MINERAL COMMODITIES LTD — Annual Report 2014

Mar 31, 2014

MINERAL COMMODITIES LIMITED

ABN 39 008 478 653

FINANCIAL REPORT 31 DECEMBER 2013

Mineral Commodities Limited Annual Report for the year ended 31 December 2013

Corporate Directory

Directors	Joseph Anthony Caruso	Non-Executive Director
	Mark Victor Caruso	Executive Chairman
	Peter Patrick Torre	Non-Executive Director
	Mr James Gerald Leahy	Independent Non-Executive Director
	Mr Guy Redvers Walker	Independent Non-Executive Director
Company Secretary	Peter Patrick Torre
Registered Office	40 Murray Road North
	Welshpool,
	Western Australia 6106
	Telephone: (61 8) 6253 1100
	Facsimile: (61 8) 9258 3601
	Email: info@mncom.com.au
	Website: www.mncom.com.au
Solicitors	Steinepreis Paganin
	Level 4, Next Building
	16 Milligan Street
	Perth WA 6000
Auditors	BDO Audit (WA) Pty Ltd
	38 Station St
	Subiaco, Western Australia 6008
Share Registry	Link Market Services Limited
	Ground Floor, 178 St Georges Terrace
	PERTH WA 6000
	Telephone 1300 554 474
Stock Exchange Listing	The Company is listed on the Australian Securities
	Exchange Limited under ASX Code	- MRC

Mineral Commodities Limited Annual Report for the year ended 31 December 2013

Contents

DIRECTORS’ REPORT	2
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME	13
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	14
CONSOLIDATED STATEMENT OF CASH FLOWS	15
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	17
DIRECTORS’ DECLARATION	51
AUDITOR’S INDEPENDENCE DECLARATION	52
INDEPENDENT AUDITOR’S REPORT	53

Mineral Commodities Limited Annual Report for the year ended 31 December 2013

Directors Report

The Directors present their report together with the financial report of Mineral Commodities Limited (“the Company”) and its controlled entities (the “Group”) for the year ended 31 December 2013.

DIRECTORS

The Directors of the Company in office during or since the end of the financial year are:

Mr Joseph Caruso – Non Executive Director Mr Mark Caruso – Executive Chairman Mr Peter Torre – Non Executive Director and Company Secretary Mr James Leahy – Independent Non Executive Director Mr Guy Walker – Independent Non Executive Director

DIRECTORS’ INFORMATION

Joseph Anthony Caruso

Non-Executive Director

Mr Caruso is a Director of Zurich Bay Holdings Pty Ltd and Construction Manager of Simto Australia Pty Ltd, both of which are involved in mining, earthmoving and civil engineering construction earthworks. Mr Caruso has considerable experience in managing and administration of engineering, mining, raw materials production operations, earthmoving and related infrastructure utilities services resource contracts. Mr Caruso has been a director of Mineral Commodities Limited since September 2000..

Mark Victor Caruso

Executive Chairman

Mr Caruso has extensive experience in mining, earthmoving and civil engineering construction earthworks. Mr Caruso has been a director of Mineral Commodities Limited since September 2000. He was previously Chairman of Allied Gold Mining PLC,(AGMP) responsible for the delivery of the Gold Ridge Project in the Solomon Islands and the Simberi Gold Project in Papua New Guinea. After resigning from AGMP Mr Caruso transitioned into the position of Executive Chairman of Mineral Commodities in August 2012. Mr Caruso is also a Director of Perpetual Resources Limited being appointed in September 2013.

Peter Torre

Non Executive Director and Company Secretary

Mr Torre was appointed Company Secretary of Mineral Commodities Limited in July 2006, and as a director of the Company on 1 April 2010. He is a Chartered Accountant, a Chartered Secretary and a member of the Australian Institute of Company Directors. He was previously a partner of an internationally affiliated firm of Chartered Accountants. Mr Torre is the Company Secretary of several ASX listed companies and is a Director of Mission New Energy Limited. In the previous three years he was previously a Director of Neo Resources Limited, resigning in September 2013.

Mr James Gerald Leahy

Non Executive Director

Following a period on the London Metal Exchange, Mr Leahy has spent the past 28 years in the mining industry as a specialist corporate broker, including mining finance, origination and equity sales. He has worked on a wide range of projects, worldwide, ranging from industrial minerals, precious metals, copper, diamonds, coal, uranium and iron ore. Mr Leahy has substantial experience with international institutional fund managers, hedge funds and sector specialists. Over the years Mr Leahy has been involved in more than 30 IPO’s and a large number of primary and secondary placings, developing junior companies through to production and beyond. Mr Leahy is currently a director of Bacanora Minerals Ltd and Forte Energy NL. He was previously a director of Continental Coal Ltd, Alberta Coal and OPI.

Mr Guy Redvers Walker

Non Executive Director

Guy is a highly accomplished director and senior investment management executive with over 21 years financial markets experience. Guy currently sits on the boards of several listed mining companies including exploration, development and production companies. Mr. Walker has extensive experience in capital raising through both traditional banks and alternative lenders. Mr Walker is currently a director of Navigator Resources Limited, Bacanora Minerals Ltd and Metals Exploration plc. He was previously a director of ENK plc.

• 2 -

Mineral Commodities Limited Annual Report for the year ended 31 December 2013

Directors Report (continued)

PRINCIPAL ACTIVITIES

The principal activity of the Group during the year was undertaking procedures for the development of mineral sands projects and investigations into other mineral resources. This has mainly involved the development of the Tormin Mineral Sands Project in the Western Cape Province of South Africa and the evaluation of the Xolobeni Mineral Sands Project in the Eastern Cape Province of South Africa.

There were no significant changes in the nature of activities of the Group during the year.

CONSOLIDATED RESULTS

The loss of the group after income tax and non-controlling interests was $1,622,215 (2012: $1,191,061).

DIVIDENDS

No dividends have been paid, declared or recommended for payment, in respect of the current financial year.

REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS

Highlights of the Company’s operations for the period under review are as follows:

South African Projects

TORMIN MINERAL SANDS PROJECT

The Company commenced and concluded the development of the Tormin Mineral Sands Project on time and on budget during the

year.

Commissioning of the Primary Beach Concentrators (“PBCs”) commenced in October 2013, followed shortly thereafter by the commencement of mining operations. By mid-December 2013, the Company had mined and stockpiled in excess of 60,000 tonnes of HMC at the Secondary Concentrator Plant (“SCP”).

Fabrication and construction of the SCP infrastructure, plant and plate-work was completed during the last quarter of the year. The water supply to the SCP, process water dams, steel structure and mechanical equipment were also installed and tested.

Initial cold commissioning was undertaken in the first week of December, 2013 and hot commissioning commenced on the 11[th] December, 2013 and by the end of the year, the Company had achieved nameplate output at very close to design specification.

The seasonal ocean and tidal conditions between the months of August and October served to act as a natural catalyst to upgrading the beach resource. The extremely high grade of ROM encountered on the beach allowed the Company to feed ROM ore directly into the SCP bypassing the PBCs.

Based on the success of associating the PBC spirals with the SCP, the Company has decided to permanently relocate and operate the PBCs at the SCP and not on the beach. This will result in significant de-risking of the PBC operation and require only one PBC unit to be operated in the future as it will not be affected by daily tidal movements and ocean conditions.

Tormin Sales and Marketing

As separately announced, the Company and its subsidiary, Mineral Sands Resources Proprietary Limited (MSR), which owns Tormin, concluded an offtake agreement with Wogen Pacific Limited for 100% of the non-magnetic concentrate (Concentrate) to be produced at Tormin.

• 3 -

Mineral Commodities Limited Annual Report for the year ended 31 December 2013

Directors Report (continued)

Pursuant to the agreement, Wogen will pay MSR for the Concentrate at an FOB level. Thereafter, Wogen will fund the shipping and processing of the Concentrate until such time as it is sold into the local Chinese market in finished product form, with sale proceeds net of commission, shipping and processing costs being paid over to MRC.

Wogen also provided MRC with US$2 million under a pre-finance arrangement associated with the offtake arrangement. MRC was able to draw down against the arrangement up to 31 December 2013 and, while interest will accrue from the time it is drawn, capital and interest will only become payable when Tormin comes into commercial production.

The Tormin mine plan and engineering processing design provides for primary beach concentration of 1.2 Mtpa producing approximately 48,000 tonnes of Zircon/Rutile Concentrate grading up to 80% Zircon and 10% Rutile.

Phase Two of the Tormin Project Development provides for further processing through construction of a dry mineral separation plant (MSP) to produce various magnetic concentrates, including up to 125,000 tonne per annum Ilmenite and 100,000 tonne per annum of Garnet.

The Company has also received a number of proposals for the Ilmenite to be produced from Tormin. MRC is in advanced negotiations with these parties and therefore hopes to be in a position to finalise an offtake for 100% of the Ilmenite in the first half of 2014. The Ilmenite concentrate is currently being stockpiled until an offtake agreement is finalised and the additional plant required to produce this product is acquired and installed.

Delivery of the Garnet concentrate to Blastrite will commence in the first half of 2014 under the terms of that offtake agreement.

Logistics

The supply chain team has made significant progress with the SA rail operator, Transnet, and a dedicated rail service has been agreed. This will improve the economics and logistics flow of the product to port.

The first Zircon/Rutile Concentrate Product to Wogen Pacific was shipped on 25 January 2014 and will continue weekly into the future.

Safety & Human Resources

MRC commenced operations with an exemplary safety record at Tormin and was pleased to announce during the year that by the commencement of the commissioning of the Secondary Concentration Plant (“SCP”), MRC had achieved in excess of 140,000 man hours on site without an LTI.

This record is even more impressive given the tight schedule, the number of separate contractors on site towards the end of the Project and that the vast majority of workers on site were drawn from the local community, who were relatively inexperienced and were working shifts as the site operated 24 hours per day.

Tormin - Offshore Prospecting Activities

MRC has previously reported that a prospecting right for the offshore area immediately adjacent to Tormin was awarded towards the end of 2012. The offshore prospecting area covers an area of 12 sqkm and extends 1km out to sea from the low-water mark and covers the full length of the existing 12km Tormin tenement.

The established geology of the region confirms that the source of the Tormin beach deposit is a Heavy Mineral-rich offshore zone and that the dynamic coastline serves to replenish the beaches by transporting sediment from deeper waters.

Formal studies, including drilling and sampling, will take place during the first half of 2014 with a view to identifying and quantifying the extent of beach replenishment and the extent of the offshore resource.

In the interim beach mining operations have confirmed the previous informal tests conducted by the Company. Ore removed by the beach operations has been replenished by the sea in one tidal cycle. Within 3 days thereafter natural jigging by the beach returns

• 4 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2013

Directors Report (continued)

the deposit to within 10% of the initial resource grading. Certain areas of the beach have already been mined 4 times in an effort to test the extent of replenishment and to date no reduction in overall resource grading has been experienced.

The Company is therefore optimistic that replenishment of the beach will increase the expected life of Tormin.

The testing planned for the first quarter as well as the empirical results from beach mining over this period will provide significant inputs into this assessment.

XOLOBENI MINERAL SANDS PROJECT

In November 2011 the Department of Mineral Resources (“DMR”) extended the prospecting rights over the Xolobeni project, excluding the Kwanyana block, for a further period of 3 years. During the first quarter of 2012, this right was executed and subsequently registered by the DMR in the third quarter of 2012.

MRC has advised that the DMR had withdrawn the previously granted Conditional Mining Right over the Kwanyana block and that it was engaging with the DMR and Minister in relation to these matters. The Company subsequently withdrew all previous applications in respect of the Kwanyana block and immediately applied for a new prospecting right over the same block.

The benefit of this approach is that the Kwanyana block will be re-aligned with the rest of the Xolobeni project which will enable the Company to progress its application to develop Xolobeni in its entirety and, in so doing, demonstrate that this can be undertaken responsibly and sustainably.

The DMR accepted the new prospecting right application (PRA) over the Kwanyana block in the first quarter of 2012 and, in accordance with prevailing legislation, directed the Company to submit an Environmental Management Plan (EMP) for the prospecting work and details of its engagement with all stakeholders with an interest in the project. The Company compiled an EMP for the Kwanyana block prospecting work and undertook a comprehensive stakeholder engagement process (SEP) during the second quarter of 2012. The EMP and SEP report were also lodged with the DMR in accordance with the required timetable.

A number of objections to the PRA were received. Accordingly, the DMR was required by law to call a meeting to consider the objections and representations made by the Company. This meeting was held on 28 November 2012.

Based on the information presented at that meeting, the DMR instructed the Company to undertake additional consultation. A comprehensive consultation process, designed to identify and engage with all potential interested and affected parties was implemented during the latter part of the year. In addition, in keeping with local traditions, a series of pre-meetings were held with the traditional leaders in the Xolobeni area to update them on developments with the project, brief them on the planned consultation process and gain their approval for the process.

Xolobeni Public Participation Successfully Completed

Having obtained the traditional leadership’s approval of the planned process and updated the DMR in the first quarter, the public consultation process took place in March and April 2013. Subsequently, feedback from all the meetings has been collated into a comprehensive issues and response trial which has been incorporated into a stakeholder engagement report (SER). The SER was completed in the last quarter and submitted to all relevant parties at the DMR for evaluation.

In late December 2013, the Company was advised that the DMR will meet to consider the SEP and other matters relating to the Kwanyana PRA on 22 January 2014.

The Company attended the meeting after the year end on 22 January 2014 as planned. The representations made by the Company were well received and all objections appropriately addressed. The Company therefore remains optimistic that the DMR will award a new prospecting right over the Kwanyana block during the first half of 2014 and enable the Company to do the final work necessary to submit a mining right application for the entire Xolobeni tenement as soon thereafter as possible.

Xolobeni Baseline Studies

In the interim, work has commenced on preparation for the various baseline studies that are required as part of the prospecting works programme and in preparation for and application for a mining right for Xolobeni. By end of the quarter MRC had appointed a specialist to commence a water study on the Xolobeni area. The Company expects this work to be completed in the first half of 2014.

• 5 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2013

Directors Report (continued)

FINANCIAL POSITION

The net assets of the group have increased from $20,962,421 at 31 December 2012 to $28,582,858 at 31 December 2013.

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

The Group will continue the process of development and operation of both the Tormin and Xolobeni projects in South Africa. The Board will continue to review other projects and opportunities in the interest of increasing shareholder value.

ENVIRONMENTAL REGULATIONS

The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use in Australia. For the first measurement period the directors have assessed that there are no current reporting requirements, but may be required to do so in the future.

In the course of its normal mining and exploration activities, the Group adheres to environmental regulations imposed upon it by the relevant regulatory authorities, particularly those regulations relating to ground disturbance and the protection of rare and endangered flora and fauna.

SCHEDULE OF MINING TENEMENTS

Mining tenements currently held by the economic entity are:

	Location Number Type of Right Status Interest
Country
South Africa	Tormin (WC)30/5/1/2/2/163MR Mining Approved 100%
South Africa	Tormin (WC)30/5/1/2/2/162MR Mining Approved 100%
South Africa	Tormin (WC)30/5/1/1/2/10036PR Prospecting Approved 100%
South Africa	Xolobeni EC30/5/1/1/2/6PR Prospecting Approved 100%
	Kwanyana EC30/5/1/1/2/10025PR Prospecting Under Application 100%
South Africa

SIGNIFICANT CHANGES IN STATE OF AFFAIRS AND LIKELY DEVELOPMENTS

The following significant changes in the state of affairs of the Consolidated Entity occurred during the year:

CORPORATE

In January 2013, the Company successfully completed all three tranches of the $14.5 million capital raising to institutional and sophisticated investors and related parties.

Existing directors of the Company subscribed for up to A$3.4 million in shares in the Company on the same terms as those issued under the original placement. The final issue of approximately 9.9 million shares pursuant to the private placement took place on 23 January 2013.

On 4 September 2013 Mineral Commodities Limited announced that it intended to undertake a 1 for 4 non-renounceable entitlement issue of approximately 80,988,228 fully paid ordinary shares to raise approximately $6,479,066. The price of New Shares under the Offer was $0.08 each. The Offer was fully underwritten by Zurich Bay Holdings Pty Ltd and Au Mining Limited. The Prospectus for the Offer was lodged with ASIC on 4 September 2013.

• 6 -

Mineral Commodities Limited Annual Report for the year ended 31 December 2013

Directors Report (continued)

Following completion of the Offer, the Company has the following securities on issue:

• 404,941,571 fully paid ordinary shares listed on the ASX

• 10,000,000 Unlisted Options exercisable at $0.20 on or before 31 December 2015

• 1,000,000 Unlisted Options exercisable at $0.35 on or before 31 December 2015

OPTIONS

No further options were issued in the period covered by this report

New issues of options and options exercised in the period are as follows:

Options	No of Options	Exercise Price	Expiry Date
Opening Balance 1 January 2013 - Options issued Balance at 31 December 2013	10,000,000 1,000,000 10,000,000 1,000,000	$0.20 $0.35 $0.20 $0.35	31 December 2015 31 December 2015 31 December 2015 31 December 2015

DIRECTORS’ SHAREHOLDING INTERESTS

The relevant interest of each director in the share capital of the Company, shown in the Register of Directors’ Shareholding at the date of the Directors’ Report is:

2013 Ordinary Shares Mark Caruso -Indirect - Direct Joseph Caruso Peter Torre Guy Walker James Leahy	Balance at 1January 2013 Received as Remuneration Options Exercised Net change other Balance 31 March 2014
	21,569,988 - - 56,784,026 78,354,014 12,627 - - 3,157 15,784 21,569,988 - - 55,437,497 77,007,485 500,000 - - 125,000 625,000 100,000 - - 25,000 125,000 - - - - -

J A Caruso and M V Caruso are both directors of and have a relevant interest in Zurich Bay Holdings Pty Ltd, which holds 77,007,485 shares in the Company

2013 Options ark Caruso oseph Caruso eter Torre uy Walker ames Leahy	Balance at 1 Jan 2013 Received as Remuneration Options Exercised Options Lapsed Net change other Balance at 31 Dec 2013
	1,000,000 - - - - 1,000,000 1,000,000 - - - - 1,000,000 1,000,000 - - - - 1,000,000 1,000,000 - - - - 1,000,000 1,000,000 - - - - 1,000,000

• 7 -

Annual Financial Report for the year ended 31 December 2013

Mineral Commodities Limited

MEETINGS OF DIRECTORS

The number of directors meetings and number of meetings attended by each of the directors of the Company during the financial year are:

	Name	Directors’ Meetings	Directors’ Meetings	Audit Committee Meeting	Audit Committee Meeting	Remuneration Committee Meeting	Remuneration Committee Meeting
	Number of meetings held A being total of meetings eligible to attend B being total of meetings actually attended	A	B	A	B	A	B
	Mr Joseph AnthonyCaruso	7	4	-	-	2	1
	Mr Mark VictorCaruso	7	7	-	-	-	-
	Mr Peter Patrick Torre	7	7	4	4	2	2
	Mr GuyWalker	7	7	4	4	2	2
	Mr James Leahy	7	7	4	4	2	2

Other matters of board business have been resolved by circular resolutions of directors, which are a record of decisions made at a number of informal meetings of the directors held to control, implement and monitor the Company’s activities throughout the year.

REMUNERATION REPORT (Audited)

The remuneration report is set out under the following main headings:

• A. Principles used to determine the nature and amount of remuneration

• B. Details of remuneration

• C. Service Agreements

• D. Share-based compensation

• E. Additional Information

A. Principles used to determine the nature and amount of remuneration

In order to retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the Company’s operations, the board reviews the remuneration packages of all Key Management Personnel, if any, on an annual basis and makes recommendations. Remuneration packages are reviewed with due regard to performance and other relevant factors. No remuneration consultants have been used due to the small number of employees and Key Management Personnel.

Remuneration packages may contain the following key elements:

• (a) Directors Fees;

• (b) Salary & Consultancy; and

Benefits – including provision of motor vehicle, superannuation.

Fees payable to non-executive directors reflect the demands which are made on, and the responsibilities of the directors. The Board reviews non-executive directors’ fees and payments annually.

Executives are offered a competitive base pay that consists of fixed components. Base pay for senior executives, if any, is reviewed annually to ensure the executive pay is competitive with the market. Total Base Pay can be structured as a total employment package which may be delivered as a combination of cash and prescribed non-financial benefits at the executives’ discretion.

There were no short or medium term cash incentives provided to any executives of the Company during the financial year. Short or medium term cash incentives are not incorporated into any executives’ salary packages at the time of this report. Long-term incentives are provided to directors and other Key Management Personnel to incentivise them to deliver long-term shareholder returns. These are determined based on what the Board views as reasonable based on market conditions. Any grant of securities to directors of the Company must be approved by shareholders in general meeting.

The directors are not required to hold any shares in the company under the constitution of the Company; however, to align directors’ interests with shareholders interests the directors are encouraged to hold shares in the company.

• 8 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2013

Directors Report (continued)

Remuneration is not directly related to company performance or key performance indicators. Directors Fees and the Remuneration of the CEO are fixed. There is no at risk component of any remuneration of the Key Management Personnel.

During the year the board appointed a separate remuneration and nomination committee.

	2013	2012	2011	2010	2009
Loss for the year	1,622,215	1,191,061	2,135,788	1,625,021	642,991
Closing Share price	18.5 cents	9.9 cents	7.5 cents	8.1 cents	4.5 cents

Voting and comments made at the Company’s 2013 Annual General Meeting

Mineral Commodities Limited received the unanimous support of shareholders present on the remuneration report at the Annual General Meeting for the 2012 financial year and 99% of proxy votes were in favour of the resolution to approve the remuneration report. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.

B. Details of Remuneration

The key management personnel of Mineral Commodities Limited Group are the directors of Mineral Commodities Limited and Mr Andrew Lashbrooke, the CEO. The amounts disclosed are therefore applicable for both Mineral Commodities Limited and the Mineral Commodities Limited Group.

Details of the remuneration of directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of Mineral Commodities Limited and the Mineral Commodities Limited Group are set out in the following tables.

There are no long term benefits amounts due to Directors and key management personnel.

There were no non-cash benefits provided to Key Management Personnel during the year.

• 9 -

Mineral Commodities Limited Annual Report for the year ended 31 December 2013

Directors Report (continued)

The following fees are applicable to directors and key Management Personnel of the Company

Executive Chairman Mark Caruso Non-Executive Directors Joseph Caruso Peter Torre Guy Walker James Leahy Total Director remuneration Other Key Management Personnel CEO Andrew Lashbrooke Total Key management personnel compensation	Cash benefits Post-employment benefits Share-based payments Totals Percentage performance based Share based payments as a percentage of remuneration $ $ $ $ %
	2013 279,095 20,905 - 300,000 - - 2012 140,333 10,044 33,500 183,877 - 18.21 2013 54,489 4,973 - 59,462 - - 2012 45,107 4,060 33,500 82,667 - 40.52 2013 150,000 - - 150,000 - - 2012 83,083 - 33,500 116,583 - 28.73 2013 68,264 - - 68,264 - - 2012 1,521 137 33,500 35,158 - 95.28 2013 68,264 - - 68,264 - - 2012 1,521 137 33,500 35,158 - 95.28
	2013 2012 620,112 271,565 25,878 14,378 - 167,500 645,990 453,443 - - - 36.94
	2013 300,000 - - 300,000 - - 2012 50,000 - 189,830 239,830 - 79.15
	2013 2012 920,112 321,565 25,878 14,378 - 357,330 945,990 693,273 - - 51.5

Base Fees	From 1 December 2013	Up to 30 November 2013
Non-Executive Directors	55,000	55,000
Additional Fees	From 9 February 2014	Up to 9 February 2013
Audit Committee Chair	10,000	10,000
Audit Committee Member	5,000	5,000
Remuneration and Nomination	10,000	10,000
Committee Chair
Remuneration and Nomination	5,000	5,000
Committee Member

• 10 -

Mineral Commodities Limited Annual Report for the year ended 31 December 2013

Directors Report (continued)

C. Service Agreements

The following service agreements are in effect at 31 December 2013.

Mark Caruso Commenced 6 August 2012 Term No fixed term Total Remuneration package $300,000 per annum Termination benefits 12 months base salary plus any payment in lieu of notice Peter Torre Commenced 1 November 2012 Term No fixed term Total Remuneration package $150,000 per annum Termination benefits 12 months base salary plus any payment in lieu of notice Andrew Lashbrooke Commenced 1 November 2012 Term No fixed term Total Remuneration package $300,000 per annum Termination benefits None

There are no other service agreements.

D. Share Based Compensation

In 2012 1,000,000 Unlisted Options exercisable at $0.20 on or before 31 December 2015 were issued to all 5 directors of the Company pursuant to shareholder approval received on 21 December 2012 (5,000,000 in total) and a further 5,000,000 Unlisted Options exercisable at $0.20 on or before 31 December 2015 to the CEO of the Company. These were independently valued using the Black Scholes method at $0.0335 per option.

1,000,000 Unlisted Options exercisable at $0.35 on or before 31 December 2015 were issued to the CEO of the Company. These were independently valued using the Black Scholes method at $0.0233 per option.

All options issued vested immediately upon issue.

No Options issued as remuneration were exercised or lapsed during the period.

E. Additional Information

There is no additional information to be provided in respect to the remuneration of the directors.

End of the Audited Remuneration Report

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Mineral Commodities Limited adhere to strict principles of corporate governance. The Company’s Corporate Governance statement will be included before the Additional ASX Information section of the Annual Financial Report.

EVENTS SUBSEQUENT TO BALANCE DATE

No event or transaction has arisen in the interval between the end of the financial year and the date of this report of a material and unusual nature likely, other than what has been disclosed elsewhere in note 28 of this financial report, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations or the state of affairs of the Company or the Consolidated Entity in future financial years unless otherwise disclosed in this Directors Report.

• 11 -

Mineral Commodities Limited Annual Financial Report for the year ended 31 December 2013

Directors Report (continued)

PROCEEDINGS ON BEHALF OF THE GROUP

No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

INSURANCE OF OFFICERS

During the financial year the Group has paid an insurance premium to insure the directors and secretaries of the company and its controlled entities. The premium paid was $35,018 representing $7,004 per director. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as Directors or Officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Group.

AUDITOR’S INDEPENDENCE DECLARATION

The Auditor’s Independence Declaration as required by Section 307C of the Corporations Act 2001 is set out on page 54 and forms part of this report.

NON-AUDIT SERVICES

The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the group are important.

There were no non–audit services provided by BDO Audit (WA) Pty Ltd in the year.

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related firms:

During the year the following fees were paid or payable for and non-related firms:	services provided by the au
Audit Services:	2013 2012
	$ $
Audit and review of financial reports
BDO Audit (WA) Pty Ltd	60,000 64,122
BDO Cape Town South Africa	19,261 11,726
Total remuneration for audit services	79,261 75,848

BDO Audit (WA) Pty Ltd continues in office.

This report has been made in accordance with a resolution of the Directors.

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Mark Caruso Executive Chairman Perth, Western Australia 31 March 2014

• 12 -

Mineral Commodities Limited

Annual Financial Statements for the year ended 31 December 2013

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 December 2013

Note Revenue Other operating income 2 Administration expenses Employees and consultants remuneration Exploration and evaluation costs Depreciation and amortisation Loss on disposal of assets Share based payments Abandoned acquisition costs Loss from Operations Finance expense 7 Finance income 7 Impairment of available for sale investment Loss before tax Tax expense 4 (Loss) after income tax Other comprehensive income Items that will or maybe reclassified to profit or loss Changes in the fair value of available-for-sale financial assets Exchange differences on translation of foreign operations Other comprehensive loss for the year net of tax Total comprehensive loss for the year Loss is attributable to: Owners of Mineral Commodities Limited Non-controlling interest Total comprehensive loss for the year is attributable to Owners of Mineral Commodities Limited Non-controlling interest	Consolidated 31 Dec 2013 $ 31 Dec 2012 $
	3,000 476,769
	3,000 476,769 (1,063,618) (668,978) (201,644) (204,934) (98,412) - (156,659) (28,428) - (152) - (357,330) - (123,243)
	(1,520,333) (1,383,065)
	(1,517,333) (906,296) (171,233) (99,937) 229,464 42,282 (163,113) (227,110)
	(1,622,215) (1,191,061) - -
	(1,622,215) (1,191,061) (262,500) (1,588,095) (880,168) (738,688)
	(1,142,668) (2,326,783)
	(2,764,883) (3,517,844)
	(1,622,215) (1,191,061) - -
	(1,622,215) (1,191,061)
	(2,764,883) (3,517,844) - -
	(2,764,883) (3,517,844)

Loss per share attributable to the ordinary equity holders of the parent.

Basic Loss per share	Cents	Cents
From continuing operations attributable to the ordinary shareholders of the company (cents per share)	(0.64)	(0.68)

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

• 13 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Consolidated Statement of Financial Position

as at 31 December 2013

Note CURRENT ASSETS Cash and cash equivalents 8 Trade and other receivables 9 Inventories 11 Available for sale financial assets 12 Prepayments 10 Total Current Assets NON-CURRENT ASSETS Receivables 9 Property, plant and equipment 13 Exploration expenditure 14 Development expenditure 14 Total Non-Current Assets Total Assets CURRENT LIABILITIES Trade and other payables 16 Short term borrowings 16 Provisions Total Current Liabilities Total Liabilities NET ASSETS EQUITY Contributed equity 17 Reserves 18 Accumulated losses Parent entity interest Non-controlling interest 15 TOTAL EQUITY	Consolidated 31 Dec 2013 31 Dec 2012 $ $
	1,694,264 7,769,202 1,315,004 148,087 869,068 - 106,500 532,113 11,594 10,925
	3,996,430 8,460,327
	829,979 427,272 5,665,045 68,689 12,397,535 12,996,362 15,322,494 -
	34,215,053 13,492,323
	38,211,483 21,952,650
	2,840,687 966,802 6,787,938 - - 23,427
	9,628,625 990,229
	9,628,625 990,229
	28,582,858 20,962,421
	61,297,477 50,912,158 (2,594,042) (1,451,375) (30,299,426) (28,677,211)
	28,404,009 20,783,572 178,849 178,849
	28,582,858 20,962,421

The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes.

• 14 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Consolidated Statement of Cash Flows

For the year ended 31 December 2013

Note CASH FLOWS FROM OPERATING ACTIVITIES Interest received Payments to suppliers & employees Discontinued acquisition Interest paid Sundry income Net cash outflows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Exploration Payments for Mining plant and equipment Mine Development expenditure Purchase of general fixed assets Investment in listed shares Proceeds from sale of plant and equipment Loan to associated company Proceeds from sales of investments Net cash inflow/(outflow) from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of shares and options (net of costs) Short term Borrowings Loan repaid Net cash inflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Exchange rate movement on opening balances Cash and cash equivalents at end of financial year	Consolidated 31 Dec 2013 31 Dec 2012 $ $
	229,464 42,282 (1,564,361) (744,254) - (1,427,776) (171,233) (99,937) - -
	(1,506,130) (2,229,685)
	(165,220) (914,089) (5,750,995) - (15,407,392) - (2,020) (79,687) - (350,000) - 4,000 (423,219) (113,636) - 1,495,102
	(21,748,846) 41,690
	10,385,319 9,707,808 6,787,938 1,407,509 - (1,407,509)
	17,173,257 9,707,808
	(6,081,719) 7,519,813 7,769,202 248,260 6,782 1,129
	1,694,264 7,769,202

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

• 15 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Consolidated Statement of Changes in Equity

Consolidated Entity For the year ended 31 December 2013 Balance at 1 January 2013 Loss for the year Other Comprehensive loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners Contributions of equity net of transaction costs Unlisted Options issued Reclassify Option Reserve for expired options Balance at the end of the year Consolidated Entity For the year ended 31 December 2012 Balance at 1 January 2012 Loss for the year Other Comprehensive loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners Contributions of equity net of transaction costs Unlisted Options issued Reclassify Option Reserve for expired options Balance at the end of the year	Contributed Equity Reserves Accumulated Losses Totals Non-controlling interest Total Equity $ $ $ $ $ $
	50,912,158 (1,451,375) (28,677,212) 20,783,572 178,849 20,962,421 - - (1,622,215) (1,622,215) - (1,622,215) - (1,142,668) - (1,142,668) - (1,142,668)
	- (1,142,668) (1,622,215) (2,764,883) - (2,764,883) 10,385,319 - - 10,385,319 - 10,385,319 - - - - - - - - - - - -
	61,297,477 (2,594,042) (30,299,426) 28,404,009 178,849 28,582,858
	Contributed Equity Reserves Accumulated Losses Totals Non-controlling interest Total Equity $ $ $ $ $ $
	41,204,350 804,656 (27,772,729) 14,236,278 178,849 14,415,127 - (1,191,061) (1,191,061) - (1,191,061) - (2,326,783) - (2,326,783) - (2,326,783)
	- (2,326,783) (1,191,061) (3,517,844) - (3,517,844) 9,707,808 - - 9,707,808 - 9,707,808 357,330 357,330 - 357,330 (286,578) 286,578 - - -
	50,912,158 (1,451,375) (28,677,212) 20,783,572 178,849 20,962,421

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

• 16 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

These financial statements are for Mineral Commodities Limited and its controlled entities, as the consolidated entity (group). Mineral Commodities Limited is an Australian domiciled public listed company.

The general purpose financial statements for the year ended 31 December 2013 have been prepared in accordance with Australian Accounting Standards and Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Compliance with IFRS

The financial statements of Mineral Commodities Limited and controlled entities also comply with International Financial Reporting Standards (IFRS).

The following significant accounting policies have been adopted in the preparation and presentation of the financial statements and have been consistently applied to all the years presented, unless otherwise stated.

The accounting policies adopted are consistent with those of the previous financial year unless otherwise stated.

The following standards for first time use annual reporting periods beginning on or after 1 January 2013 have been reviewed and applied by the Group in the year ended 31 December 2013:

- AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities and AASB 127 Separate Financial Statements

- AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB13

- AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011)

It has been determined by the Group that there is no impact, material or otherwise, of the above standards on its business and, therefore, no change is necessary to the Group accounting policies.

Historical Cost Convention

The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of available for sale financial assets for which the fair value basis of accounting has been applied.

(b) Principles of Consolidation

The consolidated financial report incorporates the assets and liabilities of all subsidiaries of Mineral Commodities Limited (“Company” or “parent entity”) as at 31 December 2013 and the results of its subsidiaries for the year then ended. Mineral Commodities Limited and its subsidiaries together are referred to in this financial report as the group.

Intercompany transactions, balances and unrealised gains on transactions between parent and or subsidiary companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the parent company.

Subsidiaries are those entities over which the company has control. The Group controls an entity when the Group is exposed to or has rights to variable returns from its involvement with the entity and has the ability to direct the activities of the entity.

Where control of an entity is obtained during a financial year, its results are included in the statements of comprehensive income from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control existed.

The purchase method of accounting is used to account for the acquisition of subsidiaries – refer to note 1 (j).

• 17 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Consolidated entity applies a policy of treating transactions with non-controlling interests as transactions with external parties to the entity. Disposals to non-controlling interests result in gains and losses for the Consolidated entity are recorded in the statement of profit or loss and other comprehensive income. Purchases from non-controlling interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary.

(c) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Interest Income

Interest and other income is recognised as it accrues on a time proportion basis using the effective interest method.

(d) Taxes

Income taxes

The charge for current income tax expense or revenue is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted at the reporting date. Income tax expense is adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.

Deferred tax is accounted for using the liability method 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 this has 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 credited to profit or loss except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

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 economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions or deductibility imposed by the law.

The income tax expense for the year is calculated using the 30% tax rate (2012: 30%).

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase of goods & services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and where receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables in the Statements of Financial Position.

• 18 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash flows are included in the Statements of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(e) Foreign Currency Transactions and Balances

Functional and presentation currency

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

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rated prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the profit for the year except where deferred in equity as a qualifying net investment hedge.

Subsidiary Companies

The financial results and position of subsidiary companies whose functional currency is different from the consolidated entities presentation currency are translated into the presentation currency as follows;

Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date.

Income and expenses are translated at average exchange rates for the period.

Hedge of a net investment in a foreign operation

The group applies hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and the parent entity’s functional currency (AUD), regardless of whether the investment is held directly or through an intermediate parent.

Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in other comprehensive income to the extent that the hedge is effective, and are presented within equity in the foreign currency translation reserve. To the extent that the hedge is ineffective, such differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the relevant amount in the foreign currency translation reserve is transferred to profit or loss as part of the profit or loss on disposal.

(f) 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.

Items of plant and equipment are initially recorded at cost and include any expenditure that is directly attributable to acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate. All other repairs and maintenance are charged to the profit for the year in which they are incurred.

• 19 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Depreciation of Plant and Equipment

Plant and equipment are depreciated at rates based upon the expected useful lives of these assets. The expected useful lives of these assets are 3-10 years.

The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount.

Disposal of Assets

The gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the time of disposal and the proceeds on disposal and is included in profit for the year of disposal.

(g) Exploration and Development Expenditure

i Exploration and Evaluation Expenditure

Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest. Such expenditure comprises direct costs and does not include general overheads or administrative expenditure not having a specific nexus with a particular area of interest.

Exploration expenditure for each area of interest is carried forward as an asset provided the rights to tenure of the area of interest are current and one of the following conditions is met:

• The exploration and evaluation expenditures are expected to be recouped through successful development and exploitation

• of the area of interest, or alternatively, by its sale; or

� Exploration and evaluation activities in the area of interest have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interests are continuing.

Exploration expenditure is written off when it fails to meet at least one of the conditions outlined above or an area of interest is abandoned.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest that the carrying amount exceeds the recoverable amount the impairment loss will be measured and disclosed in accordance with AASB 136 Impairment of Assets.

When a decision is made to develop an area of interest, all carried forward exploration expenditure in relation to the area of interest is transferred to Mine Properties and Development.

ii Mine Properties and Development

Development expenditure represents the accumulated exploration, evaluation, land and development expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of a mineral resource has commenced.

When further development expenditure is incurred in respect of a mine property after commencement of production, such expenditure is carried forward as part of the mine property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production.

In some circumstances, where conversion of resources into reserves is expected, some resources may be included. Development and land expenditure still to be incurred in relation to the current reserves are included in the amortisation calculation. Where the life of the assets are shorter than the mine life their costs are amortised based on the useful life of the assets.

• 20 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The estimated recoverable reserves and life of the mine and the remaining useful life of each class of asset is reassessed at least annually. Where there is a change in the reserves/resources amortisation rates are correspondingly adjusted.

Stripping Costs in the Production Phase of a Surface Mine

Production stripping costs (also known as deferred mining costs) are to be capitalised as part of an asset if:

• There is a probable future economic benefits will be realised;

• The costs can be reliably measured; and

• The component of an ore body for which access has been improved can be identified.

The stripping activity asset shall be amortised on a systematic basis, over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity.

(h) Inventories

Raw materials and stores, ore stockpiles and work in progress and finished gold stocks are physically measured or estimated and valued at the lower of cost and net realisable value. Net realisable value less costs to sell is assessed annually based on the amount estimated to be obtained from sale of the item of inventory in the normal course of business, less any anticipated costs to be incurred prior to its sale.

Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure and depreciation and amortisation relating to mining activities, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Inventories of consumable supplies and spare parts expected to be used in production are valued at the lower of weighted average cost, which includes the cost of purchase as well as transportation and statutory charges, or net realisable value. Any provision for obsolescence is determined by reference to specific stock items identified.

During the exploration and development phase, where the cost of extracting the ore exceeds the likely recoverable amount, work in progress inventory is written down to net realisable value.

(i) Investments

Interests in Subsidiaries

Investments in subsidiaries are carried in the Company’s financial report at cost less any impairment losses. Dividends and distributions are brought to account in profit when they are declared by the subsidiaries.

Investments in associates

Associates are all entities over which the consolidated entity has significant influence but not control, generally accompanying a shareholding of between 20%-50% of the voting rights. Investments in associates are accounted for in the parent entity financial statements using the cost method and in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The Consolidated entity’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The Consolidated entity’s share of its associates post acquisition profits or losses are recognised in profit for the year, and its share of post acquisition movements in reserves is recognised directly in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.

• 21 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Impairment of Assets

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

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

(k) Financial Instruments

The Consolidated entity classifies its financial instruments on initial recognition. The classification depends on the purpose for which the financial instrument was acquired.

Recognition and de-recognition

Regular purchases and sales of financial assets are recognised on trade date; the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or been transferred and the Group has transferred substantially all the risks and rewards of ownership.

(l) Financial Instruments (continued)

Fair value

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

Loans and receivables

Loans and receivables are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method. They are included within current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets.

Available-for-sale financial assets

Available-for-sale financial assets are recognised at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity until the instrument is sold at which time any balance in equity relating to the instrument is recycled to profit or loss as part of the profit or loss on sale.

Financial Liabilities

Financial liabilities are recognised initially at fair value and subsequently at amortised cost, comprising original debt less principle payments and amortisation of transaction costs.

Impairment

At each reporting date, the group assess 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 impairment has arisen. Impairment losses are recognised in profit or loss. Impairment losses recognised on equity instruments classified as available for sale are not reversed through the income statement.

(m) Contributed Equity

Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

• 22 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Cash and Cash Equivalents

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

(o) Trade and Other receivables

Trade and other receivables are recognised initially at fair value. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.

Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. The amount of the impairment loss is recognised in profit or loss within other expenses.

(p) Earnings / (Loss) per Share

Basic Earnings / (Loss) per Share

Basic earnings per share is determined by dividing the profit after income tax attributable to members of Mineral Commodities Limited by the weighted average number of ordinary shares outstanding during the financial year.

Diluted Earnings / (Loss) per Share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share would arise from the exercise of options outstanding at the end of the financial year.

(q) Employee Benefits

Wages and Salaries, Annual Leave, Long Service and Sick Leave

Provision is made for the consolidated entity’s liability for employee entitlements arising from services rendered by employees to reporting date. These benefits include annual and long service leave. Sick leave is non-vesting and has not been provided for. Employee entitlements expected to be settled within one year have been measured at the amounts expected to be paid when the liabilities are settled and are recognised in other payables.

The contributions made to defined contribution superannuation funds by entities within the consolidated entity are charged against profits when due.

Share-Based Payments

The issue of Employee options was approved by shareholders at a general meeting of the Company held on 21 December 2012 and the fair value of these has been expensed. There were no Share Based payment in 2013 (2012 $357,330).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 impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

(r) Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised on a straight line basis.

(s) Segment reporting

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Directors that make strategic decisions.

• 23 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

There is no goodwill attached to any of the segments. There has been no impact on the measurement of the assets and liabilities reported for each segment.

(t) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

(u) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale or transaction rather than continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets, investment property and non-current biological assets that are carried at fair value.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increase in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

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

(v) Trade and Other Payables

Trade and other payables are recognised originally at fair value and subsequently measured at amortised cost using the effective interest rate method. Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of each reporting period that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date.

(w) Interest Bearing Loans and Borrowings

All loans and borrowings are initially recognised at cost, being fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

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

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting periods.

• 24 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(x) Critical accounting estimates and judgements

The Group makes significant estimates and judgements concerning the future. The resulting accounting estimates may not equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

The directors evaluate estimates and judgements 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.

Significant judgements and critical estimate in applying the entity’s accounting policies

Exploration and development expenditure

Recoupment of the capitalised exploration and evaluation expenditure is dependent on the successful development and commercial exploitation of the Xolobeni Mineral Sands and the Tormin Mineral Sands areas of interest in South Africa. The capitalised expenditure in relation to the Xolobeni project is $7,770,410 (2012:$ 7,924,368) refer note 14 is expected to be fully recoverable once the grant of the mining right has been affirmed by the Minister of Minerals and Energy in South Africa and the Company proceeds to further develop this project.

Investment in Unlisted Entities

The investments in Africa Uranium Ltd and Petro Ventures International Ltd have been fully impaired at 31 December 2013, (carrying value at 31 December 2012 was $163,113.)

Reserves and Resources

In order to calculate ore reserves and mineral resources, estimates and assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. The consolidated entity estimates its ore reserves and mineral resources based on information compiled by Competent Persons (as defined in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as revised in December 2004 (the JORC code).

As economic assumptions used to estimate reserves change and as additional geological data is generated during the course of operations, estimates of reserves and mineral resources may vary from period to period. Changes in reported reserves and mineral resources may affect the Group’s financial results and financial position in a number of ways, including the following:

Asset carrying values may be affected due to changes in estimated future cash flows;

Depreciation and amortisation charges in profit and loss may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change; and

Restoration and rehabilitation provision may be affected due to changes in the magnitude of future restoration and rehabilitation expenditure.

• 25 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements

(y) Accounting standards not yet effective

Reference	Title	Nature of Change	Application date of standard	Impact on Group financial statements	Application date for Group
AASB 9 (issued December 2009 and amended December 2010)	Financial Instruments	Amends the requirements for classification and measurement of financial assets. The available-for-sale and held-to-maturity categories of financial assets in AASB 139 have been eliminated. AASB 9 requires that gains or losses on financial liabilities measured at fair value are recognised in profit or loss, except that the effects of changes in the liability’s credit risk are recognised in other comprehensive income.	Periods beginning on or after 1 January 2015	Adoption of AASB 9 is only mandatory for the year ending 30 June 2016. The Group has not yet made an assessment of the impact of these amendments.	1 January 2015
AASB 2013- 9 (issued December 2013)	Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments	Makes three amendments to AASB 9: � Adding the new hedge accounting requirements into AASB 9 � Deferring the effective date of AASB 9 from 1 January 2015 to 1 January 2017, and � Making available for early adoption the presentation of changes in ‘own credit’ in other comprehensive income (OCI) for financial liabilities under the fair value option without early applying the other AASB 9 requirements. Under the new hedge accounting requirements: � The 80-125% highly effective threshold has been removed � Risk components of non- financial items can qualify for hedge accounting provided that the risk component is separately identifiable and reliably measurable � An aggregated position (i.e. combination of a derivative and a non-derivative) can qualify for hedge accounting provided that it is managed as one risk exposure � When entities designate the intrinsic value of options, the initial time value is deferred in OCI and subsequent changes in time value are recognised in OCI � When entities designate only the spot element of a forward contract, the forward points can be deferred in OCI and	Annual reporting periods beginning on or after 1 January 2017	The Group does not currently applies hedge accounting as it does not currently have any hedges in place. It is expected that the application of the new amendments will not have an impact on the entity’s financial statements.	1 January 2017

• 26 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

		subsequent changes in forward points are recognised in OCI. Initial foreign currency basis spread can also be deferred in OCI with subsequent changes be recognised in OCI � Net foreign exchange cash flow positions can qualify for hedge accounting.
AASB 2013-4 (issued July 2013)	Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting (AASB 139)	Clarifies treatment of novated hedging instruments and continuation of hedge accounting where entities are required to replace the original party with a central counterparty as a consequence of laws or regulations or the introduction of laws and regulation.	Annual reporting periods beginning on or after 1 January 2014	There will be no impact on first-time adoption of this amendment as the Group does not account for proposed changes in taxation legislation until the relevant Bill has passed through both Houses of Parliament, which is consistent with the views expressed by the Australian Accounting Standards Board in their agenda decision of December 2012.	1 January 2014
AASB 2013- 5 (issued August 2013)	Amendments to Australian Accounting Standards - Investment Entities	The amendment defines an ‘investment entity’ and requires a parent that is an investment entity to measure its investments in particular subsidiaries at fair value through profit or loss in its consolidated and separate financial statements. The amendment prescribes three criteria that must be met in order for an entity to be defined as an investment entity, as well as four ‘typical characteristics’ to consider in assessing the criteria. The amendment also introduces disclosure requirements for investment entities into AASB 12 Disclosure of Interests in Other Entities_and amends AASB 127_Separate Financial Statements.	Annual reporting periods beginning on or after 1 January 2014	As the Group does not meet the definition of an investment entity, it will continue to consolidate its investments in subsidiaries in accordance with AASB 10_Consolidated_ Financial Statements.	1 January 2014
AASB 2012-6 (issued September 2012)	Amendments to Australian Accounting Standards - Mandatory Effective Date of AASB 9 and Transition Disclosures	Defers the effective date of AASB 9 to 1 January 2015. Entities are no longer required to restate comparatives on first time adoption. Instead, additional disclosures on the effects of transition are required.	Annual reporting periods beginning on or after 1 January 2015	As comparatives are no longer required to be restated, there will be no impact on amounts recognised in the financial statements. However, additional disclosures will be required on transition, including the quantitative effects of reclassifying financial assets on transition.	1 January 2015

No other standards, interpretations or amendments which have been issued are expected to have an impact on the group.

• 27 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

2. INCOME

Other Operating Income Profit from sales of investments in available for sale financial assets Miscellaneous and other income Total Other Income 3. EXPENSES BY NATURE Loss before income tax has been arrived at after charging the following: Abandoned acquisition costs Exploration expenditure written off Operating lease rentals Depreciation - plant and equipment Superannuation contributions Movement in provision for employee entitlements Impairment of available for sale investments	Consolidated Group 31 Dec 2013 31 Dec 2012 $ $
	- 464,769 3,000 12,000
	3,000 476,769
	Consolidated Group 31 Dec 2013 31 Dec 2012 $ $
	- 123,243 98,412 - 76,444 49,238 156,659 28,428 18,927 50,322 - 2,250 163,113 227,110

• 28 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

4. INCOME TAX

The components of current income tax expense comprise: Current taxation Income tax (benefit) reported in the income statement The prima facie tax on loss before income tax is reconciled to the income tax expense as follows: (Loss) / Profit before income tax Prima facie tax payable / (benefit) on loss @ 30% (2012:30%) Non allowable items Non-assessable income Net deferred tax assets not brought to account Income tax expense / (benefit) Future income tax benefit arising from un-recouped deductions at reporting date for Australian tax resident entities. Revenue losses Capital losses	Consolidated Group 31 Dec 2013 31 Dec 2012 $ $
	- -
	- -
	(1,622,215) (1,191,061)
	(486,665) (357,318) - 108,591 (466,240) (790,806) 952,905 1,039,533
	- -
	4,986,157 4,612,124 4,689,637 4,689,637

In addition the economic entity has unconfirmed tax losses and accumulated exploration expenditure that gives rise to potential carry forward tax benefits in South Africa amounting to approximately Rand 163 million (approximately A$17.5 million (2012:15 million). The benefit of these potential deferred tax assets has not been brought to account, and will only be realised if circumstances similar to those described above, also apply to the economic entity’s future operations in South Africa.

There are no franking credits available.

5. SEGMENT INFORMATION

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors which makes strategic decisions.

There is no goodwill attaching to any of the segments. There has been no impact on the measurement of the assets and liabilities reported for each segment.

There are two operating segments for South Africa, these are exploration and development projects one Tormin Mineral Sands held in Minerals Sands Resources Ltd and located on the West coast. The other is the Xolobeni Mineral Sands projected held in Transworld Energy and Minerals located on the East coast.

In Australia the Group operates in two segments, investing in the securities of unrelated entities and interest on the deposit of surplus funds. The other segment is the corporate overhead associated with the management and administration of the company’s projects and corporate administration.

• 29 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

2013 Total Revenue from operations Other income Total revenue from external sources Group’s revenue per consolidated statement of profit or loss and other comprehensive income Depreciation Segment Loss Impairment of available for sale asset Finance expense Finance income	Africa Australia Tormin Xolobeni Investing Corporate Totals Development Exploration Exploration $ $ $ $ $ $ - - - - 3,000 3,000	Africa Australia Tormin Xolobeni Investing Corporate Totals Development Exploration Exploration $ $ $ $ $ $ - - - - 3,000 3,000
	3,000 3,000 - - - - 3,000 3,000
	(130,976) - (870) - (24,813) (156,659) (184,463) - (5,672) - (1,327,198) (1,517,333) (163,113) (171,233) 229,464 (1,622,215)
		(1,622,215)

2012 Revenue from operations Other income Total revenue from external sources Depreciation Segment Loss Impairment of available for sale asset Finance expense Finance income Gain on sale of investments Abandonment of acquisition	Africa Australia Tormin Xolobeni Investing Corporate Development Exploration Exploration $ $ $ $ $ 12,000 - - - - 12,000	Totals $ 12,000 12,000
	- - - - (28,428)	(28,428) (1,244,867) (227,110) (102,792) 42,282 464,769 (123,343)
	- (15,580) (1,730) (146,565) (1,080,992)
		(1,191,061)

• 30 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

Additions to non-current assets Additions to non-current assets 2013 Africa Australia Tormin Development Tormin Exploration Xolobeni Investing Corporate $ $ $ $ $ Reportable segment assets 23,923,661 4,627,125 7,785,968 - 1,768,229 Available for sale financial assets Total Group assets Reportable segment liabilities 2,439,212 - - - 401,475 Loans and borrowings 2012 Africa Australia Tormin Development Tormin Exploration Xolobeni Investing Corporate $ $ $ $ $ Reportable segment assets - 5,688,876 7,934,347 - 7,797,315 Available for sale financial assets Total Group assets Reportable segment liabilities - 256,598 28,511 - 705,121 Loans and borrowings	Additions to non-current assets Additions to non-current assets 2013 Africa Australia Tormin Development Tormin Exploration Xolobeni Investing Corporate $ $ $ $ $ Reportable segment assets 23,923,661 4,627,125 7,785,968 - 1,768,229 Available for sale financial assets Total Group assets Reportable segment liabilities 2,439,212 - - - 401,475 Loans and borrowings 2012 Africa Australia Tormin Development Tormin Exploration Xolobeni Investing Corporate $ $ $ $ $ Reportable segment assets - 5,688,876 7,934,347 - 7,797,315 Available for sale financial assets Total Group assets Reportable segment liabilities - 256,598 28,511 - 705,121 Loans and borrowings	Totals $ 38,104,983 106,500 38,211,483 2,840,687 6,787,938 9,628,625 Totals $ 21,420,538 532,113 21,952,651 990,230 - 990,230

• 31 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

6. PARENT ENTITY INFORMATION

The following details information related to the parent entity, Mineral Commodities Limited, at 31 December 2013

The information presented here has been prepared using consistent accounting policies as presented in Note 1.

Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total Liabilities Net Assets Contributed equity Accumulated losses Option reserve Fair value investments held for resale reserve Foreign currency translation reserve Total equity Loss for the year Other comprehensive income / (loss) for the year Total comprehensive income / (loss) for the year 7. FINANCE INCOME AND EXPENSE Finance income Interest received on bank deposits Finance Expense Interest expense on financial liabilities measured at amortised cost Establishment fees on short term borrowing	31 Dec 2013 $ 31 Dec 2012 $
	1,948,676 8,321,359 31,829,294 14,343,036
	33,777,970 22,664,395
	2,739,357 705,103 - -
	2,739,357 705,103
	31,038,613 21,959,292
	61,297,477 50,912,158 (29,154,556) (28,265,939) 357,330 357,330 (262,500) - (1,199,138) (1,044,257)
	31,038,613 21,959,292
	(888,617) (763,131) (417,381) (1,400,512)
	(1,305,998) (2,163,643)
	2013 2012 229,464 42,282 229,464 42,282 71,233 99,937 100,000 - 171,233 99,937

• 32 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

8. CASH AND CASH EQUIVALENTS

Cash at Bank	Consolidated Group 31 Dec 2013 $ 31 Dec 2012 $
	1,694,264 7,769,202
	1,694,264 7,769,202

The effective interest rate on cash at bank in 2013 was 3.0% (2012 :2.30%).

(a) Interest rate risk exposure

The consolidated entity’s exposure to interest rate risk is discussed in Note 24

(b) Reconciliation to cash at the end of the year

The above figures represent the cash at the end of the financial year as shown in the Statement of Cash Flows.

9. TRADE AND OTHER RECEIVABLES

Current Trade receivables Other receivables³ Non-Current Security deposits¹ Advance to Blue Bantry²	Consolidated Group 31 Dec 2013 $ 31 Dec 2012 $
	15,328 22,871 1,299,676 125,216
	1,315,004 148,087
	293,124 313,636 536,855 113,636
	829,979 427,272

¹ Includes a secured deposit of $293,124 with First Rand bank held as security for a performance guarantee issued by the Bank in favour of the South African Department of Minerals and Energy in respect of Mineral Sands Resources (Pty) Ltd obligations under the Tormin Mining right.

² An amount of Rand 5 million (2012 1 million) has been advanced to the BEE partner Blue Bantry refer note 26.

³ Includes $1,081,138 of VAT refundable from the South African revenue service (2012 $35,088)

There are no receivables past due and impaired

(a) Fair Values and credit risk

Due to the short term nature of these receivables the carrying values represent their respective fair values as at 31 December 2013 and 2012.

The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer to Note 24 for more information on the risk management policy of the Group and the credit quality of the entity’s receivables.

• 33 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

(b) Foreign Exchange and Interest Rate Risk

Information about the Group’s exposure to foreign exchange and interest rate Risk in relation to trade and other receivables is provided in Note 24.

10. PREPAYMENTS

Prepayments 11. INVENTORIES Raw materials at cost Finished product Spare parts and consumables 12. FINANCIAL ASSETS - CURRENT Available for sale Investments Investments in companies listed on a recognised stock exchange - shares at fair value At the beginning of the year Cost of Allied Gold Mining Plc Shares sold Revaluation of listed shares transferred to reserve Subscription monies paid for Perpetual Resources Ltd Transfer from Financial asset revaluation reserve on shares sold Total available for sale investments in companies listed on a recognised stock exchange		Consolidated Group 31 Dec 2013 31 Dec 2012 $ $ 11,594 10,925 Consolidated Group 31 Dec 2013 $ 31 Dec 2012 $ 380,646 - 358,415 - 130,007 - 869,068 - Consolidated Group 31 Dec 2013 $ 31 Dec 2012 $ 369,000 1,653,000 - (1,030,333) (262,500) (14,000) - 350,000 - (589,667)
		106,500 369,000

• 34 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

FINANCIAL ASSETS - CURRENT

FINANCIAL ASSETS - CURRENT
Available for sale investment in companies not listed on a recognised stock exchange At the beginning of the year Fair value movement Impairment of unlisted shares charged to profit and loss Total available for sale investments in companies not listed on a recognised stock exchange Total Financial Assets	31 Dec 2013 $ 31 Dec 2012 $
	163,113 1,374,651 - (998,428) (163,113) (213,110)
	- 163,113
	106,500 532,113

Available for sale financial assets comprise investments in the ordinary share capital of various entities. There are no fixed returns or fixed maturity dates attached to these investments. Listed shares held for resale have been adjusted to market value at balance date. The investment in unlisted shares has been fully impaired and charged to the statement of profit or loss and other comprehensive income.

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: 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: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

2013	Level 1	Level 2	Level 3	Total
Available for sale financial assets	106,500	-	-	106,500
Total	106,500	-	-	106,500
2012	Level 1	Level 2	Level 3	Total
Available for sale financial assets	369,000	-	163,113	532,113
Total	369,000	-	163,113	532,113

The level 3 investment in an unlisted entity has been fully impaired in 2013.

• 35 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

(a) Risk Exposure

Information about the Groups’ exposure to credit risk, foreign exchange and interest rate risk is provided in note 24

13. PROPERTY, PLANT AND EQUIPMENT

~~OTHER – CURRENT~~	Mining Plant machinery and vehicles	Office equipment and furnishings	Totals
Cost
1January2012	-	74,952	74,952
Additions	-	79,688	79,688
Disposals	-	(5,545)	(5,545)
At 31 December 2012	-	149,095	149,095
At 1 January 2013		149,095	149,095
Additions	5,750,995	2,020	5,753,015
Disposals	-	-	-
At 31 December 2013	5,750,995	151,115	5,902,110
Depreciation
At1January2012	-	53,371	53,371
Depreciation	-	28,428	28,428
Disposals	-	(1,393)	(1,393)
At 31 December 2012	-	80,406	80,406
At1January2013	-	80,406	80,406
Depreciation	131,846	24,813	156,659
Disposals	-	-
At 31 December 2013	131,846	105,219	237,065
Net book value
At 1 January 2012	-	21,582	21.582
At 31 December 2012	-	68,689	68.689
At 31 December 2013	5,619,149	45,896	5,665,045

Information about the Group’s exposure to credit risk, foreign exchange and interest rate risk is provided in Note 24.

14. EXPLORATION AND DEVELOPMENT EXPENDITURE

	Development	**Exploration **
At 1January 2012
Exploration expenditure - costs carried forward in respect of areas of interest in:	-	12,506,413
Expenditure during the year	-	1,169,193
Foreignexchangemovements	-	(679,244)
At 31 December 2012	-	12,996,362
At 1January 2013		12,996,362
Expenditure during the year	15,322,494	147,058
Foreignexchangemovements	-	(647,473)
Write offdiscontinued projects	-	(98,412)
At 31 December 2013	15,322,494	12,397,535

• 36 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

South African Projects

TORMIN MINERAL SANDS PROJECT

The Company commenced and concluded the development of the Tormin Mineral Sands Project on time and on budget during the year.

Commissioning of the Primary Beach Concentrators (“PBCs”) commenced in October 2013, followed shortly thereafter by the commencement of mining operations. By mid-December 2013, the Company had mined and stockpiled in excess of 60,000 tonnes of HMC at the Secondary Concentrator Plant (“SCP”).

Fabrication and construction of the SCP infrastructure, plant and plate-work was completed during the last quarter of the year. The water supply to the SCP, process water dams, steel structure and mechanical equipment were also installed and tested.

Initial cold commissioning was undertaken in the first week of December, 2013 and hot commissioning commenced on the 11[th] December, 2013 and by the end of the year, the Company had achieved nameplate output at very close to design specification.

The seasonal ocean and tidal conditions between the months of August and October served to act as a natural catalyst to upgrading the beach resource. The extremely high grade of ROM encountered on the beach allowed the Company to feed ROM ore directly into the SCP bypassing the PBCs.

Based on the success of associating the PBC spirals with the SCP, the Company has decided to permanently relocate and operate the PBCs at the SCP and not on the beach. This will result in significant de-risking of the PBC operation and require only one PBC unit to be operated in the future as it will not be affected by daily tidal movements and ocean conditions.

XOLOBENI MINERAL SANDS PROJECT

In November 2011 the Department of Mineral Resources (“DMR”) extended the prospecting rights over the Xolobeni project, excluding the Kwanyana block, for a further period of 3 years. During the first quarter of 2012, this right was executed and subsequently registered by the DMR in the third quarter of 2012.

MRC has advised that the DMR had withdrawn the previously granted Conditional Mining Right over Kwanyana block and that it the was engaging with the DMR and Minister in relation to these matters. The Company subsequently withdrew all previous applications in respect of the Kwanyana block and immediately applied for a new prospecting right over the same block.

The benefit of this approach is that the Kwanyana block will be re-aligned with the rest of the Xolobeni project which will enable the Company to progress its application to develop Xolobeni in its entirety and, in so doing, demonstrate that this can be undertaken responsibly and sustainably.

The DMR accepted the new prospecting right application (PRA) over the Kwanyana block in the first quarter of 2012 and, in accordance with prevailing legislation, directed the Company to submit an Environmental Management Plan (EMP) for the prospecting work and details of its engagement with all stakeholders with an interest in the project. The Company compiled an EMP for the Kwanyana block prospecting work and undertook a comprehensive stakeholder engagement process (SEP) during the second quarter of 2012. The EMP and SEP report were also lodged with the DMR in accordance with the required timetable.

A number of objections to the PRA were received. Accordingly, the DMR was required by law to call a meeting to consider the objections and representations made by the Company. This meeting was held on 28 November 2012.

Based on the information presented at that meeting, the DMR instructed the Company to undertake additional consultation. A comprehensive consultation process, designed to identify and engage with all potential interested and affected parties was implemented during the last quarter. In addition, in keeping with local traditions, a series of pre-meetings were held with the traditional leaders in the Xolobeni area to update them on developments with the project, brief them on the planned consultation process and gain their approval for the process.

• 37 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

Xolobeni Public Participation Successfully Completed

Having obtained the traditional leadership’s approval of the planned process and updated the DMR in the first quarter, the public consultation process took place in March and April 2013. Subsequently, feedback from all the meetings has been collated into a comprehensive issues and response trial which has been incorporated into a stakeholder engagement report (SER). The SER was completed in the last quarter and submitted to all relevant parties at the DMR for evaluation.

In late December 2013, the Company was advised that the DMR will meet to consider the SEP and other matters relating to the Kwanyana PRA on 22 January 2014.

The Company attended the meeting after the year end on 22 January 2014 as planned. The representations made by the Company were well received and all objections appropriately addressed. The Company therefore remains optimistic that the DMR will award a new prospecting right over the Kwanyana block during the first half of 2014 and enable the Company to do the final work necessary to submit a mining right application for the entire Xolobeni tenement as soon thereafter as possible.

Xolobeni Baseline Studies

In the interim, work has commenced on preparation for the various baseline studies that are required as part of the prospecting works programme and in preparation for and application for a mining right for Xolobeni. By end of the quarter MRC had appointed a specialist to commence a water study on the Xolobeni area. The Company expects this work to be completed in the first half of 2014.

15 (a) SUBSIDIARIES AND TRANSACTIONS WITH NON-CONTROLLING INTERESTS

Set out below are the group’s principal subsidiaries at 31 December 2013. Unless otherwise stated, the subsidiaries as listed below have share capital consisting solely of ordinary shares, which are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business.

Parent Entity Mineral Commodities Limited Controlled Entities Rexelle Pty Ltd Queensland Minex NL Q Smelt Pty Ltd Mincom Waste Pty Ltd MRC Resources (Pty) Ltd MRC Africa Pty Ltd Blackhawk Oil & Gas Ltd MRC Cable Sands Pty Ltd Transworld Energy & Minerals Resources (SA) (Pty) Limited Mineral Sands Resources (Pty) Ltd Nyati Titanium Eastern Cape (Pty) Ltd RevenueMRC Metals (Pty) Ltd Skeleton Coast Resources (Pty) Ltd	Class of Share	Place of Incorporation Equity Holding N C I interest % 2013 2012 2013 2012 % %
	Ord Ord Ord Ord Ord Ord Ord Ord Ord Ord Ord Ord Ord	Australia Australia 100 100 - Australia 100 100 - Australia 90 90 10 10 Australia 100 100 - - South Africa 100 100 - Australia 100 100 - - Australia 100 100 - - Australia 100 100 - - Place of Incorporation Equity Holding 2013 2012 % %
		South Africa 56 56 44 44 South Africa 50 50 50 50 South Africa 100 100 - - South Africa 100 100 - - Namibia 100 100 - -

• 38 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

15 (b). Non-controlling interests

	Transworld Energy & Minerals Resources (SA) (Pty) Limited	Transworld Energy & Minerals Resources (SA) (Pty) Limited	Mineral Sands Resources (Pty) Ltd	Mineral Sands Resources (Pty) Ltd	Q Smelt	Pty Ltd
Summarised balance sheet	2013	2012	2013	2012	2013	2012
Current assets	3,508	4,204	2,079,665	34,292	2	2
Currentliabilities	-	-	(6,660,005)	0	0	0
Current net assets	3,508	4,204	(4,580,340)	34,292	2	2
Non-current assets	6,296,644	6,436,391	25,809,799	5,307,018	0	0
Non-currentliabilities	(5,512,399)	(5,603,371)	(20,384,275)	(4,309,692)	0	0
Non-currentnet assets	784,245	833,020	5,425,524	997,326
Net assets	787,753	837,224	845,184	1,031,618	2	2
AccumulatedNCI	124,139	124,139	-	-	54,710	54,710

	Transworld Energy & Minerals Resources (SA) (Pty) Limited	Transworld Energy & Minerals Resources (SA) (Pty) Limited	Mineral Sands Resources (Pty) Ltd	Mineral Sands Resources (Pty) Ltd	Q Smelt	Pty Ltd
Summarised statement of comprehensive income	2013	2012	2013	2012	2013	2012
Revenue	-	-	-	-	-	-
Loss for theperiod	3,314		129,659	1,176
Othercomprehensiveincome	-	-	-	-	-	-
Totalcomprehensiveincome	3,314		129,659	1,176	-	-
Loss attributed to NCI	-		-		-	-

	Transworld Energy & Minerals Resources (SA) (Pty) Limited	Transworld Energy & Minerals Resources (SA) (Pty) Limited	Mineral Resources	Sands (Pty) Ltd	Q Smelt Pty Ltd	Q Smelt Pty Ltd
Summarised cash flows	2013	2012	2013	2012	2013	2012
Cash flows from operating activities	-	-	(2,017,607)		-	-
Cash flows from investing activities	-	-	(21,085,759)	-	-	-
Cash flows from financing activities	-	-	23,139,433	-	-	-
Net increase/(decrease) in cash and cashequivalents	-	-	36,067	-	-	-

As noted (above), the company, via its wholly owned subsidiary MRC Resources (Proprietary) Limited, has an interest of 50% of the issued capital in Mineral Sands Resources (proprietary) Limited (MSR). Whilst the group controls 50% of the share voting power, it has been determined that the group effectively has 100% control due to its control over the relevant activities for accounting purposes, controls the management of MSR, and also controls the board of MSR due to provisions set out in the Shareholders Agreement entered into between the shareholders of MSR.

• 39 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

Therefore these financial statements include 100% of the results of MSR. In addition to the holding of the issued capital, the group also holds Class A and B Preference Shares in MSR which effectively provides for the repayment of the capital investment and deemed investment by the Company’s Black Empowerment partner. Due to the terms attached to these A and B Preference Shares, they are categorised as an equity instrument. As the A Preference Shares and B Preference Shares would be redeemed out of distributable profits and net assets of MSR before all other ordinary shareholders, until such time as the net assets exceed the value of the unredeemed A and B Preference shares, no value has been attributed to the non-controlling interest. Until that time, the non-controlling interest has no rights to the assets or results of the company, and therefore has not been allocated any value in these financial statements.

16. TRADE AND OTHER PAYABLES - CURRENT

Trade payables - unsecured Other payables and accruals - unsecured Short term borrowings¹ Amounts due under equipment acquisition agreements²	Consolidated Group 31 Dec 2013 31 Dec 2012 $ $
	2,010,726 530,916 829,961 435,886
	2,840,687 966,802
	2,337,900 - 4,450,038 -
	6,787,938 -

¹ Short term borrowings consist of a pre finance and marketing agreement facility of US$2.0 million which was drawn down in September 2013. This facility is repayable over a twelve month period in quarterly instalments commencing three months after production has commenced. Interest is charged at a rate of 10%.

² The Group entered into two Master rental agreements to acquire mobile mining equipment. Under the terms of these agreements there is an option to purchase which the Group intends to exercise.

(a) Fair Values and credit risk

Due to the short term nature of these payables the carrying values represent their respective fair values as at 31 December 2013 and 2012.

(b) Foreign Exchange and Interest Rate Risk

Information about the Group’s exposure to foreign exchange and interest rate Risk in relation to trade and other payables is provided in Note 24.

• 40 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Financial Statements (continued)

17. CONTRIBUTED EQUITY

CONTRIBUTED EQUITY
Balance at beginning of financial year Conversion of Listed Options Placement of 120,615,000 shares as approved by shareholders at the Annual General Meeting on 31 May 2012 Placement Proceeds of rights issue Costs of capital raising Balance at end of financial year	2013 Number of shares 2012 Number of shares 2013 $ 2012 $
	274,008,385 153,393,385 50,912,158 41,204,350 8,322 1,664 - 120,615,000 10,252,864 49,937,000 - 4,244,645 - 80,988,228 - 6,479,058 - - - (340,048) (545,056)
	404,941,935 274,008,385 61,297,477 50,912,158

(a) Ordinary Shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(b) Capital risk management

The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets in order to maintain sufficient funds necessary to continue its operations.

Investments such as the shareholding in Perpetual Resources Ltd are also regarded as part of the capital base and sold as required to fund ongoing operations.

18. RESERVES

RESERVES
General Reserve Financial asset revaluation reserve Foreign currency translation reserve Unlisted options reserve	Consolidated Group 31 Dec 2013 31 Dec 2012 $ $
	2,437,582 2,437,582 (262,500) - (5,126,455) (4,246,287) 357,330 357,330
	(2,594,042) (1,451,375)

• 41 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Financial Statements (continued)

Consolidated Entity Balance at 1 January 2012 Revaluation on disposal of listed shares Revaluation of unlisted shares held for resale Issue of unlisted options Transfer to Accumulated Losses Exchange differences on translation of foreign operations Balance at 31 December 2012 Revaluation of listed shares held for resale Exchange differences on translation of foreign operations Balance at 31 December 2013	General Reserve Financial Asset revaluation Foreign Currency Unlisted Options Listed Options Total $ $ $ $ $ $
	2,437,582 1,588,095 (3,507,599) - 286,578 804,656 (589,667) (589,667) (998,428) (998,428) 357,330 357,330 (286,578) (286,578) (738,688) (738,688)
	2,437,582 - (4,246,287) 357,330 - (1,451,374) (262,500) (262,500) (880,168) (880,168)
	2,437,582 (262,500) (5,126,455) 357,330 - (2,594,042)

Nature and purpose of reserves

General Reserve

The General Reserve arose from the issue of shares in MRC Resources Pty Ltd to an entity outside the economic entity.

Financial asset revaluation reserve

The financial asset revaluation reserve arises from the revaluation at reporting date of available for sale financial assets.

Foreign Currency Translation reserve

The foreign currency translation reserve records the unrealised foreign currency differences arising from the translation of operations into the presentation currency of the group. Refer to accounting policy Note 1 (e).

Listed Options Reserve

Records the amounts received in a prior year from the issue of listed options.

Un-listed Options Reserve

The value of the share based payment options issued in 2012

19. LOSS PER SHARE

LOSS PER SHARE
(a) Basic loss per share From continuing operations attributable to the ordinary shareholders of the company (cents per share) Total basic loss per share attributable to the ordinary equity holders of the company (cents per share) Weighted average number of ordinary shares outstanding during the year used in calculation of basic loss per share Loss used in the calculation of basic loss per share from continued operations	Consolidated 31 Dec 2013 31 Dec 2012 cents cents
	(0.64) (0.068) (0.64) (0.068) 251,763,939 173,495,885 (1,622,215) (1,191,061)

• 42 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

There were 57,357,208 options with an exercise price of 20 cents and an expiry date of 31 December 2012 on issue as at 31 December 2011. These potential ordinary shares are not considered dilutive and accordingly were not used to calculate dilutive earnings per share. The options were unexercised and therefore lapsed at 31 December 2012.

20. AUDITORS’ REMUNERATION

During the year, the following fees were paid or payable for services provided by the auditor of the parent entity and nonrelated audit firms:

Amounts paid or due and payable to the auditors Auditors of the parent entity Audit and review Audit of subsidiaries BDO Cape Town South Africa	Consolidated Group 31 Dec 2013 31 Dec 2012 $ $
	60,000 64,122 19,261 11,726 -
	79,261 75,848

21. KEY MANAGEMENT PERSONNEL DISCLOSURES

Key Management Personnel Compensation

Key Management Personnel Short-term employee benefits Post-employment benefits Share based payments	Consolidated Group 31 Dec 2013 31 Dec 2012 $ $
	920,112 321,565 25,878 14,378 - 357,330
	945,990 693,273

• 43 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

(a) Option holdings of key management personnel

The numbers of options over ordinary shares in the company held during the financial year by each director of Mineral Commodities Limited and other key management personnel of the consolidated entity are set out below:

2013
Key Management Personnel	Balance at 1 January 2013 or on appointment	Granted as Remuneration	Options Exercised	Options Lapsed	Net change other	Balance at 31 Dec 2013	Vested and exercisable	Unvested
Mark Caruso	1,000,000	-	-	-	-	1,000,000	1,000,000	-
Joseph Caruso	1,000,000	-	-	-	-	1,000,000	1,000,000	-
Peter Torre	1,000,000	-	-	-	-	1,000,000	1,000,000	-
Guy Walker	1,000,000	-	-	-	-	1,000,000	1,000,000	-
James Leahy	1,000,000	-	-	-	-	1,000,000	1,000,000	-
Andrew
Lashbrooke	6,000,000	-	-	-	-	6,000,000	6,000,000	-
2012
Key Management Personnel	Balance at 1 January 2012 or on appointment	Granted as Remuneration	Options Exercised	Options Lapsed	Net change other	Balance at 31 Dec 2012	Vested and exercisable	Unvested
Mark Caruso	7,380,396	1,000,000	-	7,380,396	-	1,000,000	1,000,000	-
Joseph Caruso	7,380,396	1,000,000	-	7,380,396	-	1,000,000	1,000,000	-
Peter Torre	200,000	1,000,000	-	200,000	-	1,000,000	1,000,000	-
Guy Walker	40,000	1,000,000	-	40,000	-	1,000,000	1,000,000	-
James Leahy	-	1,000,000	-	-	-	1,000,000	1,000,000	-
Andrew
Lashbrooke		6,000,000	-	-	--	6,000,000	6,000,000	-

(b) Shareholdings of key management personnel

The numbers of ordinary shares in the company held during the financial year by each director of Mineral Commodities Limited and other key management personnel of the consolidated entity are set out below:

2013

2013
	Balance at
	1 January 2013
	or on	Received as	Options			Balance
Director	appointment	Remuneration	Exercised		Net change other	31 Dec 2013
Mark Caruso	21,582,615	-		-	56,787,183	78,369,798
Joseph Caruso	21,569,988	-		-	55,437,497	77,007,485
Peter Torre	500,000	-		-	125,000	625,000
Guy Walker	100,000	-		-	25,000	125,000
James Leahy	-	-		-	-	-
Andrew Lashbrooke	-	-		-	-	-

• 44 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

2012
	Balance at
	1 January 2012
	or on	Received as	Options		Balance
Director	appointment	Remuneration	Exercised	Net change other	31 Dec 2012
Mark Caruso	21,582,615	-	-	-	21,582,615
Joseph Caruso	21,569,988	-	-	-	21,569,988
Peter Torre	500,000	-	-	-	500,000
Guy Walker	100,000	-	-	-	100,000
James Leahy	-	-	-	-	-
Andrew Lashbrooke	-	-	-	-	-

Joseph and Mark Caruso are both directors of Zurich Bay Holdings Pty Ltd which has a relevant interest in 77,007,485 shares.

All equity transactions with key management personnel, other than those arising from the exercise of remuneration options, have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.

(c) Loans to key management personnel

There were no loans to key management personnel during the period.

(d) Other transactions and balances with key management personnel

There were no transactions or balances with key personnel except as disclosed in this note and Note 22.

22. RELATED PARTY TRANSACTIONS

Minesite Construction Services a Company associated with Mr Mark Caruso and Mr Joseph Caruso has provided office space to Mineral Commodities Limited (MRC) throughout 2013. The amount paid by MRC was $54,000 (2012 $54,000). This is considered to be an arms length commercial rent. There is no formal sub lease in place.

Zurich Bay Holdings Pty Ltd a Company associated with Mr Mark Caruso and Mr Joseph Caruso participated in an underwriting agreement on the Rights Issue for which it received a fee of $98,942.

Minesite Construction Services has provided Secretarial staff to the Executiver Chairman pursuant to an Executive Service Agreement at a total cost of $51,600. These have been reimbursed on an arms length basis at normal commercial rates. During 2014 to the date of this report a further amount of $12,900 has been paid.

Minesite Construction Services has provided technical staff during the year ended 31 December 2013 to the Groups’ Subsidiary which operates the Tormin Mineral Sands project at a total cost of $54,300 these have been reimbursed on an arms-length basis at normal commercial rates. During 2014 to the date of this report a further $50,242 has been paid.

Wholly owned group

The group consists of Mineral Commodities Limited and its subsidiaries. Details of entities in the group are set out in Note 15.

Transactions between Mineral Commodities Limited and other entities in the group during the years ended 31 December 2013 and 31 December 2012 consisted of loans advanced and payments received and made on inter-company accounts. These transactions were made on normal commercial terms and conditions and at market rates.

During the financial year, the Company provided management, accounting and administration services to other entities in the wholly-owned group.

Key management personnel

Disclosures relating to key management personnel are set out in Note 21

• 45 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

23(a) RECONCILIATION OF LOSS FOR THE YEAR TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

Profit/(loss) after income tax and outside equity interest Depreciation Impairment losses Provision for Employee Entitlements (Profit) on sale of investment in listed companies Value of un-listed options issued Loss on disposal of fixed assets Exploration expenditure written off Changes in assets and liabilities during the year: Increase/(decrease) in trade payables and other liabilities (Increase) decrease in trade and other receivables Increase in Inventory (Increase) decrease in prepayments Net cash inflow / (outflow) from operating activities	Consolidated 31 Dec 2013 31 Dec 2012 $ $
	(1,622,215) (1,191,061) 156,659 28,428 163,113 227,110 (23,427) (12,973) - (464,769) - 357,330 - 152 - - - - 1,873,884 (1,046,345) (1,184,407) (127,795) (869,068) - (669) 238
	(1,506,130) (2,229,685)

23(b) Non-cash Investing and Financing Activities

The group has no available finance facilities as at reporting date. The group did not undertake any non-cash financing or investing activities during the period (2012: none).

24. FINANCIAL RISK MANAGEMENT

The Group holds the following financial instruments:

Financial Assets Cash at bank and short term bank deposits AA- (Standard & Poor’s/Fitch) BBB+ (Fitch) Total Cash at bank and short term bank deposits	Consolidated Entity 31 Dec 2013 31 Dec 2012 $ $
	1,632,839 7,569,613 61,425 199,589
	1,694,264 7,769,202

• 46 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

Trade and other receivables

Counterparties with external credit rating AAA (Standard & Poors) BBB+ (Standard & Poors) Counterparties without external credit rating Sundry prepayments and receivables Total Receivables Available for sale investments Financial Liabilities Trade Creditors Other payables Short term borrowings Equipment financing	31 Dec 2013 $ 31 Dec 2012 $
	24,029 45,631 1,374,261 348,724
	1,398,290 394,355
	221,431 78,293
	1,619,721 472,648
	106,500 532,113
	3,420,485 8,773,963
	2,010,726 530,916 829,961 435,886
	2,840,687 966,802
	2,337,900 - 4,450,038 -
	6,787,938 966,802
	9,628,625 966,802
	(6,208,140) 7,807,161

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. Risk management is carried out by the Board of Directors.

The Group does not hold any derivative financial instruments.

Financial Risk

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

• 47 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The primary exposure is in respect to the South African Rand arising from the investments in and loans to South African entities.

Foreign exchange risk arises from assets and liabilities denominated in a currency that is not the Reporting Company’s functional currency and net investments in foreign operations.

The Group does not hold any derivatives or foreign exchange contracts to hedge its foreign exchange risk exposure.

24. FINANCIAL RISK MANAGEMENT (Continued)

Based on the financial instruments held at the reporting date, the sensitivity of the Group’s profits after tax for the year and equity at the reporting date to movements in the Australian Dollar to South African Rand was:

• Had the Australian Dollar weakened / strengthened by 19% against the South African Rand with all other variables remaining constant, the Group’s profit after tax would have been $9,431 lower / higher (2012: $3,289 lower / higher) and equity would have been $5,636,808 lower / higher (2012: $2,310,089 lower / higher) The reasonable possible change is based on historical changes in rates estimated by management.

Credit Risk

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well as credit exposures including outstanding receivables and investments in unlisted entities.

All cash balances held at banks are held at internationally recognised institutions. The majority of receivables held are with related parties and within the Group. Given this, the credit quality of financial assets that are neither past due or impaired can be assessed by reference to historical information about default rates.

The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the economic entity’s maximum exposure to credit risk without taking account of the value of any collateral or other security obtained.

Interest Rate Risk

The Group’s exposure to interest rate risk relates primarily to the Group’s floating interest rate cash balance which is subject to movements in interest rates. The Board monitors its cash balance on an ongoing basis and liaises with its financiers regularly to mitigate cash flow interest rate risk. Interest is charged on the loans from the parent company to the South African subsidiaries at rates permitted by the South African reserve bank. This interest is eliminated on consolidation.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. The Board monitors rolling cash flow forecasts to manage liquidity risk. The only financial liabilities of the Group at balance date are trade, short term borrowings and other payables. These amounts are unsecured.

As at reporting date the Group had sufficient cash reserves to meet its requirements. Should additional cash be required to fund operations this may be raised from the sale of listed equities held as available for sale. The Group therefore had no other credit standby facilities or arrangements for further funding in place.

The only financial liabilities the Group had at reporting date were trade payables incurred in the normal course of the business. These were non-interest bearing and were due within the normal 30 day terms of creditor payments.

Price Risk

The Group has an exposure to equity securities price risk. This arises from investments held by the Group and classified on the Statement of Financial Position as available for sale financial assets.

The Group is also exposed to commodity price risk as a result of fluctuations in the market price of commodities.

• 48 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

The following table summarises the impact of any increases/decreases in the market price of available for sale equity investments. The percentage used is based on possible volatility of the share price and market value of the investments held. The 30% reasonable movement is based on management’s estimate of historical changes.

2013 Commodity price variation – Inventory product Available for sale investments Listed Shares & Options 2012 Available for sale investments Listed Shares & Options Unlisted shares	Price Risk -30% +30% Carrying amount $ Profit $ Equity $ Profit $ Equity $ 739,022 (221,707) 221,707 106,500 (31,950) - - 31,950
	845,522 (253,657) (253,657)
	Price Risk -30% +30% Carrying amount $ Profit $ Equity $ Profit $ Equity $ 369,000 (110,700) 110,700 163,113 (48,934) 48,934
	532,113 (159,634) 159,634

25. SHARE BASED PAYMENTS

The issue of Employee options was approved by shareholders at a general meeting of the Company held on 21 December 2012. The Employee option plan is designed to provide long-term incentives for senior managers and above (including directors) to deliver longterm shareholder returns.

Options granted under the plan carry no dividend or voting rights. When exercisable each option is convertible into one ordinary share at the predetermined exercise

Grant	Date	Expiry date	Exercise	Fair	Options at	Granted		Exercised	Exercised	Forfeited	Balance at	Vested at the	Vested at the
2012			price	Value at	the start of	during	the	during	the	during the	the end of the	end	of the
				grant	the year	year		year		year	year	year
				date
21 Dec	2012	31 Dec 2015	20 cents¹	3.35	10,000,000				-	-	10,000,000	10,000,000
				cents
21 Dec	2012	31 Dec 2015	35 cents²	2.23	1,000,000				-	-	1,000,000		1,000,000
				cents
					11,000,000				-	-	11,000,000	11,000,000

Fair value of options granted

The assessed fair value at grant date of options during the year ended 31 December 2012 was independently determined using a BlackScholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The total Share Based payment expense for the period was $0 (2012 $357,330).

• 49 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)

The model inputs for options granted during the year ended 31 December 2012 included:

(a) Options granted for no consideration with the expectation that the majority of these Options would be exercised towards the end of the term of the Options and there are no market based vesting conditions. (b) Exercise price ¹ 20 cents ² 35 cents (c) Grant date ¹ 21 December 2012 ² 21 December 2012 (d) Risk-free interest rate ¹ 2.50% ² 2.57% (e) Exercise date 31 December 2015 (f) Share price at grant date 8.08 cents

• (g) Expected price volatility of the company’s shares : 86% (h) Expected dividend yield – nil

The expected price volatility is based on the historic volatility and the general trend in share prices of the companies in similar businesses and trading on the ASX over the past 4 and 12 months.

26. COMMITMENTS

(a) The Company, via MRCR, and Blue Bantry are both 50% shareholders in Mineral Sands Resources Pty Ltd (MSR), the entity which owns the Tormin Mineral Sands Project (Tormin).

MRC has agreed to provide Blue Bantry access to an amount of funding to support the original objective by advancing through the Loan certain benefits Blue Bantry would expect to receive from Tormin. The Loan consists of an upfront amount of ZAR5 million (approx AUD$5364K) which has already been paid with a further ZAR 9 million (approx AUD$970k) which was to be payable no later than 31 December 2012,. Blue Bantry will repay the Loan from distributions that it will receive in the future from MSR. The additional ZAR 9 million was outstanding at 31 December 2013 pending completion of administrative

(b) Exploration Tenement Leases – Commitments for Expenditure.

In order to maintain current rights of tenure to exploration tenements, the consolidated entity is required to outlay lease rentals and to meet the minimum expenditure requirements which are not considered to be material.

27 CONTINGENT LIABILITIES

There are no Contingent Liabilities.

28. SUBSEQUENT EVENTS

No other event or transaction has arisen in the interval between the end of the financial year and the date of this report of a material and unusual nature likely, other than what has been disclosed elsewhere in this financial report, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years unless otherwise disclosed in this Directors Report.

• 50 -

Mineral Commodities Limited Annual Financial Statements for the year ended 31 December 2013

Directors’ Declaration

The Directors of the Company declare that:

1. The financial statements, comprising the consolidated statement of profit or loss and other comprehensive income, consolidated statement of financial position, consolidated statement of cash flow, consolidated statement of changes in equity and accompanying notes, are in accordance with the Corporations Act 2001 including;

2. (a) complying with Australian Accounting Standards and the Corporations Regulations 2001 and,

3. (b) give a true and fair view of the consolidated entity’s financial position as at 31 December 2013 and of its performance for the year ended on that date.

4. The Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.

5. 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.

The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors:

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Mark Caruso Executive Chairman

Dated at Perth, Western Australia this 31st day of March 2014

• 51 -

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au

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DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF MINERAL COMMODITIES LIMITED

As lead auditor of Mineral Commodities Limited for the year ended 31 December 2013, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Mineral Commodities Limited and the entities it controlled during the period.

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Brad McVeigh Director

BDO Audit (WA) Pty Ltd

Perth, 31 March 2014

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

• 52 -

Tel: +61 8 6382 4600 38 Station Street Fax: +61 8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

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INDEPENDENT AUDITOR’S REPORT

To the members of Mineral Commodities Limited

Report on the Financial Report

We have audited the accompanying financial report of Mineral Commodities Limited, which comprises the consolidated statement of financial position as at 31 December 2013, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal 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 Stat ements, that the financial statements comply with International Financial Reporting Standards .

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s 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 company’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 internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

• 53 -

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Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of Mineral Commodities Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Opinion

In our opinion:

• (a) the financial report of Mineral Commodities Limited is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2013 and of its performance for the year ended on that date; and

• (ii) complying with 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.

Report on the Remuneration Report

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

Opinion

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

BDO Audit (WA) Pty Ltd

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Brad McVeigh

Director

Perth, 31 March 2014

• 54 -