RAREX LIMITED — Annual Report 2013

Mar 16, 2014

CLANCY EXPLORATION LIMITED ABN: 65 105 578 756 AND CONTROLLED ENTITY

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

CORPORATE DIRECTORY

DIRECTORS

Dr Michael Etheridge Non-Executive Chairman

Mr Gordon Barnes Managing Director

Dr James Macdonald Non-Executive Director (Technical)

Ms Natalie Forsyth-Stock Executive Director (Financial)

COMPANY SECRETARY

Mr Rowan Caren

CHIEF FINANCIAL OFFICER

Natalie Forsyth-Stock

PRINCIPAL PLACE OF BUSINESS

3 Corporation Place Orange New South Wales 2800

Telephone: (02) 6361 1285 Facsimile: (02) 6361 1202 Website: www.clancyexploration.com

LAWYERS

Holborn Lenhoff Massey 3rd Floor, Irwin Chambers 16 Irwin Street Perth 6000 Western Australia

Watson Mangioni Level 13 50 Carrington Street Sydney New South Wales 2000

AUDITOR

Ernst & Young Ernst & Young Centre 680 George Street Sydney New South Wales 2000

SHARE REGISTRY

Security Transfer Registrars

770 Canning Highway Applecross WA 6153 Australia

Telephone: +61 8 9315 2333 Facsimile: +61 8 9315 2233

REGISTERED OFFICE

Suite 4, 6 Richardson Street West Perth Western Australia 6005

ASX CODE : CLY

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

The Board of Directors has pleasure in presenting its report on the consolidated entity consisting of Clancy Exploration Limited and the entity it controlled at the end of, or during, the year ended 31 December 2013.

1. Directors

(i) Names, Qualifications and Experience

The names and details of the Company’s directors in office at any time during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

Dr Michael Etheridge, FTSE, FAICD, FAIG, FGSA (Non-Executive Chairman) 67 Years

Dr Etheridge is a geologist who has had a varied career in universities, a government research organisation and in industry. He is currently non-executive chairman of ABM Resources Ltd (ASX: ABU) (appointed November 2009) and a non-executive director of DET CRC Ltd, a collaborative research organisation involving the mining industry, universities and government research bodies. Until November 2013, he was deputy chairman of Zeus Resources Ltd (ASX: ZEU), He was previously a director of Ballarat Gold Fields NL prior to its takeover by Lihir Gold Ltd in March 2007 and of Lihir Gold Ltd (from March 2007 to September 2010), prior to its merger with Newcrest Ltd. He was also a director of Consolidated Minerals Ltd prior to its takeover by Palmary Plc (AIM) and Ariana Resources Plc (AIM). In 1989, Dr Etheridge switched from public sector research to industry and co-founded the geoscience consultancy business Etheridge Henley Williams (EHW). EHW grew to over 30 staff on three continents before it merged with the SRK Consulting group to become SRK’s Australasian business in 1997. In 2004 Dr Etheridge left SRK Australasia, where he was chairman, to pursue a career as a professional company director in the resources and related R&D sectors.

Dr Etheridge was appointed as a director of the Company on 11 March 2011 and became Chairman on 25 July 2011. His relationship with the Company stretches back to 2004 when he was founding non-executive chairman of Geoinformatics Exploration Inc (TSX-V), from which Clancy Exploration Ltd was spun out in 2007. He is currently a member of the audit and the remuneration committees.

Dr Etheridge is a Fellow of the Australian Academy of Technological Sciences and Engineering, the Australian Institute of Company Directors, the Society of Economic Geologists and the Australian Institute of Geoscientists.

Gordon Barnes, BSc, MSc, MAIG, MSEG, GAICD

(Managing Director) 49 years

Mr Barnes is an exploration geologist with a background in exploration project management and technical consulting services. He has 26 years of practical experience, ranging from active field based projects through to multi-commodity project generation initiatives in Australia, Asia, North and South America. He worked as an Exploration Geologist with Freeport-McMoRan Copper & Gold Inc at the Karonie gold project in the Eastern Gold Fields. Following Freeport's merger with the Normandy-Poseidon Group in 1989, Mr Barnes became a Project then Senior Geologist with Normandy Exploration, working on projects in the Murchison (Au), Southern Cross (Au, Ni), Eastern Gold Fields (Au), Pilbara (Au, Cu) and Kimberley (Ni, Co, Zn) regions of Western Australia.

Mr Barnes started consulting to the industry in 1996 and co-founded the Insight Geoscience Group the following year. Insight Geoscience participated in several client-sponsored project generative initiatives in Asia (Au, Cu), Australia (Zn, Cu, Pb) and North America (Zn). He has also worked on a variety of advanced database projects for multi-national clients.

Mr Barnes joined Clancy's original parent company, Geoinformatics Exploration Inc., in April 2004 to manage the Australian exploration projects and transferred to Clancy in 2007 with overall responsibility for the management of Clancy's exploration projects.

Mr Barnes graduated from Royal Melbourne Institute of Technology with a Bachelor of Science in Applied Geology in 1987 and completed a MSc in Ore Deposit Geology at the University of Western Australia in 1996. He is a Member of the Australian Institute of Geoscientists, the Society of Economic Geologists and a Graduate of the Australian Institute of Company Directors.

Mr Barnes was appointed as Managing Director on 1 January 2011. He has not held a directorship in any other listed entity in the past three years.

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

1. Directors (continued)

Dr James Macdonald, BA (Hon), MSc, PhD, PGeo, FSEG, MAICD

(Non-Executive, (Technical) ) 59 Years

Dr Macdonald is a geoscientist. During the past four years he has operated a New Zealand-based consultancy business which for the previous five years was Brisbane-based, providing professional geoscientific services to exploration and mining companies, mainly in Australia, Asia and Southern Africa. Dr Macdonald has over 37 years’ experience in the global exploration and mining industries. He was Chief Geologist for AGIP Resources focused on exploration in Canada and Europe in the late 1980’s. Dr Macdonald managed Andean gold exploration for Homestake Mining Company from 1994 to 1998. In 1998, Dr Macdonald joined Billiton International Metals as Chief Geoscientist, based in the Netherlands. Following the merger with BHP in 2001, he relocated to Brisbane, Australia, in a similar capacity as Global Geoscience Leader. In 2008, Dr Macdonald became a non-executive director of International Base Metals Ltd. (unlisted) based in Sydney – a position he held until October 2013. He was a director of Mantle Diamonds Limited based in London from June 2006 to November 2009. In 2009, he became a non-executive Chairman of Craton Mining and Exploration Ltd, based in Windhoek, Namibia, until October 2013. He has not held a directorship in any other listed entity in the past three years. He is currently Chairman of the audit committee and Chairman of the remuneration committee. He was the chairman of the Company until 25 July 2011.

Dr Macdonald completed a Bachelor of Arts with Honours at Oxford University, majoring in Geology and Mineralogy. He subsequently completed an MSc and a PhD in Economic Geology at the University of Toronto. He is a Member of the Association of Professional Engineers and Geoscientists of British Columbia, a Fellow of the Society of Economic Geologists and a Member of the Australian Institute of Company Directors.

Natalie Forsyth-Stock, B.Bus, M.Bus, GAICD

Executive Director, 47 Years

Ms Forsyth-Stock is an investment professional with over 20 years’ experience in investment banking and private equity investment. She was previously a Director of Allco Equity Partners Management Limited and Gresham Rabo Management Limited (both private equity managers), and the corporate advisory division of Gresham Partners Limited, where she specialized in mergers and acquisitions, fund raisings and valuations.

Ms Forsyth-Stock has a Bachelor of Business (Accounting) and a Master of Business (Banking and Finance) from the University of Technology, Sydney, a Graduate Diploma in Applied Finance and Investment and is a Graduate of the Australian Institute of Company Directors.

Ms. Forsyth-Stock was appointed to the board on 3 September 2012 and is the Company’s Chief Financial Officer. She is also a member of the Audit Committee.

From August 2010 until July 2013, Ms Forsyth-Stock was a director of Bounty Mining Limited (ASX: BNT).

The Company’s Audit Committee consists of three members, two of which are non-executive directors and independent and one executive director (who is not independent).

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

1. Directors (continued)

(ii) Interests in the Shares and Options of the Company

(ii) Interests in the Shares and Options of the Company	(ii) Interests in the Shares and Options of the Company	(ii) Interests in the Shares and Options of the Company	(ii) Interests in the Shares and Options of the Company	(ii) Interests in the Shares and Options of the Company
No. of Shares					No. of Unlisted Options
	Held at	Acquired	Granted as	Held at End of	Held at Beginning of Year Granted During Year (Expiring 31 December 2013) Granted During Year (Expiring 30 September 2013) Lapsed During Year Held at End of Year1
	Beginning	During	Remuneration	Year1
	of Year	Year
G Barnes 2,457,547 - - 2,457,547 M Etheridge 2,511,877 702,986 - 3,214,863 J Macdonald 1,099,199 208,334 - 1,307,533 N Forsyth-Stock 347,009 - 264,343 611,352					1,000,000 - - 1,000,000 - - - - - - 400,000 - - 400,000 - - - - - -
6,415,632 911,320 264,343 7,591,295					1,400,000 - - 1,400,000 -

No. of Listed Options

	6,415,632 911,320 264,343 7,591,295 1,4
	No. of Listed Options
Held at Beginning of Year Acquired During Year Lapsed During year Held at End of Year1
G Barnes 345,771 - 345,771 - M Etheridge 259,424 - 259,424 - J Macdonald 142,628 - 142,628 - M Lester 100,964 - 100,964 -
848,787 - 848,787 -

1The Directors’ interests in the shares and options of the Company at reporting date and at the Company’s 31 December 2013 financial year end were identical.

2. Company Secretary

Rowan Caren, B.Com, CA

(Company Secretary) 47 Years

Mr Caren is a Chartered Accountant with over 25 years commercial experience. He has been directly involved in the minerals exploration industry for over 15 years. In 2004 he created a specialist company secretarial and advisory consultancy, Dabinett Corporate. He has provided financial and corporate services to several listed and unlisted companies involved in the resources sector. He qualified with PricewaterhouseCoopers and worked for them in Australia and overseas for six years.

Mr Caren graduated with a Bachelor of Commerce (Accounting) from the University of Western Australia and is a member of the Institute of Chartered Accountants in Australia. Mr Caren is a member of the Remuneration Committee.

3. Principal Activities

The principal activities during the year of the entities within the consolidated entity were mineral exploration and development.

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

4. Review of financial performance

The net consolidated loss from continuing operations for the year, after income tax, amounted to $677,702 (2012: $1,931,371).

The reduction in loss was primarily attributable to the sale of minority interests in a number of tenements to Gold Fields Australia Pty Ltd for total proceeds of $1.5 million, including cash of $1.0 million and a share placement of $0.5 million. In addition, expenditure amounting to $2,332,685 was funded by joint venture partners (2012: $236,328). During the year, total expenses amounted to $1,982,780 (2012: $2,908,439) of which $nil (2012: $136,404) related to equity settled exploration expenditure or share based employee benefits.

Unrestricted cash and cash equivalents amounted to $1,850,769 as at 31 December 2013 (31 December 2012: $1,839,986). Under the terms of a joint venture, the Company has an obligation to spend $134,419 (2012: $898,913) of this cash on a specific joint venture or in the event the joint venture partner does not elect to contribute beyond its minimum contribution this amount will be refunded.

5. Dividends

No dividend has been declared or paid by the Company since the end of the previous financial year and the directors do not at present recommend a dividend.

6. Review of Operations

During the year, the Company continued to explore its gold, copper and base metals projects in New South Wales, Tasmania and Western Australia, directly and through joint venture partners.

On 20 May 2013, the Company entered into a new joint venture with the signing of a Farm In and Joint Venture Agreement with High Power Exploration Inc (HPX) on the Fairholme copper gold project in New South Wales. Under the terms of the Agreement HPX has the right to earn an initial 49% of the Fairholme project by funding A$1 million in exploration over one year with a minimum spending commitment of $500,000. HPX then will have the right to fund a further $4 million in exploration over the subsequent two years with the aim of delineating a scoping study to take HPX’s stake to 65 %. HPX can increase its stake to 80% in phases or 85% by funding a Prefeasibility Study (depending on the cost of the study). In December 2013, HPX transferred its interest in the joint venture to Kaizen Discovery Inc.

7. Likely Developments and Expected Results

Other than as referred to in this report, further information as to likely developments in the operations of the Company and likely results of those operations in future financial years would, in the opinion of the directors, be speculative.

8. Significant Changes in the State of Affairs

During the year, the Company entered into a Joint Venture Termination, Subscription and Royalty agreement with Gold Fields Australia Pty Ltd, under which the Company sold its joint venture interests in six copper-gold projects in NSW. Clancy received a total of $1.0 million from the sale consideration and $0.5 million for the associated placement of shares to a related body corporate of Gold Fields.

The sale consideration was $1 million in cash which was paid immediately upon settlement. The equity component of $0.5 million was received immediately upon settlement of the placement of shares at 3.5c each. Clancy retains rights to its 2.5% Net Smelter Return (NSR) royalties on the six projects (in addition to Wellington North), subject to Gold Fields having the right at any time to purchase the NSR’s for $20 million each. Both parties’ pre-emptive rights and the Gold Fields back-in right on the Gobondery project were terminated as part of the agreement .

On 29 November 2013, the Company announced that it had entered into an agreement with ABM Resources NL (ASX: ABU) whereby the Company has the option to acquire 100% of ABM’s interests in the North Arunta Project Region in the Northern Territory. Clancy paid an option fee of $250,000 for the exclusive option to complete due diligence on the projects and subject to various conditions including satisfactory due diligence by both parties and various approvals, the right to acquire the projects. As consideration for this acquisition, Clancy will:

• issue to ABM, 125 million fully paid shares in the capital of Clancy

• issue to ABM, 175 million unlisted options to acquire an equivalent number of fully paid shares in the capital of Clancy, exercisable in whole or in three tranches of 58.333m options within three years of issue;

• transfer its entire shareholding in Genesis Resources Limited (ASX: GES) being 8,157,000 fully paid ordinary shares or the proceeds from sale of its Genesis Resources Limited shareholding, to ABM;

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

• offer ABM the right to initially have one nominee (but ultimately two nominees subject to the exercise by ABM of the first tranche of options) appointed to the Board of Clancy; and

• pay to ABM an option exercise fee of $150,000 and an acquisition fee of $200,000 in cash.

Completion of the acquisition will be subject to conditions including:

• Clancy obtaining all necessary approvals including any shareholder approvals required pursuant to the Corporations Act or ASX Listing Rules and any government or third party approvals;

• ABM obtaining all necessary approvals including any shareholder approvals required pursuant to the Corporations Act or ASX Listing Rules;

• Clancy appointing an Investment bank/broker to coordinate a placement of its ordinary shares to raise gross proceeds of between $2,500,000 and $4,000,000.

On 20 December 2013, the Company sold its shareholding in Genesis Resources Limited (ASX: GES) for net proceeds of $567,850.

9. Significant Events After Balance Date

Since the end of the financial year, Clancy announced that it has completed the due diligence processes and has exercised its option to acquire 100% of ABM’s interests in the North Arunta Project Region in the Northern Territory. The Company has paid the exercise fee of $150,000.

10. Indemnity for Group Officers and Auditors

• To the extent permitted by law, the Company indemnifies every person who is or has been:

• an Officer against any liability to any person (other than the Company or a related entity) incurred while acting in that capacity and in good faith; and

• an Officer or auditor of the Company, against costs and expenses incurred by that person in that capacity in successfully defending legal proceedings and ancillary matters.

11. Remuneration Report – Audited

This report details the nature and amount of remuneration for each director of Clancy Exploration Limited and the Group, and for the executives receiving the highest remuneration in accordance with the requirements of Section 300A of the Corporations Act 2001 and its Regulations. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Act. This remuneration report forms a part of the Directors’ Report.

For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company.

Remuneration Policy

The remuneration policy of Clancy Exploration Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives. The board of Clancy Exploration Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the consolidated entity, as well as align interests of directors, executives and shareholders.

No options to acquire ordinary shares were granted during the year ended 31 December 2013. A number of options expired during the year, including:

• The options, granted in 2009 with an expiry date of 10 August 2013, which were not transferable and were to be forfeited if either the grantee voluntarily terminates his employment and does not exercise the options within thirty days of resignation or the Company terminates his employment for reasons of serious misconduct;

• The options, granted in 2010 with an expiry date of 30 September 2013 which could only be transferred with the Board’s consent and were to be cancelled if either the grantee voluntarily terminated his employment and did not exercise the options within thirty days of resignation or the company terminated his employment for reasons of serious misconduct;

• The options, granted in 2010 with an expiry date of 31 December 2013 which were not transferable and could be cancelled at the Board’s discretion if either the grantee voluntarily terminated his employment and did not exercise the options within thirty days of resignation or the Company terminated his employment for reasons of serious misconduct.

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

11. Remuneration Report – Audited (continued)

During the year, shares were issued to an executive director pursuant to the Company’s Employee Share Option and Loan Plan (“Plan”). The Board believes that shares are an effective remuneration tool which preserves the cash reserves of the Company whilst providing valuable remuneration. The Plan was approved by shareholders in May 2011 and allows the Board to make offers of Shares (”Plan Shares”) in order to provide an incentive to deliver growth and value for the benefit of all shareholders. The Plan differs from the option plan as it delivers a direct ownership interest in the Company. A participant in the Plan must not sell, transfer, assign, mortgage, charge or otherwise encumber a Share issued under the Plan until the later of the following (to the extent applicable):

• the repayment in full of any loan advanced by the Company to the participant contemporaneously with the issue of Shares under the Plan;

• the expiry of any service continuity period specified by the Company at the time of issue of the Shares; and

• the satisfaction of any performance criteria specified by the Company at the time of issue of the Shares.

If an eligible employee ceases to be an eligible employee of the Company during the period of restriction the Company may buy-back the Plan Shares the subject of the restriction at a price equal to the issue price or the market price at the Board’s discretion.

Loans have been advanced to the executive directors, executives and employees to pay the cash consideration for the Plan Shares. During the term of any such loan, dividends paid in respect of the Plan Shares in relation to which the Company made the loan will be retained by the Company as interest paid by the borrower on the loan. The borrower must repay the loan to the Company on the earlier of 5 years from the date of allotment of the Plan Shares to which the loan relates, or the date the borrower ceases to be employed by the Company. In such an event, the borrower is required to make available to the Company their Plan Shares to settle the loan. This will result in the Company meeting the loss on the loan so that the loan is effectively linked to the value of the Shares.

The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the consolidated entity is as follows:

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

• All executives receive a base salary (which is based on factors such as length of service and experience).

• The Managing Director may also receive a cash bonus if certain Key Performance Indicators are met.

• In prior years, executives have received options to acquire ordinary shares.

• In the current year, one executive director was granted Shares pursuant to the Company’s Employee Share Option and Loan Plan. An allocation of shares was made based on factors such as length of service and experience.

• The board reviews executive packages annually by reference to the consolidated entity’s performance, executive performance and comparable information from industry sectors.

All remuneration paid to directors and executives is valued at the cost to the Company and is expensed over the appropriate vesting period. Options and shares issued under the Employee Share Plan are valued using the Binomial Tree methodology.

Non-Executive Directors

The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required.

The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Currently there is a maximum aggregate sum of $200,000 per annum, which is to be divided between the non-executive Directors in the proportions agreed between them or, failing agreement, equally.

Directors are encouraged to hold shares in the Company and have been granted options in previous years. Shares were issued to non-executive directors in prior years pursuant to the Company’s Employee Share Option and Loan Plan (“Plan”) as set out above under “Remuneration Policy”. The Board believes that shares are an effective remuneration tool which preserves the cash reserves of the Company whilst providing valuable remuneration. Loans have been advanced to the non-executive directors to pay the cash consideration for the Plan Shares.

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

11. Remuneration Report – Audited (continued)

Remuneration Sub-Committee

The Board has established a sub-committee to consider remuneration of the Board and key management personnel. The Remuneration Sub-Committee may seek independent professional advice to formulate remuneration policy recommendations which are then submitted to the Board for approval. The Remuneration Sub-Committee met on 21 March 2013. The Remuneration Sub-Committee is comprised of the Chairman of the Board, Dr Mike Etheridge, the independent non-executive Director, Dr James Macdonald and the Company Secretary, Mr Rowan Caren.

Company performance, shareholder wealth and director and executive remuneration

Shares are issued to the majority of directors and executives to encourage the alignment of personal and shareholder interests.

Executive and non-executive directors, other key management personnel and other senior employees have been granted ordinary shares pursuant to the Company’s Employee Share Option and Loan Plan. The recipients of Plan Shares are responsible for growing the Company and increasing shareholder value. If they achieve this goal the value of the Plan Shares granted to them will also increase. Therefore the Plan Shares provide an incentive to the recipients to remain with the Company and to continue to work to enhance the Company's value.

There is no policy in place which limits exposure to risk in relation to those securities in the Company which constitute an element of directors’ remuneration and which are linked to satisfaction of Company performance conditions.

The table below sets out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the five years to 31 December 2013:

Consolidated Entity:

	31 December 2013	31 December	31 December	31 December	31 December
		2012	2011	2010	2009
Revenue	$1,305,078	$977,069	$595,420	$81,643	$394,086
Net loss before tax	($677,702)	($1,931,371)	($2,325,365)	($3,119,802)	($3,201,171)
Net loss after tax	($677,702)	($1,931,371)	($2,325,265)	($2,743,959)	($3,201,171)
Share price at end ofyear1	2 cents	3 cents	5 cents	9 cents	15 cents
Basic lossper share	(0.3 cents)	(1.1 cents)	(1.7 cents)	(3.0 cents)	(5.4 cents)
Diluted loss per share	(0.3 cents)	(1.1 cents)	(1.7 cents)	(3.0 cents)	(5.4 cents)

Note 1: The Company was listed on the ASX on 11 July 2007. Note 2: No dividends have been declared or paid since the Company was listed.

Key Management Personnel Remuneration Policy

The remuneration structure for key management personnel, as determined by the Board, is based on a number of factors, including length of service, particular experience of the individual concerned and their role within the organisation. The contracts of service between the Company and key management personnel are on a continuing basis, the terms of which are not expected to change in the immediate future.

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

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DIRECTORS’ REPORT

11. Remuneration Report – Audited (continued)

Key Management Personnel Remuneration:

Remuneration for the year ended 31 December 2013

Key Management Person & Position	Short-term Benefits Long-term Benefits Post-employment Benefits Long term incentive Total	Short-term Benefits Long-term Benefits Post-employment Benefits Long term incentive Total
	Salary or Fees $ Consulting fees $ Non-monetary benefits $ Long service leave3 $	Superannuation $ Share Based Payments $ $
G Barnes1 Managing Director	240,000 - 18,466 4,578	21,900 17,564 302,508
M Etheridge Non-Executive Chairman J Macdonald Non-Executive Director	60,000 - - -	5,475 8,895 74,370
	36,000 - - -	- 5,930 41,930
N Forsyth-Stock2 Chief Financial Officer and executive director	33,027 89,250 - -	3,104 3,655 129,036
	369,027 89,250 18,466 4,578	30,479 36,044 547,844

Remuneration for the year ended 31 December 2012

Key Management Person & Position	Short-term Benefits Long-term Benefits Post-employment Benefits Long term incentive Total
	Salary or Fees $ Consulting fees $ Non-monetary benefits $ Long service leave3 $ Superannuation $ Share Based Payments $ $
G Barnes1 Managing Director	240,000 - 18,466 3,262 21,600 3,513 286,841
M Etheridge Non-Executive Chairman J Macdonald Non-Executive Director	60,000 - - - 5,400 1,779 67,179
	35,999 - - - - 1,186 37,185
M Lester2 Non-Executive Director N Forsyth-Stock2 Chief Financial Officer and executive director#	22,018 - - - 1,982 - 24,000
	11,009 122,468 - - 990 2,969 137,436
	369,026 122,468 18,466 3,262 29,972 9,447 552,641

1 G Barnes was managing director and exploration manager until 30 April 2012, at which time he ceased to be exploration manager. He may receive a cash bonus which is performance related at the Board’s discretion.

2 M. Lester resigned during 2012 and therefore his remuneration does not represent his remuneration for the entire year ended 31 December 2012. N. Forsyth-Stock was appointed as an Executive Director during 2012 and therefore her remuneration for 2012 does not represent remuneration for the whole financial year.

3 Long-service leave disclosed as remuneration for 2013 and 2012 is presented on an accruals basis and has not been paid out.

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

11. Remuneration Report – Audited (continued)

During the financial year, the following share-based payment arrangements granted as compensation were in existence:

Options

Holder Option Series	Granted No.	Grant Date	Vesting Date	Expiry Date	Expiry Date	Expiry Date
Consultants Incentive	2,050,000 12 August 2009 12 August 2009 10 August 2013 0.0507 0.175
Directors Incentive	1,650,000 28 January 2010 28 January 2010			31 December 2013	0.0680	0.195
Employees Incentive Total	1,100,000 4 May 2010 4 May 2010 30 September 2013 0.0654 0.185 4,800,000

All of the above options expired during the year.

Plan Shares

Granted in 2013

Holder Granted No. Grant Date Issue Price cents	Fair Value of Share Based Payments (Total) $	Fair Value of Share Based Payments Expensed in 2013 $	Fair Value of Share Based Payments Expensed in 2012 $
Directors 264,343 16 August 2013 .093 Total	1,471	551	-
	1,471	551	-

ASX listing Rule 10.14 approval for the issue of the Plan Shares in 2013 was obtained on 24 May 2013. Details of the Plan are disclosed in Remuneration Policy of this Remuneration Report. The continuity service period in relation to these shares is twelve months from the date of allotment. There were no performance criteria specified by the Company at the time of allotment.

Granted in 2012

Holder Granted No. Grant Date Issue Price cents	Fair Value of Share Based Payments (Total) $	Fair Value of Share Based Payments Expensed in 2013 $	Fair Value of Share Based Payments Expensed in 2012 $	Fair Value of Share Based Payments Expensed in 2012 $
Employees and Consultants 2,758,723* 10 July 2012 0.02	49,358	25,758	23,600
Directors 2,887,602 31 October 2012 0.026 Total	38,868	32,390	6,478
	88,226	58,148	30,078

*Net of shares bought back

ASX listing Rule 10.14 approval for the issue of the Plan Shares was obtained on 31 May 2011. Details of the Plan are disclosed in Remuneration Policy of this Remuneration Report. The continuity service period in relation to these shares is twelve months from the date of allotment. There were no performance criteria specified by the Company at the time of allotment.

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Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

11. Remuneration Report – Audited (continued)

Options Granted as Part of Remuneration for the year ended 31 December 2013

No options were issued to directors as part of their remuneration during the course of the year ended 31 December 2013. No options were exercised, or forfeited during the year.

There were no alterations to the terms and conditions of any options granted as remuneration since their grant date. All options expired during the year ended 31 December 2013.

Details of share-based payments in existence during 2013 are disclosed in this Directors’ Report and Notes 18, 26 and 27 to the Annual Financial Statements.

Contracts with Directors and Key Management Personnel

Gordon Barnes

The key provisions of the contract with Gordon Barnes (Managing Director) are as follows:

Contract Duration

Rollingcontract

Notice Period for Termination and Termination Payments

Mr Barnes’ remuneration is subject to an annual review undertaken by the remuneration committee. Mr Barnes may receive a discretionary performance-based cash bonus of up to 25% of his gross salary if in the opinion of the Board certain Key Performance Indicator measures are met. Mr Barnes may terminate his employment by providing 3 months’ notice in writing. The Company may terminate Mr Barnes’ employment, for reasons other than serious misconduct, by providing 3 months’ notice or providing payment in lieu of this notice period. The Company may immediately terminate Mr Barnes’ employment for reasons of serious misconduct.

12. Auditor Independence and Non-Audit Services

During the financial year, Ernst and Young, the Group’s auditor, performed certain services in addition to its statutory audit duties. The total non-audit services provided by the external auditor provided amounted to $50,469 (2012: $56,921).

The Board of Directors is satisfied that the provision of non-audit services by the external auditor did not compromise the auditor independence requirements of the act due to the following reasons:

1) all material non-audit services have been reviewed and approved by the Board of Directors prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor;

2) none of the services undermines the general principles relating to auditors independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing and auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing economic risks and rewards.

13. Auditors’ Independence Declaration

The auditors’ independence declaration for the year ended 31 December 2013 has been received and can be found on page 14.

14. Corporate Governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors support and have adhered to the principles of corporate governance. The Company’s corporate governance statement will be included in the Company’s Annual Report.

11

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

15. Share Options

At the date of this report nil options to acquire ordinary shares in Clancy Exploration Limited were on issue.

Share-based payments and options issued to directors, consultants and eligible employees, are disclosed in this Directors’ Report and Notes 18, 26 and 27 to the Annual Financial Statement.

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

16. Directors’ Meetings

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director was as follows:

Director	Directors’ Meetings Eligible to Attend	Directors’ Meetings Attended	Remuneration Committee Meetings Eligible to Attend	Remuneration Committee Meetings Attended	Audit Committee Meetings Eligible to Attend	Audit Committee Meetings Attended
G Barnes	8	8	-	-	-	-
M Etheridge	8	8	1	1	3	3
J Macdonald	8	8	1	1	3	3
N Forsyth- Stock	8	8	-	-	3	3

17. Insurance and Indemnity of Officers

The Company has in respect of any person who is or has been a director or officer of the Company paid a premium in respect of a contract insuring all directors and officers against a liability. The Company maintains insurance policies for the benefit of the relevant director or officer for the term of their appointment and for a period of seven years after retirement or resignation.

The Company has entered into a Deed of Indemnity, Access and Insurance with each of its Directors and the Company Secretary. Under the Deeds of Indemnity, Access and Insurance the Company will indemnify each officer to the extent permitted by the Corporations Act against any liability arising as a result of the officer acting as an officer of the Company. The Deeds of Indemnity, Access and Insurance also provide for the right to access Board papers and other Company records.

18. Risk Management

The Company takes a proactive approach to risk management including monitoring actual performance against budgets and forecast and monitoring investment performance. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the consolidated entity’s objectives and activities are aligned with the risks and opportunities identified by the Board.

19. Environmental Regulations and Performance

The Company is required to carry out the exploration and evaluation of its mining tenements in accordance with various State Government Acts and Regulations.

In regard to environmental considerations, the Company is required to obtain approval from various State regulatory authorities before any exploration requiring ground disturbance, such as line clearing, drilling programs and costeaning is carried out. It is normally a condition of such regulatory approval that any area of ground disturbed during the Company’s activities is rehabilitated in accordance with various guidelines.

There have been no significant breaches of these guidelines.

12

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ REPORT

This report is made in accordance with a resolution of the directors.

==> picture [65 x 51] intentionally omitted <==

G.J. Barnes Managing Director

Signed at Orange, NSW dated this 17th day of March 2014

13

680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au

==> picture [71 x 81] intentionally omitted <==

Auditor’s Independence Declaration to the Directors of Clancy Exploration Limited

In relation to our audit of the financial report of Clancy Exploration Limited for the financial year ended 31 December 2013, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

==> picture [183 x 54] intentionally omitted <==

Ernst & Young

==> picture [91 x 56] intentionally omitted <==

Ryan Fisk Partner 17 March 2014

14

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013

Notes Income Other income 4 Total Income Employee benefits expense 5(a) Consulting and outsourced services expense Self-funded exploration expenditure Net recovery from joint venture partners 5 (b) Travel expense Share based payment expense 27(a) Computer related costs Occupancy costs Insurance expense Marketing expense Depreciation, amortisation and impairment expense 5(c) Revaluation of financial instrument Loss on sale of financial instrument Other expenses Total expenses Loss from continuing operations before income tax benefit Income tax benefit 6 Loss from continuing operations after tax for the period Other comprehensive income: Other comprehensive Income Other comprehensive income/(loss) net of tax Total comprehensive loss attributable to owners of the parent Basic and diluted loss per share (cents per share) 7	Consolidated 2013 2012 $ $ 1,305,078 977,069
	1,305,078 977,069 (1,064,054) (1,044,753) (354,243) (594,523) (499,853) (1,113,229) 488,507 82,220 (34,097) (32,778) (58,699) (30,078) (1,592) (13,454) (8,908) (2,346) (27,297) (26,783) (5,857) (11,385) (41,199) (72,166) (95,783) - (247,850) - (31,855) (49,166)
	(1,982,780) (2,908,440)
	(677,702) (1,931,371) - -
	(677,702) (1,931,371) - -
	- -
	(677,702) (1,931,371)
	(0.3 cents) (1.1 cents)

The accompanying notes form part of these financial statements on pages 19 to 54.

15

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER 2013 Notes ASSETS Current Assets Cash and cash equivalents 8 Restricted cash asset 8 Trade and other receivables 9 Financial assets 10 Total Current Assets Non-Current Assets Plant and equipment 11 Intangible assets 12 Exploration asset 13 Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 14 Provisions 15 Unearned revenue 16 Exploration expenditure reimbursed in advance 16 Total Current Liabilities Non-Current Liabilities Provisions 15 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 17 Reserves 18 Accumulated losses TOTAL EQUITY	Consolidated 2013 2012 $ $ 1,850,769 1,839,986 300,000 300,000 229,160 575,447 - 911,483
	2,379,929 3,626,916
	64,737 99,425 3,742 1,221 250,000 -
	318,479 100,646
	2,698,408 3,727,562
	271,206 320,353 108,322 48,270 16,483 89,891 134,419 898,913
	530,430 1,357,427
	15,780 38,506
	15,780 38,506
	546,210 1,395,933
	2,152,198 2,331,629
	14,457,200 13,958,929 1,660,974 1,660,974 (13,965,976) (13,288,274)
	2,152,198 2,331,629

The accompanying notes set out on pages 19 to 54 form part of these financial statements.

16

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED Notes	Ordinary Shares Share based payment Reserve (Accumulated Losses) Total Equity $ $ $ $
At 1 January 2013 Total comprehensive income for the period, net of tax Transaction costs on share issues 17 Issue of share capital 17 Share based payment - employee, directors and consultants shares 17 At 31 December 2013 At 1 January 2012 Total comprehensive income for the period, net of tax Transaction costs on share issues 17 Issue of share capital 17 Share based payment - employee, directors and consultants shares 17 At 31 December 2012	13,958,929 1,660,974 (13,288,274) 2,331,629 - - (677,702) (677,702) (3,200) - - (3,200) 500,000 - - 500,000 1,471 - - 1,471
	14,457,200 1,660,974 (13,965,976) 2,152,198
	13,409,970 1,660,974 (11,356,903) 3,714,041 - - (1,931,371) (1,931,371) (7,514) - - (7,514) 468,247 - - 468,247 88,226 - - 88,226
	13,958,929 1,660,974 (13,288,274) 2,331,629

The accompanying notes set out on pages 19 to 54 form part of these financial statements.

17

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013

Notes CASH FLOWS USED IN OPERATING ACTIVITIES Sundry income Reimbursement of exploration expenditure Management fee received Payments to suppliers and employees Receipts of research and development rebate Interest received NET CASH FLOWS USED IN OPERATING ACTIVITIES 19 CASH FLOWS USED IN INVESTING ACTIVITIES Purchase of plant and equipment Purchase of intangible assets Payment for financial assets Prepayment on acquisition of tenements 13 Proceeds on sale of tenements 20 Proceeds from sale of financial assets 10 NET CASH FLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of shares Costs of share issue Loans to related entity - payments made NET CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD 8	Consolidated 2013 2012 $ $ - 17,431 1,568,192 918,257 64,312 91,826 (3,905,045) (2,851,582) 408,084 405,261 69,854 145,611
	(1,794,603) (1,273,196)
	(2,589) (13,127) (6,444) (562) - (95,625) (250,000) - 1,000,000 - 567,849 -
	1,308,816 (109,314)
	500,000 - (3,200) (7,514) (230) -
	496,570 (7,514)
	10,783 (1,390,024) 1,839,986 3,230,010
	1,850,769 1,839,986

The accompanying notes set out on pages 19 to 54 form part of these financial statements.

18

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

1. CORPORATE INFORMATION

The financial statements of Clancy Exploration Limited (the Company or the Group) for the year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors on 14 March 2014. Clancy Exploration Limited is a for profit entity.

Clancy Exploration Limited (the parent) is a company limited by shares, incorporated in Australia, and whose shares are publicly traded on the Australian Securities Exchange.

The nature of the operations and principal activities of the consolidated entity are described in the Directors' Report.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements include separate financial statements for Clancy Exploration Limited as an individual entity and the consolidated entity consisting of Clancy Exploration Limited and its controlled entity.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. These financial statements have also been prepared on a historical cost basis, except for available-for-sale investments, which have been measured at fair value.

These financial statements are presented in Australian dollars.

(b) Statement of Compliance

These financial statements comply with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.

(c) New accounting standards and interpretations

(A) Changes in accounting policy and disclosure

From 1 January 2013 the Group has adopted all standards and interpretations, mandatory for annual reporting periods beginning 1 January 2013. Adoption of these standards and interpretations did not have any effect on the financial position or performance of the Group .

AASB 10 - Consolidated Financial Statements

AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and UIG-112 Consolidation - Special Purpose Entities.

The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control.

This standard did not have an impact on the financial statements.

AASB 11 - Joint Arrangements

AASB 11 replaces AASB 131 Interests in Joint Ventures and UIG-113 Jointly- controlled Entities - Non-monetary Contributions by Ventures .

19

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition it removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method . This standard did not have an impact on the financial statements.

AASB 12 -Disclosure of Interests in Other Entities

AASB 12 includes all disclosures relating to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. New disclosures have been introduced about the judgments made by management to determine whether control exists, and to require summarised information about joint arrangements, associates, structured entities and subsidiaries with non-controlling interests.

This standard did not have an impact on the financial statements.

AASB 13 - Fair Value Measurement

AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this definition may result in different fair values being determined for the relevant assets.

AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined .

Additional disclosures have been made in Note 10 of the accounts in relation to this standard.

(B) Accounting Standards issued but not yet effective

AASB 2012-3- Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities

AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement.

It is anticipated that this standard will have nil impact on the Company since it does not offset financial assets and financial liabilities.

AASB 2013-3 - Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets

AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of Assets . The amendments include the requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal.

The following Australian Accounting Standards and Interpretations that have recently been issued but are not yet effective have not been adopted by the Group for the annual reporting period ending 31 December 2013. None of the standards issued and not yet effective are expected to have a significant impact to the financial statements unless specifically stated below. Those that are relevant to the Group are outlined below:

AASB 9 Financial Instruments

AASB 9 includes requirements for the classification and measurement of financial assets. It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are described below.

20

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(a) Financial assets that are debt instruments will be classified based on

• the objective of the entity’s business model for managing the financial assets;

• the characteristics of the contractual cash flows.

(b) Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

(c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.

(d) Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows:

• The change attributable to changes in credit risk are presented in other comprehensive income (OCI)

• The remaining change is presented in profit or loss.

If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.

Further amendments were made by AASB 2013-9 which amends the mandatory effective date to annual reporting periods beginning on or after 1 January 2017. AASB 2013-9 also modifies the relief from restating prior periods by amending AASB 7 to require additional disclosures on transition to AASB 9 in some circumstances. Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB 200911 and superseded by AASB 2010-7 and 2010-10.

The revised standard is not expected to have a significant impact on the classification and measurement of financial assets or financial liabilities.

(d) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2013. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

• Exposure, or rights, to variable returns from its involvement with the investee, and

• The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee

• Rights arising from other contractual arrangements

• The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

21

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

• Derecognises the assets (including goodwill) and liabilities of the subsidiary

• Derecognises the carrying amount of any non-controlling interests

• Derecognises the cumulative translation differences recorded in equity

• Recognises the fair value of the consideration received

• Recognises the fair value of any investment retained

• Recognises any surplus or deficit in profit or loss

• Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities

(e) Investment in joint operations

A joint operation is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

When the Group undertakes its activities under joint operations, it recognises:

• its assets, including its share of any assets held jointly;

• its liabilities, including its share of any liabilities incurred jointly;

• its revenue from the sale of its share of the output arising from the joint operation;

• its share of the revenue from the sale of the output by the joint operation; and

• its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.

The Group can elect to contribute to ongoing exploration costs in proportion to its interests or dilute (a farm-out arrangement). If contributions are made during the reporting period, they are accounted for as exploration expenditure. Once the joint arrangement partner had earned its interest, the Company recovers expenditure equivalent to the other joint arrangement partner’s interest.

The Group does not record any expenditure made by the farmee on its account. It also does not recognise any gain or loss on its exploration and evaluation farm-out arrangements. Any cash consideration received directly from the farmee is credited against costs previously incurred in relation to the whole interest.

When the Group, acting as an operator, receives reimbursement of direct costs recharged to the joint operation, such recharges represent reimbursements of costs that the operator incurred as an agent for the joint operation and therefore have no effect on profit or loss.

In many cases, the Group also incurs certain general overhead expenses in carrying out activities on behalf of the joint operation. As these costs can often not be specifically identified, joint operation agreements allow the operator to recover the general overhead expenses incurred by charging an overhead fee that is based on a fixed percentage of the total costs incurred for the year, often in the form of a management fee. Although the purpose of this recharge is very similar to the reimbursement of direct costs, the Group is not acting as an agent in this case. Therefore, the general overhead expenses and the overhead fee are recognised in profit or loss as an expense and income, respectively.

22

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition date fair value of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition related costs are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured.

(g) Segment reporting

Management has assessed that the Company’s reportable business segments under the quantitative criteria set out in AASB 8 Segment Reporting and has determined that no additional operating segments disclosures are required.

AASB 8 requires the ‘management approach’ to the identification, measurement and disclosure of operating segments. The ‘management approach’ requires that operating segments be identified on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker, for the purpose of allocating resources and assessing performance. This could also include the identification of operating segments which sell primarily or exclusively to other internal operating segments.

In its adoption of the ‘management approach’ to segment reporting, the Company has identified that it continues to operate as a gold, copper and base metals explorer and developer, in a single reportable business segment, under one segment manager, in one geographical location being Australia, consistent with the prior year. The information disclosed in the financial statements is the same information utilised internally by the chief operating decision maker. Accordingly no additional quantitative or qualitative disclosures are required.

(h) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is Clancy Exploration Limited’s functional and presentation currency.

(ii) Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

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

23

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at bank and short-term deposits with an original maturity of not more than 3 months that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above. The consolidated entity does not have any bank overdraft facilities.

Restricted cash represents the cash funds held in term deposit for exploration licenses for a period longer than 3 months but shorter than 12 months.

(j) Trade and other receivables

Trade receivables are generally paid on 30 day settlement terms and are recognised and carried at original invoice amount less an allowance for impairment. Trade receivables are non-interest bearing.

Collectability of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. An impairment provision would be recognised when legal notice has been sent and a reply not received within 30 days.

(k)

Investments and other financial assets

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

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

Recognition and Derecognition

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the consolidated entity commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place. Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or when the entity transfers substantially all the risks and rewards of the financial assets. If the entity neither retains nor transfers substantially all of the risks and rewards, it derecognises the asset if it has transferred control of the assets.

(i) Loans and receivables

Loans and receivables including loan notes are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at the transaction price minus principal repayments and minus any allowance for impairment or uncollectability. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired. Loans and receivables are included with receivables in current assets in the statement of financial position, except for those with maturities greater than 12 months after balance date, which are classified as non-current. Loans and receivables with maturities greater than 12 months are carried at amortised cost using the effective interest rate method.

(ii) Available-for-sale securities

Available-for-sale investments are those non-derivative financial assets, principally equity securities that are designated as available-for-sale or are not classified as any of the following categories: financial assets at fair value through profit or loss, held-to-maturity investments or loans and receivables. After initial recognition available-for-sale securities are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

24

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgmental inputs to a minimum.

(iii) Financial assets carried at cost

Investments are initially measured at fair value, net of transaction costs. Subsequent to initial recognition, investments in subsidiaries are measured at cost in the Company financial statements. If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value (because its fair value cannot be reliably measured), the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset.

(l) Intangibles and Impairment of non-financial assets other than that of goodwill

Intangible assets acquired separately are initially measured at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

(i) Impairment

Intangible assets other than goodwill and indefinite life intangibles are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The consolidated entity conducts an annual internal review of asset values, which is used as a source of information to assess for any indicators of impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also monitored to assess for indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of the asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that were impaired are tested for possible reversal of the impairment when events or changes in circumstances indicate that the impairment may have reversed.

(ii) Derecognition and disposal

Any gain or loss arising on derecognition of an intangible asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss when the asset is derecognised.

(m) Plant and Equipment

Plant and equipment is stated at historical cost less depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of these items.

25

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

Depreciation is calculated using the straight line and diminishing value methods to allocate the cost of the specific assets over their estimated useful lives. The expected useful lives are detailed in Note 11.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end.

(i) Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with the recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The directors have determined that items of plant and equipment do not generate independent cash inflows and that the business of the consolidated entity is, in its entirety, a cash-generating unit. The recoverable amount of plant and equipment is thus determined to be its fair value less costs to sell.

An impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. For plant and equipment, impairment losses are recognised in the statement of comprehensive income as an expense.

(ii) Derecognition and disposal An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the statement of comprehensive income. When revalued assets are sold, it is consolidated entity policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(n) Trade and other payables

Trade payables and other payables are carried at the transaction price minus principal repayments. They represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year that are unpaid and arise when the consolidated entity becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(o) Provisions and employee benefits

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

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

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date using a discounted cash flow methodology. The risks specific to the provision are factored into the cash flows and as such a risk-free government bond rate relative to the expected life of the provision is used as a discount rate. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs.

26

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Employee leave benefits

(i) Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled with 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. Liabilities for annual leave expected to be settled within 12 months of the reporting date are recognised in the current provision for the employee benefits. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. For annual leave, expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

(ii) Long Service Leave

The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

(p) Share-based payment transactions

(i) Equity settled transactions :

The consolidated entity provides benefits to its directors, employees and consultants in the form of share-based payments, whereby directors and employees render services in exchange for options to acquire shares, rights over shares (equity-settled transactions) and shares issued pursuant to the Company’s Employee Share and Loan Plan (“Plan”). The consolidated entity has also issued ordinary shares and unlisted options as consideration to vendors for the acquisition of exploration licences and drilling services.

The cost of these equity-settled transactions is measured by reference to the fair value to the Company of the equity instruments at the date at which they were granted in the case of options and shares issued under the

Plan for directors, employees and consultants; and the closing share price on, or just before, either the date of entering into, or executing, an exploration licence purchase agreement in the case of options and shares issued to tenement vendors as consideration for the settlement price. The fair value of the unlisted options and shares issued under the Plan is determined using a Binomial Tree model, taking into account the terms and conditions upon which the options were granted.

The cost of equity-settled transactions is recognised as an expense, together with a corresponding increase in equity over the period in which the vesting and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant directors and employees become fully entitled to the options (the vesting date) or shares issued under the Plan.

At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income reflects:

• (i) the grant date fair value of the options and shares issued under the Plan;

• (ii) the current best estimate of the number of options and shares issued under the Plan that will ultimately vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of vesting conditions being met, based on best available information at balance date; and

• (iii) the extent to which the vesting period has expired.

The charge to the statement of comprehensive income for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

27

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

If an equity-settled award is cancelled, it is treated as if it has vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options and shares issued under the Plan is reflected as additional share dilution in the computation of diluted earnings per share.

(q) Issued Capital

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

(r) Revenue recognition

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

(i) Rendering of Services

Where the work performed in relation to a joint venture or other contract outcome can be reliably measured:

• right to receive compensation for the services provided and the stage of completion can be reliably measured. Stage of completion is measured by reference to the labour hours performed to date as a percentage of total estimated labour hours in relation to a joint venture or for each contract. Where it is probable that a loss will arise in relation to a joint venture or from a contract, the excess of total costs over revenue is recognised as an expense immediately.

Where the contract outcome cannot be reliably measured:

• revenue is recognised only to the extent that the costs that have been incurred are recoverable.

Unearned income is recognised in respect of progress billings and advances on exploration contracts in progress, received in advance, or not represented by work done or reimbursable expenditure incurred, under joint venture arrangements. Such income is recognised and brought to account over time as it is earned.

(ii) Interest revenue

Revenue is recognised as interest accrued using the effective interest method. This is a method of calculating the amortised costs of a financial asset and allocating the interest revenue over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

All revenue is stated net of Goods and Services Tax (“GST”).

(s) Income tax and other taxes

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

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

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

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

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

28

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

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

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

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

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

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

Tax consolidation legislation

Clancy Exploration Limited and its wholly-owned Australian controlled entity formed a tax consolidated group on 1 July 2008. However, they continue to account for their own current and deferred tax amounts. The consolidated entity has applied the stand alone taxpayer approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes.

In addition to its own current and deferred tax amounts, Clancy Exploration Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Members of the tax consolidated group have not entered into a tax funding agreement and as no current tax assets or liabilities or deferred tax assets are recognised in relation to tax losses or unused tax credits, no contributions or distributions are required to be made under AASB Int 1052 Tax Consolidation Accounting.

Other taxes

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

• when the GST incurred on a purchase of goods and 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

• receivables and payables, which 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 or payables in the statement of financial position.

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

29

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

(t) Earnings per share

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

Diluted earnings per share is calculated as profit attributable to members of the parent, adjusted for:

• costs of servicing equity (other than dividends);

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(u) Exploration Expenditure

Exploration and evaluation costs are accumulated and accounted for separately on an area of interest basis. An area of interest is represented by an exploration project, which may include multiple tenements within a single geographic region.

For each area of interest, the company makes an election regarding its treatment of exploration and evaluation expenditure and whether it will be charged to the income statement as incurred, under the expense category “exploration expenditure,” or capitalised as an exploration and evaluation asset.

An exploration and evaluation can only be recognised in relation to an area of interest if the following conditions are satisfied:

• a) the rights to tenure of the area of interest are current; and

• b) at least one of the following conditions is also met:

• (i) 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; and

• (ii) exploration and evaluation activities in the area of interest have not at the end of the reporting period 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 interest are continuing.

Capitalised exploration and evaluation expenditures are recorded as an exploration asset at cost less impairment charges. All capitalised exploration and evaluation expenditure are monitored for indicators of impairment. Where an impairment indicator is identified, an assessment is performed for each area of interest to which the exploration and evaluation expenditure is attributed. To the extent that capitalised expenditure is not expected to be recovered it is charged to the income statement.

At 31 December 2013, the Group elected to capitalise the acquisition costs associated with the acquisition of the North Arunta tenements. Consistent with prior periods, for all other tenements, the Company has elected to expense the exploration and evaluation costs.

Exploration expenditure in relation to the joint operations managed by the consolidated entity is funded by the jointly controlled operation partner. The consolidated entity makes a cash call for expenditure at the beginning of each quarter for these joint operations on the basis of forecast expenditure. The consolidated entity recognises exploration expenditure reimbursed in advance at year end in the event that cash has been received in advance of expenditure. Exploration expenditure in respect of these joint operations classified in the statement of comprehensive income within the income or expense category “Net joint venture reimbursed expenses”.

30

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(v) Financial Liabilities and Equity Instruments Issued by the Consolidated Entity

• (i) Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual agreement.

• (ii) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

• (iii) Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit and loss’ or ‘other financial liabilities’.

• (iv) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financially liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Equally, the consolidated entity continually employs judgement in the application of its accounting policies.

Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions. Those which may materially affect the carrying amounts of assets and liabilities reported in future periods are discussed below:

(a) Significant accounting judgements

(i) Impairment of non-financial assets including intangible computer software The consolidated entity assesses impairment on all assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. These include technology and economic environments. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves value-in-use calculations, which incorporate a number of key estimates and assumptions.

(b) Significant accounting estimates and assumptions

(i) Share-based payment transactions

The consolidated entity measures the cost of equity settled transactions with directors, employees, consultants and brokers by reference to the fair value of the equity instruments at the date at which they are granted. In the case of options and shares issued to tenement vendors as consideration for the settlement price, fair value is measured at the closing share price on, or just before, either the date of entering into, or executing, an exploration licence purchase agreement.

In the case of shares issued to vendors of drilling services, fair value is measured by a reference to a value of the services received.

31

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

4. OTHER REVENUE (a) Sale of interest in tenements Sale of interest in tenements (b) Other revenue Interest revenue Management Fees Miscellaneous revenue Fair value gain on financial asset R&D Grant TOTAL OTHER REVENUE	Consolidated 2013 2012 $ $ 1,000,000 -
	1,000,000 -
	69,853 86,347 235,225 21,280 - 17,432 - - 453,938 398,072
	305,078 977,069
	1,305,078 977,069

5. EXPENSES

(a) Employee benefits expense includes: Directors' fees Salaries Workers’ compensation costs Annual leave provision Long service leave provision Post-employment benefits expense Other employee benefits expense (b) Net recovery from joint venture partners Joint Venture Exploration Expenditure Less joint venture funding Net recovery from joint venture partners (i)	129,026 129,026 778,737 774,345 25,157 27,974 15,639 12,163 21,687 3,262 80,340 79,371 13,468 18,612
	1,064,054 1,044,753
	1,844,178 154,108 (2,332,685) (236,328)
	(488,507) (82,220)

(i) The Company recovers a range of expenses classified elsewhere in the Statement of Comprehensive Income from its joint venture partners, in addition to exploration expenditure. Such expenses includes a portion of salaries and other exploration related overheads including depreciation, occupancy costs and insurance.

(c) Depreciation, amortisation and impairment expense included in statement of comprehensive income Depreciation of plant & equipment Amortisation of software and leasehold improvements Impairment of plant & equipment	37,054 66,268 3,923 2,892 222 3,006
	41,199 72,166

32

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

INCOME TAX (a) Income tax expense The major components of income tax expense are: Statement of comprehensive income Current income tax Current income tax charge/(benefit) Adjustments in respect of current income tax of previous years D_eferred income tax_ Relating to origination and reversal of temporary differences Income tax expense/(benefit) reported in statement of comprehensive income (b) Amounts charged or credited directly to equity Deferred income tax related to items charged or credited directly to equity Unrealised loss on available-for-sale financial assets Income tax benefit reported in equity	Consolidated 2013 2012 $ $ - - - - - - -
	- -
	- - - -
	- -

6. INCOME TAX

(c) Numerical reconciliation of accounting profit to tax expense

A reconciliation between tax expense and the accounting profit before income tax multiplied by the consolidated entity's applicable income tax rate is as follows:

Accounting loss before income tax At the consolidated entity's statutory income tax rate of 30% (2012: 30%) Non-deductible entertainment/penalties Other non-allowable items Share based payments Fringe benefits tax Increase in unrecognised deferred tax assets Disposal of tenements Income tax benefit (d) Current tax assets and liabilities Current tax liability	(677,702) (1,931,371)
	(203,311) (579,411) 562 574 263 165 18,690 42,004 296 (241) 227,693 536,909 (44,193) -
	- -
	- -

(e) Recognised deferred tax assets and liabilities

The Group has not recognised any deferred tax assets or liabilities during the year (2012: Nil)

(f) Tax losses

The group has Australian revenue tax losses for which no deferred tax asset is recognised on the statement of financial position of $12,031,141 (2012: $11,460,956) which are available indefinitely for offset against future taxable income subject to continuing to meet the relevant statutory tests.

The group has Australian capital tax losses for which no deferred tax asset is recognised on the statement of financial position of $111,962 (2012: $111,962) which are available indefinitely for offset against future taxable capital gains subject to continuing to meet the relevant statutory tests.

33

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

6. INCOME TAX (continued)

(g) Unrecognised temporary differences

As at 31 December 2013, the group has other temporary differences (excluding tax differences relating to tax losses) for which no deferred tax asset is recognised in the statement of financial position of $170,563 (2012: $286,419). None of these unrecognised temporary differences relate to investments in subsidiaries, associates or joint ventures.

(h) Tax consolidation

Members of the tax consolidated group and the tax sharing agreement

Clancy Exploration Limited and its 100% owned Australian resident subsidiary were both subsidiaries in a taxconsolidated group with Geoinformatics Exploration Australia Pty Ltd as the head entity until 2 July 2007. A new taxconsolidated group was formed on 1 July 2008 with Clancy Exploration Limited as Head Entity. Members of the new tax-consolidated group have not yet entered into a tax sharing agreement.

7. EARNINGS PER SHARE

The following reflects the income used in the basic and diluted earnings per share computations.

(a) Earnings used in calculating earnings per share For basic and diluted earnings per share: Loss from continuing operations after tax for the year (b) Weighted average number of shares Weighted average number of ordinary shares for basic and diluted earnings per share (c) Earnings per share Basic and diluted loss per share	Consolidated 2013 2012 $ $ (677,702) (1,931,371)
	2013 2012 No. of shares No. of shares 204,288,877 175,499,776
	2013 2012 (0.3 cents) (1.1 cents)

(i) Diluted earnings per share are calculated after classifying all options on issue remaining unconverted at the relevant balance date as potential ordinary shares. As at 31 December 2013, the Company has on issue Nil (2012: 98,934,786) options over unissued capital and has incurred a net loss. As the notional exercise prices of these options is greater than the current market price of the shares, they have not been included in the calculations of the diluted earnings per share as they are anti-dilutive for all periods presented.

34

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

CASH AND CASH EQUIVALENTS Notes Cash at bank Short term bank deposits	Consolidated 2013 2012 $ $ 1,600,769 1,289,986 250,000 550,000
	1,850,769 1,839,986

8. CASH AND CASH EQUIVALENTS

In addition, as at 31 December 2013 the Company has $300,000 in restricted cash (2012: $300,000) which is included as a current asset in the Statement of Financial Position, held at Westpac Banking Corporation which have been provided as set-off security in respect of a $250,000 bank guarantee facility provided in turn for exploration licence security purposes and a $50,000 corporate credit card facility.

Financing facilities available

Other than the aforementioned bank guarantee facility, at balance date, the Company did not have any financing facilities available

TRADE AND OTHER RECEIVABLES (Current) Sundry debtors Accrued income GST input tax refundable R&D Grant/ R&D benefits receivable Prepayments	Consolidated 2013 2012 $ $ 4,866 2,450 98,764 1,260 75,424 43,091 - 408,084 50,106 120,562
	229,160 575,447

9. TRADE AND OTHER RECEIVABLES (Current)

(a) Fair value and credit risk

Due to the short term nature of the receivables, their carrying value is assumed to approximate their fair value. GST input tax refundable and Income tax R&D benefits receivable are receivable from the Commonwealth of Australia and are therefore viewed as having low credit risk. Accrued income is primarily ($97,505) receivable from Kaizen Discovery Inc, a joint venture partner in respect of management fees. Given the contractual nature of the Company’s joint venture, the credit risk is perceived to be low. The remainder receivable from Westpac Banking Corporation and the National Australia Bank and are therefore viewed as having low credit risk. Sundry debtors relate principally to an amount receivable by the Company from a major insurance company in respect of a workers’ compensation claim and therefore viewed as having low credit risk. The prepayments relate to various suppliers and would have varying levels of credit risk.

FINANCIAL ASSETS Notes Shares held for sale (i) Options (ii)	Consolidated 2013 2012 $ $ - 815,700 - 95,783
	- 911,483

10. FINANCIAL ASSETS

35

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

10. FINANCIAL ASSETS (Continued)

• i) Nil (2012: 8,157,000) shares held in Genesis Resources Limited. The Directors had valued these shares at 10 c per share at 31 December 2012. The closing price of these shares on the ASX was 15 c per shares as at 31 December 2012, however the Directors believed that due to the limited liquidity in the stock, the closing share price on 31 December did not represent fair value. The shares were sold on 20 December 2013, for net proceeds of $567,849.

• ii) 2,125,000 options in Genesis Resources Limited. The options have an exercise price of 10 cents and expire on 4 May 2014. The options were valued as 31 December 2013 using the binomial option pricing model, based on the share price of 9 cents and minimal volatility. Accordingly, at 31 December 2013, no value was attributed to the options. The value as at 31 December 2012 was calculated assuming a fair market value of 10 cents per Genesis Resources Limited share as at 31 December 2012, a risk free rate of 3% and a volatility of 1.006.

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities Level 2- Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable)

Level 3- Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable).

For financial instruments that are recognised at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisations (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

As at 31 December 2013, the Company held the following classes of financial instruments measured at fair value:

Financial Assets

	31 December 2013	Level 1	Level 2	Level 3
	$	$	$	$
Options	NIL	-	NIL	-
Total	NIL	-	NIL	-

For all other financial instruments, the carrying value approximates the fair value.

36

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

PLANT AND EQUIPMENT Year ended 31 December Computer Equipment At 1 January, net of accumulated depreciation Additions Depreciation charge for the year Impairment Net of accumulated depreciation and impairment Plant and Equipment At 1 January, net of accumulated depreciation Additions Disposals Depreciation charge for the year Net of accumulated depreciation and impairment Motor Vehicles At 1 January, net of accumulated depreciation Additions Disposals Depreciation charge for the year Net of accumulated depreciation Office Furniture At 1 January, net of accumulated depreciation Additions Depreciation charge for the year Net of accumulated depreciation and impairment Leasehold Improvements At 1 January, net of accumulated depreciation Additions Amortisation charge for the year Net of accumulated amortisation Library At 1 January, net of accumulated depreciation Additions Disposals Depreciation charge for the year Net of accumulated depreciation Total Plant and Equipment At 1 January, net of accumulated depreciation Additions Disposals Depreciation charge for the year Net of accumulated depreciation and impairment	Consolidated 2013 2012 $ $ 5,095 10,680 2,589 671 (3,117) (6,045) - (211)
	4,567 5,095
	24,043 43,803 - 2,952 (222) (2,077) (11,186) (20,635)
	12,635 24,043
	51,876 79,018 - - - (608) (15,531) (26,534)
	36,345 51,876
	10,760 14,441 - 1,003 (3,027) (4,684)
	7,733 10,760
	7,420 5,898 - 8,327 (4,107) (6,805)
	3,313 7,420
	231 370 - 171 - (109) (87) (201)
	144 231
	99,425 154,210 2,589 13,124 (222) (3,005) (37,055) (64,904)
	64,737 99,425

11. PLANT AND EQUIPMENT

37

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

LANT AND EQUIPMENT (continued) At 31 December Computer equipment at cost Accumulated depreciation and impairment Net carrying amount Plant and equipment at cost Accumulated depreciation and impairment Net carrying amount Motor vehicles at cost Accumulated depreciation Net carrying amount Office furniture at cost Accumulated depreciation and impairment Net carrying amount Leasehold improvements at cost Accumulated amortisation Net carrying amount Library at cost Accumulated depreciation and impairment Net carrying amount Total cost Accumulated depreciation, amortisation and impairment Net carrying amount (i) The useful life of the assets was estimated as follows: Sundry equipment: 5 to 15 years Computer equipment: 4 years Motor vehicles: 5 to 8 years Furniture and Fittings: 5 to 15 years Library: 7 years Leasehold improvements: Over the remainder	Consolidated 2013 2012 $ $ 45,391 42,802 (40,824) (37,707)
	4,567 5,095
	90,491 90,491 (77,856) (66,448)
	12,635 24,043
	163,017 163,017 (126,672) (111,141)
	36,345 51,876
	23,693 23,693 (15,960) (12,933)
	7,733 10,760
	19,791 19,791 (16,478) (12,371)
	3,313 7,420
	1,515 1,515 (1,371) (1,284)
	144 231
	343,898 341,309 (279,161) (241,884)
	64,737 99,425
	of the lease term up to 2 years

11. PLANT AND EQUIPMENT (continued)

(ii) No assets have been pledged as security for borrowings.

12. INTANGIBLE ASSETS

Consolidated

Computer Software Year ended 31 December At 1 January, net of accumulated amortisation Additions Amortisation charge for the year Impairment Net of accumulated amortisation and impairment At 31 December Gross book value Accumulated amortisation and impairment Net carrying amount	2013 2012 $ $ 1,221 3,551 6,444 562 (3,923) (2,892) - -
	3,742 1,221
	51,057 44,613 (47,315) (43,392)
	3,742 1,221

(i) The useful life of intangible assets was estimated as follows for 2013:

Computer software: 2.5 years

38

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

13. EXPLORATION ASSET

On 29 November 2013, the Company announced that it had entered into an agreement with ABM Resources NL (ASX: ABU) whereby the Company has the option to acquire 100% of ABM’s interests in the North Arunta Project Region in the Northern Territory. The agreement is subject to due diligence. Clancy paid an option fee of $250,000 for the exclusive option to complete due diligence on the projects and subject to various conditions including satisfactory due diligence by both parties and various approvals, the right to acquire the projects. The option fee has been capitalised as an Exploration Asset at 31 December 2013, in accordance with AASB6.

E AND OTHER PAYABLES (Current)	Notes	Consolidated
		2013	2012
		$	$
Trade payables	( i ) - ( i i )	140,918	153,716
Accrued expenses		89,906	80,867
GST Payable		40,382	85,770
		271,206	320,353

14. TRADE AND OTHER PAYABLES (Current)

Terms and conditions :

(i) Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

(ii) Trade payables are non-interest bearing and are normally settled on 30 day terms.

PROVISIONS CURRENT Employee entitlements - accumulated annual leave Balance as at 1 January Additions during the period Utilised during the period Balance as at 31 December Employee entitlements - accumulated long service leave Balance as at 1 January Transferred from non-current Balance as at 31 December Total Current NON-CURRENT Employee entitlements - long service leave Balance as at 1 January Additions during the period Transferred to current Balance as at 31 December Total Non-Current	Consolidated 2013 2012 $ $ 48,270 41,179 18,185 33,252 (2,545) (26,161)
	63,910 48,270
	- - 44,412 -
	44,412 -
	108,322 48,270
	38,506 35,244 21,686 3,262 (44,412) -
	15,780 38,506
	15,780 38,506

15. PROVISIONS

39

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

Consolidated

16. UNEARNED REVENUE AND EXPLORATION UNDERSPEND

UNEARNED REVENUE AND EXPLORATION UNDERSPEND	Consolidated
Unearned revenue (i) Exploration expenditure reimbursed in advance (ii)	2013 2012 $ $ 16,483 89,891 134,419 898,913
	150,902 988,804

• (i) As at 31 December 2013, the Company had unearned revenue in respect of its management fees derived from its joint ventures with Mitsubishi Metals Corporation (“MMC”) and Kaizen Discovery Inc. (“Kaizen”).

• (ii) As at 31 December 2013, the Company had made a cash call for expenditure which under its joint venture agreements with MMC and Kaizen will either be spent on exploration in respect of the joint ventures or in the event that MMC and/or Kaizen does not elect to contribute beyond its minimum contribution (see note 20), will be refunded to MMC and/or Kaizen.

ISSUED CAPITAL		Consolidated	Consolidated
		2013	2012
		$	$
Ordinary shares	(a)	14,457,200	13,958,929

17. ISSUED CAPITAL

(a) Ordinary shares

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

Movement in ordinary shares on issue Beginning of financial year Add Shares issued pursuant to a drilling for equity agreement Shares issued pursuant to off market takeover offer Shares issued pursuant to Employee Share Scheme Shares issued pursuant to placement Less: Transaction costs on share issues As at 31 December		Consolidated 2013 2012 Number of shares $ Number of shares $ 191,704,335 13,958,929 165,242,425 13,409,970	Consolidated 2013 2012 Number of shares $ Number of shares $ 191,704,335 13,958,929 165,242,425 13,409,970
	(i) (ii) (iii) (iv) (v)
		- -	2,719,585 106,327
		- - 264,343 1,471
			18,096,000 361,920
			5,646,325 88,226
		14,285,714 500,000	- -
		- (3,200)	- (7,514)
		206,254,392 14,457,200	191,704,335 13,958,929

(i) On 25 January 2012 and 18 April 2012 respectively, 527,399 and 2,192,186 ordinary shares were issued to Australian Mineral and Waterwell Drilling Pty Ltd (“AMWD”), subject to a 12 month escrow, pursuant to a drilling earn-in agreement. Under this agreement, AMWD provides drilling services of $5 million or for a three year period from 23 September 2011, with 25% of the monthly invoice amount settled by the issue of fully paid ordinary shares escrowed for 12 months from date of issue.

(ii) On 21 August 2012 the Company issued 18,096,000 shares at 2 cents per share pursuant to the Company's off market takeover offer of Genesis Resources Limited. The shares were issued to Genesis Resources Limited shareholders who accepted the Company's off market takeover offer. As a result the Company acquired 6,032,000 shares in Genesis Resources Limited.

40

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

17. ISSUED CAPITAL (continued)

• (iii) On 16 July 2012, 6 November 2012 and 13 August 2013 respectively, 2,758,723 (net of a buyback of 294,958 shares), 2,887,602 and 264,343 shares were issued to employees and directors of the Company pursuant to the Employee Share Scheme. The shares were valued in accordance with the requirements of AABS 2 Share based payments. Refer to Note 27.

• (iv) On 13 February 2013, the Company entered into a Joint Venture Termination, Subscription and Royalty Agreement with Gold Fields Australasia Pty Ltd (“Gold Fields”). As part of this agreement, Gold Fields subscribed for 14,285,714 shares at 3.5 cents per share.

• (v) The transaction costs represent the cost of issuing shares pursuant to points (iii) – (iv) above.

(b) Capital Risk Management

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain appropriate returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures an appropriate cost of capital available for the entity.

In order to maintain or adjust the capital structure, the entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, enter into joint ventures or sell assets.

The entity does not have a defined share buy-back plan.

No dividends were paid in 2013 and no dividends are expected to be paid in 2014.

The consolidated entity is not subject to any externally imposed capital requirements.

Management reviews management accounts on a monthly basis and actual expenditures against budget on a monthly basis.

41

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

18. RESERVES Share-based payment reserve (a) Movement in reserves Share-based reserve Balance at beginning of the financial year Arising on share-based payments Balance at end of financial year	Consolidated 2013 2012 $ $ 1,660,974 1,660,974
	1,660,974 1,660,974
	1,660,974 1,660,974 - -
	1,660,974 1,660,974

Options on issue during the year are detailed below:

Option details (i)	Note Exercise price	On issue at 1 January 2013 Issued Exercised Lapsed Forfeited On issue at 31 December 2013
Options expiring on 10 August 2013 (ii) $0.175 Options expiring on 31 December 2013 (iii) $0.195 Options expiring on 30 September 2013 (iv) $0.185 Options expiring on 31 July 2013, Free attaching, listed (v), (vi) $0.150 Options expiring on 31 July 2013, Broker, listed (vii) $0.150 Options expiring on 31 July 2013, Drill for Equity, listed (viii) $0.150		2,050,000 - - 2,050,000 - - 1,650,000 - - 1,650,000 - - 1,100,000 - - 1,100,000 - - 82,134,786 - - 82,134,786 - - 10,000,000 - - 10,000,000 - - 2,000,000 - - 2,000,000 - -
		98,934,786 - - 98,934,786 - -

(i) All options in the table above were valued according to the binomial tree method except for the 2010 free attaching options (v) and (vi) which were considered to have nil value. All options vested fully on grant date and were fully expensed on that date, with the exception of the options granted in respect of the drill for equity, which are expensed over three years as an exploration expense. No options were issued during 2013 or 2012.

(ii) On 12 August 2009 the Company issued 2,350,000 options to staff and consultants, of which 300,000 were forfeited in 2010.

(iii) On 28 January 2010, the Company issued 1,650,000 options to directors.

(iv) On 4 May 2010, the Company issued 1,100,000 options to employees.

(v) and (vi) Pursuant to a 1 for 2 renounceable rights issue in July 2011 participating shareholders received 1 free attaching option for every new share subscribed totaling 54,756,724 options (see note 17 (a) (i)). Pursuant to a 1 for 3 renounceable rights issue in August 2010 participating shareholders received 1 free attaching option for every new share subscribed - totaling 27,378,362 options.

(vii) Pursuant to an underwriters' agreement in relation to the May 2011 renounceable rights issue 10,000,000 options were issued.

(viii) Pursuant to the drilling earn-in agreement per note 17(a) (i) above, 2,000,000 options were issued to AMWD.

(b) Nature and purpose of reserves

The share-based payments reserve records the value of share options issued to the Company's directors, employees, consultants and brokers as well as the vendors of drilling services and tenements. It also includes an apportionment for the value of free attaching options from proceeds of a rights issue.

42

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

STATEMENT OF CASH FLOWS RECONCILIATION (a) Reconciliation of the net profit/(loss) after tax to net cash flows from operations Loss from ordinary activities after income tax Adjustments for: Depreciation Amortisation of intangible assets Impairment of fixed assets Loss on disposal of property, plant and equipment Non-cash purchase of drilling services Non-cash net expenses paid on behalf of controlled entity via loan account Equity settled share based payments Fair value gain on financial asset Realised loss on financial asset Unrealised loss on financial asset Proceeds sale of tenements Changes in assets and liabilities (Increase)/decrease in trade and other receivables Decrease /(increase) in prepayments and bonds Increase/(decrease) in trade and other payables Increase/(decrease) in provisions (Increase)/decrease in restricted cash balances Net cash flow used in operating activities (b) Bank guarantee facility Bank guarantee facility Amount utilised	Consolidated 2013 2012 $ $ (677,702) (1,931,371) 37,054 66,268 3,923 2,892 - 3,006 222 - - 106,326 230 206 58,699 30,078 - (453,938) 247,850 - 95,783 - (1,000,000) - 275,831 104,296 13,229 8,677 (49,147) (26,793) (800,575) 999,157 - (182,000)
	(1,794,903) (1,273,196)
	300,000 300,000 (160,000) (168,000) 140,000 132,000

19. STATEMENT OF CASH FLOWS RECONCILIATION

The bank guarantee facility has been provided by a financial institution for exploration licence security and corporate credit card purposes. Term deposits of $300,000 (2012: $300,000) have been provided as set-off security for these facilities.

20. INTEREST IN JOINTLY CONTROLLED OPERATIONS

As at 31 December 2013, the Group had the following significant interests in joint ventures:

• (a) Bass Metals Limited unincorporated joint venture

• (i) Bass Metals Limited ("Bass") and Clancy Exploration Limited have a 75% and 25% interest respectively in two Tasmanian exploration licences ("tenements"), the Lake Margaret licence and the Sock Creek licence in the Mt Read Volcanic Belt in Western Tasmania.

• (ii) Joint venture property initially consists of these tenements and all mining information in the possession or control of either party relating to these tenements. It is owned by the parties as tenants in common in proportion to their respective interests. Exploration costs are currently incurred by Bass and there are no joint venture assets or liabilities.

43

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

20. INTEREST IN JOINTLY CONTROLLED OPERATIONS (continued)

• (iii) Bass as the party holding the majority interest is the manager of the joint venture and all joint venture activities.

• (iv) Bass has agreed to sole fund the joint venture until the completion of a pre-feasibility study on any one of the tenements. Thereafter expenditure is in proportion to joint venture interests. At the time of any withdrawal by Bass the tenements must be in good standing and expenditure commitments met. As at the date of this report, Bass had not withdrawn from the joint venture.

• (v) The Company has no capital commitments or contingent liabilities in respect of this joint venture.

• (vi) Under the provisions of the joint venture agreement, the Company may become entitled to performance shares.

(b) Gold Fields Australasia Pty Ltd unincorporated joint venture

• (i) Prior to February 2013, Clancy had an interest in 6 tenements in the eastern Lachlan Fold Belt in New South Wales in joint venture with Gold Fields Australasia Pty Ltd. The interest in these joint ventures was disposed of during the year as part of the Joint Venture Termination, Subscription and Royalty Agreement. During the year, the Company entered into a Joint Venture Termination, Subscription and Royalty agreement with Gold Fields Australia Pty Ltd, under which the Company sold its joint venture interests in six copper-gold projects in NSW.

• (ii) Clancy received a total of A$1.5 million from a combination of the sale consideration and a placement of shares to a related body corporate of Gold Fields. The sale consideration was A$1 million in cash which was paid immediately upon settlement. The equity component of A$500,000 was received immediately upon settlement of the placement which was done at 3.5c per share. Clancy retains rights to its 2.5% Net Smelter Return (NSR) royalties on the six projects (in addition to Wellington North), subject to Gold Fields having the right at any time to purchase the NSR’s for A$20 million each. Both parties’ pre-emptive rights and the Gold Fields back-in right on the Gobondery project was terminated as part of the agreement .

(c) Minemakers TTT Pty Ltd unincorporated joint venture

• (i) Minemakers TTT Pty Ltd ("MTTT") and Clancy Exploration Limited have, following the execution of a joint venture agreement (“agreement”) on 25 February 2011, a 75% and 25% interest respectively in each of 2 Tasmanian exploration licences ("tenements") in the Mt Read Volcanic Belt in Western Tasmania.

• (ii) MTTT is manager of the joint venture and has funded a work program on each tenement.

• (iii) On 15 February 2012 a decision was taken by both MTTT and the Company to relinquish the Waratah licence.

• (iv) MTTT is currently earning-in on the Oonah licence. The Company has elected to fund its 25% share of future expenditure on this tenement once this earn-in has been completed.

• (v) There are no joint venture assets or liabilities.

• (vi) In respect of its joint venture agreement with Minemakers TTT Pty Ltd (“MTTT”), the Company has elected to fund its 25% share of future expenditure on the Oonah tenement once MTTT’s earn-in has been completed. A drilling program has yet to be finalised but is not expected to exceed $250,000 of which the Company’s share would be $62,500. The Oonah tenement has an annual expenditure commitment of $137,900 and has been renewed to 7 August 2014. The Company has no other capital commitments or contingent liabilities in respect of this joint venture.

• (d)

Mitsubishi Metals Corporation unincorporated joint venture

• (i) In 2012, the Company entered into a joint venture with Mitsubishi Metals Corporation of Japan (“MMC”) whereby MMC could earn 49% of the Cundumbul, Currumburrama and Genaren projects by funding $3 million expenditure over three years with a minimum commitment of $500,000 in the first year.

• (ii) The Company is managing the project on behalf of the joint venture.

• (iii) As at 31 December 2013, the Company was entitled to a 100% interest in each of the projects (2012: 100%).

44

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

20. INTEREST IN JOINTLY CONTROLLED OPERATION (continued)

(e) Kaizen Discovery Inc. unincorporated joint venture

• (i) On 20 May 2013, the Company entered into a new joint venture with the signing of a Farm In and Joint Venture Agreement with High Power Exploration Inc (HPX) on the Fairholme copper gold project in New South Wales.

• (ii) Under the terms of the Agreement HPX has the right to earn an initial 49% of the Fairholme project by funding A$1 million in exploration over one year with a minimum spending commitment of A$500,000. HPX then will have the right to fund a further A$4 million in exploration over the subsequent two years with the aim of delineating a scoping study to take HPX’s stake to 65 %. HPX can increase its stake to 80% in phases or 85% by funding a Prefeasibility Study (depending on the cost of the study).

• (iii) In December 2013, HPX transferred its interest in the joint venture to Kaizen Discovery Inc.

• (iv) The Company is managing the project on behalf of the joint venture. (v) As at 31 December 2013, the Company was entitled to a 51% interest in the projects.

21. SEGMENT INFORMATION

The consolidated entity operates predominantly in one reportable business segment, managed by one segment manager and in one geographical location. This is likely to change if the Company acquires the projects in the North Arunta Region of the Northern Territory from ABM Resources Limited as discussed in Note 13. The operations of the consolidated entity consist of gold, copper and base metals exploration, within Australia.

The information disclosed in the financial statements is the same information utilised in internal reporting by the chief operating decision maker. Accordingly no additional quantitative or qualitative disclosures are required.

OMMITMENTS Estimated commitments for which no provisions were included in the financial statements are as follows: (a) Exploration Expenditure Commitments: (i) Under 12 (2012:30) NSW Government, nil (2012:1) Western Australian Government and 2 (2012:2) Tasmanian Government exploration licenses Payable - not later than one year - later than one year and not later than five years	Consolidated 2013 $ 2012 $ 525,104 639,759 260,005 59,108
	785,109 698,867

22. COMMITMENTS

The expenditure commitments as at 31 December 2013 include $412,435 (2012:$218,739) commitments that will be met by either of the Company’s joint venture partners - Mitsubishi Metals Corporation (“MMC”) or Kaizen Discovery Inc. as a result of the minimum expenditure commitment under the joint venture agreements with those parties.

There is a combined 2% net smelter royalty payable to third parties in relation to both the exploration licences comprising the Trundle project. The exploration licences that make up the Trundle project are 100% owned by the Company. The royalty is only payable in the event that a mine is ultimately constructed. The value of such payable is zero at the time of this report, as there are no reserves or resources proven or probable under those exploration licenses as of the date of this report.

During 2013 and subsequent to the end of the financial year, 3 NSW licences were applied for by the Company, including one licence which will replace two of the existing licences. Of the 14 licences held by the Company, none are pending renewal.

45

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

22. COMMITMENTS (continued)

The Company and its subsidiary Geoinformatics Exploration Tasmania Pty Ltd had, at 31 December 2013, a 25% interest in four (31 December 2012: four) Tasmanian licences two of which are covered by a mining exploration alliance agreement with Bass Metals Ltd (“Bass”), entered into on 10 May 2005, while a further two are covered by a joint venture agreement entered into on 25 February 2011 with Minemakers TTT Pty Ltd (“MTTT”). Under these various agreements, responsibility for all remaining commitments to exploration expenditure, in regard to these licences, has been undertaken by Bass and MTTT, who are also managers of this joint venture under this agreement.

Included in overall commitments calculations are estimates of the Company’s expected commitments in respect of its sole-funded exploration licences.

All the exploration expenditure commitments are non-binding, in respect of outstanding expenditure commitments, in that the Company or its joint venture partners have the option to relinquish and lose these licences or their contractual commitments at any stage, at the cost of its cumulative expenditures up to the point of relinquishment.

Refer to Note 20 for details of Jointly Controlled Operations.

(b) Operating Lease Commitments

In October 2012 the consolidated entity extended the lease for office and core shed premises in Orange, NSW for 24 months. In November 2010 it also entered into a 48 month operating lease for a photocopier-printer. Its operating lease commitments are as follows:

Payable - not later than one year - later than one year and not later than five years	Consolidated 2013 $ 2012 $ 79,076 79,076 1,991 63,514
	81,067 142,590

23. CONTINGENT LIABILITIES

In accordance with normal industry practice the consolidated entity has entered into joint venture operations and farm-in agreements with other parties for the purpose of exploring and developing its mineral interests. If a party to a joint venture defaults and does not contribute its share of joint venture obligations, then the other joint venture partners are liable to meet those obligations. In this event the interest in the tenements held by the defaulting party may be redistributed to the remaining joint venture partners. A contingent liability exists in respect of contributions due to be paid by farm-in partners of the economic entity to some of its joint ventures. However, no material losses are anticipated in respect of any of these contingencies as expenditure commitments, if not recovered from joint venture partners, can be terminated through exploration licence relinquishment at any stage.

46

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

24. RELATED PARTY DISCLOSURES

(a) Ultimate parent

The ultimate Australian parent entity and the ultimate parent of the consolidated entity is Clancy Exploration Limited.

(b) Subsidiaries

The subsidiary of Clancy Exploration Limited is listed in the following table:

Nature of investment Country of incorporation % Equity interest Name 2013 2012	Investment $ 2013 2012
Geoinformatics Exploration Tasmania Pty Ltd Ordinary shares Australia 100 100	1 1
	1 1

(c) Transactions with related parties

The following table provides the total amount of transactions (GST inclusive where GST applies) entered into with related parties for the relevant financial year. The transactions have all been undertaken on an arms’ length basis.

	Consolidated	Consolidated
	2013	2012
	$	$
Purchase of goods and services
Director's fees billed by C2Skye Management Ltd, a company controlled by a
director J. Macdonald	36,000	35,999
Directors travel expenses billed by C2Skye Management Ltd	6,647	4,636
Directors travel expenses billed by Tectonex Geoconsultants Pty Ltd, a company
controlled by the chairman M. Etheridge	6,569	9,915
Accounting and financial consultancy services paid to Forsyth & Associates Pty Ltd,
a company associated with director and chief financial officer, N. Forsyth-Stock	89,250	122,468
Directors travel expenses paid to Forsyth & Associates Pty Ltd, a company
associated with director and chief financial officer, N. Forsyth-Stock	656	-
Amounts paid on trade and other payables
Amounts paid to C2Skye Management Ltd for director's fees and travel expense
reimbursements	42,646	40,635
Amounts paid to Tectonex Geoconsultants Pty Ltd for travel expense
reimbursements	6,569	7,707
Accounting and financial consultancy services paid to Forsyth & Associates Pty Ltd,	89,906	122,468
a company associated with director and chief financial officer, N. Forsyth-Stock

47

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

24. RELATED PARTY DISCLOSURES (continued)

Superannuation guarantee contributions paid

Amounts paid to MAL Super Fund Pty Ltd as trustee for MAL Superannuation Fund, a trustee company controlled by former director M. Lester who is also a beneficiary of the superannuation fund

of the superannuation fund		-	2,725
Amounts paid to Tectonex Geoconsultants Pty Ltd as trustee for Etheridge
Superannuation Fund, a trustee company controlled by the chairman M. Etheridge
who is also a beneficiary of the superannuation fund
	5,475		5,400
Amounts paid to Far Range Pty Ltd as trustee for Far Range Superannuation Fund a
trustee company controlled by a director G. Barnes who is also a beneficiary of the
superannuation fund	21,900		21,600
Amounts paid to Matrix Superannuation Master Trust, a superannuation fund in
which director and chief financial officer, N. Forsyth-Stock is a beneficiary	3,014		991

25. SUBSEQUENT EVENTS

Since the end of the financial year, Clancy announced that it has completed the due diligence processes and has exercised its option to acquire 100% of ABM’s interests in the North Arunta Project Region (the Projects) in the Northern Territory. The Company has paid an exercise fee of $150,000.

26. DIRECTORS AND KEY MANAGEMENT PERSONNEL

(a) Details of Key Management Personnel

The names of the Company’s directors in office at any time during the financial year are as follows. Directors were in office for the entire period unless otherwise stated.

G Barnes Director, additionally Managing Director M Etheridge Chairman (Non-Executive) J Macdonald Director (Non-Executive - Technical) N Forsyth-Stock Director (Executive – Financial), also Chief Financial Officer

(b) Compensation for Key Management Personnel

Compensation for Key Management Personnel
Short-term employee benefits Short-term consulting fees Post-employment benefits Other long-term benefits Share-based payments Total Compensation	Consolidated 2013 $ 2012 $ 369,026 369,026 89,250 122,467 30,389 29,972 4,578 3,262 36,045 9,447 529,288 534,174
		534,174

48

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

26. DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued)

(c) Key Management Personnel, Company Secretary and Executive Officers (Consolidated)

(i) OPTIONS – 31 DECEMBER 2013

		Held at 1 January 2013 Granted as Remuneration Options Exercised Expired/ Forfeited	Held at 31 December 2013
Director G Barnes Incentive Listed M Etheridge Listed J Macdonald Incentive Listed N Forsyth- Stock Executives R Caren Incentive Listed J Vassallo Incentive Listed		1,000,000 - - 1,000,000 345,771 - - 345,771 259,424 - - 259,424 400,000 - - 400,000 142,628 - - 142,628 - - - - 200,000 - - 200,000 63,462 - - 63,462 700,000 - - 700,000 66,988 - - 66,988	- - - - - - - - - -
		3,178,273 - - 3,178,273

Refer to Note 18 for a description of the share options’ terms and conditions.

(ii) OPTIONS – 31 DECEMBER 2012

		Held at 1 January 2012 Granted as Remuneration Options Exercised Expired/ Forfeited Held at 31 December 2012 Exercisable/ Vested at 31 December 2012
Director G Barnes Incentive Listed M Etheridge Listed J Macdonald Incentive Listed M Lester Incentive Listed N Forsyth- Stock Executives R Caren Incentive Listed G Doig Incentive Listed J Vassallo Incentive Listed		1,000,000 - - - 1,000,000 1,000,000 345,771 - - - 345,771 345,771 259,424 - - - 259,424 259,424 400,000 - - - 400,000 400,000 142,628 - - - 142,628 142,628 250,000 - - - 250,000 250,000 100,964 - - - 100,964 100,964 - - - - - - 200,000 - - - 200,000 200,000 63,462 - - - 63,462 63,462 200,000 - - - 200,000 200,000 30,418 - - - 30,418 30,418 700,000 - - - 700,000 700,000 66,988 - - - 66,988 66,988
		3,759,655 - - - 3,759,655 3,759,655

Refer to Note 18 for a description of the share options’ terms and conditions.

(d) Shareholdings of Key Management Personnel (Consolidated)

The movement during the reporting period in the number of ordinary shares of Clancy Exploration Limited held directly, indirectly or beneficially, by each specified director and each specified executive, including their personally related entities is as follows:

49

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

26. DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued)

(i) SHARES – 31 DECEMBER 2013

	Held at 1 January 2013 Granted as Remuneration On Exercise of Options Acquired Net Change Held at 31 December 2013
Director G Barnes M Etheridge J Macdonald N Forsyth-Stock	2,457,547 - - - - 2,457,547 2,511,877 - - 702,986 702,986 3,214,863 1,099,199 - - 208,334 208,334 1,307,533 347,009 264,343 - - 264,343 611,352
	6,415,632 264,343 - 911,320 1,175,663 7,591,295

(ii) SHARES – 31 DECEMBER 2012

	Held at 1 January 2012 Granted as Remuneration On Exercise of Options Acquired Net Change Held at 31 December 2012
Director G Barnes M Etheridge J Macdonald M Lester N Forsyth-Stock	504,041 1,565,885 - 387,621 1,953,506 2,457,547 518,847 793,030 - 1,200,000 1,993,030 2,511,877 570,512 528,687 - - 528,687 1,099,199 201,926 - - - - 201,926 - 347,009 - - 347,009 347,009
	1,795,326 3,234,611 - 1,587,621 4,822,232 6,617,558

Refer to Notes 17 and 18 for the types of share-based payment plans.

The ordinary shares acquired by directors and executives during the year were from participation in a rights issue (Refer to Note 17 above).

50

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

27. SHARE-BASED PAYMENTS

(a) Recognised share-based payments expenses

The expense recognised for the settlement price for the provision of drilling services and the expensing of employee and consultant services received is shown in the table below:

Expense recognised for the settlement price for the provision of drilling services Expense arising from equity-settled share based payment - settlement price (shown as a part of exploration expenditure in the Income Statement) Expense recognised for of employee and consultant services received Expense arising from equity-settled share-based payment transactions – employees and consultants (i) Expense arising from equity-settled share-based payment transactions – directors (ii)

Consolidated 2013 $ 2012 $ - 106,326 25,758 23,600 32,941 6,478

58,699 30,078

• (i) In 2012, 2,758,723 shares were issued to employees and consultants under the Company’s Employee Share Option and Loan Plan (“the Plan”) with a fair value of $49,358. This amount was expensed over a 12 month period from the date of issue, consistent with the continuity service period under the Plan. See Note 17.

• (ii) In 2012 and 2013, 2,887,602 and 264,343 shares respectively were issued under the Company’s Employee Share Option and Loan Plan (“the Plan”) with a fair value of $38,868 and $1,471 respectively. These amounts were/are to be expensed over a 12 month period from the date of issue, consistent with the continuity service period under the Plan. See Note 17.

(b) Weighted average remaining contractual life

All options had expired at 31 December 2013. The weighted average remaining contractual life for the share options outstanding as at 31 December 2012 was 0.59 years.

(c) Range of exercise price

All options had expired at 31 December 2013.

• The range of exercise prices for directors, employees and consultants options outstanding at the end of 31 December 2012 was $0.175 to $0.195.

• The brokers’ options outstanding at the end of 31 December 2012 were exercisable at $0.15.

• The drilling service provider options outstanding at 31 December 2012 were exercisable at $0.15.

As the range of exercise is wide, refer to Notes 17(a) and Note 18 above for further information in assessing the number and timing of additional shares that may be issued and the cash that may be received upon exercise of those options.

(d) Weighted average fair value

The weighted average fair value of the directors and employees options granted during the year was $nil (2012: $nil). The weighted average fair value of drilling service provider options granted during the year was $nil (2012: $nil).

(e) Weighted average share price

The weighted average price per share during the year was $0.01 (2012: $0.03).

51

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

28. AUDITORS’ REMUNERATION

The auditor of Clancy Exploration Limited is Ernst & Young. Prior to May 2012, the auditor was Deloitte Touche Tohmatsu (“Deloitte”)

Amounts received or due and receivable for: - an audit or review of the financial statements of the entity and its controlled entity – Ernst & Young - other services in relation to the entity and its controlled entity - tax compliance services - Ernst & Young - an audit or review of the financial statements of the entity and its controlled entity - Deloitte	Consolidated 2013 $ 2012 $
	44,789 37,446 50,469 56,921 - 4,000
	95,258 98,367

29. INFORMATION RELATING TO CLANCY EXPLORATION LIMITED (‘the Parent Entity")

ASSETS Current Assets Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Non-current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Loss of the parent entity Total comprehensive loss of the parent entity	2013 2012 $ $ 2,382,831 3,629,586 318,479 100,645
	2,701,310 3,730,231
	520,456 1,349,997 25,755 45,935
	546,211 1,395,932
	2,155,099 2,334,299
	14,917,200 14,418,928 1,660,974 1,660,974 (14,423,075) (13,745,603)
	2,155,099 2,334,299
	(677,472) (1,931,165)
	(677,472) (1,931,165)

Contingent liabilities of the parent entity: Nil

Commitments for the acquisition of property, plant and equipment by the parent entity: Nil

52

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

29. INFORMATION RELATING TO CLANCY EXPLORATION LIMITED (continued)

Reserves included in the parent entity:

Share-based payment reserve	Consolidated 2013 2012 $ $ 1,660,974 1,660,974
	1,660,974 1,660,974

30. FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES

The consolidated entity’s principal financial instruments comprise cash, short-term deposits and available-for-sale investments.

The main purpose of these financial instruments is to finance the consolidated entity’s operations. The consolidated entity has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. It is, and has been throughout the entire period under review, the consolidated entity’s policy that no trading in financial instruments shall be undertaken.

The various categories of the consolidated and parent entity’s financial instruments and their carrying amounts coincide with the tables below which set out financial instrument exposure to interest rate risk. Accordingly financial instruments are not separately categorised elsewhere.

The main risk arising from the consolidated entity’s financial instruments is cash flow interest rate risk. Other minor risks are either summarised below or disclosed at Note 9 in the case of credit risk and Note 16 in the case of capital risk management. The Board reviews and agrees policies for managing each of these risks.

(a) Cash Flow Interest Rate Risk

The consolidated entity’s exposure to the risks of changes in market interest rates relates primarily to the consolidated entity’s short-term deposits with a floating interest rate. These financial assets with variable rates expose the consolidated entity to cash flow interest rate risk. All other financial assets and liabilities in the form of receivables and payables are non-interest bearing. The consolidated entity does not engage in any hedging or derivative transactions to manage interest rate risk. In regard to its interest rate risk, the consolidated entity continuously analyses its exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative investments and the mix of fixed and variable interest rates.

The following tables set out the consolidated entity’s exposure to interest rate risk and the effect on profit before tax if interest rates at that date had been 20% (2012: 20%) higher or lower with all other variables held constant as a sensitivity analysis.

Year	Increase/Decrease basis points	Effect on Profit Before Tax $
2013	+48	10,183
	-48	(10,183)
2012	+60	12,377
	-60	(12,377)

A sensitivity of 20% (2012: 20%) has been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates. A 20% (2012: 20%) sensitivity would move short term interest rates at 31 December 2013 from around 2.4% representing a 48 basis points shift either down to 1. 92% or up to 2.88% (2012: from around 3% representing a 60 basis points shift either down to 2.4% or up to 3.6%). This could represent one or two adjustments upwards in the context of an easing of monetary stimulus by the Reserve Bank of Australia in response to stronger domestic conditions and an improving international economy.

53

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

NOTES TO ACCOUNTS

30. FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Based on the sensitivity analysis only interest revenue from variable rate deposits and cash balances is impacted, resulting in a decrease or increase in overall income.

(a) Liquidity risk

The consolidated entity manages liquidity risk by maintaining sufficient cash reserves and through the continuous monitoring of budgeted and actual cash flows. Further, the consolidated entity only invests surplus cash with major financial institutions.

Contracted maturities of payables year ended 31 December:

Payable - less than 6 months - 6 to 12 months - 1 to 5 years - later than 5 years Total	Consolidated 2013 $ 2012 $
	271,206 - - - 320,353 - - -
	271,206 320,353

(b) Commodity price risk

The consolidated entity is exposed to commodity price risk. This risk arises from its activities directed at exploration and development of mineral commodities. If commodity prices fall, the market for companies exploring for these commodities is affected. The consolidated entity does not hedge its exposures.

(c) Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The consolidated entity’s foreign transactions are immaterial and it is therefore not exposed to material foreign currency risk.

(d) Carrying values of financial instruments not recognised at fair value

Due to their short term nature, the carrying value of financial assets and financial liabilities, not recognised at fair value, recorded in the financial statements approximates their respective fair values, determined in accordance with accounting policies disclosed in Note 2 of the financial statements.

54

Clancy Exploration Limited ABN: 65 105 578 756 and controlled entity

2013

DIRECTORS’ DECLARATION

The directors of Clancy Exploration Limited declare that:

1. In the opinion of the directors:

2. (a) the attached financial statements and the notes thereto of the Company and of the consolidated entity are in accordance with the Corporations Act 2001, including:

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

   • (ii) complying with Accounting Standards;

(b) the attached financial statements and the notes thereto of the Company and of the consolidated entity are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board; and

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

1. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 31 December 2013.

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

On behalf of the Board

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G. J. BARNES

Managing Director

Orange, NSW

Dated this 17th day of March 2014

55

680 George Street Tel: +61 2 9248 5555 Sydney NSW 2000 Australia Fax: +61 2 9248 5959 GPO Box 2646 Sydney NSW 2001 ey.com/au

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Independent auditor's report to the members of Clancy Exploration Limited

Report on the financial report

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

Directors' responsibility for the financial report

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

Auditor's responsibility

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

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

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

Independence

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

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

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Opinion

In our opinion:

• a. the financial report of Clancy Exploration 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 2.

Report on the remuneration report

We have audited the Remuneration Report included in pages 6 to 11 of the directors' report for the year ended 31 December 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

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

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Ernst & Young

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Ryan Fisk Partner Sydney 17 March 2014

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation