland basins) with 4.2 MMbbl (0.7Gl) of oil and 153.1Bcf (4.3 Bcm) of gas produced in 2010.

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Location of EP386 and RL1 including the Weaber, Waggon Creek and Vienta gas fields, and other prospects and leads.

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Advent holds Exploration Permit EP 386 (2,568 square kilometres in area) which is the sole petroleum permit in the Western Australian section of the onshore Bonaparte Basin. Since 1960 twelve wells have been drilled in or near EP 386 and only sixteen in the whole of the onshore basin, with a resultant excellent technical success rate of encountering hydrocarbons.

Waggon Creek-1, drilled in 1995, provided strong evidence of a significant sweet gas-charged stratigraphic trap with fair to good quality sandstone reservoir within the upper Milligans Formation. Drilling of Vienta-1 in 1998 demonstrated numerous gas shows within Enga Sandstone units, with dry gas flowed to surface and visual porosity described in the cuttings. Both Waggon Creek-1 and Vienta-1 were cased and suspended for future production.

Production testing of the Waggon Creek-1 well has demonstrated flows of over 1 million standard cubic feet of natural gas per day (MMscf/d), and a gas column over a 217 metre gross interval. Production testing of the Vienta-1 well has demonstrated flows of over 2 MMscf/d. Gas production at Waggon Creek was from zones less than 1000m sub surface.

Within EP386, recoverable resource estimates range from 53.3 Bcf (Low) to 1,326.3 Bcf (High) of Prospective Resources, with a Best Estimate of 355.9 Bcf of gas.

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Production testing at Waggon Creek-1.

Application has been made to the Western Australian Department of Mines and Petroleum (DMP) for a variation, suspension and extension to the conditions and term of the EP386 permit. This application is pending as of the date of writing.

In the NT, Advent holds Retention Licence RL-1 (166 square kilometres in area), which covers the Weaber Gas Field, originally discovered in 1985.

Advent has previously advised that the 2C Contingent Resources* for the Weaber Gas Field in RL1 are 11.5 billion cubic feet (Bcf) of natural gas following an independent audit by RISC. Significant upside 3C Contingent Resources of 45.8 Bcf have also been assessed by RISC.

MEC Resources 2016 ANNUAL REPORT 3

Company Focus and Developments

Western Australia / Northern Territory – Onshore Bonaparte Basin (continued)

The results are summarised below:

Weaber Field	1C	2C	3C
Gas InitiallyIn Place(Bcf)	0.33	13.9	54.1
Contingent Resources(Bcf)	0.25	11.5	45.8

Contingent Resources, as defined under the Society of Petroleum Engineers Petroleum Resource Management System (SPE PRMS) guidelines.

The current rapid development of the Kununurra region in northern Western Australia, including the Ord River Irrigation Area phase 2, the township of Kununurra, and numerous regional resource projects provides an exceptional opportunity for Advent to potentially develop its nearby gas resources.

Market studies have identified a current market demand of up to 30.8 TJ per day of power generation capacity across the Kimberley region that could potentially be supplied by Advent Energy’s conventional gas projects in EP386 and RL1. In addition, the Federal Government’s White Paper on Developing Northern Australia described an estimated increase in electricity consumption of 52 per cent by 2018 for northern Western Australia.

The release of the Federal Government’s White Paper on Developing Northern Australia provides great confidence for an ongoing expansion of the east Kimberley region. The Commonwealth Government is providing a new $5 billion Northern Australian Infrastructure Facility to provide concessional loans for the construction of major infrastructure such as ports, roads, rail, pipelines, electricity and water supply. This will greatly assist Advent in further market development and potential reduced costs through the government funded infrastructure developments that may improve roads and ports in the vicinity of Advent’s EP386 and RL1 resources.

Prior to the election, the Coalition government announced a $130 million funding package for regional roads in the Northern Territory conditional upon its re-election. This package included the construction of an all-weather highway on the Keep River Road. The Keep River Road runs through Advent’s RL1 permit and brings the highway to within 4.5km of our Weaber gas wells in the Northern Territory. Its promised upgrade would provide much needed stimulus to the region north and east of Kununurra in Western Australia. Potential projects to benefit include the planned Project Sea Dragon aquaculture development, the expanded Ord River irrigation scheme, and the potential development of our Weaber Gas Field in RL1.

The Seafarms Group is progressing the potential development of Project Sea Dragon, a proposed world scale aquaculture operation adjacent to Advent’s EP386 and RL1 gas resources spanning the border of northern Western Australia and Northern Territory. Land access rights for Legune Station have been acquired by the Seafarms Group which will allow progression to application for regulatory approvals and commencement of a bankable feasibility study. A Letter Of Intent was signed by Advent Energy with the proponents of Project Sea Dragon in 2013 for the potential supply of energy to the aquaculture operation.

In addition, Advent Energy signed an LOI with Northern Minerals in March 2016 for the potential supply of energy to their proposed heavy rare earth elements project, southeast of Halls Creek in Western Australia.

Advent is in an exceptional position to potentially satisfy this growing regional demand where it remains the operator and 100% owner of key petroleum permits in the vicinity of this region.

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Unconventional Resources Within EP386 and RL1

The prospectivity of the Bonaparte Basin is evident from the known oil and gas fields in both the offshore and onshore portions of the basin. Advent’s onshore EP386 and RL1 contain many large structures with conventional reservoir gas discoveries.

Advent has identified significant shale areas in EP386 and RL1 and is continuing to assess these resources. The following data illustrates detail from that study showing results from the re-analysis of the well logs from prior drilling in Advent’s areas using enhanced computer processes.

Advent has indicated significant potential upside in prospective shale gas resources with estimated unrisked original gas in place (OGIP) in the range from 19 TCF to 141 TCF for the 100% Advent owned EP386 and RL1;
The thickness of the prospective shale gas play varies from 300m to over 1500m;
In addition to the existing gas discoveries in conventional petroleum reservoirs, composite wireline and mudlog gas display of these wells have consistently indicated the presence of continuous elevated gas shows. Source rock analyses on core, sidewall core and cuttings samples have indicated the presence of source rocks with up to 4.3 % Total Organic Contact and mature for gas and oil generation; and
Advent has calculated a Prospective Resource (best estimate) of 9.8 TCF for the shale gas areas of the Bonaparte permits of EP386 and RL1.

Garimala-1: Elevated Gas Shows over Milligans-Langfield Section

Example well composite log from Garimala-1 demonstrating elevated gas shows over a considerable shale sequence. Composite well logs from all onshore Bonaparte Basin wells demonstrate similar characteristics.

MEC Resources 2016 ANNUAL REPORT 5

Company Focus and Developments

Unconventional Resources Within EP386 and RL1 (continued)

Advent has recognised a considerable potential hydrocarbon resource and is working toward identifying and understanding the nature of the unconventional shale gas/condensate play in its 100% owned EP386 and RL1 permits.

An independent report has assessed the shale gas potential in Australia’s sedimentary basins, and has described a 6 trillion cubic feet (Tcf) resource for the onshore Bonaparte Basin, equal to a 1.09 billion barrels of oil equivalent (BOE) resource.

The report, titled Engineering energy: unconventional gas production, as a study of shale gas in Australia was undertaken by the Australian Council of Learned Academies (ACOLA). The ACOLA resource assessment made in the onshore Bonaparte Basin was assessed from the Milligans Formation gas zone.

In calculating the recoverable gas resource of 6 Tcf (over 1 billion BOE), the ACOLA report used a figure of only 120 feet (36 metres) as a shale thickness.

Advent has previously analysed the well logs of 16 conventional wells drilled in its areas in the Bonaparte Basin.

The thickness of the shales in these wells within the Milligans Formation varies from 300 metres to 1700 metres (984 feet to 5574 feet), and is materially thicker than the ACOLA figure.

The ACOLA report also used a total organic carbon (TOC) of 1.8% in deriving its assessment of shale source. Advent has reprocessed its well logs and observed TOC of up to 5% in a number of wells. Gas flow results from the conventional gas wells in Advent’s acreage have been up to 4.5 million standard cubic feet per day (MMscf/d).

Whilst encouraging that one of Australia’s premier petroleum producing basins is finally getting the recognition it deserves for its rich petroleum potential, the report’s assessment of the onshore Bonaparte Basin’s shale gas potential has not had the benefit of using information now available from the reprocessed petrophysical logs from the numerous wells in the area. This additional information provides further confidence in their findings and impacts positively on the potential estimates of unconventional gas resources in the area.

PEP11 Oil and Gas Permit

Advent, through wholly owned subsidiary Asset Energy Pty Ltd, holds 85% of Petroleum Exploration Permit PEP 11 – an exploration permit prospective for natural gas located in the Offshore Sydney Basin. Joint Venture partner Bounty Oil & Gas NL holds the remaining 15%.

PEP 11 is a significant offshore exploration area with large scale structuring and potentially multi-Trillion cubic feet (Tcf) gas charged Permo-Triassic reservoirs. Mapped prospects and leads within the Offshore Sydney Basin are generally located less than 50km from the Sydney-Wollongong-Newcastle greater metropolitan area. This area has a population of approximately 5,000,000 people.

The prospectivity of this proven petroleum basin has been enhanced by the confirmation of the presence of apparent ongoing hydrocarbon seeps. Sub-bottom profile data, swath bathymetry, seismic and echosounder data collected by Geoscience Australia along the continental slope / permit margin has demonstrated active erosional features in conjunction with geophysical indications of gas escape.

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Advent has previously interpreted significant seismically indicated gas features. Key indicators of hydrocarbon accumulation features have been interpreted following review of the 2004 seismic data (reprocessed in 2010). The seismic features include apparent Hydrocarbon Related Diagenetic Zones (HRDZ), Amplitude Versus Offset (AVO) anomalies and potential flat spots.

In addition, a new geochemical report was received during the year that provided support for a potential exploration well in PEP11. The report reviewed the hydrocarbon analysis performed on sediment samples obtained with PEP11 during 2010. The 2010 geochemical investigation utilised a proprietary commercial hydrocarbon adsorption and laboratory analysis technique to assess the levels of naturally occurring hydrocarbons in the seabed sediment samples.

The report supports that the area surrounding the proposed drilling site on the Baleen prospect appears best for hydrocarbon influence relative to background samples. In addition, the report found that the Baleen prospect appears to hold a higher probability of success than other prospects. Importantly, “a recent review of more than 850 wildcat wells – all drilled after geochemical surveys – finds that 79% of wells drilled in positive anomalies resulted in commercial oil and gas discoveries.” (Surface geochemical exploration for oil and gas: New life for an old technology, D. Schumacher, 2000, The Leading Edge)

Advent has demonstrated considerable gas generation and migration within PEP11, with the mapped prospects and leads highly prospective for the discovery of gas.

Heightening the prospectivity and critical positioning of PEP11, the Australian Energy Market Operator warned during the year that the developed gas reserves in eastern and south-eastern Australia can only meet forecast demand until 2019. The NSW onshore gas industry is in turmoil and gas reserves are declining in the Bass Strait and Cooper Basin. The east coast gas prices have recently hit staggering prices, due to gas shortages as a result of winter temperatures and LNG exports from Gladstone, Queensland. Spot prices on wholesale markets in Sydney have reached nearly $29 per gigajoule, as reported in the Australian Financial Review (1st July 2016).

Advent Energy is pushing ahead with a focussed seismic campaign around a key potential drilling prospect in PEP11, in the offshore Sydney Basin.

A high resolution 2D seismic survey covering approximately 200 line km will be performed to assist in the drilling of the Baleen target approximately 30 km south east of Newcastle, New South Wales. A drilling target on the Baleen prospect with total depth of 2150 metres has been identified in a review of previous seismic data. Intersecting 2D lines suggest an extrapolated 6000 acre (24.3 km[2] ) seismic amplitude anomaly area at that drilling target. The report on this drilling target noted previous 2D seismic data showed that the Permian aged section of the Bowen Basin has producing conventional gas fields at a similar time and depth to PEP11 at the Triassic/Permian age boundary.

Ocean bottom seismographs or nodes (OBS) are being considered for deployment in association with the planned seismic program in PEP11. Application has been made to Geoscience Australia for their potential use in PEP11. Geoscience Australia is home to a new generation of broadband OBS, which are precise and highly advanced instruments engineered to withstand ocean depths down to 6000m and can remain on the seafloor continuously recording for up to 12 months.

An OBS can be deployed prior to or during acquisition of traditional seismic surveys. They have the benefit of a direct coupling with the seabed, thereby eliminating the noise associated with seismic wave travel through the water column, leading to improved data quality. In conjunction with surface towed seismic surveys, an OBS program can yield a much more robust image of the subsurface than previously known.

MEC Resources 2016 ANNUAL REPORT 7

Company Focus and Developments

BPH Energy Limited

MEC Resources holds 4.01% of BPH Energy Limited (“BPH”).

BPH is a diversified company holding investments in biotechnology and resources. BPH also holds a significant interest (27%) in unlisted oil and gas exploration company Advent Energy Ltd. BPH is commercialising a portfolio of Australian biomedical technologies emerging from collaborative research by leading universities, medical institutes and hospitals across Australia.

Biomedical technologies in the commercialisation stage include:

Cortical Dynamics’ Brain Anaesthesia Response (BAR) Monitor; a device that measures a patient’s brain electrical activity (EEG) to indicate the response to drugs administered during surgery
HLS5 Tumour Suppress Gene; a genetic marker for early and accurate cancer detection

Molecular Discovery Systems Limited (”MDSystems”)

MDSystems was established to acquire high content information from large scale sample analysis to create a range of direct and indirect commercial opportunities. Research and development is focused on oncology drug discovery and further validating HLS5 as a novel tumour suppressor gene.

HLS5 Project:

MDSystems is working with the Molecular Cancer Research Group at the Harry Perkins Institute of Medical Research to validate HLS5 as a novel tumour suppressor gene, particularly for liver cancer.

The researchers at the Perkins Institute originally identified HLS5 (TRIM35) as a tumour suppressor associated with leukemia. However, in a separate study conducted in China, low levels of HLS5 (TRIM35) was found to correlate with human liver cancer development, and that reduced HLS5 (TRIM35) expression could potentially be used as prognostic marker for the disease.

In a significant further phase of this research the Perkins Institute researchers have developed a preclinical model of liver cancer and have demonstrated, in this model that removing the expression of HLS5 (TRIM35) can accelerate the development of liver disease.

Research undertaken by the Perkins Institute team, and laboratories in China, has revealed that HLS5 (TRIM35) is capable of slowing the growth of tumour cells in culture, including suppression of liver cancer cells.

Liver cancer ranks as the second leading cause of cancer-related deaths in developing countries. An estimated 782,500 new cases of liver cancer and 745,500 deaths occurred worldwide in 2012, of which China alone accounted for almost 50% of cases. While survival rates for many cancers have improved over the past two decades, there has been no major improvement in liver cancer prognosis.

Liver cancer also looms as one of Australia’s greatest cancer challenges, with new analyses predicting increased mortality from the disease in the future. At present, limited treatment options exist for patients with liver cancer.

8 MEC Resources 2016 ANNUAL REPORT

Cortical Dynamics Limited (“Cortical”):

Cortical is working with BPH Energy and the Swinburne University of Technology (”SUT”) to develop and commercialise a unique depth of anaesthesia monitoring system for use during major surgery. The core technology is based on real time analysis of the patients electroencephalograph (EEG) using a proprietary algorithm based on a mathematically and physiologically detailed understanding of the brain’s rhythmic electrical activity.

During the year Cortical has achieved a major milestone in the commercialisation of its Brain Anaesthesia Response Monitor (BAR). Cortical received notification from the Therapeutic Goods Administration (“TGA”) that a decision was made to issue a conformity assessment certificate to Cortical under section 41EC of the Therapeutic Goods Act 1989. In addition to this Cortical also received notification that to it would be issued MRA EC certificates (“CE Mark”) under the Mutual Recognition Agreement (MRA) with the European Union therefore allowing the CE mark to be applied to the BAR monitor.

Having achieved TGA certification and the CE Mark, Cortical is now able to market the BAR monitor within Australia and Europe.

Further to the above Cortical signed a Letter of Intent (“LOI”) with Device Technologies Australia (“Device”) for the BAR Monitor. Under the LOI Device will have exclusive distribution rights for Australia and New Zealand for the sale of products for a period of six (6) months. Subject to the overall market assessment outcome Device will have the right to continue the exclusive distribution rights for an additional 4 and a half (4.5) years.

NOTE: In accordance with ASX listing requirements, the geological information supplied in this report has been based on information provided by geologists who have had in excess of five years experience in their field of activity.

Asset Energy Pty Ltd is a wholly owned subsidiary of Advent Energy Ltd and is the Operator for PEP11 under the joint operating agreement with Bounty Oil and Gas NL.

MEC is an exploration investment company and relies on the resource and ore reserve statements compiled by the companies in which it invests. All Resource and Reserve Statements have been previously published by the companies concerned. Summary data has been used. Unless otherwise stated all resource and reserve reporting complies with the relevant standards. Resources quoted in this report equal 100% of the resource and do not represent MEC’s investees’ equity share unless stated.

MEC Resources 2016 ANNUAL REPORT 9

Directors’ Report

The directors of MEC Resources Ltd (“MEC” or the “Company”) present their report on the Company for the financial year ended 30 June 2016.

Directors

The names of directors in office at any time during or since the end of the year are:

H Goh

D L Breeze K O Yap D Ambrosini

Company Secretary

Ms Deborah Ambrosini continues in her role of Company Secretary. She also holds the position of Chief Financial Officer of the company and has over 15 years’ experience in corporate accounting roles.

Principal Activities

MEC is registered as a Pooled Development Fund under the Pooled Development Fund Act (1992). It has been formed to invest into exploration companies that are targeting potentially large energy and mineral resources.

MEC will provide carefully selected companies in the energy and mineral exploration sectors with development and exploration funding. MEC intends to identify investment opportunities with a number of specific characteristics including: large targets; a stage of development that permits a strategic investor or IPO within several years; strong and experienced management team and a definitive competitive advantage.

MEC’s current major investment lies in unlisted Australian oil and gas exploration company, Advent Energy Ltd.

Advent Energy Ltd - Oil and Gas

MEC has a controlling interest in the unlisted energy explorer Advent Energy Ltd (“Advent”) of 44.89%.

Advent has assembled a range of hydrocarbon permits which contain near term production opportunities with pre-existing infrastructure and exploration upside.

Advent’s assets include EP386 and RL1 (100%) in the onshore Bonaparte Basin in the north of Western Australia and Northern Territory and PEP11 (85%) in the offshore Sydney Basin.

Advent is investigating a considerable potential shale gas resource within EP386 and RL1. Studies indicate significant potential upside in prospective shale gas resources with an estimated (Best Estimate) prospective recoverable resource of 9.8 Tcf (Low Estimate is 1.9 Tcf and High Estimate is 25.4 Tcf).

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A conventional 2C Contingent Resource of 11.5 Bcf (1C is 0.3 Bcf and 3C is 45.8 Bcf) for the Weaber Gas Field (RL1) has been assessed by an independent third party as a component of Advent’s drive to commercialise its 100% owned onshore Bonaparte Basin assets. Included in these assets in EP386 conventional recoverable resource estimates range from 53.3 Bcf (Low) to 1,326.3 Bcf (High) of Prospective Resources, with a Best Estimate of 355.9 Bcf of gas. The rapid development of the Kununurra region in northern Western Australia, including the Ord Irrigation Expansion Project and numerous resource projects, provides an exceptional opportunity for Advent to potentially develop its nearby gas resources for the benefit of the region along with Advent and its shareholders.

The Sydney Basin is a proven petroleum basin with excellent potential for the discovery of gas and oil. Advent has demonstrated an active hydrocarbon system with seeps reported in the offshore area and sampling has indicated the presence of thermogenic hydrocarbon gas. This is considered to occur in basins actively generating hydrocarbons and/or that contain excellent migration pathways. Previous drilling has shown that the early Permian geological sequence is mature for hydrocarbons.

Undiscovered gross prospective recoverable gas resources for structural targets within the PEP11 offshore permit have been estimated at 5.7 Tcf (at the Best Estimate level). A Low Estimate of 0.3 Tcf and High Estimate of 67.8 Tcf has been assessed by Pangean Resources in 2010. PEP 11 lies adjacent to the most populous region of Australia and the major industrial hub and port of Newcastle.

Operating Results

The loss attributable to the owners of the Consolidated Group after tax for the year was $1,034,477 (2015: Loss $1,767,525).

Dividends

The Directors recommend that no dividend be paid in respect of the current period and no dividends have been paid or declared since the commencement of the period.

Financial Position

The net assets of the Consolidated Group have decreased by $657,865 to $28,846,820 at 30 June 2016.

MEC Resources 2016 ANNUAL REPORT 11

Directors’ Report

Significant Changes In State Of Affairs

Advent Energy Ltd

On 28 January 2016 Advent announced that the National Offshore Petroleum Titles Administrator (NOPTA) had approved a suspension of the PEP11 Year 2 work program of a 200 km 2D seismic survey and geotechnical studies until 12th August 2016. Further application has been made to NOPTA to allow the planned seismic program to occur in 2017. As at the time of writing this report, that application is still pending.
Following application by Onshore Energy Pty Ltd the WA Department of Mines & Petroleum granted a suspension of the condition requiring the completion of the existing work commitments for a period of twelve (12) months to 31 March 2017.
Advent signed a Letter Of Intent (“LOI”) with Northern Minerals (ASX: NTU) for the potential future supply of gas to their Browns Range heavy rare earth element project in north-eastern Western Australia. The non-binding LOI provides an initial framework for discussion, information sharing and negotiation towards a possible gas supply agreement.
During the period Asset Energy Pty Ltd executed a contract for the seismic activities within PEP11 in the offshore Sydney Basin. The contracted vessel will perform a high resolution 2D seismic survey covering approximately 200 line km to assist in the drilling of the Baleen target approximately 30 km south east of Newcastle, New South Wales.
During the year MEC announced a Share Purchase Plan (“SPP”). Under the SPP eligible shareholders were entitled to purchase up to a maximum of $15,000 worth of shares at a price of $0.037 per share. The offer was capped to a maximum of 30% of the Company’s share capital. The plan closed on 2 May 2016 with a total of $606,495 being raised. After Balance Date Events

After Balance Date Events

There have not been any matters or circumstances that have arisen since the end of the financial year, that have significantly affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

Future Developments

The Company will continue to develop its investee portfolio projects including PEP 11 and EP 386 and will evaluate and invest in a range of resource projects.

12 MEC Resources 2016 ANNUAL REPORT

Information on Directors

H Goh

Non-Executive Chairman – Age 61

Shares held in MEC– nil Shares held in Advent – 3,000,000 Listed Options held – nil Unlisted Options held MEC – nil

Hock was formerly President of Network and Infrastructure Solutions, a division of Schlumberger Ltd, based in London with revenue in excess of US$1.5 billion. He had global responsibility of Schlumberger’s outsourcing services, security, business continuity and networked related business units.

Prior to that, Hock was President of Schlumberger Asia based in Beijing, China where he managed their Asian operations consisting of a broad range of services including oil field services, IT outsourcing, financial software and smartcards.

In his 25 year career with Schlumberger, Hock held several other field and management responsibilities in the oil and gas industry spanning more than ten countries in Asia, the Middle East and Europe. Hock started as an oil field service engineer in Indonesia in 1980 before moving to Australia where he worked on the rigs in Roma, Queensland, Bass Strait in Victoria and the Northwest Shelf, offshore Western Australia.

After retiring from Schlumberger, Hock was a partner with Baird Asia Capital Partners, the U.S. based buyout fund of Baird Private Equity, providing change-of-control and growth capital to middle-market companies.

Hock currently serves on the boards of Santos Limited, Stora Enso Ojy, AB SKF and Versuvius PLC. He received his B Eng (Hons) in Mechanical Engineering from Monash University, Australia in 1980. He also completed an Advanced Management Program at INSEAD/ France in 2004.

D L Breeze

Executive Director and Managing Director – Age 62

Shares held MEC – 15,597,988 Shares held in Advent – 2,000,000 Listed Options – nil Unlisted Options held in Advent – nil Unlisted Options held in MEC - nil

David has been Executive Director of MEC Resources Ltd since 2005. He is also Chairman of Grandbridge Limited (a publicly listed investment company) and BPH Energy Limited, and an Executive Director of Advent Energy Ltd. He has extensive experience in transaction structuring, corporate advisory and funding for listed and unlisted companies. He has also held executive, consulting and/or board positions across a range of stockbroking companies.

David has provided Independent Experts reports for asset valuation under the provisions of the Australian Securities Exchange Rules and Corporations Law. He has also published in the Australian Securities Industry Journal on resource valuation and is a co-author of an European Geosciences Union paper. He holds a Bachelor of Economics and an MBA, and is a Fellow of the Financial Services Institute of Australia and the Institute of Company Directors of Australia.

MEC Resources 2016 ANNUAL REPORT 13

Directors’ Report

Information on Directors (continued)

K O Yap

Non-Executive Director – Age 54

Shares held MEC– 4,444,755 Listed options –nil Unlisted Options held in MEC – nil

K.O Yap has over 16 years experience in investment banking. He has recently helped establish Hexa Asset Management in Hong Kong. Prior to this, K.O was Head of Corporate Finance at Daiwa Securities (H.K.) Ltd., Executive Director at Alta Financial Group and founder of Eton Advisory Services.

His career took him from general audit, computer audit and corporate advisory with Ernst & Young in London to investment banking with Barclays de Zoete Wedd Asia Ltd. and then Daiwa Securities (H.K.) Ltd.

His extensive experience covers all aspects of corporate finance, advisory, M&A and capital raisings throughout Asia. These include privatisation, listing and public offerings from the PRC (Northeast Electric, H-Share), Malaysia (Petronas Gas) and Thailand (PTTEP); equity-linked issues from HK (Emperor International) and Thailand (Bangkok Land) and debt issues including a samurai bond for Wharf (H.K.).

K.O also has extensive experience in mergers and acquisitions (and related restructurings) with transactional experience in Thailand, Indonesia, Malaysia, Hong Kong and China.

K.O is a graduate from the London School of Economics, in 1984 and is also a fellow of the Institute of Chartered Accountants in England and Wales.

D Ambrosini

Executive Director and Company Secretary – Age 42

Shares held – nil Listed options – nil Unlisted Options held in MEC – nil Unlisted Options held in Advent – nil

Deborah is a chartered accountant with over 15 years’ experience in accounting and business development spanning the biotechnology, mining, IT communications and financial services sectors. She has extensive experience both nationally and internationally in financial and business planning, compliance and taxation.

Deborah is a member of Chartered Accountants, Australia and New Zealand. She was a state finalist in the 2009 Telstra Business Woman Awards and was a recipient of the highly regarded 40 under 40 award held by the WA Business News.

Deborah is also a Director of ASX listed Grandbridge Limited.

14 MEC Resources 2016 ANNUAL REPORT

Remuneration Report (Audited)

This report details the nature and amount of remuneration for key management personnel of MEC Resources Ltd. The remuneration report details the remuneration arrangements for Key Management Personnel 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 Group.

This information provided in this remuneration report has been audited as a required by Section 308(3C) of the Corporations Act 2001 .

The Directors and other key management personnel of the Group during or since the end of the financial year were:

H Goh – Non-Executive Chairman

D L Breeze – Executive Director

K O Yap – Non-Executive Director

D Ambrosini – Executive Director and Company Secretary

E H Tan – Non Executive Director of Advent

All the parties have held their current position for the whole of the financial year and since the end of the financial year unless otherwise stated.

Remuneration Policy

The remuneration policy of MEC Resources Ltd has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives as determined by the Board and/or shareholders. The remuneration report, as contained in the 2015 financial accounts was adopted at the Company’s 2015 annual general meeting. Remuneration for both Executive and Non-Executive directors has not increased since company inception. Although remuneration is reviewed annually against local market levels, the Board believes this course of action to be appropriate.

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

The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was approved by the Board.

All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits and options.
The Board reviews executive packages annually by reference to the Company’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.

Remuneration philosophy

The performance of the Company depends upon the quality of the Directors and executives. The philosophy of the Company in determining remuneration levels is to:

set competitive remuneration packages to attract and retain high calibre employees;
link executive rewards to shareholder value creation; and
establish appropriate, demanding performance hurdles for variable executive remuneration

MEC Resources 2016 ANNUAL REPORT 15

Directors’ Report

Remuneration philosophy (continued)

The performance of executives is measured against criteria agreed biannually with each executive and is based predominantly on the forecast growth of the Company’s profits and shareholders’ value. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.

Executives are also entitled to participate in the employee share and option arrangements.

The executives receive a superannuation guarantee contribution required by the government, which is currently 9.50%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

Shares given to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using an appropriate methodology.

The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. Payments to non-executive directors are based on market practice, duties and accountability. Independent external advice is sought when required on payments to nonexecutive directors. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the Company. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the employee option plan.

A policy on Directors hedging their equity has not been implemented by the Consolidated Group.

Compensation Practices

The Board’s policy for determining the nature and amount of compensation of key management for the Group is as follows:

The compensation structure for key management personnel is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Company. The contracts for service between the Company and key management personnel are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement, key management personnel are paid employee benefit entitlements accrued to date of retirement. Key management personnel are paid one months of salary in the event of redundancy and options not exercised before or on the date of termination will lapse after one month.

The Board determines the proportion of fixed and variable compensation for each key management personnel.

Employment contracts of directors

The employment conditions of the managing director are formalised in a contract of employment. The employment contract stipulates a six month resignation period. The Company may terminate an employment contract without cause by providing six months written notice or making payment in lieu of notice, based on the individual’s annual salary component together with a redundancy payment of six months of the individual’s fixed salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct, the company can terminate employment at any time. Any options not exercised before or on the date of termination will lapse after one month.

16 MEC Resources 2016 ANNUAL REPORT

The remaining directors are consultants to MEC Resources Ltd and each party can terminate their services by written notice.

Details of Remuneration for the year ended 30 June 2016

The remuneration for each director of the consolidated entity receiving the highest remuneration during the year was as follows:

2016

Key Management Person H Goh	Cash, Salary and Fees 100,000	Short-term Benefts Bonus Non-cash beneft - -	Short-term Benefts Bonus Non-cash beneft - -	Other -	Post- employment Benefts Superannuation -
D L Breeze	115,000	-	-	-	-
K O Yap	25,000	-	-	-	-
D Ambrosini	50,000	-	-	-	-
E H Tan	25,000	-	-	-	-

2016 (continued)

Key Management Person	Long- term Benefts	Share-based payment	Share-based payment	Total	Performance Related	Compensation relating to options
	Other	Shares Options		$	%	%
H Goh	-	-	-	100,000	-	-
D L Breeze	-	-	-	115,000	-	-
K O Yap	-	-	-	25,000	-	-
D Ambrosini	-	-	-	50,000	-	-
E H Tan	-	-	-	25,000	-	-

2015

Key Management Person	Cash, Salary and Fees	Short-term Benefts Bonus Non-cash beneft	Short-term Benefts Bonus Non-cash beneft	Other	Post- employment Benefts Superannuation
H Goh	100,000	-	-	-	-
D L Breeze	115,000	-	-	-	-
K O Yap	25,000	-	-	-	-
D Ambrosini	50,000	-	-	-	-
E H Tan	25,000	-	-	-	-

MEC Resources 2016 ANNUAL REPORT 17

Directors’ Report

Details of Remuneration for the year ended 30 June 2016 (continued)

2015 (continued)

Key Management Person H Goh	Long- term Benefts Other -	Share-based payment Shares Options - -	Total $ 100,000	Performance Related % -	Compensation relating to options % -
D L Breeze	-	- -	115,000	-	-
K O Yap	-	- -	25,000	-	-
D Ambrosini	-	- -	50,000	-	-
E H Tan	-	- -	25,000	-	-

Interest in the shares and options of the Company and related bodies corporate

The following relevant interests in shares and options of the Company or a related body corporate were held by Directors as at the date of this report.

2016 Number of Unlisted Options Held by Key Management Personnel Advent Energy Ltd

	Balance 1.7.2015	Granted as Compen- sation	Options Exercised	Net Change Other *	Balance 30.6.2016	Total Vested 30.6.2016	Total Vested and Exercis- able 30.6.2016	Total Unexercis- able 30.6.2016
H Goh	-	-	-	-	-	-	-	-
D Breeze	2,000,000	-	-	(2,000,000)	-	-	-	-
K O Yap	-	-	-	-	-	-	-	-
D Ambrosini	500,000	-	-	(500,000)	-	-	-	-
E H Tan	-	-	-	-	-	-	-	-

*these options expired on 5 August 2015

Shareholdings - MEC ResourcesNumber of Shares Held by Key Management Personnel

2016

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Balance Received as Options Net Change Balance
1.7.2015 Compen-sation Exercised Other * 30.6.2016
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H Goh	5,085,498	-	-	-	5,085,498
D L Breeze	15,192,583	-	-	405,405	15,597,988
K O Yap	4,039,350	-	-	-	4,039,350
D Ambrosini	-	-	-	-	-
E H Tan	-	-	-	-	-

*During the year Mr Breeze participated in the Company Share Purchase Plan by converting $15,000 in prior year accrued director fees.

18 MEC Resources 2016 ANNUAL REPORT

Shareholdings - Advent Energy Number of Shares Held by Key Management Personnel

2016

	Balance 1.7.2015	Received as Compen- sation	Options Exercised	Net Change Other	Balance 30.6.2016
H Goh	3,000,000	-	-	-	3,000,000
D L Breeze	2,000,000	-	-	-	2,000,000
K O Yap	-	-	-	-	-
D Ambrosini	-	-	-	-	-
E H Tan	2,000,000	-	-	-	2,000,000

The value of options lapsed during the year was nil.

There were nil options exercised during the year.

The Company has an agreement with Trandcorp Pty Ltd on normal commercial terms procuring the services of David Breeze. The agreement is at the rate of $65,000 per annum, commencing from the time of receiving listing approval. This is included in Mr Breeze’s total remuneration above. Board payments may be made up to a level of $250,000 per annum. Payments are to be made up to $25,000 per annum per director and $50,000 per annum for the Chairman. Remuneration to the directors of Advent is included in the tables above.

There were no grants of share based payment compensation to directors and senior management during the year.

Company performance, shareholder wealth, and director and executive remuneration

The following table shows the gross revenue and the operating result for the last five years for the listed entity, as well as the share price at the end of the respective financial years. Analysis of the actual figures shows a decrease in the operating loss in the current year from the normalised loss in the prior year. The loss for last year was negatively influenced by the loss incurred on the sale of redundant capitalised items. A book loss of $1.2M was recorded on the sale of these items however the normalised loss was $1.6M. The Board is of the opinion that the decreased loss is in line with expectations as efforts continue to cut the costs of the Company while navigating very difficult market conditions.

==> picture [427 x 21] intentionally omitted <==

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2012 2013 2014 2015 2016
----- End of picture text -----

Revenue	376,380	164,590	58,933	28,524	23,984
Net Proft/Loss	(9,645,887)	(3,263,080)	(1,916,524)	(2,903,730)	(1,300,678)
Shareprice at Year end	$0.085	$0.038	$0.037	$0.019	$0.029
Lossper share	($5.89)	($1.31)	($0.87)	($0.01)	($0.06)

End of remuneration report.

MEC Resources 2016 ANNUAL REPORT 19

Directors’ Report

Meetings of Directors

During the financial year, one meetings of directors (including committees of directors) were held. Attendances by each director during the year were:

	Number eligible	Directors’ Meetings to attend Number attended
H Goh	1	1
D L Breeze	1	1
K O Yap	1	1
D Ambrosini	1	1

Indemnifying Officers or Auditors

During or since the end of the financial year the company has given an indemnity or entered an agreement to indemnify, or paid or agreed to pay insurance premiums as follows:

The company has paid premiums to insure each of the following directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the company. The amount of the premium was $25,548.

D Breeze
D Ambrosini
H Goh
K O Yap
E H Tan

The company has not indemnified the current or former auditor of the company.

Options

At the date of this report, the unissued ordinary shares of MEC Resources Ltd under unlisted options are as follows:

MEC Resources Ltd

Grant Date	Date of Expiry	Exercise Price	Number Under Option
01/07/2013	30/06/2018	$0.10	950,000
02/04/2016	31/03/2020	$0.06	2,400,000

During the year ended 30 June 2016, nil ordinary shares of MEC Resources Ltd were issued on the exercise of options granted under the MEC Resources Ltd Incentive Option Scheme (2015: nil). No amounts are unpaid on any of the shares.

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

20 MEC Resources 2016 ANNUAL REPORT

Proceedings on Behalf of Company

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

Environmental Issues

During the period, petroleum well integrity assessments were carried out by specialist contractors on the Waggon Creek-1 and Vienta-1 wells within EP386. These wells are cased and suspended as potential future producers. These inspections were performed on the basis of environmental plans approved for the recompletion and production testing of these wells in 2011.

Non-audit Services

The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

all non-audit services are reviewed and approved by the Board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

No fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2016 (2015: Nil).

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2016 has been received and can be found on page 22.

The directors’ report is signed in accordance with a resolution of directors made pursuant to S298(2) of the Corporations Act 2001 .

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David Breeze Director

Dated this 26th Day of August 2016

MEC Resources 2016 ANNUAL REPORT 21

Auditor’s Independence Declaration

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As lead auditor for the audit of the consolidated financial report of MEC Resources Limited for the year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of:

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

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Perth, Western Australia 26 August 2016

B G McVeigh Partner

HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: [email protected]. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers.

MEC Resources 2016 ANNUAL REPORT

Corporate Governance Statement

The Board of Directors of MEC Resources Limited (“MEC or “the company”) is responsible for the corporate governance of the economic entity. The Board guides and monitors the business and affairs of the company on behalf of the shareholders by whom they are elected and to whom they are accountable.

To ensure that the Board is well equipped to discharge its responsibilities, it has established guidelines and accountability as the basis for the administration of corporate governance.

A copy of the Company’s Corporate Governance Statement can be found on the Company’s website at www.mecresources.com.au

MEC Resources 2016 ANNUAL REPORT

Statement of Profit or Loss and other Comprehensive Income

for the year ended 30 June 2016

Comprehensive Income for the year ended 30 June 2016
Note Revenue 2 Other gains and losses 2 Other Income 2 Administration expenses Consulting and Legal expenses 3 Depreciation and amortisation expense Employee expenses 3 Insurance expenses Interest expenses Data centre administration Service Fees Travelling expenses Other expenses Operating loss before income tax Income tax expense 8 Operating loss for the year Other Comprehensive Income Items that will never be reclassifed to proft or loss Items that are or may be reclassifed to proft or loss Total Comprehensive income for the period Loss attributable to non-controlling interest Loss attributable to owners of the company Total Comprehensive income attributable to non-controlling interest Total Comprehensive Income attributable to the owners of the Company Earnings Per Share – Basic and diluted earnings per share (cents per share) 6	Consolidated 2016 $ 2015 $
	23,984 28,524 - (1,425,070) 37,498 234 (252,750) (216,577) (131,348) (257,662) (1,170) (3,081) (487,587) (473,235) (31,418) (30,349) (3,901) (3,466) (34) (12,726) (309,720) (331,156) (33,278) (56,382) (110,954) (122,784)
	(1,300,678) (2,903,730) - -
	(1,300,678) (2,903,730) - - - -
	(1,300,678) (2,903,730)
	(266,201) (1,136,205)
	(1,034,477) (1,767,525)
	(266,201) (1,136,205)
	(1,034,477) (1,767,525)
	(0.56) (1.07)

The accompanying notes form part of these financial statements.

24 MEC Resources 2016 ANNUAL REPORT

Statement of Financial Position

as at 30 June 2016

Note Current Assets Cash and cash equivalents 7 Trade and other receivables 9 Financial assets 12 Other current assets 10 Total Current Assets Non-Current Assets Other non-current assets 11 Evaluation and exploration expenditure 12 Financial assets 13 Property, plant & equipment 14 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 15 Provisions 16 Financial liabilities 17 Total Current Liabilities Non-Current Liabilities Provisions 16 Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital 18 Option Reserve 19 Accumulated losses Total Equity Attributable to Owners Non-controlling Interest Total Equity	Consolidated 2016 $ 2015 $
	877,018 1,265,571 118,322 174,573 44,867 44,867 30,138 33,018
	1,070,345 1,518,023
	22,674 22,674 29,022,046 29,024,515 453,415 285,333 1,782 2,952
	29,499,917 29,335,474
	30,570,262 30,853,503
	793,795 545,074 91,190 87,016 810,973 697,978
	1,695,958 1,330,068
	27,484 18,750
	27,484 18,750
	1,723,442 1,348,818

	28,846,820 29,504,685
	26,165,961 25,529,466 15,845,209 522,672 (25,874,320) (24,839,843)
	16,136,850 1,212,295 12,709,970 28,292,390
	28,846,820 29,504,685

The accompanying notes form part of these financial statements.

MEC Resources 2016 ANNUAL REPORT 25

Statement of Changes in Equity

for the year ended 30 June 2016

Balance at 1 July 2014 Loss attributable to members of the consolidated entity Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Options exercised during the fnancial period Options issued during the fnancial period Balance at 30 June 2015 Balance at 1 July 2015 Loss attributable to members of the consolidated entity Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Options exercised during the fnancial period Reclassifcation of NCI to contribution reserve (note 19) Options issued during the fnancial period Balance at 30 June 2016	Ordinary Share Capital $ Accumu- lated losses $ Option Reserve $ Contri- bution Reserve $ Total attributable to owners $ Non- controlling Interest $ Total $
	24,924,466 (23,072,318) 520,081 - 2,372,229 29,428,595 31,800,824 - (1,767,525) - - (1,767,525) (1,136,205) (2,903,730) - - - - - - -
	- (1,767,525) - - (1,767,525) (1,136,205) (2,903,730) 605,000 - - - 605,000 - 605,000 - - 2,591 - 2,591 - 2,591
	25,529,466 (24,839,843) 522,672 - 1,212,295 28,292,390 29,504,685
	25,529,466 (24,839,843) 522,672 - 1,212,295 28,292,390 29,504,685 - (1,034,477) - - (1,034,477) (266,201) (1,300,678) - - - - -
	- (1,034,477) - - (1,034,477) (266,201) (1,300,678) 636,495 - - - 636,495 - 636,495 - - - 15,316,219 15,316,219 (15,316,219) - - - 6,318 - 6,318 - 6,318
	26,165,961 (25,874,320) 528,990 15,316,219 16,136,850 12,709,970 28,846,820

The accompanying notes form part of these financial statements.

26 MEC Resources 2016 ANNUAL REPORT

Statement of Cash Flows

for the year ended 30 June 2016

Note Cash Flows From Operating Activities Payments to suppliers and employees Interest received Net cash used in operating activities 20 Cash Flows From Investing Activities Amounts repaid by/ (loaned to) other entities Amounts repaid to other entities Receipts for sale of equipment Receipts from sale of listed investments Payment for deferred expenditure – (net of reimbursements) Net cash used in investing activities Cash Flows From Financing Activities Proceeds from Share Issue Net cash provided by fnancing activities Net increase (decrease) in Cash Held Cash At the Beginning Of The Financial Year Cash At The End Of The Financial Year 7	Consolidated 2016 $ 2015 $
	(881,080) (1,166,660) 13,447 28,524
	(867,633) (1,138,136)
	(160,000) (110,000) - (40,000) - 163,921 - 209,885 62,585 (3,735)
	(97,415) 220,071
	576,495 560,000
	576,495 560,000
	(388,553) (358,065) 1,265,571 1,623,636
	877,018 1,265,571

The accompanying notes form part of these financial statements.

MEC Resources 2016 ANNUAL REPORT 27

Notes to the Financial Statements

for the year ended 30 June 2016

1. Statement of Significant Accounting Policies

Corporate Information

The financial report includes the consolidated financial statements and the notes of MEC Resources Ltd and its controlled entities (‘Consolidated Group’ or ‘Group’).

MEC Resources Ltd is a public listed company on the ASX, which is incorporated and domiciled in Australia.

The financial report was authorised for issue on 26 August 2016 by the Board of Directors.

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001 . MEC Resources Ltd is a for-profit entity for the purpose of preparing the financial statements.

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 to which they apply. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

The financial report has been prepared on an accruals basis and is based on historical costs, modified, where stated below.

Compliance with IFRS

The consolidated financial statements of MEC Resources Ltd comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Financial Position

The Consolidated Group has incurred losses for the year ended 30 June 2016 of $1,300,678 (2015: $2,903,730) and has a net cash outflow from operating activities of $867,633 (2015: $1,138,136).

The Consolidated Group has a working capital deficit of $609,428 (Note 18b) as at 30 June 2016 (2015: surplus of $92,086) which includes cash assets of $877,018 as at 30 June 2016 (2015: $1,265,571), trade receivables of $118,322 (2015: $174,573), trade creditors and other payables of $793,795 and (2015: $545,074) and financial liabilities of $810,973 (2015: $697,978)

Included in trade creditors and payables are director fee accruals of $669,477 (2015: $449,515). The directors have reviewed their expenditure and commitments for the Consolidated Group and have implemented methods of costs reduction. The directors as a part of their cash monitoring, have voluntarily suspended cash payments for their directors’ fees to conserve cash resources until such time that the Consolidated Group has sufficient cash.

The Group has total financial liabilities of $810,973 at 30 June 2016. Subsequent to year end the Group has received confirmation from the lender that the current financial liabilities of $810,973 (2015: $697,978) will not be called for a period of 12 months from the date of this financial report or until such time as the Group is financially independent.

The directors have prepared cash flow forecasts that indicate that the Consolidated Group will have sufficient cash flows to meet its non-exploration commitments for a period of at least 12 months from the date of this report.

28 MEC Resources 2016 ANNUAL REPORT

Based on the cash flow forecasts, directors voluntarily suspending their payments, deferral of $697,978 in financial liabilities and the reduction of operational costs, the directors are satisfied that, the going concern basis of preparation is appropriate. The financial report has therefore been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

For further disclosure concerning the exploration permits and expenditure commitments of the Group and the ability of the Group to realise the associated capitalised exploration expenditure please refer to Note 12.

Accounting Policies

(a) Principles of Consolidation

A controlled entity is any entity which MEC Resources Ltd is exposed or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of controlled entities is contained in Note 25 to the financial statements. All controlled entities have a June financial year-end. As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

All inter-company balances and transactions between entities in the Consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the Consolidated Group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position respectively.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.

MEC Resources 2016 ANNUAL REPORT 29

Notes to the Financial Statements

for the year ended 30 June 2016

1. Statement of Significant Accounting Policies (continued)

(a) Principles of Consolidation (continued)

Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

(b) Business Combinations

Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method.

The purchase method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate. Acquisition-related costs are recognised in profit or loss as incurred.

Goodwill is recognised initially at the excess of cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in profit or loss.

(c) Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is accounted for in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is recognised in the statement of profit or loss and other comprehensive income except where it relates to items that may be recognised directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences or unused tax losses and tax credits can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

30 MEC Resources 2016 ANNUAL REPORT

(d) Property, plant and equipment

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

Plant and equipment

Plant and equipment are measured on the cost less accumulated depreciation and any impairment losses.

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

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 statement of profit or loss and other comprehensive income during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives to the consolidated Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

Class of Fixed Asset	Depreciation Rate
Plant and equipment	15.00 - 33.33%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.

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

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

MEC Resources 2016 ANNUAL REPORT 31

Notes to the Financial Statements

for the year ended 30 June 2016

1. Statement of Significant Accounting Policies (continued)

(e) Exploration and Development Expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward where right of tenure of the area of interest is current and to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from Intangible assets to mining property and development assets within property, plant and equipment. Should exploration be successful and result in a project, costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology.

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

(f) Financial Instruments

Recognition and Initial Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit and loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

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

32 MEC Resources 2016 ANNUAL REPORT

Classification and Subsequent Measurement

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

Financial assets are classified at fair value through profit and loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in the profit and loss in the period in which they arise.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognised at fair value plus any directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest rate method.

(iii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories.

The Group also has investments in unlisted shares that are not traded in an active market but that are also classified as available for sale financial assets and stated at fair value (because the directors consider that fair value can be reliably measured). Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognised in profit or loss.

(iv) Financial Liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Fair value

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

Impairment

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of profit or loss and other comprehensive income.

MEC Resources 2016 ANNUAL REPORT 33

Notes to the Financial Statements

for the year ended 30 June 2016

1. Statement of Significant Accounting Policies (continued)

(f) Financial Instruments (continued)

Impairment (continued)

Assets carried at amortised cost

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

Assets classified as available-for-sale

If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss.

Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period.

If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

(g) Derivatives

Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the statement of profit or loss and other comprehensive income immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the statement of profit or loss and other comprehensive income depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset; a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

34 MEC Resources 2016 ANNUAL REPORT

(h) Impairment of Assets

The Group reviews non-financial assets, other than deferred tax assets, at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit” or “CGU”). An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(i) Cash and Cash Equivalents

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

(j) Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest revenue is accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate applicable.

Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting.

Revenue from the rendering of a service is recognised by reference to the stage of completion of the contract. All revenue is stated net of the amount of goods and services tax (GST).

MEC Resources 2016 ANNUAL REPORT 35

Notes to the Financial Statements

for the year ended 30 June 2016

1. Statement of Significant Accounting Policies (continued)

(k) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST 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 statement of financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(l) Trade and other payables

Liabilities are recognized for amounts to be paid in the future for goods or services received, whether or not billed to the Consolidated Group. The amounts are unsecured and are usually paid within 30 days. The carrying amounts of trade and other payables are assumed to be the same as their fair values due to their short-term nature. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

(m) Share based payments

Share based compensation benefits are provided to employees via the Company’s Employee Option plan.

The fair value of options granted under the Company’s Employee Option Plan is recognized as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognized over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using an appropriate option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the share price at grant date and expected volatility of the underlying share, the expected dividend yield and risk free interest rate for the term of the option.

The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Company revises its estimate of the number of options that are expected to vest. The employee benefit expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

36 MEC Resources 2016 ANNUAL REPORT

(n) Earnings per share

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

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

(o) Foreign Currency

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Australian dollars (‘$’), which is the functional currency of the company and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise.

(p) Comparative Figures

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

(q) Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to statement of financial position. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits using a corporate bond rate.

MEC Resources 2016 ANNUAL REPORT 37

Notes to the Financial Statements

for the year ended 30 June 2016

1. Statement of Significant Accounting Policies (continued)

(r) Critical Accounting Estimates and Judgements

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

Key Judgments —Impairment of capitalised and carried forward exploration expenditure

Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. These costs are carried forward in respect of an area that has not at statement of financial position date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, refer to the accounting policy stated in note 1(e). Refer to Note 12 for further discussion on the commitments of the exploration permits held by the Group.

(s) Application of New and Revised Accounting Standards

Standards and Interpretations applicable to 30 June 2016

In the year ended 30 June 2016, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting period.

As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and, therefore, no material change is necessary to Group accounting policies.

Standards and Interpretations in issue not yet adopted

The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2016. As a result of this review the Directors have determined that there is no material impact, of the new and revised Standards and Interpretations on the Group and, therefore, no change is necessary to Group accounting policies.

38 MEC Resources 2016 ANNUAL REPORT

2. Revenue Revenue Interest revenue: other entities Total revenue Other Income and gains and losses Net gain/loss on the sale of assets Net gain/loss on fnancial assets designated as fair value through proft and loss Other income – R&D tax rebate 3. Loss For The Year Expenses Employee Expenses Salary Superannuation expense Other payroll expenses Consulting and Legal Consulting fees Legal fees 4. Auditors’ Remuneration Remuneration of the auditor of the parent entity for: HLB Mann Judd Nexia Perth Audit Services Remuneration of other auditors of subsidiaries for: - auditing or reviewing the fnancial report of subsidiaries HLB Mann Judd Nexia Perth Audit Services	Consolidated 2016 $ 2015 $
	23,984 28,524
	23,984 28,524
	- (1,220,589) - (204,481)
	- (1,425,070) 37,498 234
	37,498 (1,424,836)
	458,149 453,175 18,946 18,577 10,492 1,483
	487,587 473,235
	127,113 243,498 4,235 14,164
	131,348 257,662
	16,000 - 10,491 32,898 5,000 - - 7,500
	31,491 40,398

MEC Resources 2016 ANNUAL REPORT 39

Notes to the Financial Statements

for the year ended 30 June 2016

5. Key Management Personnel Compensation

(a) Names and positions held of economic and parent entity key management personnel in office at any time during the financial year are:

Key Management Personnel

H Goh – Non-Executive Chairman

D L Breeze – Executive Director

K O Yap – Non-Executive Director

D Ambrosini – Executive Director

E H Tan – Non-Executive Director of Advent

H Goh –Non-Executive Chairman D L Breeze –Executive Director K O Yap –Non-Executive Director D Ambrosini –Executive Director E H Tan –Non-Executive Director of Advent
Short term employee benefts Share based payments	Consolidated 2016 $ 2015 $
	315,000 315,000 - -
	315,000 315,000

Included in trade creditors and payables are director fee accruals of $669,477 (30 June 2015: $449,515).

	Amount Owing
Director	30 June 2016
David Breeze	77,967
Goh Hock	274,920
K O Yap	43,320
Deborah Ambrosini	127,047
Eng Hin Tan	124,974
Directors who havepreviouslyresigned	21,249
Balance owing	669,477

Key management personnel remuneration is disclosed in the remuneration report included in the directors report. Key management personnel shareholdings and option holdings are show below:

6. Earnings per share (a) Reconciliation of Earnings to Proft or Loss Net loss attributable to members of the parent Earnings used to calculate basic and diluted EPS (b) Weighted average number of ordinary shares outstanding during the year used in calculating basic and diluted EPS Loss per share (cents per share) The Company’s potential ordinary shares, being its options granted, are not considered dilutive as the conversion of these options will result in a decreased net loss per share.	Consolidated 2016 $ 2015 $
	(1,034,477) (1,767,525)
	(1,034,477) (1,767,525)
	184,403,862 165,220,767 (0.56) (1.07)

40 MEC Resources 2016 ANNUAL REPORT

		Consolidated	Consolidated
		2016	2015
		$	$
7.	Cash and cash equivalents
	Cash at bank and in hand	877,018	1,265,571
	Reconciliation of cash
	Cash at the end of the fnancial year as shown in the statement of cash
	fows is reconciled to items in the statement of fnancial position as follows:
	Cash and cash equivalents	877,018	1,265,571
8.	Income Tax Expense
(a)	The components of tax expense comprise:
	Current tax	-	-
	Deferred tax	-	-
	The expense for the year can be reconciled to
	accounting loss as follows:
	Loss from continuing operations	(1,300,678)	(2,903,730)
	Prima facie tax payable on proft from ordinary activities
	before income tax at 30% (2015: 30%)	(390,206)	(871,119)
	Non deductible expenses	1,271	82,075
	Difference in tax rates of parent which is taxed at
	25% (due to pooled development fund status)	40,691	40,966
	Unused tax losses not recognised as
	deferred tax assets	348,244	748,078
		-	-
	Weighted average rate of tax	-%	-%
(b)	The following deferred tax balances at 30% (2015: 30%)
	have not been recognised
	Deferred Tax Assets:
	Temporary differences	166,738	213,506
	Carry forward revenue losses	15,912,070	15,894,719
(c)	Unrecognised deferred liabilities
	Exploration Expenditure	8,713,416	8,714,066
	The above Deferred Tax Liabilities have not been recognised as they have been offset		against to
	the carry forward revenue losses for which the Deferred Tax Asset has not been recognised.
	The tax benefts of the above Deferred Tax Assets will only be obtained if:

(i) company derives future assessable income in a nature and of an amount sufficient to enable the benefits to be utilised;

(ii) the company continues to comply with the conditions for deductibility imposed by law; and

(iii) no changes in income tax legislation adversely affect the company in utilising the benefits.

MEC Resources 2016 ANNUAL REPORT 41

Notes to the Financial Statements

for the year ended 30 June 2016

9. Trade and other receivables Current Trade receivables Net GST receivables Other receivables Ageing of past due but not impaired 60-90 days 90-120 days 120 days and over Total 10. Other Assets Current Prepaid expenses 11. Intangibles Intangibles – Contacts database 12. Capitalised Exploration Costs Exploration expenditure capitalised Exploration and evaluation phases Reconciliation of movement during the year Opening balance at 1 July Capitalised expenditure – EP325 Capitalised expenditure – PEP11 Capitalised expenditure – EP386 Balance at 30 June	Consolidated 2016 $ 2015 $
	105,006 105,006 13,316 9,452 - 60,115
	118,322 174,573
	- - - - 105,006 105,006
	105,006 105,006
	30,138 33,018
	30,138 33,018
	22,674 22,674
	22,674 22,674
	29,022,046 29,024,515
	29,022,046 29,024,515
	29,024,515 30,405,290 - 249 (2,469) (1,384,508) - 3,484
	29,022,046 29,024,515

42 MEC Resources 2016 ANNUAL REPORT

Recoverability of the carrying amount of exploration assets is dependent on the successful exploration and sale of natural gas. Capitalised costs amounting to $nil (2015: $3,735) have been included in cash flows from investing activities in the statement of cash flows. Receipts for the sale of capitalised items of $62,585 (2015: nil) have been included in cash flows from investing activities in the statement of cash flows.

The Consolidated Group has current commitments for its exploration permits of $5,150,000 over the next 12 months. To assist in meeting these commitments, the Group is continually seeking and reviewing potential sources of both equity and debt funding. Advent is currently in negotiations with a number of parties on the terms of investment and management has confidence that a suitable outcome will be achieved however there is no certainty at this stage that those discussions will result in further funding being made available.

In relation to the Group’s exploration commitments (which include Asset Energy Pty Ltd completing 200km of 2D seismic and geotechnical studies within the PEP 11 area by 12 August 2016), Advent’s wholly owned subsidiary, Asset Energy Pty Ltd, lodged an application in respect of Petroleum Exploration Permit 11 (“PEP11”) with the National Offshore Petroleum Titles Administrator (“NOPTA”) prior to 30 June 2016 to vary a condition of PEP11, suspend the years 2 and 3 work commitments and request a subsequent extension of the PEP11 permit term. NOPTA is currently assessing the application.

Asset Energy Pty Ltd has invested over $25 million in the PEP11 title in recent history, and, along with its JV partner Bounty Oil and Gas NL, is committed to continuing to explore for and ultimately exploit any petroleum accumulations which may be identified in this title area.

In addition to the 2D seismic commitment, Advent is committed to drill an exploration well and perform a seismic survey by the end of March 2017 for EP 386. These 2 commitments comprise the significant balance of $4,797,500.

The application to vary a condition of the title and suspend the years 2 and 3 work commitments was prepared following discussions with NOPTA, however a decision has not been received by the Company from NOPTA.

The above conditions indicate the uncertainty that may affect the ability of the Group to realise the carrying value of the exploration assets in the ordinary course of business.

MEC Resources 2016 ANNUAL REPORT 43

Notes to the Financial Statements

for the year ended 30 June 2016

		Consolidated	Consolidated
		2016	2015
		$	$
13.	Financial Assets
	Current
	Loan receivable	44,867	44,867
	Total	44,867	44,867
	Loans receivable
	Loan to Grandbridge Limited (a)	44,867	44,867
	Non-Current
	Loan receivable
	Loan to BPH Energy Ltd (b)	282,942	114,860
	Fair Value through Proft and Loss Financial Assets
	Investment in Central Petroleum Ltd	-	-
	Investment in BPH Energy Limited	100,562	100,562
	Available for sale fnancial assets
	Investment in Molecular Discovery Systems Ltd	69,911	69,911
		453,415	285,333
(a)	The loan to Grandbridge Limited is unsecured non-interest bearing and repayable on demand.
(b)	On 22 October 2014 MEC entered into a convertible loan agreement with BPH Energy Ltd for a
	maximum $200,000. Interest is charged monthly at a rate of 8.97% per annum. The funds are to
	be used for working capital. The loan agreement is convertible at the election of MEC. The issue
	price on conversion will be the higher of $0.04 cents per share and the	average closing price of the
	Borrower Shares on the ASX over the 5 trading days immediately prior	to the date of conversion.
	On 18 February 2016 the loan was extended to a maximum amount of	$324,000. As at reporting
	date the closing balance of the loan including interest accrued to 30 June 2016 was $282,942 (2015:
	$114,860l).

14. Property, Plant and Equipment Plant and Equipment: At cost Accumulated depreciation Total Property, Plant and Equipment Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current fnancial year. Consolidated Entity: Balance at the beginning of the year Depreciation expense Carrying amount at the end of the year	Consolidated 2016 $ 2015 $
	21,133 21,133 (19,351) (18,181)
	1,782 2,952
	2,952 6,033 (1,170) (3,081)
	1,782 2,952

44 MEC Resources 2016 ANNUAL REPORT

15. Trade and other payables Trade payables Sundry payables and accrued expenses 16. Provisions Current Employee entitlements: Opening balance at 1 July Increase/Decrease in provision Balance at 30 June Share sale agreement Opening balance at 1 July Increase in provision Balance at 30 June Total Current Provisions	Consolidated 2016 $ 2015 $
	82,488 22,996 711,307 522,078
	793,795 545,074
	5,173 6,282 4,174 (1,109)
	9,347 5,173 81,843 81,843 - -
	81,843 81,843
	91,190 87,016

Provision for Employee Entitlements

A provision has been recognised for employee entitlements relating to annual leave and long service leave. The measurement and recognition criteria relating to employee benefits has been included in Note 1 to this report.

Provision for Share Sale Agreement

A provision has been recognised for the payment of fees to relevant parties upon the successful listing of Advent Energy Ltd.

Non-Current Employee entitlements: Opening balance at 1 July Increase/Decrease in provision Balance at 30 June 17. Financial Liabilities Loans payable - Current Loan from BPH Energy Limited Loan from Grandbridge Limited Loans from other entities	18,750 11,107 8,734 7,643
	27,484 18,750
	39,486 41,935 770,129 654,685 1,358 1,358
	810,973 697,978

Loans payable are unsecured, non-interest bearing and repayable on demand.

MEC Resources 2016 ANNUAL REPORT 45

Notes to the Financial Statements

for the year ended 30 June 2016

18. Issued Capital 200,034,633 (2015: 182,832,049) fully paid ordinary shares Less: Capital raising costs Issued Capital The company does not have an authorised capital and issued shares have no par value. Ordinary Shares At the beginning of reporting period Shares issued during the year on conversion of options At reporting date	2016 2015	Consolidated 2016 $ 2015 $
		27,196,110 26,559,615 (1,030,149) (1,030,149)
		26,165,961 25,529,466
		2016 2015
	$ $ 25,529,466 24,924,466 636,495 605,000	No No 182,832,049 155,823,150 17,202,584 27,008,899
	26,165,961 25,529,466	200,034,633 182,832,049

During the year MEC announced a Share Purchase Plan. Under the SPP eligible shareholders were entitled to purchase up to a maximum of $15,000 worth of shares at a price of $0.037 per share. The offer was capped to a maximum of 30% of the Company’s share capital. The plan closed on 2nd May 2016 with a total of $576,497.09 in cash and further $29,999.98 in reduction of liabilities.

A further 810,811 shares were issued to consultants as payment of outstanding invoices.

Fully Paid Ordinary Share Capital

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

(a) Options

There were 3,350,000 unlisted employee options on issue at the end of the year:

Total number	Exercise price	Expiry date
MEC Resources
950,000	$0.10	30 June 2018
2,400,000	$0.06	31 March 2020
3,350,000

The market price of the company’s ordinary shares at 30 June 2016 was 2.9 cents.

The holders of options do not have the right, by virtue of the option, to participate in any share issue or interest issue of any other body corporate or registered scheme.

46 MEC Resources 2016 ANNUAL REPORT

(b) Capital risk management

The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders.

The focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet corporate overheads and exploration commitments. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group and the parent entity at 30 June 2016 and 30 June 2015 are as follows:

		Consolidated	Consolidated
		2016	2015
		$	$
	Cash and cash equivalents	877,018	1,265,571
	Trade and other receivables	118,322	69,567
	Trade and other payables	(1,604,768)	(1,243,052)
	Working capital position	(609,428)	92,086
	Refer to Note 1 for working capital and fnancial position note.
19.	Reserves
	Options Reserve (a)	528,990	522,672
	Contributions Reserve (b)	15,316,219	-
(a)	The option reserve records items recognised as expenses in respect
	of the granting of Director and Employee share options.
(b)	The purpose of the contribution reserve is to refect the effect on equity
	of changes in ownership of the outside equity interest.
	Option Reserve
	Reconciliation of movement
	Opening balance	522,672	520,081
	Options charged during the year	6,318	2,591
	Closing balance	528,990	522,672
	Contribution Reserve
	Reconciliation of movement
	Opening balance	-	-
	Reclassifcation of NCI to Contribution reserve	15,316,219	-
	Closing balance	15,316,219	-

The Group has reclassified outside equity interest to a contribution reserve to reflect the relative interest of the outside equity interest in the equity of the controlled entities.

MEC Resources 2016 ANNUAL REPORT 47

Notes to the Financial Statements

for the year ended 30 June 2016

20. Cash Flow Information (a) Reconciliation of Cash Flow from Operations with Proft after income tax Operating loss after income tax Non-cash fows in proft: Depreciation Revaluation on investments Share based payments Share of associated loss Administration recharges Changes in net assets and liabilities, net of effects of purchase and disposal of subsidiaries (Increase)/decrease in trade and term receivables (Increase)/decrease in other assets Increase/(decrease) in trade payables and accruals Increase/(decrease) in provisions Net cash fow from operating activities	Consolidated 2016 $ 2015 $
	(1,300,678) (2,903,730) 1,170 3,081 - 204,481 - 1,220,589 66,318 47,591 104,911 138,591 (3,863) 63,206 2,880 (3,532) 248,721 85,053 12,908 6,534
	(867,633) (1,138,136)

20.
Cash Flow Information
(a)
Reconciliation of Cash Flow from Operations with
Proft after income tax
Operating loss after income tax
Non-cash fows in proft:
Depreciation
Revaluation on investments
Share based payments
Share of associated loss
Administration recharges
Changes in net assets and liabilities, net
of effects of purchase and disposal of
subsidiaries
(Increase)/decrease in trade and term
receivables
(Increase)/decrease in other assets
Increase/(decrease) in trade payables
and accruals
Increase/(decrease) in provisions
Net cash fow from operating activities

Consolidated
2016
$ 2015
$

(1,300,678)
(2,903,730)
1,170
3,081
-
204,481
-
1,220,589
66,318
47,591
104,911
138,591
(3,863)
63,206
2,880
(3,532)
248,721
85,053
12,908
6,534

(867,633)
(1,138,136)

21. Financial Risk Management

(a) Financial Risk Management

The Group’s financial instruments consist mainly of deposits with banks, short-term investments, investments held for trading, accounts receivable and payable, and loans to and from related parties. The main purpose of non-derivative financial instruments is to raise finance for group operations policies.

i. Financial Risk Exposures and Management

The main risks the Group is exposed to through its financial instruments are interest rate risk, liquidity risk, credit risk and equity price risk.

Interest rate risk

Interest rate risk is managed with a mixture of fixed and floating rate debt.

Liquidity risk

The Group manages liquidity risk by monitoring forecast cash flows.

48 MEC Resources 2016 ANNUAL REPORT

Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements.

Credit risk for derivative financial instruments arises from the potential failure by counter-parties to the contract to meet their obligations.

Equity Price Risk

The Group is exposed to equity price risks arising from equity investments. The performance of equity investments are reviewed biannually to market. The Group holds a diversified portfolio with investments in biotech and oil & gas exploration to manage this risk.

Equity Price Sensitivity Analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5% higher/lower:

Net loss for the year ended 30 June 2016 would decrease/increase $5,028 (2015: increase/ decrease by $5,028) as a result of the changes in fair value of financial assets through the profit and loss; and
The Group’s sensitivity to equity prices has not changed significantly from the prior year.

(b) Financial Instruments

i. Interest rate risk

The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

2016 Effective Average Interest Rate Payable %	Floating Interest Rate $ Fixed Interest Rate $ Non- Interest Bearing $ Total $
Financial Assets Cash and cash equivalents 1.79% Trade and other receivables - Financial Assets -current - Financial Assets- non-current 8.97% Financial Liabilities Trade and sundry Payables - Financial liabilities -	877,018 - - 877,018 - - 118,322 118,322 - - 44,867 44,867 - 282,897 170,518 453,415
	877,018 282,897 333,707 1,493,622
	- - 793,795 793,795 - - 810,973 810,973
	- - 1,604,768 1,604,768

MEC Resources 2016 ANNUAL REPORT 49

Notes to the Financial Statements

for the year ended 30 June 2016

21. Financial Risk Management (continued)

(b) Financial Instruments (continued)

i. Interest rate risk (continued)

(b) Financial Instruments (continued) i. Interest rate risk (continued)
2015 Effective Average Interest Rate Payable %	Floating Interest Rate $ Fixed Interest Rate $ Non- Interest Bearing $ Total $
Financial Assets Cash and cash equivalents 1.79% Trade and other receivables - Financial Assets -current - Financial Assets- non-current 8.97% Financial Liabilities Trade and sundry Payables - Financial liabilities -	1,265,571 - - 1,265,571 - - 174,574 174,574 - - 44,867 44,867 - 114,860 170,473 285,333
	1,265,571 114,860 389,914 1,770,345
	- - 545,074 545,074 - - 697,978 697,978
	- - 1,243,052 1,243,052

ii. Fair Values

The fair values of:

Term receivables are determined by discounting the cash flows, at the market interest rates of similar securities, to their present value.
Listed investments have been valued at the quoted market bid price at balance date. For unlisted investments where there is no organised financial market, the net fair value has been based on a reasonable estimation based on valuation techniques that are not based on observable market data.
Other loans and amounts due are determined by discounting the cash flows, at market interest rates of similar borrowings to their present value.
Other assets and liabilities approximate their carrying value.

No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments.

50 MEC Resources 2016 ANNUAL REPORT

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

date:
Financial Assets Financial assets at fair value through proft or loss Available for sale fnancial assets Loans and receivables Financial Liabilities Other loans and amounts due Other liabilities	Consolidated 2016 2015 Carrying Amount Fair Value Carrying Amount Fair Value
	100,562 100,562 100,562 100,562 69,911 69,911 69,911 69,911 446,131 446,131 334,301 334,301
	616,604 616,604 504,774 504,774
	810,973 810,973 697,978 697,978 793,795 793,795 545,074 545,074
	1,604,768 1,604,768 1,243,052 1,243,052

iii. Sensitivity Analysis

Interest Rate Risk

The Group has performed sensitivity analysis relating to its exposure to interest rate risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.

Interest Rate Sensitivity Analysis

The effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

remaining constant would be as follows:
Change in proft – Increase in interest rate by 1% – Decrease in interest rate by 0.5%	Consolidated Group 2016 2015
	13,400 12,655 (6,700) (6,328)

iv. Liquidity risk

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

Liquidity is the risk that the company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

MEC Resources 2016 ANNUAL REPORT 51

Notes to the Financial Statements

for the year ended 30 June 2016

21. Financial Risk Management (continued)

(b) Financial Instruments (continued) iv. Liquidity risk (continued)

The following are the contractual maturities at the end of the reporting period of financial liabilities.

30 June 2016	Contractual cash fows Carrying amount Total 2 months or less 2-12 months 1-2 years 2-5 years More than 5 years
Financial liabilities Trade and other payables Unsecured loans	793,795 (793,795) - (793,795) - - - 810,973 (810,973) - (810,973) - - -
	1,604,768 (1,604,768) - (1,604,768) - - -

30 June 2015	Contractual cash fows Carrying amount Total 2 months or less 2-12 months 1-2 years 2-5 years More than 5 years
Financial liabilities Trade and other payables Unsecured loans	545,074 (545,074) - (545,074) - - - 697,978 (697,978) - (697,978) - - -
	1,243,052 (1,243,052) - (1,243,052) - - -

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

30 June 2016 Financial assets at FVTPL – Investments in listed entities Available for sale fnancial assets – Investments in unlisted entities Total	Level 1 Level 2 Level 3 Total
	100,562 - - 100,562 - - 69,911 69,911
	100,562 - 69,911 170,473

52 MEC Resources 2016 ANNUAL REPORT

30 June 2015 Financial assets at FVTPL – Investments in listed entities Available for sale fnancial assets – Investments in unlisted entities Total	Level 1 Level 2 Level 3 Total
	100,562 - - 100,562 - - 69,911 69,911
	100,562 - 69,911 170,473

Reconciliation of Level 1 fair value measurements of financial assets:

Reconciliation of Level 1 fair value measurements of fnancial assets:
Opening balance Add: Purchases Total gains or loss in the proft and loss Proceeds from sale of listed investments Closing balance	2016 2015 Investments in listed entities (Level 1) Investments in listed entities (Level 1)
	100,562 514,928 - - - (204,481) - (209,885)
	100,562 100,562

The Consolidated Group sold its investment in Central Petroleum Ltd in the prior period

Reconciliation of Level 3 fair value measurements of financial assets:

Reconciliation of Level 3 fair value measurements of fnancial assets:
Opening balance Add: Purchases Total gains or loss in the proft and loss Closing balance	2016 2015 Available for sale (Level 3) Available for sale (Level 3)
	69,911 69,911 - - - -
	69,911 69,911

The company received through an in specie distribution an investment in Molecular Discovery Systems Ltd in January 2010. The investment in Molecular Discovery Systems Ltd was an arm’s length transaction.

The fair value of the Group’s investment in MDSystems as at 30 June 2016 has been arrived at on the basis of a valuation performed at 30 June 2015 by an independent expert valuer to the company and reassessed by management at 30 June 2016. The valuer holds the appropriate qualifications and recent experience in the valuation of investments of this nature. The fair value was determined using the relative valuation methodology. The approach considers the value of broadly comparable listed entities which are at a similar stage of biotechnology product life cycle to MDSystems. The valuation supported the carrying value of MEC’s AFS investment in the company.

MEC Resources 2016 ANNUAL REPORT 53

Notes to the Financial Statements

for the year ended 30 June 2016

22. Operating Segment

Identification of reportable segments

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

The operating segments are identified by management based on their investment in exploration companies. Financial information of these investments is reported to the managing director and his management team on at least a monthly basis. Currently, management’s focus is on the exploration program of Advent Energy project’s PEP 11, EP 325 and EP 386, which is disclosed in Note 12.

The Group operates predominantly in one industry, namely investments in energy and mineral resources. These activities are predominantly in Australia.

Accounting policies and inter-segment transactions

The accounting policies used by the Group in reporting segments are the same as those contained in note 1 to the accounts and in the prior period.

23. Events after the Balance Sheet Date

24. Related Party Transactions

(a) Directors’ Remuneration

Details of directors’ remuneration and retirement benefits are disclosed in the remuneration report in the Directors report and note 5.

in the Directors report and note 5.
Directors’ Equity Holdings Ordinary Shares Held as at the date of this report by directors and their director-related entities in: Advent Energy Ltd Unlisted Options Held as at the date of this report by key management personnel and their key management personnel-related entities in: Advent Energy Ltd	Parent 2016 2015 $ $
	7,000,000 7,000,000
	- 2,500,000

(b) Directors’ Equity Holdings

54 MEC Resources 2016 ANNUAL REPORT

(c) Related entities

A loan facility exists between Advent and its parent entity MEC, $3,600,000 (2015: $3,600,000). The loan is secured by a second charge over all of the assets and rights of Advent Energy including but not limited to, all real and personal property, choses in action, goodwill and called but unpaid nominal and premium capital. The loan is due and payable on the earlier of a successful capital raising or the date that MEC issues a notice for repayment. On the 30 July 2015 MEC Resources signed a variation to their secured loan agreement with Advent Energy Ltd which varied the agreement to incorporate a fixed repayment date of 19 November 2017.

(d) Directors

The company has an agreement with Trandcorp Pty Limited on normal commercial terms procuring the services of David Breeze to provide product development services. $65,000 (2015: $65,000) was paid during the year.

25. Controlled Entities and Non-Controlling Interests

(a) Controlled Entities

(a) Controlled Entities
		Country of	Ownership Interest
Name of Entity	Principal Activity	Incorporation	%
Parent Entity			2016 2015
MEC Resources Limited	Investment	Australia
Subsidiaries of MEC Resources Ltd
Advent Energy Limited	Oil and Gas	Australia	44.29 44.29
	exploration and
	development
Asset Energy Pty Ltd	Oil and Gas	Australia	44.29 44.29
	exploration and
	development
Onshore Energy Pty Ltd	Oil and Gas	Australia	44.29 44.29
	exploration and
	development

MEC owns 44.29% equity interest in Advent and its subsidiaries and consequentially does not control more than half of the voting power of those shares. However, the majority of the Board of MEC is on the Board of Advent and therefore has the ability to add and remove directors of Advent and hence has control over the financial and operating policies of Advent. Therefore Advent is controlled by the Group and is consolidated in these financial statements.

MEC Resources 2016 ANNUAL REPORT 55

Notes to the Financial Statements

for the year ended 30 June 2016

25. Controlled Entities and Non-Controlling Interests (continued)

(b) Non-Controlling Interests

Ownership interests and voting rights in Advent Energy and its subsidiaries, held by non-controlling interests make up 55.71%.

Summarised financial information of Advent Energy and its subsidiaries is as follows:

2016	Current Assets Non- Current Assets Current Liabilities Non- Current Liabilities Revenues Loss for the Year Total Compre- hensive Loss for the Year
Advent Energy Ltd Asset Energy Pty Ltd Onshore Energy Pty Ltd 2015	2,240,548 27,640,660 1,583,267 3,600,000 1,708 (392,057) (392,057)
	2,240,548 27,640,660 1,583,267 3,600,000 1,708 (392,057) (392,057)
	1,878 758,404 1,762,611 - - (21,357) (21,357)
	1,878 758,404 1,762,611 - - (21,357) (21,357)
	1,184 884,800 538,784 - - (69,713) (69,713)
	1,184 884,800 538,784 - - (69,713) (69,713)
	Current Assets Non- Current Assets Current Liabilities Non- Current Liabilities Revenues Loss for the Year Total Compre- hensive Loss for the Year
Advent Energy Ltd Asset Energy Pty Ltd Onshore Energy Pty Ltd	2,393,824 27,644,300 1,348,139 3,600,000 1,463 (1,972,124) (1,972,124)
	2,393,824 27,644,300 1,348,139 3,600,000 1,463 (1,972,124) (1,972,124)
	1,602 758,404 1,740,739 - - (21,859) (21,859)
	1,602 758,404 1,740,739 - - (21,859) (21,859)
	371 884,800 468,258 - - (68,094) (68,094)
	371 884,800 468,258 - - (68,094) (68,094)

56 MEC Resources 2016 ANNUAL REPORT

26. Share-Based Payments

The following share-based payment arrangements existed at 30 June 2016:

There were 3,350,000 unlisted employee options on issue at the end of the year:

				Fair Value at
Number	Exercise price	Expiry date	Issue Date	grant date
MEC Resources
950,000	$0.10	30 June 2018	1 July 2013	$0.1000
2,400,000	$0.06	30 March 2020	2 April 2015	$0.0032
3,350,000

At balance date, nil MEC share options have been exercised (2015: nil).

All options granted to key management personnel are ordinary shares in MEC Resources Ltd or its subsidiary Advent Energy Ltd, which confer a right of one ordinary share for every option held.

During the year, nil options (2015: 2,400,000) were issued under the company’s employee share option plan.

Outstanding at the beginning of the year Granted Exercised Expired / Cancelled Outstanding at year-end Exercisable at year-end Outstanding at the beginning of the year Granted Exercised Expired / Cancelled Outstanding at year-end Exercisable at year-end	MEC Resources Ltd 2016 2015 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $
	5,425,000 $0.549 3,125,000 $0.549 - - 2,400,000 $0.080 - - - - (2,075,000) $0.776 (100,000) $0.100
	3,350,000 $0.071 5,425,000 $0.350
	1,433,333 $0.078 2,319,667 $0.686
	Advent Energy Limited 2016 2015 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $
	2,500,000 $2.00 2,500,000 $2.00 - - - - - - - - (2,500,000) $2.00 - -
	- - 2,500,000 $2.00
	- - 2,500,000 $2.00

MEC Resources 2016 ANNUAL REPORT 57

Notes to the Financial Statements

for the year ended 30 June 2016

27. Contingent Liabilities

There were no contingent liabilities at reporting date.

28. Commitments

Capital Commitments

In order to maintain an interest in the exploration tenements in which the Group is involved, the Group is committed to meet the conditions under which the tenements were granted.

Capital expenditure forecasted for at the reporting date but not recognised as liabilities as follows:

Work Program Commitments – Exploration permits Payable: Within one year Greater than one year less than fve years Total	Consolidated 2016 $ 2015 $
	4,797,500 4,647,500 15,722,500 15,875,000
	20,520,500 20,522,500

In relation to the Group’s exploration commitments (which include Asset Energy Pty Ltd completing 200km of 2D seismic and geotechnical studies within the PEP 11 area by 12 August 2016) Advent’s wholly owned subsidiary, Asset Energy Pty Ltd, lodged an application in respect of Petroleum Exploration Permit 11 (“PEP11”) with the National Offshore Petroleum Titles Administrator (“NOPTA”) prior to 30 June 2016 to vary a condition of PEP11, suspend the current year’s work commitments for 12 months and request a subsequent corresponding extension of the PEP11 permit term. NOPTA is currently assessing the application.

Advent, through wholly owned subsidiary Onshore Energy Pty Ltd, has applied to the Western Australian Department of Mines and Petroleum for a variation, suspension and extension of current work commitments including an exploration well and 2D seismic. It is committed to drill an exploration well and perform a seismic survey by the end of March 2017 for EP 386. These 2 commitments comprise the significant balance of $4,797,500. The variation to the work commitments includes the reservoir stimulation and production testing of Waggon Creek-1 and Vienta-1 in EP386, to be completed by the end of March 2018.

58 MEC Resources 2016 ANNUAL REPORT

29. Parent Entity Disclosures Financial Position Assets Current assets Non-current assets Total asset Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued Capital Retained earnings Reserves Option Reserve Total equity Financial Performance Proft/Loss for the year Other comprehensive income Total comprehensive income	Consolidated 2016 $ 2015 $
	1,615,345 1,152,184 7,400,797 7,872,714
	9,016,142 9,024,898
	599,860 442,610 27,484 18,750
	627,344 461,360
	26,165,961 25,529,466 (18,242,961) (17,425,408) 465,798 459,480
	8,388,798 8,563,538
	(817,553) (841,653) - -
	(817,553) (841,653)

MEC Resources 2016 ANNUAL REPORT 59

Directors Declaration

The directors of the company declare that:

the financial statements and notes, as set out on pages 24 to 59, are in accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001 ; and
(b) give a true and fair view of the financial position as at 30 June 2016 and of the performance for the year ended on that date of the consolidated entity;
the Financial Statements and Notes comply with International Accounting Standards as disclosed in Note 1;
the directors have been given the declarations required by S295A of the Corporations Act 2001.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors made pursuant to S295(5) of the Corporations Act 2001 .

Director

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David Breeze Executive Director

Dated this 26th Day of August 2016

60 MEC Resources 2016 ANNUAL REPORT

Independent Auditor’s Report

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To the members of MEC Resources Limited

Report on the Financial Report

We have audited the accompanying financial report of MEC Resources Limited (“the company”), which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flow for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration, of the Group comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, the consolidated financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s and its controlled entities’ 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.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

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

Independence

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

HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers.

MEC Resources 2016 ANNUAL REPORT 61

Independent Auditor’s Report

Auditor’s Opinion

In our opinion:

(a) the financial report of MEC Resources Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Emphasis of Matter

We draw attention to Note 12 to the financial statements which describes the uncertainty around the basis of continuing to recognize the carrying value of exploration and evaluation assets. Our opinion is not modified in respect of this matter.

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2016.

The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the C orporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of MEC Resources Limited for the year ended 30 June 2016 complies with section 300A of the Corporations Act 2001 .

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HLB Mann Judd Chartered Accountants

B G McVeigh Partner

Perth, Western Australia 26 August 2016

62 MEC Resources 2016 ANNUAL REPORT

Additional Securities Exchange Information

Additional information required by Australian Securities Exchange Limited and not shown elsewhere in this report as follows. The information is made up to 16 August 2016.

1. Distribution of Shareholders

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

Number Ordinary
Range of Holding Shareholders Shares %
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Range of Holding	Shareholders Number Ordinary Shares %
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	475 202,693 0.10 456 1,379,668 0.69 464 4,098,236 2.05 1154 41,875,085 20.93 312 152,478,951 76.23
	2,861 200,034,633 100.00

2. (a) Distribution of Unlisted Optionholders

Range of Holding	Optionholders	Number of Options	%
MEC Resources
100,001 and over	4	3,350,000	100.00

3. Voting Rights - Shares

All ordinary shares issued by MEC Resources Ltd carry one vote per share without restriction.

4. Voting Rights - Options

The holders of employee options do not have the right to vote.

5. Restricted Securities

Restricted Securities
Shares- Number of Shares free of escrow Total Shares Options Number of Employee options not subject to Escrow (Not Listed) Total Options	200,034,633
	200,034,633
	3,350,000
	3,350,000

MEC Resources 2016 ANNUAL REPORT 63

Additional Securities Exchange Information

6. Tenements and Interests Held

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Permit Details Interest Held Entity
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Petroleum Exploration Permit 386	100%	Advent Energy
Petroleum Exploration Permit 11	85%	Advent Energy
Petroleum Exploration Permit 325	8.3%	Advent Energy
Retention Licence 1	100%	Advent Energy

7. Twenty Largest Shareholders (as at 16 August 2016)

The names of the twenty largest shareholders of the ordinary shares of the company are:

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Number of ordinary % held of issued
Name fully paid shares ordinary capital
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Name

Number of ordinary
fully paid shares
% held of issued
ordinary capital

Grandbridge Ltd
Healy Robert Anthony
Breeze David
HSBC Custody Nom (Aust) Ltd
Trandcorp Pty Ltd (Super Ac)
Citicorp Nom Pty Ltd
Trandcorp Pty Ltd
Gunthorpe Andrew John
Pado John Thomas
Bujo Pty Ltd
Semerdziev Ianaki
Ming Ding Gui
Ware Colin Victor
Lam Terry Luong and Chan Pui Sze (Super Ac)
Birch Lawrence Milton and Birch Jean Frances
Barter Ross Coventry
Grandridge
Davenport Roger Julian and Davenport Frances
Batts Colin Alexander
Cullen Lawrence Gerrard

9,747,362
9,429,608
6,722,081
6,586,291
6,227,238
5,804,365
2,648,669
2,598,021
2,502,870
2,405,405
2,379,831
2,000,000
1,800,483
1,700,000
1,520,992
1,506,665
1,405,405
1,386,619
1,222,996
1,197,177
4.87
4.71
3.36
3.29
3.11
2.90
1.32
1.30
1.25
1.20
1.19
1.00
0.90
0.85
0.76
0.75
0.70
0.68
0.61
0.60

70,774,068
35.38

64 MEC Resources 2016 ANNUAL REPORT

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ABN 44 113 900 020

14 View Street North Perth WA 6006 Telephone: (08) 9328 8477 Facsimile: (08) 9328 8733 [email protected]

www.mecresources.com.au

Photographs and images used throughout this report do not depict assets of the company unless expressly indicated otherwise.

AI assistant

MEC RESOURCES LIMITED — Annual Report 2016

65353_rns_2016-10-02_e4a6d064-93f5-47d9-bc0b-a93671c0b240.pdf

Contents

Corporate Directory

Directors

Registered Office

Auditor

Share Registry

Australian Securities Exchange Listing

Australian Business Number

Chairman’s Report

Dear Shareholder

Company Focus and Developments

MEC’s investment focus:

Advent Energy

Western Australia / Northern Territory – Onshore Bonaparte Basin

Company Focus and Developments

Unconventional Resources Within EP386 and RL1

Garimala-1: Elevated Gas Shows over Milligans-Langfield Section

Company Focus and Developments

Unconventional Resources Within EP386 and RL1 (continued)

PEP11 Oil and Gas Permit

Company Focus and Developments

BPH Energy Limited

MEC Resources holds 4.01% of BPH Energy Limited (“BPH”).

Molecular Discovery Systems Limited (”MDSystems”)

HLS5 Project:

Cortical Dynamics Limited (“Cortical”):

Directors’ Report

Directors

Company Secretary

Principal Activities

Advent Energy Ltd - Oil and Gas

Operating Results

Dividends

Financial Position

Directors’ Report

Significant Changes In State Of Affairs

Advent Energy Ltd

After Balance Date Events

Future Developments

Information on Directors

H Goh

D L Breeze

Directors’ Report

Information on Directors (continued)

K O Yap

D Ambrosini

Remuneration Report (Audited)

Remuneration Policy

Remuneration philosophy

Directors’ Report

Remuneration philosophy (continued)

Compensation Practices

Employment contracts of directors

Details of Remuneration for the year ended 30 June 2016

2016

2016 (continued)

2015

Directors’ Report

Details of Remuneration for the year ended 30 June 2016 (continued)

Interest in the shares and options of the Company and related bodies corporate

2016 Number of Unlisted Options Held by Key Management Personnel Advent Energy Ltd

Shareholdings - MEC ResourcesNumber of Shares Held by Key Management Personnel

Shareholdings - Advent Energy Number of Shares Held by Key Management Personnel

Company performance, shareholder wealth, and director and executive remuneration

Directors’ Report

Meetings of Directors

Indemnifying Officers or Auditors

Options

MEC Resources Ltd

Proceedings on Behalf of Company

Environmental Issues

Non-audit Services

Auditor’s Independence Declaration

Auditor’s Independence Declaration

Corporate Governance Statement

Statement of Profit or Loss and other Comprehensive Income

Statement of Financial Position

MEC RESOURCES LIMITED Annual Report 2016