SANDFIRE RESOURCES LIMITED — Annual Report 2013

Aug 27, 2013

Sandfire Resources NL ABN 55 105 154 185 Level 1, 31 Ventnor Ave, West Perth Western Australia 6005 Phone: +61 8 6430 3800 Fax: +61 8 6430 3849 Email: info@sandfire.com.au Web: www.sandfire.com.au

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ASX Release 28 August 2013

APPENDIX 4E Financial year ended 30 June 2013

Results for announcement to the market - 2013	$’000	Up/Down	Movement
Revenue from ordinary activities	507,331	Up	2,453%
Profit after tax from ordinary activities attributable to members	87,998	Up	368%
Net profit for the period attributable to members	87,998	Up	368%
Net tangible assets		2013	2012
Net tangible assets per ordinary security (cents per share)		1.36	0.78

Additional Appendix 4E disclosure requirements can be found in the Director’s Report and the 30 June 2013 financial statements and accompanying notes.

This information should be read in conjunction with Sandfire’s audited consolidated financial report which is enclosed.

For further information contact: Sandfire Resources NL

Matthew Fitzgerald – CFO and Company Secretary Office: +61 8 6430 3800

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Financial Report

For the year ended 30 June 2013

ASX Code: SFR

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 CONTENTS

Corporate Information	1
Directors’ Report	3
Auditor’s Independence Declaration	20
Consolidated Statement of Comprehensive Income	34
Consolidated Statement of Financial Position	35
Consolidated Statement of Changes in Equity	36
Consolidated Statement of Cash Flows	37
Notes to the Financial Statements	38
Directors’ Declaration	79
Independent Auditor’s Report	80

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 CORPORATE INFORMATION

ABN 55 105 154 185

Directors

Derek La Ferla Independent Non-Executive Chairman Karl M Simich Managing Director and Chief Executive Officer W John Evans Non-Executive Director Robert N Scott Independent Non-Executive Director Soocheol Shin Non-Executive Director Paul D Hallam Independent Non-Executive Director

Company Secretary and Chief Financial Officer

Matthew L Fitzgerald

Registered Office and Principal Place of Business

Level 1, 31 Ventnor Avenue West Perth WA 6005 Tel: +61 8 6430 3800 Fax: +61 8 6430 3849 Email: admin@sandfire.com.au Web: www.sandfire.com.au

Share registry

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Tel: +61 8 9315 2333 Fax: +61 8 9315 2233 Email: registrar@securitytransfer.com.au

Auditors

Ernst & Young Ernst & Young Building 11 Mounts Bay Road Perth WA 6000

Home Exchange

Australian Securities Exchange Limited Exchange Plaza 2 The Esplanade Perth WA 6000 ASX Code

Ordinary fully paid shares: SFR

Competent Person’s Statement – Mineral Resources and Open Pit Ore Reserves

The information in this report that relates to Mineral Resources and Open Pit Ore Reserves is based on information compiled by Mr Ekow Taylor who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Taylor is a permanent employee of Sandfire Resources and has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Taylor consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Competent Person’s Statement – Underground Ore Reserves

The information in this report that relates to Underground Ore Resources is based on information compiled by Mr Shane McLeay who is a Fellow of The Australasian Institute of Mining and Metallurgy. Mr. McLeay is a permanent employee of Entech Pty Ltd and has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr McLeay consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Forward-Looking Statements

Certain statements made during or in connection with this statement contain or comprise certain forward-looking statements regarding Sandfire’s Mineral Resources and Reserves, exploration operations, project development operations, production rates, life of mine, projected cash flow, capital expenditure, operating costs and other economic performance and financial condition as well as general market outlook. Although Sandfire believes that the expectations reflected in such forward-looking statements are reasonable, such expectations are only predictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward looking statements and no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, delays or changes in project development, success of business and operating initiatives, changes in the regulatory

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 CORPORATE INFORMATION

environment and other government actions, fluctuations in metals prices and exchange rates and business and operational risk management. Except for statutory liability which cannot be excluded, each of Sandfire, its officers, employees and advisors expressly disclaim any responsibility for the accuracy or completeness of the material contained in this statement and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this statement or any error or omission. Sandfire undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after today's date or to reflect the occurrence of unanticipated events other than required by the Corporations Act and ASX Listing Rules. Accordingly you should not place undue reliance on any forward looking statement.

Exploration and Resource Targets

Any discussion in relation to the potential quantity and grade of Exploration Targets for the DeGrussa Copper Mine is only conceptual in nature. While Sandfire is confident that it will report additional JORC compliant resources for the DeGrussa Copper Mine, there has been insufficient exploration to define mineral resources in addition to the current JORC compliant resource inventory and it is uncertain if further exploration will result in the determination of additional JORC compliant Mineral Resources.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

The directors present their report on the consolidated entity (referred to as the Group) consisting of the Parent entity, Sandfire Resources NL (Sandfire or the Company), and the entities it controlled at the end of, or during, the year ended 30 June 2013 (the reporting period) and the auditor’s report thereon.

1 Directors

The names and details of the Company’s directors in office during the financial year and until the date of this report are as follows:

are as follows:
Name	Period of Directorship
Mr Derek La Ferla	Appointed 17 May 2010
Independent Non-Executive Chairman
Mr Karl M Simich	Appointed Director 27 September 2007
Managing Director & Chief Executive Officer	Managing Director and Chief Executive	Officer since 1 July 2009
Mr W John Evans	Appointed Executive Technical Director 2 October		2007
Non-Executive Director	Resigned Executive Technical Director	1 January 2013
	Appointed Non-Executive Director 1 January 2013
Mr Robert N Scott	Appointed 30 July 2010
Independent Non-Executive Director
Mr Soocheol Shin	Appointed 28 February 2012
Non-Executive Director
Mr Paul D Hallam	Appointed 21 May 2013
Independent Non-Executive Director

The qualifications, experience, other directorships and special responsibilities of the directors in office at the date of this report are:

Derek La Ferla	Independent Non-Executive Chairman
Qualifications	B. Arts, B.Juris, B.Law, Fellow of AICD
Experience and expertise	Mr La Ferla has been a corporate lawyer for over 25 years and is a partner with
	international law firm, Norton Rose Fulbright. He is one of two national team leaders
	for the firm’s Corporate Advisory Group (which includes mining and resources). Mr
	La Ferla also has considerable experience as a company director and (in addition to
	his role as non executive chairman of Sandfire Resources NL) is the chairman of
	Cashmere Iron Limited and OTOC Limited. He has also	previously served on the
	Norton Rose Australia national board (while the firm was Deacons) and listed
	investment company, Katana Capital Limited. He is a	fellow of the Australian
	Institute of Company Directors.
Special responsibilities	Chairman of the Remuneration and Nomination Committee.
	Member of the Audit and Risk Committee.
Karl M Simich	Managing Director and Chief Executive Officer
Qualifications	B.Com, FCA, F.Fin
Experience and expertise	Mr Simich has had considerable international business experience in the
	management and administration of publicly listed companies, specialising in
	resource finance and corporate management. Mr Simich is a Fellow of the Institute
	of Chartered Accountants and a Fellow of the Financial Services Institute of
	Australasia and has completed post-graduate studies in business and finance.
W John Evans	Non-Executive Director
Qualifications	B.Sc
Experience and other directorships	Mr Evans graduated from the University of Auckland New Zealand in 1970 with
	B.Sc. Major in geology. Mr Evans is a fellow of the Australasian Institute of Mining
	and Metallurgy. Between 1970 and 1987, he was employed by various divisions of
	CRA Limited, including being in charge of all field operations for iron ore in the
	Pilbara, Western Australia and gold and base metals in	the Murchison, Western
	Australia. He was the Managing Director of Marymia Exploration NL for 12 years
	until 2002 and has been a geological consultant to numerous companies during and
	since.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

1 Directors (continued)

1 Directors (continued)
Robert N Scott	Independent Non-Executive Director
Qualifications	FCA
Experience and expertise	Mr Scott has extensive experience as a		taxation advisor, specialising						in the mining
	sector and has over 35 years experience		with major accounting			firms		as a			corporate
	advisor. Mr Scott holds a Fellowship of the Australian Institute of Chartered
	Accountants and the Taxation Institute of			Australia. He is also			a member of the
	Institute of Company Directors.
Other current directorships	Non-executive Director of Lonestar	Resources Ltd (formerly Amadeus								Energy Ltd)
	(since October 1996).
	Non-executive Director of Homeloans Ltd		(since November 2000).
	Non-executive Chairman of Manas Resources Limited (since January							2013).
Former directorships in last three years	Non-executive Director of CGA Mining Ltd (January 2009 to January 2013).
	Non-executive Director of Neptune Marine Services Ltd (May 2007						to March 2012).
	Chairman of bioMD Ltd (July 2006 to June 2011).
	Chairman of Australian Renewable Fuels		Ltd (December 2002 to June 2011).
Special responsibilities	Chairman of the Audit and Risk Committee.
	Member of the Remuneration and Nomination Committee.
Soocheol Shin	Non-Executive Director
Qualifications	B.A. Public Administration
Experience and expertise	Mr Shin is the Managing Director	of POSCO Australia			Pty Ltd		(a	wholly-owned
	subsidiary of the Korean steelmaker POSCO), which holds 15.3 percent of the
	Company’s issued capital. Mr Shin joined POSCO in 1989 and					has held a					variety of
	positions throughout his career, including			Project Manager, POSCO					Australia Pty
	Ltd; Team Leader, Coal Procurement Group; Team Leader,					Steel			Making Raw
	Materials Procurement Group and	Group Leader, Raw Materials						Transportation
	Group. He was appointed Managing Director of POSCO Australia in February 2012.
Other current directorships	Non-executive Director of Jupiter Mines Ltd			(since March 2012).
	Non-executive Director of Cockatoo Coal		Ltd (since March 2012).
Special responsibilities	Member of the Remuneration and Nomination Committee (resigned 4 June										2013).
	Member of the Audit and Risk Committee		(resigned 4 June 2013).
Paul D Hallam	Independent Non-Executive Director
Qualifications	BE (Hons) Mining, FAICD, FAusIMM
Experience and expertise	Mr Hallam is a highly experienced	resource industry executive with						more than				35
	years experience working for a number of blue chip Australian						and			International
	mining companies, including 15 years at senior executive management level. His
	experience spans a range of corporate			and operating environments, both								in
	Australia and overseas, covers a range of			commodities (iron ore,			bauxite, alumina,
	aluminium, gold, silver, copper, zinc and lead) and includes both								surface and
	underground mining. His former roles include Director –				Operations with Fortescue
	Metals Group and Executive General Manager – Development & Projects with
	Newcrest Mining Limited. Mr Hallam retired from executive roles in 2011 to pursue a
	career as a professional non-executive		Director. Mr Hallam is a qualified mining
	engineer and holds a BE (Hons) from		Melbourne University			and a			Certificate			of
	Mineral Economics from Curtin University.			He is a Fellow of the Australian Institute
	of Company Directors and the Australasian			Institute of Mining & Metallurgy.
Other current directorships	Non-executive Director of Altona Mining Ltd (since March 2013).
	Non-executive Director of Gindalbie Metals			Ltd (since December 2011).
	Non-executive Director of Enterprise	Metals Ltd (since November 2011).
	Non-executive Director of Powertrans Pty Ltd (since December 2011).
Special responsibilities	Member of the Remuneration and Nomination Committee (appointed 4 June 2013).
	Member of the Audit and Risk Committee		(appointed 4 June 2013).

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

1 Directors (continued)

Interests in the shares and options of the Company

As at the date of this report, the interests of the directors in the shares and options of Sandfire Resources NL were:

	Number of ordinary	Number of options over
	shares	ordinary shares
Derek La Ferla	21,668	-
Karl M Simich	6,009,735	(a)600,000
W John Evans	1,315,215	(a)330,000
Robert N Scott	5,000	-
Soocheol Shin	-	-
Paul D Hallam	-	-

(a) Expiring 27 November 2014.

2 Company Secretary

Matthew L Fitzgerald Company Secretary and Chief Financial Officer Qualifications B.Com, CA Experience and expertise Mr Fitzgerald was appointed to the position of Company Secretary on 22 February 2010. He began his career in the Assurance and Advisory division of KPMG, before joining ASX-listed Kimberley Diamond Company NL in 2003, where he held the position of Chief Financial Officer and director until July 2008.

3 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 were as follows:

Board Meetings A B	Board Committee Meetings
	Audit and Risk Remuneration and Nomination A B A B
Derek La Ferla 7 7 Karl M Simich 7 7 W John Evans 7 7 Robert N Scott 7 7 Soocheol Shin 7 7 Paul D Hallam (a) 1 1	3 3 2 2 - - - - - - - - 3 3 2 2 2 2 1 1 1 1 1 1

A Number of meetings attended.

B Number of meetings held during the time the director held office or was a member of the relevant committee during the year.

(a) Mr Hallam was appointed a director on 21 May 2013, and appointed to the Audit and Risk Committee and Remuneration and Nomination Committee on 4 June 2013.

Committee membership

As at the date of this report, the Board had an Audit and Risk Committee and a Remuneration and Nomination Committee. Members acting on the committees during the year were:

Audit		Remuneration	Remuneration
and Risk		and Nomination
Robert N Scott	- Chairman	Derek La Ferla	- Chairman
Derek La Ferla		Robert Scott
Paul D Hallam	(a)	Paul D Hallam	(a)
Soocheol Shin	(b)	Soocheol Shin	(b)

• (a) Mr Hallam was appointed a member of the Audit and Risk Committee and Remuneration and Nomination Committee on 4 June 2013.

• (b) Mr Shin resigned from being a member of the Audit and Risk Committee and Remuneration and Nomination Committee on 4 June 2013.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

4 Dividends

The directors have not recommended the declaration of a dividend. No dividends were paid or declared by the Group during the current or previous financial year.

5 Principal activities, operating and financial review

The principal activities of the Group during the financial year were:

• Production and sale of copper and gold from the Group’s DeGrussa Copper Mine in Western Australia;

• Completion of development and construction of the DeGrussa Copper Mine; and

• Exploration and evaluation of mineral tenements in Australia and overseas.

5.1 Project review, strategies and future prospects

DOOLGUNNA PROJECT, WESTERN AUSTRALIA (100%)

The Doolgunna Project is located 900km north of Perth and approximately 150km north of the regional mining centre of Meekatharra in Western Australia. The tenement package, known as Doolgunna, covers a total area of 400km2 in an emerging copper-gold mineralised belt in the Bryah Basin close to existing mines and infrastructure and includes the Company’s DeGrussa Copper Mine.

DeGrussa Copper Mine

Construction & Development

Major site construction activities were completed during the first half of the 2013 financial year, with construction supervision personnel released from the project and operations teams taking full control of the processing plant during the December Quarter.

Commissioning commenced with the introduction of waste rock into the circuit to commission the SAG mill, Ball Mill and the tails slurry stream through to the tailings storage facility. Ore was subsequently added to the SAG mill to establish a slurry flow through the concentrate stream, leading to the production of the first concentrate in October 2012.

Production ramp-up commenced towards the end of the December 2012 Quarter and nameplate throughput rates were achieved from the March 2013 Quarter.

Open Pit and Underground Development

Following commencement of the open pit pre-strip and box-cut development in April 2011, mining continued in the DeGrussa open pit and in the underground mine during the 2013 financial year, with excellent progress achieved.

A summary of production from the open pit and underground mine for the 12 months to 30 June 2013 is provided below:

			Grade	Grade	Contained	Contained
FY2013		Tonnes	(% Cu)	(g/t Au)	Copper (t)	Gold (oz)
	Mined	127,951	23.4	3.1	29,845	12,703
DSO	Crushed	128,730	23.4	3.1	30,130	12,880
	Sales	138,397	23.1	3.2	31,921	14,343
	Mined	1,103,791	4.9	1.9	54,485	68,619
Concentrator	Milled	935,118	4.8	1.7	44,618	50,824
	Concentrate produced	144,602	23.4	3.9	33,887	17,978
	Concentrate sold	130,402	23.2	3.7	30,233	15,561
	Mined	3,559	-	0.8	-	94
Oxide Gold	Milled (toll treatment)	108,447	-	3.8	-	13,163
	Gold production	-	-	-	-	11,821
	Gold sales	-	-	-	-	11,821
	Mined	1,234,941	6.8	2.1	84,330	81,416
	Crushed/Milled	1,172,295	6.4	2.0	74,748	76,867
Total	Copper production	273,332	23.4	3.5	64,017	30,858
	Gold production	-	-	-	-	11,821
	Contained metal	-	-	-	64,017	42,679
	Copper and gold sales	268,799	23.1	-	62,154	41,725

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.1 Project review, strategies and future prospects (continued)

Open Pit Mining

Open pit mining operations were completed during the 2013 financial year, with Stage 1 of the DeGrussa open pit completed in early December 2012 and Stage 2 of the open pit completed in April 2013.

A total of 13.1 million bank cubic metres (Mbcm) of material was extracted during the Stage 1 and Stage 2 open pit operations. Demobilisation of the open pit contractor, Hamptons Mining and Civil, was completed during the June 2013 Quarter.

The DSO mining and sales program was also completed during the June 2013 Quarter, with a total of 144,887 tonnes grading 23.6% Cu for 34,169 tonnes of contained copper and 15,218 ounces of gold sold over the life of the open pit mining operation.

Underground Mining

Underground mining progressed on schedule through the 2013 Financial Year with five stopes in various stages of development and production by the end of the reporting period. A total of 760,040 tonnes of sulphide ore was mined and delivered to the ROM during the period ending 30 June 2013.

Commissioning of the paste plant commenced in March 2013 with first paste produced and delivered underground in early April 2013. At the end of the reporting period, the first stope, the P1 stope in Conductor 1, had been filled and the second stope, P2, was being finalised.

Underground mining will continue to progressively ramp up, with current underground mining rates at ~100,000 tonnes per month (1.2Mtpa) delivering ore to the concentrator. Full underground mining rates of 125,000 tonnes per month (1.5Mtpa) are expected to be achieved from the end of the September 2013 Quarter.

Underground development is proceeding on schedule, with construction of the Evans Decline completed during the June 2013 Quarter. The next key phase of underground development is now underway, with the development of the Conductor 1 and Conductor 4/5 Declines from junctions off the Evans Decline now underway.

The Conductor 1 Decline will enable the large Conductor 1 deposit to be fully developed and extracted. The Conductor 4/5 Decline will enable development and mining of the deep, high-grade Conductor 4 and 5 deposits to occur. This Decline is expected to reach Conductor 4, located approximately 400m away, towards the end of the 2013 calendar year enabling development activities to commence.

The development of these new declines is important as it will ensure that DeGrussa can source ore from multiple underground sources, providing stability and consistency of production in the long term. It will also facilitate the establishment of underground diamond drilling platforms later this year from which extensions and potential repeats of the Conductor 4 and 5 deposits can be targeted. These drill positions will also be used to allow early grade drilling to define mining shapes in Conductor 4 and 5 and to conduct in-fill drilling to enable conversion of Inferred Mineral Resources to Ore Reserves in these deposits.

Total development for the underground mine to date is over 13km.

Processing

Plant commissioning progressed during the reporting period, with ore throughput achieving nameplate levels of 125,000 tonnes per month by the end of the March 2013 Quarter.

During the reporting period overall concentrator recoveries were constrained in the short term while concentrator feed has been supplemented by sulphide ore from the open pit. This material contributed around [30%] of plant feed during the March and June 2013 Quarters, constraining overall copper recoveries to around [80%]. Targeted recovery is +90% at steady-state production levels.

When primary sulphide ore from underground mining has been wholly fed into the Concentrator it is delivering pleasing recoveries of 85-90% and copper concentrate which meets specification.

A series of plant shutdowns were completed during the year to enable a number of identified improvements and modifications to the plant to be completed during commissioning and ramp-up, including:

1. Tailings thickener feedwell to improve throughput and stability;

2. SAG mill grate closure to improve throughput, grind size and reduce Scats;

3. Cleaner circuit hopper modifications to improve plant stability, recovery and reliability;

4. Achievement of a coarser primary grind and greater process stability in grinding and flotation; and

5. Optimisation of the reagent suite.

Approximately 100,000 tonnes of open pit sulphide ore remained to be processed at the end of the reporting period, with this material to be blended on a reducing campaign basis during the September 2013 Quarter.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.1 Project review, strategies and future prospects (continued)

Once this is completed, ore feed to the Concentrator will comprise 100% primary sulphide ore from underground. Throughput rates are expected to be increased to nameplate levels of 125,000 tonnes per month (1.5Mtpa) with recoveries at the +90% target level to achieve targeted annualised production levels.

Official Opening Ceremony

The DeGrussa Copper Mine was officially opened by the Hon. Colin Barnett MLA, Premier of Western Australia and Minister for State Development and Science, on Sunday 4 August 2013 at a ceremony held on site which was attended by over 200 dignitaries and key stakeholders.

Production Guidance

Contained metal production	FY2014(Guidance)	FY2013(Actual)
	Cu (kt) Au (koz)	Cu (kt) Au (koz)
Concentrator DSO Oxide gold	65-75 35-45	34 18 30 13 - 12
	- -
	- -
Total	65-75 35-45	64 43
DSO Oxide gold		4 2 - 1
Total – FY 2012		4 3
Total – Project to date – FY 2013		68 36

FY2014 copper and gold production is expected to come solely from the concentrator, with the DSO and oxide gold production and sales programs now complete.

Guidance for key physicals and operational targets for the 2014 financial year is provided below:

	FY2014
Key Operational Targets	Guidance
Ore mined	1.45Mt	Solely from underground operations.
Ore processed	1.50Mt	Includes stockpile of open pit sulphide (blending Q1 FY2014)
Mined grade – copper	5.2% Cu	Mining Conductor 1 (~80%) and DeGrussa (~20%) orebodies
Mined grade – gold	1.8g/t Au
Copper recovery	89%	Copper recovery maintained at ~80% for Q1FY2014 (open pit blend),
		increasing to 92% into Q3-Q4FY2014
Gold recovery	47%	Currently ~40%, increasing to LOM target of 50% over FY2014.
Concentrate produced	280kt	Based on mid-point of production guidance
Concentrate grade – copper	25% Cu	Targeted on spec concentrate grade and quality
Concentrate grade - gold	5g/t Au

Sales & Marketing

Metal sales for the 2013 financial year totalled 62,154 tonnes of copper metal and 41,725 ounces of gold.

DSO Shipments

The DSO mining and sales program was completed during the reporting period, with a total of 144,887 tonnes grading 23.6% Cu for 34,169 tonnes of contained copper and 15,218 ounces of gold sold on a project-to-date basis.

Copper Concentrate Shipments

For the 2013 financial year, 130,402 tonnes of plant concentrate grading 23.2% Cu and containing 30,233 tonnes of copper metal has been shipped.

Copper Concentrate Sales Agreements

During the reporting period, Sandfire secured four sales contracts for DeGrussa’s copper concentrate production, following a successful marketing process for the DeGrussa concentrate. The sales contracts, for up to 3-year terms, have been signed with international trading companies and smelters.

Sandfire’s marketing strategy is for sales contracts covering up to 85 per cent of annual copper concentrate production from DeGrussa, with the remainder available for delivery into the spot market and production variances.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.1 Project review, strategies and future prospects (continued)

DeGrussa Laterite Gold Processing

Sandfire has entered into an Ore Sale and Purchase Agreement with Barrick (Plutonic) Ltd to process the lateritic gold material mined as part of the open pit operations.

During the reporting period, 108,447t grading 3.8g/t Au was processed for the production and sale of 11,821oz of gold.

Feasibility Studies, Metallurgy, Ore Reserves and Mineral Resources

Oxide Copper Feasibility Study

Work continued throughout year to progress a Feasibility Study on a heap leach/solvent extraction and electrowinning (SX/EW) recovery option for the stockpiled copper oxide ore at DeGrussa.

An engineering study of the oxide copper crushing-scrubbing plant by GR Engineering Services is also underway, with excellent results achieved from scrubbing trials which demonstrated that excellent copper recoveries can be achieved.

A composite of +150um scrubbed material was sent to Worley Parsons and Hydrogeosense USA, with testing underway to complete the required detailed heap leach design. ALS AMMTEC has commenced additional bottle roll and acid consumption testing of the bulk scrubbing testing to understand the acid consumption and total copper extraction rates to be used in the financial modelling.

Outotec has completed the thickening testing of the reject of the scrubbing testing and is preparing a report on this testwork program. ATC Williams has been given the results of this testing and the amount and rates of deposition of the composites for the final design for the oxide TSF.

Western Process Equipment has started to develop the equipment list for the scrubbing plant.

Xstrata Tech has a well-developed flow-sheet for the design of the SX/EW part of the project and is specifying the equipment and pricing for the SX/EW equipment.

DeGrussa Exploration

Overview

During the year, Sandfire continued to progress a tightly focused, multi-disciplinary exploration campaign to unlock the broader potential of the Doolgunna region for additional VMS deposits. Cutting-edge geophysical and geochemical techniques, in conjunction with detailed geological interpretation and analysis, resulted in significant advances in the vectoring towards potential accumulations of VMS mineralisation within the DeGrussa mine stratigraphic corridor.

A relatively limited surface diamond drilling program was conducted during the March 2013 Quarter targeting extensions to Conductor 4 and Conductor 5. This program yielded immediate success, resulting in an increase in the Company’s high-grade Mineral Resource inventory (see below).

An important focus during the second half of CY2013 will be the establishment of new underground drilling positions from the new Conductor 1 and Conductor 4/5 declines, which will enable the Company to target depth extensions and potential repeats of the deep, high-grade VMS lenses. This important phase of the Company’s exploration program at DeGrussa has only just commenced and is expected to accelerate as additional underground drilling positions become available.

Increase in High Grade Mineral Resource

The Mineral Resource for the DeGrussa Copper Mine as at 31 March 2013 increased to 13.4 million tonnes grading 4.7% Cu and 1.9g/t Au for 634,000 tonnes of contained copper and 795,000oz of contained gold. An additional 66,000 tonnes of contained copper and 149,000oz gold has been added to DeGrussa’s mineral inventory following depletion to March 2013, with the additional Inferred Mineral Resource now incorporated into the DeGrussa mine plan.

The majority of the increase in tonnage and contained metal has come from successful surface drilling programs at DeGrussa targeting the two deepest high-grade deposits – Conductor 4 and Conductor 5. These drilling programs were guided by information and insights gained from structural interpretation from mapping within the underground mine and open pit.

This has enabled Sandfire to develop an enhanced understanding of the lithological sequence, structural setting and, consequently, the positioning of potential accumulations of VMS mineralisation at DeGrussa.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.1 Project review, strategies and future prospects (continued)

The surface drilling programs have resulted in the addition of 56,000 tonnes of contained copper (an increase of 42%) and 63,000 ounces of contained gold (an increase of 34%) in total Inferred Mineral Resources for these two deposits, as shown below:

Mineral Resource –	Tonnes	Copper	Gold	Contained	Contained
Conductor 4 and 5	(Mt)	(%)	(g/t)	Copper (t)	Gold (oz)
March 2012 – Total	2.7	4.9	2.1	134,000	185,000
Increase	0.8	6.7	2.4	56,000	63,000
March 2013 - Total	3.5	5.3	2.2	190,000	248,000

The revised Mineral Resource for Conductor 4, incorporating the results of diamond drilling targeting the interpreted eastern extension of the deposit, is shown below:

Mineral Resource –	Tonnes	Copper	Gold	Contained	Contained
Conductor 4	(Mt)	(%)	(g/t)	Copper (t)	Gold (oz)
Indicated	1.0	5.3	1.8	54,000	59,000
Inferred	1.1	4.4	1.7	48,000	60,000
March 2013 - Total	2.1	4.8	1.7	102,000	119,000

This represents a 0.4Mt increase in tonnage (25% increase) and 24,000t Cu increase in contained copper (31% increase) compared with the March 2012 Mineral Resource.

Diamond drilling to test an interpreted sub-parallel lens stratigraphically below Conductor 5 passed through the deposit and encountered significantly thicker massive sulphide intersection than previously interpreted, highlighting the potential to increase the Mineral Resource in this area.

Three diamond holes were completed during the December 2012 and March 2013 Quarters to test this thickened position, with the results incorporated into a revised Mineral Resource estimate, as set out below:

Mineral Resource –	Tonnes	Copper	Gold	Contained	Contained
Conductor 5	(Mt)	(%)	(g/t)	Copper (t)	Gold (oz)
Inferred	1.4	6.2	2.8	88,000	129,000
March 2013 - Total	1.4	4.8	2.8	88,000	129,000

This represents a 0.4Mt increase in tonnage (40% increase) and 32,000t Cu increase in contained copper (57% increase) compared with the March 2012 Mineral Resource.

Drilling of the Inferred Resource in C4 and C5 will be undertaken from underground when development has progressed sufficiently to allow more practical and less expensive drilling positions given the depth of these ore bodies. Drilling of the C4 Inferred Resource is planned in the first half of CY2014.

Ore Reserve and Mine Plan Update

The Mine Plan is Sandfire’s internal plan which schedules forecasted production parameters, operating and capital works programs. It is developed with the assistance of both internal Sandfire employees and external consultants and includes both Mineral Resources and Ore Reserves.

The table below compares the DeGrussa Mine Plan to the stated Mineral Resource and Ore Reserve by key output and mining tonnes (for full details of the Mineral Resource and Ore Reserve refer below).

March 2013 Comparison of the Underground Mine Plan, Mineral Resource and Ore Reserve

	Tonnes	Copper	Gold	Contained	Contained
DeGrussa Underground Mine	(Mt)	(%)	(g/t)	Copper (t)	Gold (oz)
Mine Plan	10.5	4.9	1.8	512,000	597,000
Mineral Resource	10.2	5.7	2.1	586,000	688,000
Ore Reserve	7.9	5.0	1.7	393,000	434,000

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.1 Project review, strategies and future prospects (continued)

DeGrussa Underground Mine	Tonnes	DG	C1	C4	C5
by orebody	(Mt)	(Mt)	(Mt)	(Mt)	(Mt)
Mine Plan	10.5	1.6	5.5	1.9	1.5
Mineral Resource	10.2	1.4	5.2	2.1	1.4
Ore Reserve	7.9	1.6	5.3	1.0	-

* Mine Plan and Ore Reserve include mining dilution.

The Company continues to incorporate Inferred Mineral Resources from Conductor 4 and 5 into its Mine Plan process due to the geological continuity and high copper grade tenor of the deposits.

Work commenced on the Conductor 4/5 access decline during June to develop and access these orebodies from 2014 onwards. As part of this decline development, a drill position will be established to commence grade control drilling into the C4 and C5 orebodies which the Company expects will result in additional conversion of the C4 and C5 Inferred Mineral Resource to Ore Reserve.

The drilling position will also be used to test down-dip extensions of C4 and targets below and down-plunge of C5. Exploration drilling is targeted to commence during the first half of 2014.

Ore Reserves have been updated based on the March 2013 Mineral Resource model and depletions up to 31 March 2013.

DeGrussa Mine Ore Reserves,	Tonnes	Copper	Gold	Contained	Contained
net of depletion	(Mt)	(%)	(g/t)	Copper (t)	Gold (oz)
Underground Mine	7.9	5.0	1.7	393,000	434,000
Open pit – stockpiles	3.1	1.5	1.1	45,000	104,000
March 2013 Total	11.0	4.0	1.5	439,000	538,000

The open cut mine was almost complete at the end of March 2013, with Ore Reserves of 3.1Mt grading 1.5% Cu and 1.1g/t Au containing 45,000t Cu and 104,000oz Au, representing chalcocite, sulphide and oxide copper stockpiles.

Doolgunna Regional Exploration

Regional exploration conducted during the reporting period included follow-up Reverse Circulation (RC) drilling of first pass geochemical aircore anomalies at the North Robinson Range regional target, which returned a series of encouraging anomalous results and geochemistry.

An in-fill aircore geochemistry program was subsequently completed at North Robinson Range, which further enhanced the prospectivity of this target.

At the Airstrip South target, RC drilling was completed targeting the DGRC672 VTEM and geochemistry anomaly. This drilling was a part of the systematic program aimed at evaluating more distal extensions of the prospective NESW trending stratigraphy in conjunction with interpretation of geophysical and geochemical anomalism. The geology model of this anomaly is evolving.

Following the completion of a 3D seismic surface survey of the area above the Conductor 5 orebody during 2012, further work was conducted by HiSeis during the year to acquire additional data with the aim of producing a seismic model that accurately reflects the drill-proven sub-surface geology. Processing and interpretation of this data is currently being undertaken by HiSeis.

A program of 61 aircore drill-holes completed as part of the Gascoyne West In-fill Geochemistry Program during the year returned a number of anomalous intersections. The lithological and geochemical information gained from these aircore programs is crucial in redefining the detailed interpreted geology of this section of the Bryah Basin and defining target areas for future field testing.

Systematic, regional grid Aircore drilling, in conjunction with limited, targeted Reverse Circulation drilling, has also identified a number of strong Copper-Gold geochemical anomalies related to DeGrussa-type stratigraphy located roughly 5km south-west of the DeGrussa mine site (Cow Hole Bore).

The anomalous Copper-Gold values are associated with volcanogenic sediments, basalts and dolerites, extending over a strike length exceeding 3.5km. Exploration in the first half of FY2014 will focus on better defining the tenor and disposition of the higher grade portions of the anomalous geochemistry prior to more intensive drill testing.

AUSTRALIAN & INTERNATIONAL EXPLORATION

The Company also holds and is progressing various exploration and exploration joint venture interests across Australia and Internationally.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.1 Project review, strategies and future prospects (continued)

Ore Reserve and Mineral Resource

DeGrussa Mine - Underground As at 31 March 2013 Ore Reserve Mineral Resource	DeGrussa Mine - Underground As at 31 March 2013 Ore Reserve Mineral Resource	DeGrussa Mine - Underground As at 31 March 2013 Ore Reserve Mineral Resource
Deposit Reserve category Tonnes (Mt) Copper (%) Gold (g/t) Contained Copper (t) Contained Gold (oz)		Resource category Tonnes (Mt) Copper (%) Gold (g/t) Contained Copper (t) Contained Gold (oz)
DeGrussa	Proved 1.2 5.7 1.8 67,000 66,000 Probable 0.4 8.2 2.1 32,000 26,000	Measured 1.0 7.4 2.3 73,000 72,000 Indicated 0.4 9.4 2.4 34,000 28,000
Conductor 1	Proved 1.4 5.4 1.8 76,000 82,000 Probable 3.9 4.4 1.7 174,000 210,000	Measured 1.3 6.5 2.2 86,000 92,000 Indicated 3.7 5.1 1.9 190,000 231,000 Inferred 0.2 4.6 1.8 11,000 14,000
Conductor 4	Probable 1.0 4.3 1.5 43,000 47,000	Indicated 1.0 5.3 1.8 54,000 59,000 Inferred 1.1 4.4 1.7 48,000 60,000
Conductor 5	Probable - - - - -	Inferred 1.4 6.2 2.8 88,000 129,000
Stockpiles	Proved <0.1 7.9 3.0 2,000 3,000	Measured <0.1 7.9 3.0 2,000 3,000
	Proved 2.6 5.6 1.8 145,000 151,000	Measured 2.3 6.9 2.2 161,000 167,000
	Probable 5.3 4.7 1.7 248,000 282,000	Indicated 5.1 5.4 1.9 278,000 318,000
		Inferred 2.8 5.3 2.3 147,000 203,000
	Total 7.9 5.0 1.7 393,000 434,000	Total 10.2 5.7 2.1 586,000 688,000
DeGrussa Mine – Open Pit As at 31 March 2013 Ore Reserve Mineral Resource
Deposit Reserve category Tonnes (Mt) Copper (%) Gold (g/t) Contained Copper (t) Contained Gold (oz)		Resource category Tonnes (Mt) Copper (%) Gold (g/t) Contained Copper (t) Contained Gold (oz)
Conductor 1	Probable - - - - -	Indicated 0.1 3.9 1.8 2,000 3,000
Stockpiles	Proved 3.1 1.5 1.1 45,000 104,000	Measured 3.1 1.5 1.1 45,000 104,000
	Proved 3.1 1.5 1.1 45,000 104,000	Measured 3.1 1.5 1.1 45,000 104,000
	Probable - - - - -	Indicated - - - - -
		Inferred - - - - -
	Total 3.1 1.5 1.1 45,000 104,000	Total 3.1 1.5 1.1 48,000 108,000

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.1 Project review, strategies and future prospects (continued)

DeGrussa Mine - Total As at 31 March 2013	Ore Reserve	Mineral Resource
Deposit	Reserve category Tonnes (Mt) Copper (%) Gold (g/t) Contained Copper (t) Contained Gold (oz)	Resource category Tonnes (Mt) Copper (%) Gold (g/t) Contained Copper (t) Contained Gold (oz)
DeGrussa	Proved 1.2 5.7 1.8 67,000 66,000 Probable 0.4 8.2 2.1 32,000 26,000	Measured 1.0 7.4 2.3 74,000 72,000 Indicated 0.4 9.4 2.4 34,000 28,000
Conductor 1	Proved 1.4 5.4 1.8 76,000 82,000 Probable 3.9 4.4 1.7 174,000 210,000	Measured 1.3 6.5 2.2 86,000 92,000 Indicated 3.8 5.1 1.9 192,000 234,000 Inferred 0.3 4.6 1.8 12,000 15,000
Conductor 4	Probable 1.0 4.3 1.5 43,000 47,000	Indicated 1.0 5.3 1.8 54,000 59,000 Inferred 1.1 4.4 1.7 48,000 60,000
Conductor 5	- - - - -	Inferred 1.4 6.2 2.8 88,000 129,000
Stockpiles	Proved 3.1 1.5 1.1 47,000 107,000	Measured 3.1 1.5 1.1 47,000 107,000
	Proved 5.7 3.4 1.4 190,000 256,000	Measured 5.4 3.8 1.6 206,000 271,000
	Probable 5.3 4.7 1.7 248,000 282,000	Indicated 5.2 5.4 1.9 280,000 321,000
		Inferred 2.8 5.3 2.3 148,000 203,000
	Total 11.0 4.0 1.5 439,000 538,000	Total 13.4 4.7 1.9 634,000 795,000

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.2 Review of financial results

	DeGrussa	Other
	Copper Mine	A Operations	Group
12 months ended June 2013	$ million	$ million	$ million
Sales revenue	507.3	-	507.3
Profit (loss) before net finance and income tax	194.5	(52.4)	142.1
Profit before income tax			125.7
Net profit			88.0
Basic earnings per share			57.48 cents
Diluted earnings per share			57.38 cents

A Includes the exploration, corporate and treasury segments.

The DeGrussa Copper Mine contributed profit before net finance and income tax of $194.5 million (2012: $15.1 million) from a combination of open pit, underground and concentrator operations.

The Group’s other operations, including its exploration and business development, corporate and treasury functions, contributed a loss before net finance and income tax of $52.4 million (2012: loss of $48.6 million). The Group did not declare or pay a dividend during or subsequent to the financial year.

Sales revenue

12 months ended June 2013	DSO $ million Concentrate $ million	Gold (toll treatment) $ million DeGrussa Copper Mine $ million
Revenue from sales of copper in concentrate Revenue from sales of gold in concentrate Revenue from sales of silver in concentrate Revenue from sales of gold in laterite (toll treated)	232.8 213.8 19.6 21.7 - 1.2 - -	- 446.6 - 41.3 - 1.2 18.2 18.2
	252.4 236.7	18.2 507.3

Sales revenue during the period came from sale of Direct Shipping Ore (DSO) from stage I of the open pit (DSO sales commenced in the prior period) and plant concentrate from the newly constructed 1.5Mtpa processing plant, which commenced production and sales of copper concentrate following the commencement of commissioning and ramp up in October 2012.

Copper sales for the financial year totalled 62,154 tonnes (contained copper production: 64,017 tonnes) and gold sales totalled 41,725 ounces (contained gold production: 42,679 ounces). Copper represents approximately 90% of revenue derived from the DeGrussa Mine at current metals prices. Some downward pressure in base metal pricing, including copper prices, has in large part been offset by a reduction in the USD:AUD currency exchange rate, albeit with a delayed reduction in currency. Market fundamentals appear to continue to support strong AUD copper pricing.

Operations costs

12 months ended June 2013	DeGrussa Copper Mine $ million
Mine operations costs Employee benefit expenses Freight, treatment and refining expenses Changes in inventories of finished goods and work in progress	83.4
	26.5
	78.6
	(26.9)
	161.6

Operations costs have been incurred in both the open pit, underground mining and plant operations. The underground operations and concentrator plant have been in commissioning and ramp up phase during the reporting period, with all sales and costs from operations disclosed in the Statement of Comprehensive Income following commencement of commercial production in October 2012. Inventories of ore stockpiles, concentrate and consumables have all increased in line with ramping operations.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.2 Review of financial results (continued)

The Group has provided cost guidance for the 2014 Financial Year of US$1.05-1.15 per pound of payable copper production (after gold and silver credits). This compares to a stated C1 cash costs of US$1.37 per pound for the June 2013 Quarter, impacted by restricted copper production from blending of lower recovery open pit sulphide material, which is scheduled to conclude around the end of the September 2013 Quarter.

Royalties

Royalties are levied at 5.0% for copper sold as concentrate and 2.5% for gold, plus native title payments. As DeGrussa’s production value is heavily weighted towards copper production, the combined royalty rate approximates the 5% level.

The Group has expensed royalties for copper concentrate produced by open pit operations (DSO) and plant operations (concentrator) at the level of 5% as it has determined to be applicable under the royalty regulations.

The Group is currently involved in a process to fully and appropriately determine the royalty rate applicable to the DSO sold as concentrate, and has disclosed a $5.5 million contingent liability within this Financial Report, representing an additional 2.5% royalty on DSO sales for the reporting period.

Exploration and evaluation

Significant exploration and evaluation activities continued in and around the DeGrussa Copper Mine with the objective of discovering further ore bodies and lenses to establish a copper-gold VMS camp. Further expenditure has been incurred on the Group’s other project tenements and on a number of joint venture earn-in arrangements. For the period ended 30 June 2013 the Group’s Exploration segment contributed a loss before net financing expense and income tax of $31.2 million (2012: $35.5 million). In accordance with the Group’s accounting policy, exploration and evaluation expenditure is expensed as incurred. Please refer to note 4 of the financial report for further details.

Depreciation and amortisation

	WDV June 2013 $ million WDV June 2012 $ million Depreciation and amortisation during the year $ million
Open Pit Stage I Waste stripping Production stripping Stage II Waste stripping Underground Decline and lateral development Property, plant and equipment Rehabilitation, restoration and dismantling	- 30.0 31.0 - 12.4 12.4
	- 42.4 43.4 - 9.6 26.2
	- 52.0 69.6
	172.7 111.6 31.8 272.4 202.2 22.3 21.3 14.8 2.1
Total depreciation and amortisation	125.8

The Group commenced waste stripping in Stage I of the open pit in May 2011, representing the start of a planned two year mining campaign to access Direct Shipping Ore (DSO) chalcocite and primary sulphides, along with direct costed secondary materials of gold laterite and oxide copper. Stage I waste stripping expenditure up to first DSO (to February 2012) was deferred on balance sheet in the prior period and amortised as a cost to DSO and sulphide inventory as mined in the prior and current reporting period.

Production phase stripping has been expensed as incurred, except for additional stripping completed in the prior period which allowed for ore access in the current period. Costs deferred in the prior period have been amortised to production and inventory during the current reporting period.

The Group commenced waste stripping in Stage II of the open pit in January 2012 to access further gold laterite, copper oxide and primary sulphide material, over a mining campaign which concluded ahead of schedule in April 2013. Stage II waste stripping expenditure up to first sulphide extraction was deferred on balance sheet and amortised to sulphide inventory as mined (from January 2013), with secondary materials of gold laterite and copper oxide material directly costed to inventory in the Statement of Financial Position.

Income tax expense

Income tax expense of $37.7 million for the period is based on the corporate tax rate of 30% on taxable income of the Group, adjusted for permanent and timing differences in tax and accounting treatments.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.2 Review of financial results (continued)

FINANCIAL POSITION

Net assets of the Group have increased by $94.4 million to $211.7 million during the reporting period.

Cash balance

Cash on hand was $77.1 million, including $50 million held in a debt service reserve account to cover the September 2013 scheduled facility repayment and interest. $20 million is held in a cost overrun account to be released to operating bank accounts once formal project completion is confirmed under the Group’s finance facility.

Trade and other receivables

Trade and other receivables have increased marginally with the commencement of plant concentrate sales replacing DSO sales commending in the prior period. Trade receivables include remaining funds from the sale of concentrate subject to provisional pricing and quotational periods at the time of sale.

Inventories

Inventories have increased in finished goods (plant concentrate), ore stockpiles and consumables in line with open pit operations and concentrator plant ramp up.

Mine properties

Further investment has been made in underground mine development, with mine properties at cost increasing by $116.3 million to $283.1 million, including expenditure on underground mine development of $104.9 million to establish decline and development access to the sulphide ore bodies and development phase waste stripping in stage II of the open pit of $17.6 million to access sulphide ore.

Property, plant and equipment

Property, plant and equipment at cost increased by $67.5 million to $273.1 million at the end of the period, predominantly driven by expenditure on process plant construction and associated mine infrastructure.

Deferred tax assets

Income tax resulting from profitable operations has been offset against previously recognised deferred tax assets. The Group is not required to make any income tax payments relating to the reporting period.

Interest bearing liabilities

The Group’s fully secured $390 million project finance facility was established in 2011 to fund the development and construction of the DeGrussa Copper Mine, including $380 million in project construction and working capital funding and $10 million for environmental bonding.

A total of $380 million had been drawn to August 2012 under the facility and used to fund project development and construction, assist with inventory build up, sales timing and plant commissioning costs. The following table summarises the facility transactions during the reporting period, as well as the currently scheduled repayment and cash reserve account obligations for future financial years:

								Closing
						Non-	On	balance
	Opening		Scheduled	Closing	Current	current	**deposit ***	including
Financial	balance	Drawdown	repayment	balance	liability	liability	(DSRA)	deposit
Year	$ million	$ million	$ million	$ million	$ million	$ million	$ million	$ million
2012/2013	350.0	30.0	(95.0)	285.0	165.0	120.0	(45.0)	240.0
2013/2014	285.0	-	(165.0)	120.0	90.0	30.0	(25.0)	95.0
2014/2015	120.0	-	(90.0)	30.0	30.0	-	(15.0)	15.0
2015/2016	30.0	-	(30.0)	-	-	-	-	-

Within the consolidated statement of financial position, $165 million is disclosed within current liabilities, prior to offset for capitalised finance establishment costs, representing the 2013/2014 financial year scheduled quarterly repayments. A further $120 million is disclosed within non-current liabilities, prior to offset for capitalised finance establishment costs, representing the scheduled repayments to the facility end date of 31 December 2015.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

5 Principal activities, operating and financial review (continued)

5.2 Review of financial results (continued)

CASH FLOWS

Operating activities

Net cash inflow from operating activities was $250.2 million for the period. Net cash flow from operating activities prior to exploration and evaluation activities was $272.4 million for the period.

Investing activities

Net cash outflow from investing activities of $188.6 million for the period is significantly represented by payments for property, plant and equipment purchases ($68.4 million) and mine properties ($119.6 million).

Financing activities

Net cash outflow from financing activities of $84.9 million for the period includes funds received on exercise of share options ($5.5 million) and finance facility drawdown ($30.0 million), offset by facility repayment ($95.0 million) and interest and other costs of finance ($24.4 million).

5.3 Corporate

Board and management

On 1 January 2013 Mr W John Evans was appointed as Non-executive director, retiring from his previous position as Executive technical director.

On 21 May 2013, the Company appointed Mr Paul Hallam as Non-executive director.

Mr Michael Spreadborough was appointed Chief Operating Officer effective 12 August 2013, following the resignation of Mr Martin Reed as Chief Operating Officer.

6 Significant changes in the state of affairs

In the opinion of the directors there were no other significant changes in the state of affairs of the Group that occurred during the financial year under review, other than those described in this financial report under ‘Principal activities and review of operations’.

7 Significant events after the balance date

There have been no events that have occurred subsequent to the reporting date which have significantly affected or may significantly affect the Group’s operations, results or state of affairs in future periods.

8 Likely developments and expected results

The Group will continue to ramp-up mining operations from its DeGrussa Copper Mine and further the exploration and evaluation of the Group’s tenements. Further comments on likely developments and expected results of certain operations of the Group are included in this financial report under ‘Principal activities and review of operations’.

9 Environmental regulation and performance

The Group holds environmental licenses and is subject to significant environmental regulation in respect of its activities in both Australia and overseas. The Board is responsible for monitoring environmental exposures and compliance with these regulations and is committed to achieving a high standard of environmental performance. The Board believes that the Group has adequate systems in place for the management of its environmental requirements.

The Group is registered under the National Greenhouse and Energy Reporting Act (the NGER Act) which introduces a single national reporting framework for the reporting and dissemination of information about the greenhouse gas emissions, greenhouse gas projects, and energy use and production of corporations. As a result, the Group is required to report energy consumption and greenhouse gas emissions for its Australian facilities for the 12 months ended 30 June and future periods. The Group has established data collection systems and processes to meet the new requirements.

In addition, the Group’s Australian operations, while not liable entities, will be indirectly impacted by the Australian Federal Government’s Clean Energy Act which came into force on 1 July 2012.

The Group is also registered under the Australian Federal Government’s Energy Efficiency Opportunities Act 2006 and is currently preparing the first plan to meet the obligations under this Act.

There have been no significant known breaches of the Group’s license conditions or any environmental regulations to which it is subject.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

10 Share options

10.1 Unissued shares under option

As at the date of this report unissued ordinary shares of the Company under option are:

Expiry Date	Exercise Price	Number
27 November 2014	$4.66	330,000
27 November 2014	$5.44	330,000
27 November 2014	$6.22	330,000
15 June 2015	$3.80	33,333
15 June 2015	$4.40	133,333
15 June 2015	$5.00	333,335
28 February 2016	$9.00	1,749,995
28 February 2016	$10.30	1,666,665
28 February 2016	$11.70	1,583,340

10.2 Share options issued

The following options over ordinary shares were issued by the Company during or since the end of the financial year:

Expiry Date	Exercise Price	Number
28 February 2016	$9.00	250,000
28 February 2016	$10.30	166,667
28 February 2016	$11.70	83,333
28 February 2016	$9.00	250,000
28 February 2016	$10.30	250,000
28 February 2016	$11.70	250,000

10.3 Shares issued as a result of the exercise of options

The following number of ordinary shares were issued by the Company as a result of the exercise of options during or since the end of the financial year:

Expiry Date	Exercise Price	Number
6 July 2012	$1.40	320,000
12 July 2013	$0.60	800,000
15 June 2015	$3.80	195,833
15 June 2015	$4.40	133,333
15 June 2015	$3.80	37,500
12 July 2013	$0.80	800,000
15 June 2015	$4.40	66,667
27 November 2014	$4.66	20,000
27 November 2014	$5.44	20,000
27 November 2014	$6.22	20,000
12 July 2013	$0.60	210,000
12 July 2013	$0.80	180,000
12 July 2013	$1.00	1,600,000

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

DIRECTORS’ REPORT

11 Indemnification and insurance of directors and officers

Indemnification

The Company indemnifies each of its directors and officers, including the company secretary, to the maximum extent permitted by the Corporations Act 2001 from liability to third parties, except where the liability arises out of conduct involving lack of good faith, and in defending legal and administrative proceedings and applications for such proceedings.

The Company must use its best endeavours to insure a director or officer against any liability, which does not arise out of a conduct constituting a wilful breach of duty or a contravention of the Corporations Act 2001. The Company must also use its best endeavour to insure a director or officer against liability for costs and expenses incurred in defending proceedings whether civil or criminal.

The Company has not entered into any agreement with its current auditors indemnifying them against any claims by third parties arising from their report on the financial report. The directors of the Company are not aware of any proceedings or claim brought against Sandfire Resources NL as at the date of this report.

Insurance premiums

The Company has paid insurance premiums in respect of directors’ and officers’ liability and legal expenses insurance contracts for current and former directors, executive officers and secretaires. The directors have not included details of the premium paid in respect of the directors’ and officers’ liability and legal expenses’ insurance contracts, as such disclosure is prohibited under the terms of the contract.

12 Rounding

The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable and where noted ($’000)) under the option available to the Company under ASIC CO 98/0100. The Company is an entity to which the Class Order applies.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

13 Auditor independence and non-audit services

The directors received the following declaration from the auditor of Sandfire Resources NL.

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Non-audit services

The following non-audit services were provided by the Company’s auditor, Ernst & Young. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

Taxation services – Research & Development Tax Concession

$ 24,741

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

DIRECTORS’ REPORT

14 Remuneration report (audited)

This remuneration report for the year ended 30 June 2013 outlines the remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C) of the Act.

14.1 Introduction

The remuneration report details the remuneration arrangements for the Group’s key management personnel (KMP) who 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 Company and other designated senior executives.

For the purposes of this report, the term ‘executive’ includes the Chief Executive Officer (CEO) and other senior executives of the Company and the Group.

Details of KMP including remunerated executives of the Company and the Group are set out below.

Name	Position	Period as KMP
Non-executive directors (NEDs)
Derek La Ferla	Chairman (non-executive)	All financial year
W John Evans	Director (non-executive)	All financial year	(a)
Robert N Scott	Director (non-executive)	All financial year
Soocheal Shin	Director (non-executive)	All financial year
Paul D Hallam	Director (non-executive)	Appointed 21 May 2013
Executive directors
Karl M Simich	Managing Director and Chief Executive Officer	All financial year
Other executive KMPs
Matthew L Fitzgerald	Chief Financial Officer and Company Secretary	All financial year
Martin Reed	Chief Operating Officer	All financial year	(b)
Robert Klug	Chief Commercial Officer	From 1 January 2013		(c)

(a) W John Evans was appointed as Non-executive director on 1 January 2013, retiring from his previous position as Executive technical director.

(b) Martin Reed has resigned with effect from 30 June 2013.

• (c) Robert Klug met the definition of a key management person on his appointment as Chief Commercial Officer on 1 January 2013.

Michael Spreadborough was appointed Chief Operating Officer with effect from 12 August 2013. There were no other changes to KMP after the reporting date and before the date the financial report was authorised for issue.

14.2 Remuneration at a glance

Remuneration strategy

The Company is committed to the alignment of remuneration, particularly that of executives, to shareholder return. To this end, Sandfire’s remuneration strategy is designed to attract, motivate and retain employees, contractors and nonexecutive directors (NEDs) by identifying and rewarding high performers and recognising the contribution of each employee to the continued growth and success of the Company.

Key objectives of the Company’s remuneration framework are to ensure that remuneration practices:

• Are aligned to the Company’s business strategy;

• Offer competitive remuneration benchmarked against the external market;

• Provide strong linkage between individual and Company performance and rewards; and

• Achieve the broader outcome of creation of value for shareholders by aligning the interests of executives, including employees and contractors, with shareholders.

The remuneration structure of the Company incentivised management to achieve the following during the financial year ended 30 June 2013:

• Maintain safety standards;

• Successfully complete major site construction activities at the DeGrussa Copper Mine during the first half of the 2013 financial year;

• Complete open pit mining operations at the Company’s DeGrussa Copper Mine, with Stage 1 of the open pit completed in early December 2012 and Stage 2 of the open pit completed in April 2013. A total of 13.1 million bank cubic metres (Mbcm) of material was extracted during the Stage 1 and Stage 2 open pit operations. The direct shipping ore (DSO) mining and sales program was also completed during the June 2013 quarter, with a total of 144,887 tonnes grading 23.6% Cu for 34,169 tonnes of contained copper and 15,218 ounces of gold sold over the life of the open pit mining operation;

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.2 Remuneration at a glance (continued)

• Progress underground mining activities with five stopes in various stages of production by the end of the reporting period and a total of 760,040 tonnes of sulphide ore mined as at 30 June 2013;

• Complete commissioning of the 1.5Mtpa concentrator and achievement of nameplate levels of throughput (125,000 tonnes per month) by the end of the March 2013 quarter;

• Sales and marketing – metal sales for the 2013 financial year totalled 62,154 tonnes of copper and 41,725 ounces of gold; and

• Repayment of $95 million in project debt reducing the outstanding project loan facility balance to $285 million as at 30 June 2013.

14.3 Board oversight of remuneration

Remuneration and Nomination Committee

The Remuneration and Nomination Committee comprises three NEDs. Members acting on the Remuneration and Nomination Committee during the fin a ncial year are listed below:

	Name	Period
Chairman	Derek La Ferla	All financial year
Members	Robert Scott	All financial year
	Paul D Hallam	Appointed 4 June 2013
	Soocheol Shin	Resigned 4 June 2013

The Remuneration and Nomination Committee is responsible for making recommendations to the Board on the remuneration arrangements for NEDs and executives. The committee meets regularly through the year, and assesses the appropriateness of the nature and amount of remuneration of NEDs and executives by reference to relevant market conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of high performing directors and executives. In determining the level and composition of executive remuneration, the Remuneration and Nomination Committee engages external advisors to provide independent advice where considered appropriate.

Further information on the committee’s role, responsibilities and membership can be seen at www.sandfire.com.au.

Remuneration approval process

The Board approves the remuneration arrangements of the CEO and executives and awards made under the shortterm and long-term incentive plans, and sets the maximum aggregate remuneration of NEDs (which is subject to shareholder approval) and the individual NED fee levels, following recommendations from the Remuneration and Nomination Committee.

Use of remuneration consultants

To ensure the Remuneration and Nomination Committee is fully informed when making remuneration decisions, it seeks external remuneration advice. The Board’s appointed remuneration advisor is McDonald & Company (Australasia) (McDonald & Co).

The engagement by the Remuneration and Nomination Committee was based on an agreed set of protocols to ensure that remuneration recommendations are free from bias and undue influence by members of the KMP to whom the recommendations may relate.

During the 2013 financial year, McDonald & Co provided the Company with a report on Gold and General Mining Industry Remuneration. The Company paid McDonald & Co $4,750 for the provision of remuneration services during the financial year ended 30 June 2013.

Remuneration report approval at the 2012 AGM

The remuneration report for the 2012 financial year received positive shareholder support at the annual general meeting held on 27 November 2012, with a vote of 87% in favour.

14.4 Non-executive director remuneration arrangements

Remuneration policy

The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually against fees paid to NEDs of comparable companies (typically S&P ASX 200 companies). The Board considers advice from external advisors when undertaking the annual review process.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.4 Non-executive director remuneration arrangements (continued)

The Company’s constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time by a general meeting. Non-executive directors’ fees are presently limited to a total aggregate fee pool of $500,000 per annum. The Board will seek to increase the NED fee pool at the 2013 AGM to reflect the expanding Company and Board size.

Structure

The remuneration of NEDs consists of directors’ fees and committee fees. NEDs do not receive retirement and or termination benefits. The Company’s remuneration practices do not allow NEDs to participate in any incentive programs.

The base fee for the Chairman of the Company has been set to $170,000 per annum, which represents a fixed fee with no additional fees for service on board committees.

The Company’s other NEDs receive a base fee for being a director of the Company. An additional fee of $20,000 is also paid if the NED is a chair of a board committee. The payment of additional fees for serving as a chair of a board committee recognises the additional time commitment required by NEDs who serve in this role.

The remuneration of NEDs for the year ended 30 June 2013 and 30 June 2012 is detailed in table 1 and table 2 respectively of this report.

14.5 Executive remuneration arrangements

Remuneration levels and mix

Sandfire’s executive remuneration strategy is designed to attract, motivate and retain high performing individuals and align the interest of executives and shareholders. The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities with the Company and aligned with market practice.

Structure

During the 2013 financial year, the executive remuneration framework consisted of the following components:

• Fixed remuneration; and

• Variable remuneration.

The table below illustrates the structure of Sandfire Resources NL’s executive remuneration arrangements:

Remuneration
component	Applies to	Vehicle	Purpose	Link toperformance
Fixed	All	Comprises base salary and	To provide competitive fixed	Company and individual
remuneration		superannuation contributions if	remuneration set with	performance are
		applicable.	reference to role and	considered during the
			responsibilities, market and	annual remuneration
			experience.	review.
Short-term	All	Paid in cash.	Rewards executives for their	Linked to Company
Individual			contribution to achievement	performance via the
Performance			of key short and medium	achievement of individual
Bonus Plan			term Group objectives, as	key objectives, which
			well as individual key	assist the Company in
			performance objectives.	meeting its overall
				performance targets and
				market hurdles.
Safety and	All	Paid in cash.	Rewards executives for their	Linked to the achievement
Production			contribution to achievement	of safety, production and
Bonus Plan			of specific DeGrussa Copper	cost parameters for the
			mine safety, production and	DeGrussa Copper Mine.
			cost parameters.
Producer	All	Paid in cash.	Rewards executives for their	Linked to the achievement
Status Bonus			contribution to achievement	of reaching Producer
			of Sandfire transitioning from	status.
			being a Developer to a
			Producer.
Long-term	Executive	Awards can be made in the form of	Rewards executive directors	Linked to Company
Indexed Bonus	Directors	equity or cash at the Company’s	for their continued service	performance with respect
Plan		discretion. Awards for the 2013	and contribution to the	to share price
		financial year were settled in cash.	creation of shareholder value	appreciation during the
			over the longer term	vesting period.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.5 Executive remuneration arrangements (continued)

Remuneration
component	Applies to	Vehicle	Purpose	Link toperformance
Long-term	Executive	Awards are made in the form of	Rewards executives for their	Linked to Company
Employee	Directors	options over unissued shares in the	continued service and	performance with respect
Incentive	and Senior	Company.	contribution to the creation of	to share price
Option Plan	Executives		shareholder value over the	appreciation during the
			longer term.	vesting period.

Fixed remuneration

Fixed remuneration includes base pay including superannuation contributions, if applicable. Executive contracts of employment do not include any guaranteed base pay increases and are reviewed annually by the Remuneration and Nomination Committee. The process considers:

• A detailed review of the Company’s performance;

• Individual performance against key job objectives as specified in the executive’s employment or consulting contract;

• Comparative external remuneration data, including market benchmarks using remuneration data sourced from industry surveys; and

• Independent external advice.

In reviewing comparative remuneration data sourced from industry surveys, the Remuneration and Nomination Committee’s policy is to position total fixed remuneration above the median of its defined market to ensure a competitive offering.

The fixed component of executives’ remuneration for the year ended 30 June 2013 and 30 June 2012 is detailed in table 1 and table 2 respectively of this report.

Variable remuneration - Short-term Individual Performance Bonus Plan

The Company operates an annual short-term bonus plan that is available to selected employees and contractors, including KMP. Awards under the plan are made in cash and are subject to annual individual performance appraisals on a calendar year basis.

The total potential short-term bonus available under the plan is set at a level so as to provide sufficient incentive to executives to achieve key objectives as specified within their employment and service contracts. Actual short-term payments awarded to each executive depend on the extent to which key objectives are met. The targets consist of a number of indicators covering financial, non-financial, corporate and individual measures of performance, chosen as they represent the key drivers for the short-term success of the business and provide a framework for delivering longterm value.

The maximum total gross benefit under the short-term bonus plan is limited to 30% of the annual gross fixed remuneration or services contract of the executive for that calendar year. The minimum gross benefit under the shortterm bonus plan, assuming that no executives meet their respective objectives for that year, is nil.

In line with their responsibilities the Remuneration and Nomination Committee, after consideration of performance against key objectives, determine the amount, if any, of the short-term incentive to be paid to each executive. This process usually occurs within three months after the calendar year end date. Payments made are delivered as a cash bonus.

Short-term Bonus Plan for the 2013 financial year

For the 2013 financial year the Company made $647,000 (2012: $603,165) in short-term bonus payments to executives, representing 20% - 30% of the annual gross fixed remuneration or services contract of each executive.

The short-term bonus plan component of executives’ remuneration for the year ended 30 June 2013 and 30 June 2012 is detailed in table 1 and table 2 respectively of this report.

Variable remuneration – Safety and Production Bonus Plan

To coincide with the Company moving into the production phase, the Board on recommendation by the Remuneration and Nomination Committee has, with effect from 1 July 2012, introduced a Safety and Production Bonus Plan.

The bonus plan allows participants, including executives to be rewarded:

• Up to 10% of individual yearly fixed remuneration on the achievement of targeted quarterly safety, production and cost parameters; and

• Up to an additional 10% of individual yearly fixed remuneration on the achievement of stretched quarterly safety, production and cost parameters.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.5 Executive remuneration arrangements (continued)

Actual payments awarded to each participant, including executives depend on the extent to which the set quarterly parameters are met. This review process usually occurs every quarter and payments made are delivered as a cash bonus.

Safety and Production Bonus Plan for the 2013 financial year

During the quarter ended 30 September 2012 commissioning of the Concentrator commenced, with production rampup underway and the Company met the targeted and stretched quarterly safety, production and cost parameters. As a result, a bonus of $114,000 (2012: $nil) was paid to executives, representing 5% of individual yearly fixed remuneration.

While the Company met the targeted and stretched quarterly safety paramaters in the second, third and fourth quarter of the financial year ended 30 June 2013, the Company did not meet the targeted or stretched quarterly production and cost parameters due to lower than expected production, mainly driven by Concentrator ramp-up issues. Accordingly, the bonus did not vest and was not paid during these quarters.

The following table outlines the Safety and Production bonus plan payments (SPBP) to executives for the year ended 30 June 2013.

Quarter	Ended	Quarter	Ended	Quarter	Ended	Quarter	Ended	Year	Ended
30-Sep-12		31-Dec-12		31-Mar-13		30-June-13		30-June-13
Value of	Value of	Value of	Value of	Value of	Value of	Value of	Value of	Value of	Value of
SPBP	SPBP	SPBP	SPBP	SPBP	SPBP	SPBP	SPBP	SPBP	SPBP
$	%	$	%	$	%	$	%	$	%
114,000	5.00	-	-	-	-	-	-	114,000	1.25

Variable Remuneration - Producer Status Bonus

During the 2013 financial year, the Company’s Remuneration and Nomination Committee approved a Producer Status Bonus, equivalent to 10% of yearly fixed remuneration, to be paid to all employees and permanent contractors engaged for the 12 months to 30 June 2012, to mark Sandfire’s transition from being a Developer to achieving the status of Producer. Individuals appointed during the year were paid the bonus amount pro rata.

Producer Status Bonus for the 2013 financial year

For the 2013 financial year the Company made $221,697 (2012: $nil) in producer status payments to executives.

The producer status bonus component of executives’ remuneration for the year ended 30 June 2013 is detailed in table 1 and table 2 respectively of this report.

Variable remuneration - Long-term Indexed Bonus Plan (Executive Directors)

During the 2011 financial year, the Company’s Remuneration and Nomination Committee approved the Long-term Indexed Bonus Plan (long-term bonus plan) to align the objectives of executive directors with that of the Company.

The Company granted 1,000,000 rights to executive directors in July 2010 and granted a further 2,000,000 rights to executive directors in August 2011. No additional rights were granted in the year ended 30 June 2013.

Rights issued under the plan are long term in nature and have multiple vesting dates, with current rights vesting from 15 June 2011 to 15 December 2016.

The Company sets an initial indexed notional value (INV) for rights issued under the bonus plan. On the first vesting date, the holder of the awards receives, at the Company’s sole discretion, either cash, or subject to any shareholder approval required under the Corporations Act 2001 and the ASX Listing Rules, ordinary shares in the Company for the difference between the 5-day volume weighted average ASX price of underlying Company shares prior to the vesting date (test price), and the INV set when the rights were initially granted. At each subsequent test date, the award is re-tested, whereby the holder receives the difference between the 5-day volume weighted average ASX price of underlying Company shares prior to the test date and the higher of the initial INV or the highest test price that occurred prior to that date.

Termination and change of control provisions

Participant initiated termination

Where a participant ceases to be an employee or contractor of the Company prior to vesting of their award, all outstanding rights will expire and cease to carry any rights or benefits.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.5 Executive remuneration arrangements (continued)

Company initiated termination

Where the engagement or employment is terminated by the Company for reasons other than serious misconduct, the rights will continue to vest for 180 days following the end of the required notice period, with the final vesting date to be the date on which the 180 day notice period expires.

Change of control

In the event of a change of control of the Company, the vesting period will be brought forward to the date of the change of control and awards will automatically vest.

Listed below are the terms and conditions of rights issued by the Company under the long-term bonus plan.

		Indexed
		notional	Initial vesting		Contractual
Grant date	Number	value	date	Test dates	life
Long-term bonus plan grant to	666,666	$9.00	15 June 2013	15 June and 15 December	5 years
executive directors of the Company				from 2013 to 2016
on 8 August 2011, expiring 15 December 2016.	666,667	$10.30	15 June 2014	15 June and 15 December from 2014 to 2016	5 years
	666,667	$11.70	15 June 2015	15 June and 15 December from 2015 to 2016	5 years
Long-term bonus plan grant to	333,332	$3.80	15 June 2011	15 June and 15 December	4 years
executive directors of the Company				from 2011 to 2015
on 2 July 2010, modified on 8 August 2011, expiring 15 December 2015.	333,334	$4.40	15 June 2012	15 June and 15 December from 2012 to 2015	4 years
	333,334	$5.00	15 June 2013	15 June and 15 December from 2013 to 2015	4 years

Long-term Indexed Bonus Plan for the 2013 financial year

On 1 January 2013 Mr Evans resigned as an executive technical director and was appointed a non-executive director. The Board resolved that Mr Evans’ long term rights would continue to vest for 180 days after resignation date and in addition to any other test date per the original plan, the final test date would be 30 June 2013, after which time the long-term rights ceased to vest and he ceased to be entitled to any bonus payments under the plan. As a result and subsequent to his resignation date, Mr Evans’ rights were tested on 15 June 2013 and 30 June 2013 and a payment of $80,498 was made to him. Total payments to Mr Evans under the plan for the current financial year amounted to $217,931. The rights were cancelled on 30 June 2013 and an amount of $639,359 of previously recognised remuneration was reversed when valued in accordance with AASB 2.

In accordance with the terms and conditions of the plan, the Company paid $1,089,655 (2012: $846,331) in cashsettled awards for the year ended 30 June 2013, representing vesting of long-term rights. The Company also recognised a credit to expenses of $2,108,264 (2012: expense of $2,001,679) during the current financial year relating to the valuation of long term rights, in accordance with AASB 2. For details on the valuation of rights, including models and assumptions used, refer to note 22 of the financial report.

The above components are included as part total executives’ remuneration in Table 1 of this report, disclosed as a component of share-based payments.

Further details in respect of the award are provided in Table 3b of this report.

Variable remuneration - Long-term Incentive Option Plan

The long-term Incentive Option Plan (IOP) was introduced to promote continuity of employment and provide additional incentive to KMP to increase shareholder wealth. The plan provides for selected executives, including KMP, to be offered the opportunity to subscribe for options over ordinary fully paid shares. Each option carries the right to subscribe for one fully paid ordinary share.

Options under the plan are provided to KMP based on their level of seniority and position within the Company. Options may only be issued to directors subject to approval by shareholders in a general meeting.

Under the IOP the Board has the right to issue options on terms and conditions they determine appropriate and in exercising that discretion may give regard to the following:

• the Eligible Participant’s length of service to the Company;

• the contribution made by the Eligible Participant to the Company; and

• the potential contribution of the Eligible Participant to the Company.

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14 Remuneration report (audited) (continued)

14.5 Executive remuneration arrangements (continued)

The Board may also impose certain conditions, including performance-related and service based conditions, on the right of the participant to exercise any option granted. The Board imposed service based conditions on options issued during the financial year. The Board did not impose any performance-related conditions on options issued during the financial year.

There are no voting or dividend rights attached to the options and options issued under the plan are to be issued for no consideration. Voting rights will be attached to the ordinary issued shares when the options have been exercised.

KMPs are not permitted to limit or offset their exposure to market risk in relation to securities issued.

Long-term Incentive Option for the 2013 financial year

No options were issued to key management persons, including executives, under the IOP during the current financial year. The issue of options to Mr Klug on 2 August 2012 was made prior to his appointment as Chief Commercial Officer when he met the definition of a key management person.

For details on the valuation of options, including models and assumptions used, please refer to note 22 of the financial report.

Further details in respect of options issued to KMP are provided in Table 3a of this report.

14.6 Company performance and the link to remuneration

Company performance and its link to short-term incentives

The Group has various short term incentives that are linked to Company performance:

• the short-term individual performance bonus plan; and

• the safety and production bonus plan.

The purpose of the plans is to reward executives for their contribution to achievement of key short and medium term Group objectives, as well as individual key performance objectives, which assist the Group in meeting its overall targets and market hurdles. Refer to section 14.5 of this report for more details relating to the performance of the Company and relevant executives against set performance hurdles.

Company performance and its link to long-term incentives

The Company’s long-term incentives including the Long-term Indexed Bonus Plan and the Long-term Incentive Option Plan reward key management personnel for their continued service and contribution to the achievement of Company outcomes, with respect to share price appreciation. The approach of linking individual executive remuneration to plans such as the Long-term Indexed Bonus Plan and Long-term Incentive Option Plan is an established practice for listed companies and has the benefit of conserving cash whilst appropriately incentivising and rewarding senior executives to increase shareholder wealth.

Please refer to section 14.5 of this report for further details.

The following table outlines the Company’s respective earnings, share price and any dividends paid from the period 1 July 2008 to 30 June 2013.

July 2008 to 30 June 2013.
Net profit / (loss) ($) Closing ASX share price	Year ended
	30 Jun 09 30 Jun 10 30 Jun 11 30 Jun 12 30 Jun 13
	(5,148,000) (29,546,000) (27,051,000) (23,883,000) 87,998,000 $1.10 $3.24 $7.05 $7.16 $5.12

14.7 Summary of executive contractual arrangements

Remuneration arrangements for KMP are formalised in employment agreements or service contracts.

Chief Executive Officer

The services of the CEO, Mr Simich, are contracted under a rolling service contract.

Under the terms of the present contract:

• The CEO receives fixed remuneration of $1,000,000 per annum, with effect from 1 January 2011. Fixed remuneration for the financial year ended 30 June 2013 was $1,000,000.

• The CEO is eligible to participate in the Company’s variable short-term and long-term incentive plans on terms determined by the Board, subject to shareholder approval if applicable.

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14 Remuneration report (audited) (continued)

14.7 Summary of executive contractual arrangements (continued)

The CEO’s termination provisions are as follows:

		Payment in lieu of
	Notice period	notice
Company-initiated termination	12 months	12 months
Termination for serious misconduct	None	None
Contractor-initiated termination	6 months	6 months

Other KMP

All other KMP have standard rolling employment contracts. Standard KMP termination provisions are as follows:

		Payment in lieu of
	Notice period	notice
Employer-initiated termination	3 to 6 months	3 to 6 months
Termination for serious misconduct	None	None
Employee-initiated termination	3 to 6 months	3 to 6 months

Payments applicable to outgoing executives

The following arrangements applied to outgoing executives in office during the 2013 financial year.

Mr W John Evans

On 1 January 2013 Mr Evans resigned from his position as executive technical director and was appointed as nonexecutive director. Mr Evans received a termination payment of $nil, in accordance with the terms of his employment contract.

At the date of resignation Mr Evans was also a participant in the long-term indexed bonus plan (refer to paragraph 14.5 and Table 3b of this report for further details). The Board resolved that Mr Evans’ long term rights would continue to vest for 180 days after resignation date and in addition to any other test date per the original plan, the final test date would be 30 June 2013, after which time the long-term rights ceased to vest and he ceased to be entitled to any bonus payments under the plan. As a result and subsequent to his resignation date, Mr Evans’ rights were tested on 15 June 2013 and 30 June 2013 and a payment of $80,498 was made to him. Total payments to Mr Evans under the plan for the current financial year amounted to $217,931. The rights were cancelled on 30 June 2013 and an amount of $639,359 of previously recognised remuneration was reversed when valued in accordance with AASB 2.

Mr Martin Reed

Mr Reed resigned from his position as Chief Operation Officer effective 30 June 2013. Mr Reed did not receive any termination payments, in accordance with the terms of his employment contract.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.8 Remuneration of key management personnel

Table 1: Remuneration for the year ended 30 June 2013

Note Non-executive directors Derek La Ferla Robert N Scott Soocheol Shin W John Evans Paul D Hallam B	Short-term benefits Post employment Total Share-based payments (SBP) Total Value of SBP Performance related Salary & fees Cash bonus A Other Super- annuation Options Share appreciation rights $ $ $ $ $ $ $ $ % %	Short-term benefits Post employment Total Share-based payments (SBP) Total Value of SBP Performance related Salary & fees Cash bonus A Other Super- annuation Options Share appreciation rights $ $ $ $ $ $ $ $ % %	Short-term benefits Post employment Total Share-based payments (SBP) Total Value of SBP Performance related Salary & fees Cash bonus A Other Super- annuation Options Share appreciation rights $ $ $ $ $ $ $ $ % %	Short-term benefits Post employment Total Share-based payments (SBP) Total Value of SBP Performance related Salary & fees Cash bonus A Other Super- annuation Options Share appreciation rights $ $ $ $ $ $ $ $ % %	Short-term benefits Post employment Total Share-based payments (SBP) Total Value of SBP Performance related Salary & fees Cash bonus A Other Super- annuation Options Share appreciation rights $ $ $ $ $ $ $ $ % %	Short-term benefits Post employment Total Share-based payments (SBP) Total Value of SBP Performance related Salary & fees Cash bonus A Other Super- annuation Options Share appreciation rights $ $ $ $ $ $ $ $ % %	Short-term benefits Post employment Total Share-based payments (SBP) Total Value of SBP Performance related Salary & fees Cash bonus A Other Super- annuation Options Share appreciation rights $ $ $ $ $ $ $ $ % %
	155,963 - - 14,037 170,000 - - 170,000 - - 100,665 - - 4,335 105,000 - - 105,000 - - 85,000 - - - 85,000 - - 85,000 - - 87,500 - - - 87,500 - - 87,500 - -
	8,059	-	- 725 8,784	-	- 8,784	-	-
Total non-executive directors	437,187	-	- 19,097 456,284	-	- 456,284	-	-
Executive directors Karl M Simich	1,000,000 450,000 - - 1,450,000 - C(597,181) 852,819 (70.02) 52.77 162,546 128,500 - 22,454 313,500 - D(421,428) (107,928) (390.47) 119.06 400,579 220,500 - 21,621 642,700 - - 642,700 - 34.30 408,000 183,697 - 22,000 613,697 - - 613,697 - 29.93
W John Evans D	162,546 128,500		- 22,454 313,500
Other key management personnel Martin Reed E Matthew L Fitzgerald Robert Klug F
	183,486	-	- 16,514 200,000	-	- 200,000	-	-
Total executive KMP	2,154,611 982,697		- 82,589 3,219,897	- (1,018,609) 2,201,288 (46.27) 44.64
Totals	2,591,798 982,697 - 101,686 3,676,181 - (1,018,609) 2,657,572 (38.33) 36.98

A Amounts included in remuneration represent the amount that vested in the financial year based on achievement of key objectives in accordance with the Company’s annual Short-term Bonus Plan (Bonus Plan) as detailed in note 14.5 of the remuneration report. No amounts were forfeited and no amounts vest in future financial years in respect of the Bonus Plan for the 2013 financial year.

B Paul D Hallam was appointed a Non-executive director on 21 May 2013. C The credit of $597,181 relates to adjustments arising from Mr Simich’s rights issued under the Long-term Indexed Bonus Plan and includes a reversal of $1,468,905 for previously recognised remuneration valued in accordance with AASB 2 (refer to note 22 of the financial report). Mr Simich received $871,724 in cash payments during the financial year representing vesting of long term rights.

D On 1 January 2013, Mr Evans resigned from his position as executive technical director and was appointed as non-executive director. In accordance with the terms of his resignation, Mr Evans’ long term rights were cancelled on 30 June 2013 and $639,359 of previously recognised remuneration was reversed when valued in accordance with AASB 2 (refer to note 22 of the financial report). Mr Evan received $217,931 in cash payments during the current financial year representing vesting of long term rights prior to cancellation.

E Martin Reed resigned with effect from 30 June 2013.

F Robert Klug met the definition of a key management person on his appointment as Chief Commercial Officer on 1 January 2013.

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• 29 -

FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.8 Remuneration of key management personnel (continued)

Table 2: Remuneration for the year ended 30 June 2012

Note Non-executive directors Derek La Ferla Robert N Scott Soocheol Shin E Jonghun Jong E Total non-executive directors Executive directors Karl M Simich W John Evans Other key management personnel Martin Reed Matthew L Fitzgerald	Short-term benefits Post employment Total Share-based payments (SBP) Total Value of SBP Performance related Salary & fees Cash bonus A Other Super- annuation Options B Share appreciation rights $ $ $ $ $ $ $ $ % %
	155,963 - - 14,037 170,000 - - 170,000 - - 100,665 - - 4,335 105,000 - - 105,000 - - 28,333 - - - 28,333 - - 28,333 - -
	56,667 - - - 56,667 - - 56,667 - -
	341,628 - 18,372 360,000 - - 360,000 - -
	1,000,000 300,000 - - 1,300,000 - C2,212,685 3,512,685 62.99 8.54 330,275 48,165 - 34,060 412,500 - D635,325 1,047,825 60.63 5.01 446,121 141,000 - 20,229 607,350 - - 607,350 - 23.22
	383,296 114,000 - 16,753 514,049 303,034 - 817,083 37.09 13.95
Total executive KMP	2,159,692 603,165 - 71,042 2,833,899 303,034 2,848,010 5,984,943 52.65 10.15
Totals	2,501,320 603,165 - 89,414 3,193,899 303,034 2,848,010 6,344,943 49.66 9.57

A Amounts included in remuneration represent the amount that vested in the financial year based on achievement of key objectives in accordance with the Company’s annual Short-term Bonus Plan (Bonus Plan) as detailed in note 14.5 of the remuneration report. No amounts were forfeited and no amounts vest in future financial years in respect of the Bonus Plan for the 2012 financial year.

B The fair value of options is calculated at the date of grant using the Black-Scholes option pricing model and recognised over the period in which the minimum service conditions are fulfilled (the vesting period). No share options were granted to key management persons, including executives, as remuneration during the financial year. The value disclosed is the portion of the fair value of the options issued during the previous financial year but recognised in the current reporting period. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual KMP may in fact receive. For details on the valuation of the options, including models and assumptions used, refer to note 22 of the financial report.

C Mr Simich received $677,064 during the year in cash payments resulting from the vesting of long term rights.

D Mr Evans received $169,267 during the year in cash payments resulting from the vesting of long term rights.

E Soocheol Shin was appointed 28 February 2012; Jonghun Jong resigned 28 February 2012.

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• 30 -

FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14.9 Equity Instruments

Table 3a: Options granted and vested during the year[A]

Executive directors Karl M Simich W John Evans_C_ Other key management personnel Martin Reed Matthew L Fitzgerald Robert Klug_D_ Total		Terms and conditions for each grant during the year	Options vested during the year
	Number	Grant date Fair value per option at grant date ($)B Exercise price ($) Expiry date Vesting date	Number %
	- - - - - - - - 250,000 166,667 83,333	27-Nov-2009 - - - - 27-Nov-2009 - - - - 21-Jun-2010 - - - - 11-Mar-2011 - - - - 11-Mar-2011 - - - - 21-Jun-2010 - - - - 11-Mar-2011 - - - - 11-Mar-2011 - - - - 2-Aug-2012 $0.59 $9.00 28-Feb-2016 2-Aug-2012 2-Aug-2012 $0.62 $10.30 28-Feb-2016 28-Feb-2013 2-Aug-2012 $0.81 $11.70 28-Feb-2016 28-Feb-2014	200,000 100.00 110,000 100.00 133,334 100.00 116,667 100.00 116,667 100.00 133,334 100.00 266,667 100.00 83,333 100.00 250,000 100.00 166,667 100.00 - - 1,576,669
	500,000

A Each option carries the right to subscribe for one fully paid ordinary share in Sandfire Resources NL. For details on the valuation of the options, including models and assumptions used, refer to note 22 of the financial report.

B The fair value of options is calculated at the date of grant using the Black-Scholes option pricing model and recognised over the period in which the minimum service conditions are fulfilled (the vesting period). The fair value is not related to or indicated of the benefit (if any) that the individual KMP may in fact receive.

C W John Evans was appointed a Non-executive director and resigned as an Executive technical director on 1 January 2013.

D Robert Klug met the definition of a key management person on his appointment as Chief Commercial Officer on 1 January 2013. The issue of options to Mr Klug was prior to his appointment as Chief Commercial Officer and as a result, the value of the options issued has not been included within Mr Klug’s remuneration for the year ended 30 June 2013.

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• 31 -

FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.9 Equity Instruments (continued)

Table 3b: Rights granted, modified and vested during the year

Note Executive directors Karl M Simich 1,3 1,3 1,3 2,3 2,3 2,3 W John Evans 4 1,3 1,3 1,3 2,3 2,3 2,3 Total	Number	Terms and conditions for each grant during the year Grant / Modification Date Fair value ($) Indexed notional value ($) Expiry date Initial vesting date	Rights vested during the year Number %	Rights tested during the year Number 15-Dec-12 15-Jun-13 30-Jun-13 Test price Fair value Test price Fair value Test price Fair value
	266,666 266,667 266,667 500,000 500,000 500,000 66,666 66,667 66,667 166,666 166,667 166,667	8-Aug-2011 $0.04 - $0.63 $8.04 15-Dec-2015 15-Jun-2011 8-Aug-2011 $0.04 - $0.63 $8.04 15-Dec-2015 15-Jun-2012 8-Aug-2011 $0.23 - $1.03 $6.21 15-Dec-2015 15-Jun-2013 8-Aug-2011 $0.01 - $0.75 $9.00 15-Dec-2016 15-Jun-2013 8-Aug-2011 $0.05 - $0.58 $10.30 15-Dec-2016 15-Jun-2014 8-Aug-2011 $0.16 - $0.45 $11.70 15-Dec-2016 15-Jun-2015 8-Aug-2011 $0.04 - $0.63 $8.04 30-Jun-2013 15-Jun-2011 8-Aug-2011 $0.04 - $0.63 $8.04 30-Jun-2013 12-Jun-2012 8-Aug-2011 $0.23 - $1.03 $6.21 30-Jun-2013 15-Jun-2013 8-Aug-2011 $0.01 - $0.75 $9.00 30-Jun-2013 15-Jun-2013 8-Aug-2011 $0.05 - $0.58 $10.30 30-Jun-2013 15-Jun-2014 8-Aug-2011 $0.16 - $0.45 $11.70 30-Jun-2013 15-Jun-2015	- - - - 266,667 100.00 500,000 100.00 - - - - - - - - 66,667 100.00 166,666 100.00 - - - -	266,666 $8.04 $0.96 $6.21 - 266,667 $8.04 $1.10 $6.21 - 266,667 $6.21 $1.21 500,000 $6.21 - 66,666 $8.04 $0.96 $6.21 - $5.17 - 66,667 $8.04 $1.10 $6.21 - $5.17 - 66,667 $6.21 $1.21 $5.17 - 66,666 $6.21 - $5.17 - $5.17 - $5.17 -
	3,000,000		1,000,000	1,566,666

• 1 The terms and conditions of the rights, initially granted 2 July 2010, were modified 8 August 2011. Refer to note 14.5 of the remuneration report for details.

• 2 This grant relates rights issued under the Company’s long-term Indexed Bonus Plan during the current financial year. Refer to note 14.5 of the remuneration report for details. 3 The fair value of the rights is calculated at the reporting date using the Black-Scholes option pricing model. In accordance with the terms and conditions of the long-term Indexed Bonus Plan, the ultimate value of the long-term rights will be calculated on the initial vesting date and subsequent testing dates. Vested rights are tested on 15 June and 15 December of each calendar year subsequent to the initial vesting date and up to expiry. The fair value of the rights at each of the test dates, is the difference between the 5-day volume weighted average ASX price of underlying Company shares and the higher of the initial INV or the highest test price that occurred prior to that test date. For details on the valuation of the rights, including models and assumptions used, refer to note 22 of the financial report.

• 4 On 1 January 2013 Mr Evans resigned from his position as executive technical director and was appointed as non-executive director. The Board resolved that Mr Evans’ long term rights continued to vest for 180 days following the end of the notice period and in addition to any other test date, the final test date was the date on which the 180 day period expired (being 30 June 2013), after which time the long-term rights ceased to vest and he ceased to be entitled to be paid any bonus under the rights.

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• 32 -

FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 DIRECTORS’ REPORT

14 Remuneration report (audited) (continued)

14.9 Equity Instruments (continued)

Table 4: Value of options granted, exercised and lapsed during the year

	Value of options	Value of options	Value of options	Value of options
	granted during the year	exercised during the year A	sold during the year B	lapsed during the year
	$	$	$	$
Non-executive directors
W John Evans	-	6,522,200	-	-
Executive directors
Karl M Simich	-	17,064,000	-	-
Other key management personnel
Matthew L Fitzgerald	-	-	1,513,164	-

A The value is calculated as the market price of shares of the Company as at close of trading on the date the options were exercised after deducting the price paid to exercise the option.

B The value is calculated as the market price of shares of the Company as at the close of trading on the date the options were disposed after deducting the price to exercise the option.

There were no alterations to the terms and conditions of options awarded as remuneration since their award date.

Shares issued on exercise of options

2,400,000 fully paid shares were issued to Mr Simich on the conversion of 800,000 unlisted options at $0.60 each, 800,000 unlisted options at $0.80 each and 800,000 unlisted options at $1.00 each.

1,190,000 fully paid shares were issued to Mr Evans on the conversion of 210,000 unlisted options at $0.60 each, 180,000 unlisted options at $0.80 each and 800,000 options at $1.00 each.

Signed in accordance with a resolution of the directors.

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Derek La Ferla Non-executive Chairman

Karl M. Simich Managing Director and Chief Executive Officer

West Perth, 28 August 2013

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• 33 -

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2013

Note Sales revenue 5 Realised and unrealised metal and price adjustments gains (losses) 5 Other income 15 Changes in inventories of finished goods and work in progress Mine operations costs Employee benefit expenses 6 Freight, treatment and refining expenses Royalties expense Exploration and evaluation expenses Depreciation and amortisation expenses 6 Share of net loss of associate Impairment expense 15 Administrative expenses Profit (loss) before net finance and income tax Finance income 7 Finance expense 7 Net finance (expense) income Profit (loss) before income tax Income tax (expense) benefit 8 Net profit (loss) for the year Other comprehensive income for the period, net of tax Total comprehensive income for the period Earnings (loss) per share Basic earnings (loss) per share attributable to ordinary equity holders (cents) Diluted earnings (loss) per share attributable to ordinary equity holders (cents)	2013 $000 2012 $000
	507,331 20,684 (14,573) (326) - 1,470 26,888 5,852 (83,412) (2,920) (38,716) (14,986) (78,563) (3,985) (20,986) (1,263) (22,079) (26,424) (125,849) (4,524) (1,106) (650) (500) (1,463) (6,299) (5,008)
	142,136 (33,543) 3,051 1,217 (19,519) (235)
	(16,468) 982
	125,668 (32,561) (37,670) 8,678
	87,998 (23,883)
	- -
	87,998 (23,883)
	57.48 (15.85) 57.38 (15.85)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

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• 34 -

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013

Note ASSETS Cash and cash equivalents 10 Trade and other receivables 11 Inventories 12 Other current assets Total current assets Receivables 11 Inventories 12 Mine properties 13 Property, plant and equipment 14 Other financial assets 15 Deferred tax assets 8 Total non-current assets TOTAL ASSETS LIABILITIES Trade and other payables 16 Interest bearing liabilities 17 Provisions 18 Total current liabilities Trade and other payables 16 Interest-bearing liabilities 17 Provisions 18 Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 19 Reserves 22 Accumulated losses TOTAL EQUITY	2013 $000 2012 $000
	77,070 100,389 8,491 7,015 38,507 7,254 1,954 1,085
	126,022 115,743
	84 3 11,698 6,233 177,752 163,670 245,924 202,232 183 1,189 2,939 40,580
	438,580 413,907
	564,602 529,650
	43,932 49,626 163,906 94,146 2,360 1,311
	210,198 145,083
	553 1,383 119,542 251,019 22,654 14,929
	142,749 267,331
	352,947 412,414
	211,655 117,236
	219,391 213,007 6,114 6,077 (13,850) (101,848)
	211,655 117,236

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

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• 35 -

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2013

Note At 1 July 2012 Profit for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners: Exercise of options 19 Share issue costs net of income tax benefit Transfer from share-based payments reserve on exercise of options Share based payments recognised at fair value 22 At 30 June 2013 At 1 July 2011 Loss for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners: Exercise of options 19 Share issue costs net of income tax benefit Transfer from share-based payments reserve on exercise of options Share based payments recognised at fair value 22 Share of movement in share based payments reserve from associate 15 At 30 June 2012	Issued capital $000 Share based payments reserve $000	Accumulated losses $000 Total equity $000
	213,007 6,077	(101,848) 117,236
	- -	87,998 87,998
	- -	- -
	- -	87,998 87,998
	5,531 -	- 5,531
	(69) -	- (69)
	922 (922)	- -
	- 959	- 959
	219,391 6,114	(13,850) 211,655
	Issued capital $000 Share based payments reserve $000	Accumulated losses $000 Total equity $000
	210,325 6,092 - - - -	(77,965) 138,452 (23,883) (23,883) - -
	- - 1,968 - (73) - 787 (787) - 795 - (23)	(23,883) (23,883) - 1,968 - (73) - - - 795 - (23)
	213,007 6,077	(101,848) 117,236

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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• 36 -

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2013

Note Cash flows from operating activities Cash receipts Cash paid to suppliers and employees Payments for exploration and evaluation Interest received Net cash inflow (outflow) from operating activities 20 Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payments for mine properties Payments for investments 15 Refunds (payments) of security deposits and bonds Net cash inflow (outflow) from investing activities Cash flows from financing activities Proceeds from the conversion of options to shares Share issue costs Proceeds from borrowings Repayment of borrowings Payment of finance lease liabilities Finance establishment costs Interest and other costs of finance paid Net cash inflow (outflow) from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 10, 20	2013 $000 2012 $000
	469,634 18,187 (201,057) (28,052) (22,213) (29,533) 3,866 3,073
	250,230 (36,325)
	(68,367) (146,494) - 98 (119,573) (123,628) (600) (1,855) (81) 3,165
	(188,621) (268,714)
	5,531 1,968 (98) (94) 30,000 350,000 (95,000) - (931) (350) - (9,274) (24,430) (10,863)
	(84,928) 331,387
	(23,319) 26,348 100,389 74,041
	77,070 100,389

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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• 37 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

1 Corporate Information

The consolidated financial statements of Sandfire Resources NL for the year ended 30 June 2013 were authorised for issue in accordance with a resolution of the directors on 28 August 2013.

Sandfire Resources NL (the Parent) is a company incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange (ASX). The nature of the operations and principal activities of the Company are described in the directors’ report.

2 Summary of significant accounting policies

Basis of preparation

The financial report of the Group, a for-profit entity, is a general purpose financial report, which has 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. The financial report has been prepared on a historical cost basis.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated.

The Group’s consolidated financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

At balance date the Group had a net working capital deficiency of $84.2 million. Cash and cash equivalents of $77.1 million included $50 million in Debt Service Reserve account, which is restricted for future finance facility repayments, and $20 million in Cost Overrun Account which is expected to be released in the short term following final Completion Test sign off. Current interest bearing liabilities include $165 million of scheduled finance facility repayments up to 30 June 2014, which are forecast to be funded from continued positive operating cash flows post balance date.

The directors have considered the funding and operational status of the business in arriving at their assessment of going concern, including consideration to the following:

• Published market guidance on 2014 operating parameters, copper and gold production and operating and capital cost levels;

• Current operating performance and cash flow generation compared to expectation;

• Current market pricing for copper, gold and currency as well as the published outlook for these markets; and

• Ability to manage the timing of cash flows to meet the obligations of the business as and when due.

Accordingly, the directors believe that the Group will continue as a going concern and that it is appropriate to adopt that basis of accounting in the preparation of the financial report.

(a) Compliance with IFRS

The financial report complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

(b) New Accounting Standards and interpretations

(i) Changes in accounting policy and disclosures – mandatory standards

The accounting policies adopted are consistent with those of the previous financial year except as described below. Certain comparative information has been reclassified to conform with the current year’s presentation.

The Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2012:

• AASB 119 Employee Benefits.

• AASB 112 Income Taxes (amendment) – Deferred taxes: Recovery of Underlying Assets.

• AASB 7 Financial Instruments: Disclosures – Enhances Derecognition Disclosure Requirements Improvements to AASB (May 2010).

The adoption of the new and amended standards or interpretations had no impact on the financial position or performance of the Group.

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• 38 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(b) New Accounting Standards and interpretations (continued)

(ii) Changes in accounting policy and disclosures – early adoption of standards

The following standards were early adopted by the Group during the year ended 30 June 2012 and were adopted again in the current financial year:

• Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine effective 1 July 2013. This interpretation applies to stripping costs incurred during the production phase of a surface mine. Production stripping costs are to be capitalised as part of an asset, if an entity can demonstrate that it is probable future economic benefits will be realised, the costs can be reliably measured and the entity can identify the component of an ore body for which access has been improved. This asset is to be called the “stripping activity asset”. The stripping activity asset shall be depreciated or amortised on a systematic basis, over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity. The units of production method shall be applied unless another method is more appropriate. Refer to accounting policy note 2(l) for more details.

(iii) Accounting Standards and Interpretations issued but not yet effective

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Group for the reporting period ending 30 June 2013, are outlined in the table below.

			Application date and
			impact on the Group’s
Reference	Title	Summary	financial report
AASB 10	Consolidated	AASB 10 establishes a new control model that applies to	The amendments which
	Financial Statements	all entities. It replaces parts of AASB 127_Consolidated_	become mandatory for the
		_and Separate Financial Statements_dealing with the	Group’s 30 June 2014
		accounting for consolidated financial statements and UIG-	financial statements are not
		112_Consolidation – Special Purpose Entities._	expected to have any
		The new control model broadens the situations when an	impact on the financial
		entity is considered to be controlled by another entity and	statements.
		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.
		Consequential amendments were also made to other
		standards via AASB 2011-7.
AASB 11	Joint Arrangements	AASB 11 replaces AASB 131_Interests in Joint Ventures_	The amendments which
		and UIG-113_Jointly- controlled Entities – Non-monetary_	become mandatory for the
		_Contributions by Ventures._AASB 11 uses the principle of	Group’s 30 June 2014
		control in AASB 10 to define joint control, and therefore the	financial statements are not
		determination of whether joint control exists may change.	expected to have any
		In addition it removes the option to account for jointly	impact on the financial
		controlled entities (JCEs) using proportionate	statements.
		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.
		Consequential amendments were also made to other
		standards via AASB 2011-7 and amendments to AASB
		128.
AASB 12	Disclosure of	AASB 12 includes all disclosures relating to an entity’s	The amendments which
	Interests in Other	interests in subsidiaries, joint arrangements, associates	become mandatory for the
	Entities	and structures entities. New disclosures have been	Group’s 30 June 2014
		introduced about the judgments made by management to	financial statements are not
		determine whether control exists, and to require	expected to have any
		summarised information about joint arrangements,	material impact on the
		associates and structured entities and subsidiaries with	financial statements.
		non-controlling interests.

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• 39 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(b) New Accounting Standards and interpretations (continued)

			Application date and
			impact on the Group’s
Reference	Title	Summary	financial report
AASB 13	Fair Value	AASB 13 establishes a single source of guidance for	The amendments which
	Measurement	determining the fair value of assets and liabilities. AASB	become mandatory for the
		13 does not change when an entity is required to use fair	Group’s 30 June 2014
		value, but rather, provides guidance on how to determine	financial statements are not
		fair value when fair value is required or permitted.	expected to have any
		Application of this definition may result in different fair	material impact on the
		values being determined for the relevant assets.	financial statements.
		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.
		Consequential amendments were also made to other
		standards via AASB 2011-8.
AASB 119	Employee Benefits	The main change introduced by this standard is to revise	The amendments which
		the accounting for defined benefit plans. The amendment	become mandatory for the
		removes the options for accounting for the liability, and	Group’s 30 June 2014
		requires that the liabilities arising from such plans is	financial statements are not
		recognised in full with actuarial gains and losses being	expected to have any
		recognised in other comprehensive income. It also revised	impact on the financial
		the method of calculating the return on plan assets.	statements.
		The revised standard changes the definition of short-term
		employee benefits. The distinction between short-term
		and other long-term employee benefits is now based on
		whether the benefits are expected to be settled wholly
		within 12 months after the reporting date.
		Consequential amendments were also made to other
		standards via AASB 2011-10.
AASB 2012-2	Amendments to	AASB 2012-2 principally amends AASB 7 Financial	The amendments which
	Australian Accounting	Instruments: Disclosures to require disclosure of	become mandatory for the
	Standards –	information that will enable users of an entity’s financial	Group’s 30 June 2014
	Disclosures –	statements to evaluate the effect or potential effect of	financial statements are not
	Offsetting Financial	netting arrangements, including rights of set-off associated	expected to have any
	Assets and Financial	with the entity’s recognised financial assets and	impact on the financial
	Liabilities	recognised financial liabilities, on the entity’s financial	statements.
		position.

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• 40 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(b) New Accounting Standards and interpretations (continued)

			Application date and
			impact on the Group’s
Reference	Title	Summary	financial report
AASB 9	Financial Instruments	AASB 9 includes requirements for the classification and	The amendments which
		measurement of financial assets. It was further amended	become mandatory for the
		by AASB 2010-7 to reflect amendments to the accounting	Group’s 30 June 2016
		for financial liabilities.	financial statements are not
		These requirements improve and simplify the approach for classification and measurement of financial assets	expected to have any impact on the financial
		compared with the requirements of AASB 139. The main	statements.
		changes are described below.
		(a) Financial assets that are debt instruments will be
		classified based on (1) the objective of the entity’s
		business model for managing the financial assets; (2)
		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: (i) The change attributable to changes in
		credit risk are presented in other comprehensive
		income (OCI); and (ii) 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.
		Consequential amendments were also made to other
		standards as a result of AASB 9, introduced by AASB
		2009-11 and superseded by AASB 2010-7 and 2010-10.
AASB 2012-3	Amendments to	AASB 2012-3 adds application guidance to AASB 132	The amendments which
	Australian Accounting	Financial Instruments: Presentation to address	become mandatory for the
	Standards –	inconsistencies identified in applying some of the offsetting	Group’s 30 June 2016
	Offsetting Financial	criteria of AASB 132, including clarifying the meaning of	financial statements are not
	Assets and Financial	“currently has a legally enforceable right of set-off” and that	expected to have any
	Liabilities;	some gross settlement systems may be considered	impact on the financial
		equivalent to net settlement.	statements.

(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of Sandfire Resources NL and its subsidiaries (as outlined in note 21) as at and for the period ended 30 June each year (the Group). Interests in associates are equity accounted and are not part of the consolidated Group (see note 2(d) below).

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

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• 41 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(d) Investment in an associate

The Group’s investment in its associate is accounted for using the equity method. An associate is an entity in which the Group has, or has the ability to exert, significant influence.

Under the equity method, the investment in the associate is carried on the statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.

The income statement reflects the Group’s share of the results of operations of the associate. When there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The Group’s share of profit (loss) of an associate is shown on the face of the income statement. This is the profit (loss) attributable to equity holders of the associate and, therefore, is profit (loss) after tax and non-controlling interests in the subsidiaries of the associate.

The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

(e) Operating segments

An operating segment is a component of the Group about which separate financial information is available that is evaluated regularly by the Group’s key management personnel in deciding how to allocate resources and in assessing performance.

Segment information that is evaluated by key management personnel is prepared in conformity with the accounting policies adopted for preparing the financial statements of the Group.

Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive management team and the Board of directors.

(f) Foreign currency

(i) Functional and presentation currency

The consolidated financial statements are presented in Australian dollars. 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 functional currency of Sandfire Resources NL is Australian dollars ($).

(ii) Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency at the respective functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the spot rate of exchange ruling at the reporting date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income.

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.

(g) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised.

(i) Sale of goods – concentrate

Revenue from the sale of goods is recognised when persuasive evidence of an arrangement exists, usually in the form of an executed sales agreement, indicating there has been a transfer of risks and rewards to the customer, no further processing is required by the Group, the quantity and quality of the goods has been determined with reasonable accuracy, the price is fixed or determinable, and collectability is probable. This is generally when title passes, which for the sale of direct shipping ore represents the bill of lading date when the ore is delivered for shipment.

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• 42 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(g) Revenue recognition (continued)

Revenue on provisionally priced sales is recognised at the estimated fair value of the total consideration received or receivable. Royalties paid and payable are separately reported as expenses.

Contract terms for many of the Group’s sales allow for a price adjustment based on a final assay of the goods by the customer to determine content. Recognition of the sales revenue for these commodities is based on the most recently determined estimate of product specifications with a subsequent adjustment made to revenue upon final determination.

The terms of direct shipping ore sales contracts with third parties contain provisional pricing arrangements. The selling price for metal in direct shipping ore is based on prevailing spot prices at the time of shipment to the customer and adjustments to the sales price occur based on movements in quoted market prices up to the date of final settlement.

These provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. Accordingly, the embedded derivative, which does not qualify for hedge accounting, is recognised at fair value, with subsequent changes in fair value recognised in the Income Statement in each period until final settlement. Changes in fair value over the Quotational Period (QP) and up until final settlement are estimated by reference to forward market prices. The QP often reflects the average time to elapse between the date of shipment and the date of processing by the smelter at final destination. This pricing methodology is normal for the industry.

For amounts at balance date still subject to price adjustments due to the quotational period remaining open, a final settlement price is estimated based on the closing LME (London Metals Exchange) copper price on the final day of the month. This revaluation is performed up until the final invoice is received. The actual settlement price may vary from this estimate.

(ii) Sale of goods – gold laterite ore

Sales of gold laterite are recognised when the ore is presented for processing. Revenue is based on recovery grades and prevailing gold prices at the time of final production.

(iii) Interest income

Income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income 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. Interest income is included in finance income in the income statement.

(iv) Rendering of services

Revenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the reporting date.

(h) Cash and cash equivalents

Cash and cash equivalents in the statement of financial position and statement of cash flows comprise cash at bank and on hand and short-term deposits that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(i) Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. Provisional payments in relation to trade receivables are due for settlement within 30 days from the date of recognition, with any mark to market adjustment due for settlement usually from 60-90 days. Sales of direct shipping ore and gold laterite are recognised in accordance with note 2(g).

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 is recognised when there is objective evidence that the Group will not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 90 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the impairment is recognised in the income statement.

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• 43 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(j) Inventories

Stores and consumables and ore are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed indirect expenditure.

Costs are assigned to individual items of inventory on the basis of weighted average costs. Cost includes direct material, waste removal including amortisation (refer accounting policy 2(l)), mining, processing, labour, related transportation costs to the point of sale and other fixed and variable costs directly related to mining activities.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Stores and consumables, and ore inventories expected to be processed or sold within twelve months after the balance sheet date, are classified as current assets. All other inventories are classified as non-current assets.

(k) Exploration and evaluation expenditure

Pre-licence costs are expensed in the period in which they are incurred.

Once the legal right to explore has been acquired, exploration and evaluation expenditure incurred on licences where the technical feasibility and commercial viability of extracting mineral resources has not yet been established is expensed as incurred. The directors of the Company generally consider a project to be economically viable on the satisfactory completion of a feasibility study and a JORC reserve estimate.

Exploration and evaluation expenditure include the costs of acquiring and maintaining the rights to explore, investigate, examine and evaluate an area of mineralisation, and assessing the technical feasibility and commercial viability of extracting the mineral resources from that area.

Once the technical feasibility and commercial viability of extracting mineral resources are demonstrable (at which point, the Company considers it probable that economic benefits will be realised), the Company capitalises any further evaluation costs incurred for the particular licence to mine properties.

Cash flows arising from exploration and evaluation expenditure

Cash flows arising from exploration and evaluation expenditure are included in the statement of cash flows as an operating activity.

(l) Mine properties

Mine development

Mine property and development assets are stated at historical cost less accumulated amortisation and any impairment losses recognised. Mine property and development assets include costs incurred in accessing the ore body and costs to develop the mine to the production phase, once the technical feasibility and commercial viability of an ore body has been established.

Overburden and waste removal

Overburden and other waste removal costs (stripping costs) incurred in the development of a surface mine before production commences are capitalised and included as part of mine properties as development phase stripping. These costs include direct costs and an allocation of relevant indirect expenditure.

Stripping costs incurred during the production phase of a surface mine are capitalised when the Group can identify the component of an ore body for which access has been improved and are included as part of mine properties as production phase stripping. These costs include direct costs and an allocation of relevant indirect expenditure.

Amortisation

The Group amortises mine property and development assets from the commencement of commercial production. The amortisation methods adopted by the Group are shown in the table below:

Category	Amortisation method
Mine development	Units of material extracted method over the life of mine.
Development phase stripping	Tonnes of contained copper (direct shipping ore and sulphides) method over the life of
	mine.
Production phase stripping	Tonnes of contained copper (direct shipping ore and sulphide) method, over the
	expected useful life of the identified component of the ore body that becomes more
	accessible as a result of the stripping activity.

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• 44 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(m) Property, plant and equipment

Property, plant and equipment is stated at historical cost, less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items and costs incurred in bringing the asset into use.

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 flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are recognised in the income statement as incurred.

The capitalised value of a finance lease is also included within property, plant and equipment.

Depreciation

The depreciation methods adopted by the Group are shown in table below:

Category Depreciation method Plant and equipment Straight line over the life of the mine/asset (3 to 7 years) Motor vehicles Straight line over the life of the asset (3 to 5 years) Leased equipment Straight line over the life of the asset (3 to 5 years)

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

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

(n) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at inception date, whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

Group as lessee

Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased item to the Group, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the income statement.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and lease term.

Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.

(o) Other financial assets

Initial recognition and measurement

Financial assets within the scope of AASB 139 are classified as financial assets at fair value though profit or loss, loans and receivables, held to maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge relationship, as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.

Subsequent measurement – Available for sale financial investments

Available for sale financial investments include equity investments. Equity investments classified as available for sale are those that are neither classified as held for trading nor designated at fair value through profit and loss.

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• 45 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(o) Other financial assets (continued)

After initial investment, available for sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available for sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available for sale reserve to the income statement. Interest earned whilst holding available for sale financial investments is reported as interest income using the EIR method.

The Group evaluates whether the ability and intention to sell its available for sale financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

For the financial asset reclassified from the available for sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using EIR. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired then the amount recorded in equity is reclassified to the income statement.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• The rights to receive cash flows from the asset have expired.

• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and wither (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assets

The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred since the initial recognition of the asset (as incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

(p) Impairment of non-financial assets

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s (CGU) fair value less costs to sell and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations cover a period of three to seven years.

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• 46 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(p) Impairment of non-financial assets (continued)

Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement in expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGUs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

(q) Trade and other payables

Trade and other payables are carried at amortised cost and due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are generally unsecured and are usually paid within 60 days of recognition.

(r) Interest bearing loans and liabilities

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans and borrowings.

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

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(s) Provisions

General

Provisions are recognised when the Group 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 Group expects some or all of a provision to be reimbursed 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 income statement 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. The discount rate used to determine the present value reflects current market assessments of 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.

(i) Employee leave benefits (wages, salaries, annual leave and sick leave)

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees' services up to the reporting date. 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.

(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 using the projected unit credit method. 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. The Group does not have obligations with respect to long service leave as at 30 June 2013.

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• 47 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(s) Provisions (continued)

(iii) Rehabilitation, restoration and dismantling

The Group records the present value of estimated costs of legal and constructive obligations required to restore and rehabilitate operating locations in the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration, reclamation and re-vegetation of affected areas.

The obligation generally arises when the asset is installed or the ground/environment is disturbed at the production location. When the liability is initially recognised, the present value of the estimated costs is capitalised by increasing the carrying amount of the related assets to the extent that it was incurred by the development/construction of the asset. The capitalised cost of this asset is depreciated over the useful life of the related asset. Rehabilitation and restoration obligations arising from the Group’s exploration activities are recognised immediately in the income statement in accordance with the Group’s accounting policy 2(k).

Over time, the discounted liability is increased for the change in present value based on the discount rates that reflect current market assessments and the risks specific to the liability. The periodic unwinding of the discount is recognised in the income statement as a finance cost. Additional disturbances or changes in rehabilitation costs will be recognised as additions or charges to the corresponding assets and rehabilitation liability when they occur.

The provisions referred to above do not include any amounts related to remediation costs associated with unforeseen circumstances.

(t) Share-based payment transactions

(i) Equity settled transactions

The Group provides benefits to its employees and contractors (including key management personnel) in the form of share-based payments, whereby employees render services in exchange for rights over shares (equity-settled transactions). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of the options granted is measured using the Black-Scholes option pricing model. Further details of which are given in note 22.

In valuing equity-settled transactions, no account is taken of any vesting conditions, other than (if applicable):

• Non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment in equity or cash; and

• Conditions that are linked to the price of the shares of Sandfire Resources NL (market conditions).

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date).

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

• a) The grant date fair value of the award;

• b) The current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and

• c) The expired portion of the vesting period.

The charge to the income statement 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.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition or non-vesting condition is considered to vest irrespective of whether or not that market condition or non-vesting condition is fulfilled, provided that all other conditions are satisfied.

If a non-vesting condition is within the control of the Group or the employee, the failure to satisfy the condition is treated as a cancellation. If a non-vesting condition within the control of neither the Group nor employee is not satisfied during the vesting period, any expense for the award not previously recognised is recognised over the remaining vesting period, unless the award is forfeited.

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.

If an equity-settled award is cancelled, it is treated as if it had 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.

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• 48 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(t) Share-based payment transactions (continued)

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted loss per share (see note 9).

(ii) Cash settled transactions

The Group also provides benefits to employees and contractors (including key management personnel) in the form of cash-settled share-based payments, whereby employees render services in exchange for cash, the amounts of which are determined by reference to movements in the price of the shares of Sandfire Resources NL.

The ultimate cost of these cash-settled transactions will be equal to the actual cash paid to the employees, which will be the fair value at settlement date.

The cumulative cost recognised until settlement is a liability and the periodic determination of this liability is as follows:

• At each reporting date between grant and settlement, the fair value of the award is determined;

• During the vesting period, the liability recognised at each reporting date is the fair value of the award at that date multiplied by the percentage of the vesting period completed;

• From the end of the vesting period until settlement, the liability recognised is the full fair value of the liability at the reporting date; and

• All changes in the liability are recognised in employee benefits expense for the period.

The fair value of the liability is determined, initially and at each reporting date until it is settled, by applying the BlackScholes option pricing model, taking into account the terms and conditions on which the award was granted, and the extent to which employees have rendered service to date (see note 22).

(u) 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.

(v) Income taxes and other taxes

Current tax assets and liabilities for the current period 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 at the reporting date.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting 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 or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of taxable temporary difference associated with investments in subsidiaries, associates and interests in joint ventures, when 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.

Deferred income tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses. Deferred tax assets are recognised 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 tax asset relating to the deductible temporary difference arises from the initial recognition of an 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;

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred 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 tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

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• 49 -

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2013

2 Summary of significant accounting policies (continued)

(v) Income taxes and other taxes (continued)

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in 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 relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

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

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or in profit or loss.

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.

• 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.

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

(w) Earnings per share

Basic earnings per share is calculated as net profit/(loss) attributable to members of the Group divided by the weighted average number of ordinary shares. Diluted earnings per share is calculated by adjusting the net profit/(loss) attributable to members of the Group and the number of shares outstanding for the effects of all dilutive potential ordinary shares, which include share options.

(x) Financial instruments

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if:

• There is a currently enforceable legal right to offset the recognised amounts

• There is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously

Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:

• Using recent arm’s length market transactions

• Reference to the current fair value of another instrument that is substantially the same

• A discounted cash flow analysis or other valuation models

An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 23.

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• 50 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

3 Significant accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources.

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 and may materially affect financial results or the financial position reported in future periods.

Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements.

Rehabilitation, restoration and dismantling provision

The Group assesses its rehabilitation, restoration and dismantling (rehabilitation) provision annually. Significant estimates and assumptions are made in determining the provision for rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases as compared to the inflation rates, and changes in discount rates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required. Changes to estimated future costs are recognised in the statement of financial position by either increasing or decreasing the rehabilitation liability and rehabilitation asset if the initial estimate was originally recognised as part of an asset measured in accordance with IAS 16 Property, Plant and Equipment . Any reduction in the rehabilitation liability and therefore any deduction from the rehabilitation asset may not exceed the carrying amount of that asset. If it does, any excess over the carrying value is taken immediately to profit or loss.

If the change in estimate results in an increase in the rehabilitation liability and therefore an addition to the carrying value of the asset, the entity is required to consider whether this is an indication of impairment of the asset as a whole and test for impairment in accordance with AASB 136. If the revised assets, net of rehabilitation provisions, exceed the recoverable value, that portion of the increase is charged directly to the income statement.

Ore reserve and resource estimates

Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Group’s mining properties. The Group estimates its ore reserves and mineral resources based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgments to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements, and production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body and removal of waste material. Changes in these estimates may impact upon the carrying value of mine properties, property, plant and equipment, provision for rehabilitation, recognition of deferred tax assets, inventory, and depreciation and amortisation charges.

Technical feasibility and commercial viability of extracting mineral resources

The Group assesses a project to be in a development stage when the project is assessed as being technically and commercially viable. The process for determining whether a project is technically and commercially viable involves a number of judgements and estimates, including forecasting metal prices, assessing resource grades and viable methods of extracting the mineral resource. The directors of the Company generally consider a project to be economically viable upon the satisfactory completion of a feasibility study and a JORC reserve estimate.

Impairment of non-financial assets

The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists the recoverable amount of the asset is determined. As at 30 June 2013 the Group assessed that no indication of impairment existed.

Taxation and recovery of deferred tax assets

Judgment is required in determining whether deferred tax assets and certain deferred tax liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits.

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• 51 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

3 Significant accounting judgements, estimates and assumptions (continued)

Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. These depend on estimates of future production and sales volumes, operating costs, restoration costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the statement of comprehensive income.

Share-based payment transactions

The Group measures the cost of equity-settled and cash-settled transactions with employees and contractors (including key management personnel) by reference to the fair value of the instruments. Estimating fair value for share based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the instrument, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 22.

Estimated useful lives of assets

The estimation of the useful lives of assets has been based on historical experience, lease terms (for leased equipment) and turnover policies (for motor vehicles). In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary.

4 Segment information

For management purposes, the Group has four reportable segments as follows:

• The DeGrussa Copper Mine, a copper-gold mine located in the Bryah Basin mineral province of Western Australia, approximately 900 kilometres north-east of Perth and 150 kilometres north of Meekatharra. The DeGrussa Copper Mine generates revenue from the sale of copper-gold products to customers in Asia;

• Exploration, which includes exploration and evaluation of the mineral tenements in Australia and overseas, including exploring for potential repeats of the DeGrussa Volcanogenic Massive Sulphide (VMS) mineralised system at the Doolgunna Project;

• Treasury, which includes realised and unrealised price adjustments, finance income and finance expense; and

• Corporate, which includes all corporate expenses that cannot be directly attributed to the DeGrussa Copper Mine exploration and treasury.

Segment information that is evaluated by key management personnel is prepared in conformity with the accounting policies adopted for preparing the financial statements of the Group.

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• 52 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

4 Segment information (continued)

in $000 Income statement for the year ended 30 June 2013 Sales revenue Net metal and price adjustments gains (losses) Other income Changes in inventories of finished goods and work in progress Mine operations costs Employee benefit expenses Freight, treatment and refining Royalties expense Exploration and evaluation expenses Depreciation and amortisation expenses Share of net loss of associates Impairment expense Other expenses Profit (loss) before net finance and income tax Finance income Finance expense Profit (loss) before income tax Income tax expense Net profit (loss) for the year in $000 Income statement for the year ended 30 June 2012 Sales revenue Net metal and price adjustments gains (losses) Other income Changes in inventories of finished goods and work in progress Mine operations costs Employee benefit expenses Freight, treatment and refining Royalties expense Exploration and evaluation expenses Depreciation and amortisation expenses Share of net loss of associates Impairment expense Other expenses Profit (loss) before net finance and income tax Finance income Finance expense Profit (loss) before income tax Income tax benefit Net profit (loss) for the year	DeGrussa Mine Exploration Corporate Treasury Group
	507,331 - - - 507,331
	(6,878) - - (7,695) (14,573)
	- - - - -
	26,888 - - - 26,888
	(83,412) - - - (83,412)
	(26,459) (8,342) (3,915) - (38,716)
	(78,563) - - - (78,563)
	(20,986) - - - (20,986)
	- (22,079) - - (22,079)
	(123,409) (806) (1,634) - (125,849)
	- - (1,106) - (1,106)
	- - (500) - (500)
	- - (6,299) - (6,299)
	194,512 (31,227) (13,454) (7,695) 142,136
	- - - 3,051 3,051
	- - - (19,519) (19,519)
	194,512 (31,227) (13,454) (24,163) 125,668
	(37,670)
	87,998
	DeGrussa Mine Exploration Corporate Treasury Group
	20,684 - - - 20,684 - - - (326) (326) - - 1,470 - 1,470 5,852 - - - 5,852 (2,920) - - - (2,920) (122) (8,236) (6,628) - (14,986) (3,985) - - - (3,985) (1,263) - - - (1,263) - (26,424) - - (26,424) (3,149) (892) (483) - (4,524) - - (650) - (650) - - (1,463) - (1,463) - - (5,008) - (5,008)
	15,097 (35,552) (12,762) (326) (33,543) - - - 1,217 1,217 - - - (235) (235)
	15,097 (35,552) (12,762) 656 (32,561) 8,678
	(23,883)

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• 53 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

4 Segment information (continued)

Adjustments and eliminations

Deferred taxes are not allocated to individual segments as they are managed on a Group basis.

Segment assets

The Group does not separately disclose assets for its operating segments, as a majority of Group assets are attributable to the DeGrussa Copper Mine segment and the Group does not consider assets attributable to the exploration, corporate and treasury segments to be material.

Information about geographical areas and products

Revenues from external customers Year ended 30 June 2013 Sales of copper in concentrate Sales of gold in concentrate Sales of silver in concentrate Sales of gold in laterite Specimen sales Total sales revenue Year ended 30 June 2012 Sales of copper in concentrate Sales of gold in concentrate Sales of gold in laterite Total sales revenue 5 Sales revenue, realised and unrealised metal and price adjustment gains (losses) Sales revenue Sales of copper in concentrate Sales of gold in concentrate Sales of silver in concentrate Sales of gold in laterite Realised and unrealised metal and price adjustment gains (losses) Copper metal and price adjustment Gold metal and price adjustment Silver metal and price adjustment Copper and gold foreign exchange adjustment	Australia $000 Asia $000 Group $000	Australia $000 Asia $000 Group $000
	- 446,627 446,627
	- 41,349 41,349
	- 1,190 1,190
	18,151 - 18,151
	14 - 14
	18,165 489,166 507,331
	- 17,098 17,098
	- 2,100 2,100
	1,486 - 1,486
	1,486 19,198 20,684
	Note (i) (i) (i) (i)	2013 $000 2012 $000
		446,641 17,098 41,349 2,100 1,190 - 18,151 1,486
		507,331 20,684
		(12,257) (307) (2,365) 31 188 - (139) (50)
		(14,573) (326)

(i) Sandfire delivers concentrate to customers on the industry standard basis using prevailing London Metal Exchange (LME) metal prices.

For those sales based on prevailing LME metal prices, the customer makes a provisional payment to Sandfire against a provisional invoice for the contained copper and precious metal credits (for gold and silver) in the shipment. Final settlement of the payment is based on the average LME metal price over a subsequent pricing period as specified by the terms of the sales contract. The period commencing on the date of shipment to the end of the pricing period is known as the Quotational Period (QP). The QP historically reflects the average time to elapse (usually 2 to 4 months) between the date of shipment and the date of processing by the smelter at final destination. This pricing methodology is normal for the industry. This resulted in an unfavourable $14,573,000 (2012: $326,000) mark-to-market adjustment to profit or loss for the year ended 30 June 2013.

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• 54 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 6 Expenses Profit (loss) before income tax includes the following expenses: Depreciation Plant and equipment Motor vehicles Leased equipment Rehabilitation, restoration and dismantling Less depreciation capitalised to mine properties Total depreciation Amortisation Mine development Development phase stripping Production stripping Rehabilitation, restoration and dismantling Total amortisation Total depreciation and amortisation Lease payments included in statement of comprehensive income Minimum lease payments – operating lease Cost of goods sold Net loss on sale of property, plant and equipment Consultant share-based payments Employee benefits expenses Wages and salaries Defined contribution superannuation expense Employee share-based payments 22 Other employee benefits expense Less employee benefits expenses capitalised to mine properties and property, plant and equipment	2013 $000 2012 $000
	21,336 948 222 311 829 395 1,407 -
	23,794 1,654 (150) (279)
	23,644 1,375 31,809 - 57,289 3,149 12,375 - 732 -
	102,205 3,149
	125,849 4,524
	810 824
	216,322 2,547 - 11 642 - 38,098 21,455 2,854 1,778 (702) 3,643 2,392 1,325
	42,642 28,201 (3,926) (13,215)
	38,716 14,986

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• 55 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

		2013	2012
	Note	$000	$000
7 Finance income (expense)
Finance income
Interest on bank deposits		3,866	2,865
Less interest on bank deposits capitalised to mine properties and property,
plant and equipment		(1,013)	(1,807)
		2,853	1,058
Foreign exchange gain		198	159
		3,051	1,217
Finance (expense)
Interest charges		(22,574)	(12,807)
Less interest charges capitalised to mine properties and property, plant and equipment	(i)	5,865	12,695
		(16,709)	(112)
Foreign exchange loss		(633)	(123)
Unwinding of discount on provisions		(500)	-
Finance establishment costs amortisation		(2,242)	(1,690)
Less finance establishment costs capitalised to mine properties and
property, plant and equipment		565	1,690
		(19,519)	(235)
(i) The Group has capitalised $5,865,000 (2012: $12,695,000) in borrowing costs		to qualifying assets in accordance with the
Group’s accounting policy with respect to borrowing costs (see accounting policy note 2(r)).
8 Income tax
The major components of income tax expense (benefit) are:
Income taxes
Current income tax expense (benefit)		60,123	(34,860)
Under (over) provision for prior year		211	(5,738)
Deferred income tax
Origination and reversal of temporary differences		(22,121)	26,527
Under (over) provision for prior year		(543)	5,393
Income tax expense (benefit) reported in statement of comprehensive income		37,670	(8,678)
Amounts charged (credited) directly to equity
Deferred income tax related to items charged (credited) directly to equity
Share issue costs		(29)	(21)
Income tax expense (benefit) reported in equity		(29)	(21)

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• 56 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

8 Income tax (continued) Reconciliation between tax expense (benefit) recognised in the statement of comprehensive income and tax expense (benefit) calculated per the statutory income tax rate Profit / (Loss) before tax Income tax expense (benefit) using domestic corporate tax rate of 30% (2012: 30%) Increase (decrease) in income tax due to: Non-deductible expenses Movement in unrecognised temporary differences with respect to investments Under (over) provision for prior year Other deductible expenses Income tax expense (benefit)	2013 $000 2012 $000
	125,668 (32,561)
	37,700 (9,768) 51 802 482 633 (332) (345) (231) -
	37,670 (8,678)

Recognised deferred tax assets and liabilities

in $000 Opening balance Charged to income Charged to equity Closing balance Tax expense (benefit) in the statement of comprehensive income Amounts recognised in the statement of financial position: Deferred tax asset Deferred tax liability	2013 2012 Current tax payable Deferred income tax Current tax payable Deferred income tax	2013 2012 Current tax payable Deferred income tax Current tax payable Deferred income tax	2013 2012 Current tax payable Deferred income tax Current tax payable Deferred income tax
	Current tax payable
	-	40,580 - (37,670) - 29 -	31,881 8,678 21
	-
	-
	-	2,939 -	40,580
		37,670 2,939 - 2,939	(8,678) 40,580 -
			40,580

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• 57 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

8 Income tax (continued) Deferred income tax at 30 June relates to the following: Deferred tax liabilities Mine properties Property, plant & equipment Other Gross deferred tax liabilities Set-off of deferred tax assets Net deferred tax liabilities Deferred tax assets Employee benefits provision Inventories Other payables and accruals Rehabilitation, restoration and dismantling provision Share issue costs reflected in equity Revenue losses available for offset against future taxable income Unused tax credits Unrealised metal and price adjustments Other Gross deferred tax assets Set-off of deferred tax assets Net deferred tax assets	2013 $000 2012 $000
	17,607 36,020 4,236 3,069 58 60
	21,901 39,149
	21,901 39,149
	- -
	645 393 1,980 1,483 327 770 6,796 4,479 741 1,147 10,957 71,359 495 - 2,856 - 43 98
	24,840 79,729
	21,901 39,149
	2,939 40,580

Unrecognised temporary difference

The company has temporary differences for which no deferred tax asset is recognised in the statement of financial position of $1,123,000 (2012: $642,000) that have not been recognised as the statutory requirements for recognising those deferred tax assets has not been met.

The current tax liability on taxable income has been reduced $nil for the year ended 30 June 2013 as it has been offset in full against carry forward losses from prior periods that were previously brought to account as deferred tax assets.

9 Earnings per share

Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

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

Net profit (loss) attributable to ordinary equity holders 87,998 (23,883)

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• 58 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

9 Earnings per share (continued) Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Share options Weighted average number of ordinary shares adjusted for the effect of dilution Note 10 Cash and cash equivalents Cash at bank and on hand Debt service reserve account (i) Cost overrun account (ii)	2013 Number 2012 Number
	153,081,977 150,712,453 266,136 -
	153,348,113 150,712,453
	2013 $000 2012 $000
	7,070 72,389 50,000 8,000 20,000 20,000
	77,070 100,389

Under the terms and conditions of the Group’s Project Loan Facility (see note 17), the Group must maintain:

• (i) A cash debt service reserve amount equal to or greater than the next quarter’s scheduled amortisation payment and projected interest payment; and

• (ii) A cost overrun account, to only be withdrawn and used as a contingency in the event of a cost overrun to achieve project (DeGrussa Copper Mine) completion as defined by the Group’s Finance Facilities. Following project completion a minimum of $20 million is to be held in the proceeds account, until the final repayment date, being 31 December 2015 (see note 17).

11 Trade and other receivables

Current Trade receivables Other receivables Non-current Security and environmental bonds	6,151 2,382 2,340 4,633
	8,491 7,015
	84 3

All amounts are not considered past due or impaired. It is expected that these amounts will be received when due. The Group does not hold any collateral in relation to these receivables.

See note 23 on credit risk of trade receivables to understand how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.

12 Inventories Current Concentrate Ore stockpiles – copper sulphide Stores and consumables Non-current Ore stockpiles – oxide copper	14,566 6,863 18,930 - 5,011 391
	38,507 7,254
	11,698 6,233

All inventories are valued at cost.

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• 59 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

13 Mine properties

Mine property and development assets include costs incurred in accessing the ore body and costs to develop the mine to the production phase, once the technical feasibility and commercial viability of a mining operation has been established.

Reconciliation of the carrying amounts for each class of mine properties is set out below:

At 1 July 2012 net of accumulated amortisation Additions Disposals Amortisation Transfers to property, plant and equipment (note 14) At 30 June 2013 net of accumulated amortisation At 30 June 2013 Cost Accumulated amortisation Net carrying amount	Mine development $000 Development phase stripping $000 Production Stripping $000	Rehabilitation, restoration and dismantling $000 Total $000
	106,172 39,669 12,375	5,454 163,670
	104,937 17,620 -	320 122,877
	- - -	- -
	(31,809) (57,289) (12,375)	(732) (102,205)
	(6,590) - -	- (6,590)
	172,710 - -	5,042 177,752
	204,519 60,438 12,375	5,774 283,106
	(31,809) (60,438) (12,375)	(732) (105,354)
	172,710 - -	5,042 177,752

At 1 July 2011 net of accumulated amortisation Additions Disposals Amortisation At 30 June 2012 net of accumulated amortisation At 30 June 2012 Cost Accumulated amortisation Net carrying amount	Mine development $000 Development phase stripping $000 Production Stripping $000 Rehabilitation, restoration and dismantling $000 Total $000
	18,574 4,408 - 874 23,856 87,598 38,410 12,375 4,580 142,963 - - - - - - (3,149) - - (3,149)
	106,172 39,669 12,375 5,454 163,670
	106,172 42,818 12,375 5,454 166,819 - (3,149) - - (3,149)
	106,172 39,669 12,375 5,454 163,670

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• 60 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

14 Property, plant and equipment

Reconciliation of the carrying amounts for each class of property, plant and equipment is set out below:

At 1 July 2012 net of accumulated depreciation Additions Disposals Transfers from mine properties (note 13) Transfers Depreciation At 30 June 2013 net of accumulated depreciation At 30 June 2013 Cost Accumulated depreciation Net carrying amount At 1 July 2011 net of accumulated depreciation Additions Disposals Transfers Depreciation At 30 June 2012 net of accumulated depreciation At 30 June 2012 Cost Accumulated depreciation Net carrying amount		Plant and equipment $000 Motor vehicles $000 Leased equipment $000 Assets under construction $000	Rehabilitation, restoration and dismantling $000	Total $000
		2,548 513 2,193 187,504	9,474	202,232
		256 74 1,467 52,193	6,906	60,896
		- - - -	-	-
		6,324 266 - -	-	6,590
		235,561 (589) 47 (235,019)	-	-
		(21,336) (222) (829) -	(1,407)	(23,794)
		223,353 42 2,878 4,678	14,973	245,924
		246,622 1,227 4,197 4,678	16,380	273,104
		(23,269) (1,185) (1,319) -	(1,407)	(27,180)
		223,353 42 2,878 4,678	14,973	245,924
		Plant and equipment $000 Motor vehicles $000 Leased equipment $000 Assets under construction $000	Rehabilitation, restoration and dismantling $000	Total $000
		1,899 718 1,274 33,538 1,599 119 1,408 153,966 (2) (13) (94) - - - - - (948) (311) (395) -	159 9,315 - - -	37,588 166,407 (109) - (1,654)
		2,548 513 2,193 187,504	9,474	202,232
		4,481 1,476 2,683 187,504 (1,933) (963) (490) -	9,474 -	205,618 (3,386)
		2,548 513 2,193 187,504	9,474	202,232

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• 61 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

15 Other financial assets Available for sale investment – Breakaway Resources Ltd Acquisition at cost Impairment Closing carrying amount Investment in associate - White Star Resources Ltd Movement in carrying amount of investment Acquisition at cost Share of losses after income tax Share of movement in reserves Impairment Closing carrying amount	2013 $000 2012 $000
	600 - (417) -
	183 -
	- 1,189 1,189 3,325 (1,106) (650) - (23) (83) (1,463)
	- 1,189
	183 1,189

Breakaway Resources Limited

The Group has a 6.3% interest in Breakaway Resources Ltd (ASX: BRW) whose principal activities are the exploration for gold, nickel and copper in Queensland and Western Australia.

For available for sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. The determination of what is “significant” or “prolonged” requires judgement. In making this judgement, the Group evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.

Based on these criteria, the Company identified an impairment of $417,000 on the available for sale investment – Breakwater Resources Limited. The impairment on available for sale financial investments is recognised within impairment expense in the consolidated statement of comprehensive income.

White Star Resources Limited

The Group has a 17.4% interest in junior explorer White Star Resources Ltd (ASX: WSR), a South American-focused copper-gold explorer. The Group was issued 26.5 million shares at $0.07 per share, for a total cost of $1.855 million, as part of the $7.28 million share placement undertaken by White Star to sophisticated investors. In addition, the Group was issued with 17 million White Star shares and 14.5 million options with an exercise price of $0.20 per share and an expiry date of 30 April 2014 as part of Technical Services Agreement between the companies, recognising $1.47 million as other income in the year ended 30 June 2012.

The share price of White Star as at 30 June 2013 was $0.006. The Group accounts for the investment in White Star using the equity method of accounting.

The share of losses after income tax of $1,106,000 (2012: $650,000) represents the Group’s share of the net loss after tax of White Star after adjustments to expense capitalised exploration expenditure recognised by White Star, in accordance with the Group’s accounting policy (see policy note 2(o)).

At the date of this report, White Star has not completed its full year financial statements as at 30 June 2013 and therefore summarised financial information on White Star at 30 June 2013 is not included in these financial statements. The following information is based on the White Star interim financial statements for the half year ended 31 December 2012, which are White Star’s latest auditor reviewed financial statements:

in $000	Assets	Liabilities	Revenue	Net loss after tax
White Star Resources Ltd	4,999	353	127	(4,688)

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• 62 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 16 Trade and other payables Current Trade payables and accruals Other payables Interest payable 17 Related party payables – cash-settled share-based payments 22 Related party payables – KMP related entities 21 Non-current Related party payables – cash-settled share-based payments 22	2013 $000 2012 $000
	43,276 43,169 31 3,028 87 1,944 207 1,485 331 -
	43,932 49,626
	553 1,383

Terms and conditions of the above financial liabilities:

• Trade payables and accruals are non-interest bearing and are normally settled on 60-day terms.

• Other payables are non-interest bearing and have an average term of three months.

• Interest payable relates to the Group’s DeGrussa Project Loan Facility and is normally settled quarterly throughout the financial year. Refer to note 17 for details.

• For terms and conditions relating to cash-settled share-based payments, refer to note 22.

• For terms and conditions relating KMP related entities, refer to note 21.

• For explanations on the Group’s credit risk management processes, refer to note 23.

17 Interest-bearing liabilities

Current interest-bearing loans and borrowings Obligations under finance leases and hire purchase contracts Insurance premium funding Secured bank loan DeGrussa Project Loan Facility (i) Capitalised finance establishment costs (net of amortisation) offset against Project Loan Facility Total current interest-bearing loans and borrowings Non-current interest-bearing loans and borrowings Obligations under finance leases and hire purchase contracts Secured bank loan DeGrussa Project Loan Facility (i) Capitalised finance establishment costs (net of amortisation) offset against Project Loan Facility Total non-current interest-bearing loans and borrowings (i) Finance facilities The Group has access to the following facilities: DeGrussa Project Loan Facility Bond Facility Facilities utilised at reporting date: DeGrussa Project Loan Facility Bond Facility Facilities not utilised at reporting date: DeGrussa Project Loan Facility Bond Facility	1,024 649 1,133 630 165,000 95,000 (3,251) (2,133)
	163,906 94,146
	1,906 1,744 120,000 255,000 (2,364) (5,725)
	119,542 251,019
	285,000 380,000 10,000 10,000
	295,000 390,000
	285,000 350,000 4,145 4,250
	289,145 354,250
	- 30,000 5,855 5,750
	5,855 35,750

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• 63 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

17 Interest-bearing liabilities (continued)

Finance facilities - Project Loan Facility

The Group’s financing arrangements are provided under a secured loan facility with the Group’s bankers and are secured by a fixed and floating charge over the Group’s assets, including the DeGrussa Project and the broader Doolgunna Project, and a mining mortgage over the Project tenements. The full $295 million facility, which includes $10 million relating to bonding, was designed to underpin the Group’s construction and development of its DeGrussa Copper Mine in Western Australia.

The Group completed the final drawdown under the Project Loan Facility, totaling $30 million in August 2012. The facility is repayable in set quarterly installments (repayments commenced on 31 March 2013) and is to be fully repaid by 31 December 2015.

The bond facility is drawn in the form of bank guarantees to the relevant State Government for environmental restoration and property managers for security deposits and does not involve the provision of funds.

Interest rate and liquidity risk

Information regarding interest rate and liquidity risk exposure is set out in note 23.

18 Provisions Current Employee benefits Obsolete stock Non-current Rehabilitation, restoration and dismantling	2013 $000 2012 $000
	2,151 1,311 209 -
	2,360 1,311
	22,654 14,929

Movement in provisions

Movements in each class of provision during the financial year are set out below:

At 1 July 2012 Arising during the year Utilised Unwinding of discount At 30 June 2013	Employee benefits $000 Obsolete stock $000 Rehabilitation, restoration and dismantling $000 Total $000
	1,311 - 14,929 16,240
	2,368 209 8,225 10,802
	(1,528) - - (1,528)
	- - (500) (500)
	2,151 209 22,654 25,014

19 Issued capital Ordinary and paid up capital	2013 $000 2012 $000
	219,391 213,007

Issued ordinary shares

The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Group’s residual assets. Ordinary shares have no par value.

Movement in ordinary shares on issue On issue at 1 July Conversion of options to shares On issue at 30 June	2013 Number 2012 Number
	151,237,635 149,384,969 4,403,333 1,852,666
	155,640,968 151,237,635

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• 64 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

19 Issued capital (continued)

Posco Australia Pty Ltd (POSA)

Australian Securities Exchange (ASX) has granted the Company a waiver from listing rule 6.18 to the extent necessary to permit the Company to give POSA the right to maintain its percentage interest in the issued capital of the Company by participating in any issue of shares or subscribing for shares (the “Top-Up Right”) in respect of a diluting event, subject to the following conditions:

• (i) The Top-Up Right lapses if POSA’s percentage holding in the Company falls below 10%;

• (ii) The Top-Up Right lapses if the strategic relationship between the Company and POSA ceases or changes in such a way that it effectively ceases;

• (iii) The Top-Up Right may only be transferred to an entity in the wholly owned group of POSA;

• (iv) Any securities issued under the Top-Up-Right are offered to POSA for cash consideration that is no more favourable than offered to third parties; and

• (v) The number of securities that may be issued to POSA under the Top-Up Right in the case of any diluting event must not be greater than the number required in order for POSA to maintain its percentage holding immediately before the diluting event.

Movement in shares under option

Movement in shares under option
Options expiring on or before Note	Exercise Price On issue 30 Jun 12 Issued Exercised On issue 30 Jun 13
6 July 2012 12 July 2013 12 July 2013 12 July 2013 27 November 2014 27 November 2014 27 November 2014 15 June 2015 15 June 2015 15 June 2015 28 February 2016 (i) 28 February 2016 (i) 28 February 2016 (i)	$1.40 320,000 - (320,000) - $0.60 1,010,000 - (1,010,000) - $0.80 980,000 - (980,000) - $1.00 1,600,000 - (1,600,000) - $4.66 330,000 - (20,000) 310,000 $5.44 330,000 - (20,000) 310,000 $6.22 330,000 - (20,000) 310,000 $3.80 266,666 - (233,333) 33,333 $4.40 333,333 - (200,000) 133,333 $5.00 333,335 - - 333,335 $9.00 1,249,995 500,000 - 1,749,995 $10.30 1,249,998 416,667 - 1,666,665 $11.70 1,250,007 333,333 - 1,583,340
	9,583,334 1,250,000 (4,403,333) 6,430,001

(i) The options were issued to senior employees and officers of the Group. Refer to note 22 for details.

Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong liquidity position in order to support its business and maximise shareholder value.

The Group manages and makes adjustments to its capital structure in light of changes in economic conditions. In order to maintain or adjust the capital structure, the Group may for example return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group has a $285 million secured loan facility, secured by a fixed and floating charge over the Group’s assets, including the DeGrussa Project and the broader Doolgunna Project, to underpin the construction and development of its DeGrussa Copper Mine in Western Australia (see note 17).

The directors have not recommended the declaration of a dividend and no dividends were paid or declared by the Company during the current or previous financial year.

The Group is not subject to externally imposed capital requirements other than restrictions relating to the Company’s finance facilities as disclosed in this report (see note 17).

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• 65 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 20 Cash flow statement reconciliation Cash and cash equivalents in the statement of cash flows 10 Reconciliation of cash flows from operating activities Profit (loss) for the period Adjusted for: Loss on sale of assets Depreciation and amortisation included in statement of comprehensive income Capitalised interest revenue Interest and other costs of finance paid Share based payments (credit) expense Unrealised price adjustments and FX adjustments Income tax expense (benefit) Other non cash items Operating loss before changes in working capital and provisions Change in assets and liabilities: Decrease (increase) in trade and other receivables Decrease (increase) in prepayments Decrease (increase) in inventories (Increase) decrease in trade and other payables (Increase) decrease in interest bearing liabilities (Increase) decrease in provisions Net cash inflow (outflow) from operating activities Non cash financing and investing activities Equity-settled employee share-based payments capitalised to mine properties 22	2013 $000 2012 $000
	77,070 100,389
	87,998 (23,883) - 11 125,849 4,524 1,013 1,807 16,709 112 (1,148) 553 9,519 - 37,670 (8,678) 3,992 140
	281,602 (25,414) (11,785) (4,706) (868) (702) (36,446) (6,242) 15,712 155 503 308 1,512 276
	250,230 (36,325)
	- 242

21 Related party disclosures

The consolidated financial statements include the financial statements of the Company and the subsidiaries listed in the following table:

the following table:
Name Note Country of incorporation SFR Copper & Gold Peru S.A. (i) Peru	% equity interest
	2013 2012 100.00 100.00

(i) The wholly owned subsidiary was formed and incorporated by the Company on 11 April 2012.

The ultimate parent

Sandfire Resources NL is the ultimate parent based and listed in Australia.

Associate

White Star Resources Ltd

The Group has a 17.4% interest in White Star Resources Ltd (White Star) (2012: 17.4%). Refer to note 15 for details.

Information relating to Sandfire Resources NL (the ‘Parent entity’)

The results and financial position of the Group for the financial year ended 30 June 2013 and financial year ended 30 June 2012 represent that of the Parent entity.

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• 66 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

21 Related party disclosures (continued)

Compensation of key management personnel of the Group

Compensation of key management personnel of the Group
Short-term employee benefits Post-employment benefits Share-based payments Total compensation	2013 $ 2012 $
	3,574,495 3,104,485 101,686 89,414 (1,018,609) 3,151,044
	2,657,572 6,344,943

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

Option holdings of key management personnel

The movement during the reporting period in the number of options over ordinary shares in Sandfire Resources NL held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

Executive directors Karl M Simich W John Evans Other key management personnel Martin Reed B Matthew L Fitzgerald Robert Klug	Balance at 1 Jul 12 Granted as remuneration Options exercised Other Achanges Held on resignation Balance at 30 Jun 13 Vested and exercisable
	3,000,000 - (2,400,000) - - 600,000 600,000
	1,520,000 - (1,190,000) - - 330,000 330,000
	650,000 - - - 650,000 650,000 650,000
	1,262,500 - - (329,166) - 933,334 667,667
	287,500 500,000 (37,500) - - 750,000 583,333

A Includes off-market transfers and sales.

B Martin Reed has resigned with effect from 30 June 2013.

Non-executive directors Jonghun Jong B Executive directors Karl M Simich W John Evans Other key management personnel Martin Reed Matthew L Fitzgerald	Balance at 1 Jul 11 Granted as remuneration Options exercised Other A changes Held on resignation Balance at 30 Jun 12 Vested and exercisable
	60,000 - - - 60,000 - - 3,000,000 - - - - 3,000,000 2,800,000 1,520,000 - - - - 1,520,000 1,410,000 650,000 - - - - 650,000 166,666 1,312,500 - - (50,000) - 1,262,500 329,166

A Includes off-market transfers and sales.

B Mr Jong resigned 28 February 2012.

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• 67 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

21 Related party disclosures (continued)

Shareholdings of key management personnel

The movement during the reporting period in the number of ordinary shares in Sandfire Resources NL held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

	Balance at		Exercise of		Held on	Balance at
	1 Jul 12	Purchases	options	Sales	resignation	30 Jun 13
Non-executive directors
Derek La Ferla	21,668	-	-	-	-	21,668
Robert N Scott	5,000	-	-	-	-	5,000
Executive directors
Karl M Simich	3,909,735	-	2,400,000	(300,000)	-	6,009,735
W John Evans	860,215	-	1,190,000	(735,000)	-	1,315,215
Other key management
personnel
Martin Reed A	6,733	-	-	-	-	6,733
Matthew L Fitzgerald	19,000	-	-	(19,000)	-	-
Robert Klug	-	-	37,500	(35,500)	-	2,000
A Martin Reed has resigned with effect from 30 June 2013.

Non-executive directors Derek La Ferla Robert N Scott Executive directors Karl M Simich W John Evans Other key management personnel Martin Reed Matthew L Fitzgerald	Balance at 1 Jul 11 Purchases Exercise of options Sales Held on resignation Balance at 30 Jun 12
	21,668 - - - - 21,668 - 5,000 - - - 5,000 3,909,735 - - - - 3,909,735 860,215 - - - - 860,215 6,733 - - - - 6,733 92,483 - - (73,483) - 19,000

Other transactions and balances with key management personnel and their related parties

A number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities and transacted with the Group during the reporting period. The terms and conditions of the transactions with management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length basis. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees received for any related party payables. It is the Company’s policy to avoid related party transactions when possible. The Company’s related party transactions with Resource Development Company Pty Ltd and Tongaat Pty Ltd have existed since the Sandfire Resources NL was a junior explorer.

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• 68 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

21 Related party disclosures (continued)

The aggregate value of transactions and outstanding balances relating to key management personnel and their related entities over which they have control or significant influence were as follows:

KMP and their related entity Transaction Note Derek La Ferla– Norton Rose Australia Corporate and legal services (i) Karl M Simich– Tongaat Pty Ltd Lease of corporate office parking premises (ii) Karl M Simich– Resource Development Company Pty Ltd Lease of corporate office parking premises (iii) Karl M Simich– Resource Development Company Pty Ltd Corporate and financial services (iv)	Transactions value year ended 30 June Balance outstanding as at 30 June 2013 $ 2012 $ 2013 $ 2012 $
	- 9,266 - - 12,600 12,600 - - 12,600 6,300 - - 567,476 587,025 - -
	592,676 615,191 - -

Notes to the other transactions and balances with key management personnel and their related parties table

(i) $nil (2012: $9,266) was charged to the Group by Norton Rose Australia, of which Derek La Ferla is a partner, for the provision of corporate and legal services.

(ii) $12,600 (2012: $12,600) was charged to the Group by Tongaat Pty Ltd for the lease of corporate office parking, including variable outgoings.

• (iii) $12,600 (2012: $6,300) was charged to the Group by Resource Development Company Pty Ltd for the lease of corporate office parking, including variable outgoings.

• (iv) $567,476 (2012: $587,025) was charged to the Group by Resource Development Company Pty Ltd, of which Karl M Simich is a director, for the provision of corporate and financial services by RDC’s professionally qualified personnel.

22 Share-based payments

Recognised share-based payments

Details of share-based payments recognised during the current and previous financial year are shown in the following table:

Details of share-based payments recognised during the current and previous table:	financial year are shown in the following
Note Equity-settled employee share-based payments 22(a) Equity-settled consultant share-based payments 22(a) Cash-settled employee share-based payments 22(b) Total arising from share-based payments	2013 $000 2012 $000
	317 795 642 - (1,019) 2,848
	(60) 3,643

Types of share-based payment plans

The Company’s share-based payment plans were introduced to promote continuity of employment/service and provide additional incentive to employees, contractors and consultants, including key management personnel (KMP), to increase shareholder wealth. Rights and options under these plans are provided to KMP and staff based on their level of seniority and position within the Group and options may only be issued to directors subject to approval by shareholders in general meeting. The share-based payment plans are described below.

(a) Equity-settled employee share-based payments

Long-term Incentive Option Plan

The long-term Incentive Option Plan (IOP) provides for selected employees, contractors and consultants, including KMP, to be offered the opportunity to subscribe for options over ordinary fully paid shares each year for no consideration. Each option carries the right to subscribe for one fully paid ordinary share in Sandfire Resources NL.

Options under the plan are provided to employees based on their level of seniority and position within the Group. Options may only be issued to directors subject to approval by shareholders in general meeting.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

22 Share based payments (continued)

(a) Equity-settled employee share-based payments (continued)

Under the IOP the Board of directors has the right to issue options on terms and conditions they determine appropriate and in exercising that discretion may give regard to the following:

• the Eligible Participant’s length of service to the Group;

• the contribution made by the Eligible Participant to the Group; and

• the potential contribution of the Eligible Participant to the Group.

The directors may also impose certain conditions, including performance-related and service based conditions, on the right of the participant to exercise any option granted.

There are no voting or dividend rights attached to the options and options issued under the plan are to be issued for no consideration. Voting rights will be attached to the ordinary issued shares when the options have been exercised.

In accordance with the IOP, listed below are the terms and conditions of issues made by the Group during the financial year.

		Exercise	Service based vesting	Contractual
Grant date	Number	price	conditions	life
Option grant to employee on 2 August 2012,	250,000	$9.00	-	3.6 years
expiring 28 February 2016	166,667	$10.30	28 February 2013	3.6 years
	83,333	$11.70	28 February 2014	3.6 years
Option grant to consultant on 21 December 2012,	250,000	$9.00	28 February 2013	3.3 years
expiring 28 February 2016	250,000	$10.30	28 February 2014	3.3 years
	250,000	$11.70	28 February 2015	3.3 years

The options cannot be exercised before the above listed dates (referred to as vesting conditions), except where either of the following events occurs before the relevant vesting condition is satisfied:

• The service of a bidder’s statement or a like document on the Company; or

• The option holder ceases to be an employee or contractor of the Company for any reason (including voluntary or involuntary resignation) (ceasing date); or

• If a merger by way of a scheme of arrangement under the Corporations Act 2001 (Cth) has been approved by the Court under section 411(4)(b) of the Corporations Act 2001 (Cth).

Where an option holder ceases to be an employee or contractor of the Group for any reason (including voluntary or involuntary resignation), the option holder will be entitled to exercise the options granted as a result of the offer in accordance with the terms of the offer, for a period up to 180 days after the ceasing date, after which the option holder’s options will lapse immediately and all rights in respect of those options will thereupon be lost.

Option pricing model

The fair value of options issued are estimated at the date of grant using the Black-Scholes option pricing model and have been recognised over the period in which the minimum service conditions are fulfilled (the vesting period). The following tables set out the assumptions made in determining the fair value of the options granted during the years ended 30 June 2013 and 30 June 2012.

Fair value at grant date Option exercise price Grant date Dividend yield Expected volatility Risk-free interest rate Expected life Share price on date of grant	30 June 2013
	2 August 2012 Employee option grant 21 December 2012 Consultant option grant
	$0.59 $0.62 $0.81 $0.40 $0.96 $1.21
	$9.00 $10.30 $11.70 $9.00 $10.30 $11.70
	2 Aug 12 2 Aug 12 2 Aug 12 12 Dec 12 12 Dec 12 12 Dec 12
	0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
	40.00% 40.00% 40.00% 40.00% 40.00% 40.00%
	3.30% 2.79% 2.79% 2.97% 2.69% 2.69%
	1 year 1.5 years 2.5 years 0.2 years 1.2 years 2.2 years
	$7.05 $7.05 $7.05 $8.49 $8.49 $8.49

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

22 Share-based payments (continued)

(a) Equity-settled employee share-based payments (continued)

Fair value at grant date Option exercise price Grant date Dividend yield Expected volatility Risk-free interest rate Expected life Share price on date of grant	30 June 2012
	9 March 2012 Employee option grant 30 March 2012 Employee option grant
	$0.78 $0.89 $1.32 $0.77 $0.84 $1.29 $9.00 $10.30 $11.70 $9.00 $10.30 $11.70 9 Mar 12 9 Mar 12 9 Mar 12 30 Mar 12 30 Mar 12 30 Mar 12 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 4.51% 3.36% 3.36% 4.28% 3.47% 3.47% 6 months 1 year 2 years 6 months 3 years 2 years $7.90 $7.90 $7.90 $7.89 $7.89 $7.89

The effects of early exercise have been incorporated into the calculations by using an expected life for the option that is shorter than the contractual life based on historical exercise behaviour, which is not necessarily indicative of exercise patterns that may occur in the future.

Movements in the year

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options issued during the current and previous financial years:

Outstanding at 1 July Granted during the year Exercised during the year A Outstanding at 30 June B Exercisable at 30 June	2013 Number 2013 WAEP 2012 Number 2012 WAEP
	9,583,334 $5.40 10,936,000 $4.44 1,250,000 $10.15 500,000 $10.33 (4,403,333) $1.26 (1,852,666) $1.06
	6,430,001 $9.16 9,583,334 $5.40
	4,846,661 $8.33 6,419,994 $3.19

A The weighted average share price at the date of exercise is $7.54 (2012: $6.71).

B The outstanding balance at 30 June 2013 is represented by:

Options expiring on or before	Exercise Price On issue 30 Jun 13
27 November 2014 27 November 2014 27 November 2014 15 June 2015 15 June 2015 15 June 2015 28 February 2016 28 February 2016 28 February 2016	$4.66 310,000 $5.44 310,000 $6.22 310,000 $3.80 33,333 $4.40 133,333 $5.00 333,335 $9.00 1,749,995 $10.30 1,666,665 $11.70 1,583,340
	6,430,001

Weighted average remaining contractual life

The weighted average remaining contractual life for share options outstanding as at 30 June 2013 is 2.43 years (2012: 2.48 years).

Range of exercise price

The range of exercise prices for options outstanding at the end of the year was $3.80 - $11.70 (2012: $0.60 - $11.70). As the range of exercise prices is wide, refer to the above table 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.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

22 Share-based payments (continued)

(a) Equity-settled employee share-based payments (continued)

Weighted average fair value

The weighted average fair value of options granted during the year was $0.77 (2012 $0.98).

(b) Cash-settled employee share-based payments

During the 2011 financial year, the Company’s Remuneration and Nomination Committee approved the Long-term Indexed Bonus Plan (long-term bonus plan) to align the objectives of executive directors with that of the Company.

The Company granted 1,000,000 rights to executive directors in July 2010 and granted a further 2,000,000 rights to executive directors in August 2011.

Rights issued under the plan are long term in nature and have multiple vesting dates, with current rights vesting from 15 June 2011 to 15 December 2016.

The Company sets an initial indexed notional value (INV) for rights issued under the bonus plan. On the first vesting date, the holder of the awards receives, at the Company’s sole discretion, either cash, or subject to any shareholder approval required under the Corporations Act 2001 and the ASX Listing Rules, ordinary shares in the Company for the difference between the 5-day volume weighted average ASX price of underlying Company shares prior to the vesting date (test price), and the INV set when the rights were initially granted. At each subsequent test date, the award is retested, whereby the holder receives the difference between the 5-day volume weighted average ASX price of underlying Company shares prior to the test date and the higher of the initial INV or the highest test price that occurred prior to that date.

Termination and change of control provisions

Participant initiated termination

Where a participant ceases to be an employee or contractor of the Group prior to vesting of their award, all outstanding rights will expire and cease to carry any rights or benefits.

Group initiated termination

Where the engagement or employment is terminated by the Group for reasons other than serious misconduct, the rights will continue to vest for 180 days following the end of the required notice period, with the final vesting date to be the date on which the 180 day notice period expires.

Change of control

In the event of a change of control of the Company, the vesting period will be brought forward to the date of the change of control and awards will automatically vest.

Listed below are the terms and conditions of rights issued by the Company under the long-term indexed bonus plan. No additional rights were issued by the company during the current financial year.

		Indexed
		notional	Initial vesting		Contractual
Grant date	Number	value	date	Test dates	life
Long-term bonus plan grant to	666,666	$9.00	15 June 2013	15 June and 15 December	5 years
executive directors of the Company				from 2013 to 2016
on 8 August 2011, expiring 15 December 2016.	666,667	$10.30	15 June 2014	15 June and 15 December from 2014 to 2016	5 years
	666,667	$11.70	15 June 2015	15 June and 15 December from 2015 to 2016	5 years
Long-term bonus plan grant to	333,332	$3.80	15 June 2011	15 June and 15 December	4 years
executive directors of the Company				from 2011 to 2015
on 2 July 2010, modified on 8 August 2011, expiring 15 December 2015.	333,334	$4.40	15 June 2012	15 June and 15 December from 2012 to 2015	4 years
	333,334	$5.00	15 June 2013	15 June and 15 December from 2013 to 2015	4 years

In accordance with the terms and conditions of the plan, the Company paid $1,089,655 (2012: $846,331) in cashsettled awards for the year ended 30 June 2013, representing vesting of long-term rights. The Company also recognised a credit to expenses of $2,108,264 (2012: expense of $2,001,679) during the current financial year relating to the valuation of the long term rights, in accordance with AASB 2.

Pricing model

The ultimate cost of the rights issued and amended during the period will be equal to the actual cash paid to the participants, which will be the fair value at settlement date.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

22 Share based payments (continued)

(b) Cash-settled employee share-based payments (continued)

The cumulative cost recognised until settlement is recognised as a liability and the periodic determination of this liability is as follows:

• At each reporting date between grant and settlement, the fair value of the award is determined;

• During the vesting period, the liability recognised at each reporting date is the fair value of the award at that date multiplied by the percentage of the vesting period completed;

• From the end of the vesting period until settlement, the liability recognised is the full fair value of the liability at the reporting date; and

• All changes in the liability are recognised in employee benefits expense for the period.

The fair value of the liability is determined, initially and at each reporting date until it is settled, by applying the BlackScholes option pricing model, taking into account the terms and conditions on which the award was granted.

The following table sets out the assumptions made in determining the fair value of the rights granted and modified during the current financial year.

Fair value at reporting date Notional value or test price Dividend yield Expected volatility Risk-free interest rate Expected life (years) Share price at reporting date	Granted (2 Jul 2012) Modified (8 Aug 2011) Granted (8 Aug 2011)
	Tranche 1 Tranche 2 Tranche 3 Tranche 1 Tranche 2 Tranche 3
	$0.04-$0.63 $0.04 - $0.63 $0.23 - $1.03 $0.01 - $0.75 $0.05 - $0.58 $0.16 - $0.45
	(a)$8.04 (a)$8.04 (b)$6.21 $9.00 $10.30 $11.70
	0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
	40.00% 40.00% 40.00% 40.00% 40.00% 40.00%
	2.58 – 2.76% 2.58 – 2.76% 2.58% 2.58 – 2.76% 2.58 – 2.76% 2.58 – 2.76%
	0.5 – 2.5 0.5 – 2.5 0.5 – 2.0 1.0 – 3.5 1.0 – 3.5 2.0 – 3.5
	$5.12 $5.12 $5.12 $5.12 $5.12 $5.12

(a) Calculated as the 5-day volume weighted average ASX price of underlying Company shares prior to the initial vesting date of 15 December 2012.

(b) Calculated as the 5-day volume weighted average ASX price of underlying Company shares prior to the initial vesting date of 15 June 2013.

23 Financial risk management objectives and policies

The Group’s principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal financial assets comprise trade and other receivables, and cash and short-term deposits that arise directly from its operations.

The Group’s activities expose it to a variety of financial risks such as:

• Market risk consisting of commodity price risk, foreign currency exchange risk and interest rate risk;

• Credit risk; and

• Liquidity risk.

This note presents information about the Group’s exposure to each of the above risks and the objectives, policies and processes the Group uses to measure and manage these risks.

Primary responsibility for the identification and control of these financial risks rests with the Group’s senior management. The Group’s senior management is supported by the Audit and Risk Committee under the authority of the Board. The Audit and Risk Committee provides assurance to the Board that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite.

The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rates via assessments of market forecasts for interest rates and monitoring liquidity risk through the development of future rolling cash flow forecasts.

As at 30 June 2013, the Group did not use any form of derivatives to hedge its exposures. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices for the Group comprise three types of risk: interest rate risk, currency risk and commodity price risk. Financial instruments affected by market risk include loans and borrowings, trade receivables and cash and short-term deposits.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

23 Financial risk management objectives and policies (continued)

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s current and non-current debt obligations with floating interest rates. The Group is also exposed to interest rate risk on its cash and short-term deposits.

At 30 June 2013 the interest rate profile of the Group’s interest-bearing financial instruments was:

Financial assets Cash and cash equivalents Financial liabilities Interest bearing liabilities	Average interest rate % Variable interest rate $000	Fixed interest rate maturity Less than 1 year $000 1 to 5 years $000 More than 5 years $000 Total $000
	3.04 77,070	- - - 77,070
	5.90 285,000	2,157 1,906 - 289,063

At 30 June 2012 the interest rate profile of the Group’s interest-bearing financial instruments was:

Financial assets Cash and cash equivalents Financial liabilities Interest bearing liabilities	Average interest rate % Variable interest rate $000	Fixed interest rate maturity Less than 1 year $000 1 to 5 years $000 More than 5 years $000 Total $000
	3.39 100,389	- - - 100,389
	6.34 350,000	1,279 1,744 - 353,023

The following table demonstrates the sensitivity of pre-tax losses and equity to a reasonably possible change in interest rates by +0.25%/-0.50% as at 30 June 2013 (2012: +0.25%/-0.50%) with all other variables held constant. The exposure is mainly as a result of borrowings and cash at bank at floating rates.

0.25% increase (2012: 0.25% increase) 0.50% decrease (2012: 0.50% decrease)	Pre-tax loss higher (lower) Equity higher (lower)
	2013 $000 2012 $000 2013 $000 2012 $000
	(520) - - 624 1,004 - - (1,248)

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in different currency from the Group’s functional currency), primarily with respect to the Australian dollar.

As at 30 June 2013, the Group did not use any form of derivatives to hedge its exposure to foreign currency risk.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

23 Financial risk management objectives and policies (continued)

The following tables demonstrate the sensitivity of pre-tax losses and equity to a reasonably possible change in the US dollar and AUD exchange rate by +10%/-10% as at 30 June 2013 (2012: +10%/-10%), with all other variables held constant.

10% increase (2012: 10%) 10% decrease (2012: 10%)	Pre-tax loss higher (lower)	Equity higher (lower)
	2013 $000 2012 $000	2013 $000 2012 $000
	(412) (115) 454 126	(288) (115) 318 126

The impact on the Group’s loss before tax is due to changes in the fair value of trade receivables designated in US dollars.

Commodity price risk

The Group is exposed to commodity price volatility on sales made by its DeGrussa Copper Mine, which are priced on, or benchmarked to, open market exchanges. As at 30 June 2013 and 30 June 2012, the Group did not use any form of derivatives to hedge its exposure to commodity price risk.

At reporting date, if commodity prices increased/decreased by +10%/-10% from the 30 June 2013 LME (London Metals Exchange) closing prices (2012: +10%/-10%), pre-tax losses and equity for the year would have been impacted due the provisionally priced sales contract outstanding at year end (see note 5), as per the table below:

10% increase (2012: 10%) 10% decrease (2012: 10%)	Pre-tax loss higher (lower) Equity higher (lower)
	2013 $000 2012 $000 2013 $000 2012 $000
	7,792 1,823 5,454 1,823 (7,792) (1,823) (5,454) (1,823)

In accordance with Australian Accounting Standards, the sensitivity analysis includes the impact of the movement in commodity prices only on the outstanding trade receivables at the end of the year being $4,535,000 (2012: $2,382,000) and does not include the impact of the movement in commodity prices on the total sales for the year.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (trade receivables) and from its financing activities, including deposits with banks and financial institutions. At the reporting date, the carrying amount of the Group’s financial assets represents the maximum credit exposure.

The credit risk on cash and cash equivalents is managed by restricting dealing to banks which are assigned high credit ratings by international credit rating agencies.

Credit risk in trade receivables is managed by the Group by undertaking a regular risk assessment process including assessing the credit quality of the customer, taking into account its financial position, past experience and other factors. As there are a relatively small number of transactions, they are closely monitored to ensure payments are made on time. Credit risk arising from sales to customers is managed by contracts that stipulate a provisional payment of at least 90 per cent of the estimated value of each sale. This is payable promptly after vessel loading. The balance outstanding is received within 60 days of the vessel arriving at the port of discharge. Additionally, several sales are covered by letter of credit arrangements with approved financial institutions.

The Group does not have any significant receivables which are past due at the reporting date.

Liquidity risk

Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet its obligations to repay financial liabilities as and when they fall due.

The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages liquidity risk by conducting regular reviews of the timing of cash flows in order to ensure sufficient funds are available to meet these obligations.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

23 Financial risk management objectives and policies (continued)

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

undiscounted cash flows.
Note Year ended 30 June 2013 Trade and other payables 16 DeGrussa Project Loan Facility 17 Other interest bearing liabilities 17 Year ended 30 June 2012 Trade and other payables 16 DeGrussa Project Loan Facility 17 Other interest bearing liabilities 17	Within 6 months $000 6 to 12 months $000 1 to 5 years $000 Total $000
	43,881 51 553 44,485
	92,354 84,594 124,842 301,790
	1,675 677 2,044 4,396
	137,910 85,322 127,439 350,671
	48,141 1,485 1,383 51,009 12,145 105,445 298,652 416,242 961 500 1,878 3,339
	61,247 107,430 301,913 470,590

Finance Facilities

The Group’s financing arrangements are provided under a secured loan facility with the Group’s bankers and are secured by a fixed and floating charge over the Group’s assets, including the DeGrussa Project and the broader Doolgunna Project, and a mining mortgage over the Project tenements. The full $295 million facility, which includes $10 million relating to bonding, was designed to underpin the Group’s construction and development of its DeGrussa Copper Mine in Western Australia.

The Group completed the final drawdown under the Project Loan Facility, totaling $30 million in August 2012. The facility is repayable in set quarterly installments (repayments commenced on 31 March 2013) and is to be fully repaid by 31 December 2015.

The bond facility is drawn in the form of bank guarantees to the relevant State Government for environmental restoration and property managers for security deposits and does not involve the provision of funds.

Fair value

The carrying amount of all financial assets and financial liabilities recognised in the Balance Sheet approximates their fair value.

24 Contingent liabilities and commitments

Contingent liability - DeGrussa DSO Royalty Rate

The Western Australian Department of Mines and Petroleum has advised Sandfire of its determination that a royalty rate of 7.5% applies to the Direct Shipping Ore (“DSO”) sold from its DeGrussa Copper Mine. This is based on an assessment that it is “other crushed and screened material” under the applicable Regulations.

The Company was invited to, and made, a submission to the Western Australian Minister for Mines and Petroleum to present an alternative interpretation of the Regulations. This submission was part of a process aimed at finally determining the royalty rate which should apply to the DSO.

Sandfire contends that under the Regulations, a maximum royalty rate of 5 per cent applies to the sale of copper material, applying to copper sold as concentrate. Sandfire has submitted that the royalty rate of 5 per cent apply to its DSO which it contends has been sold as concentrate. Sandfire has received legal advice in this regard. Sandfire has expensed royalties based on the 5 per cent rate.

Sandfire believes it probable that a rate of 5 per cent will ultimately be determined to be applicable consistent with its royalty expense. However, as the additional 2.5 per cent liability is considered a possible result following full and proper determination by other parties, an amount of $5.5 million exists at balance date, as a contingent liability, representing the potential additional 2.5 per cent royalty from the period from the first DSO sale, to 30 June 2013.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

24 Contingent liabilities and commitments (continued)

Operating lease commitments – Group as lessee

The Group leases corporate office, administrative and storage facilities throughout Australia. The leases have varying terms, with options to renew the lease on respective expiry dates. There are no restrictions placed upon the lessee by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

Note Within one year After one year but not more than five years Total minimum lease payments	2013 $000 2012 $000
	759 750 2,811 26
	3,570 776

Finance leases and hire purchase commitments – Group as lessee

The Group has finance leases and hire purchase contracts for various motor vehicles and mobile plant with a carrying amount of $2,878,000 (2012: $2,193,000). These lease contracts expire within two to five years. Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows:

Within one year After one year but not more than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments Included in the financial statements as: Current interest bearing liabilities 17 Non-current interest bearing liabilities 17 Total included in interest-bearing liabilities	1,186 822 2,044 1,878
	3,230 2,700 (300) (307)
	2,930 2,393
	1,024 649 1,906 1,744
	2,930 2,393

Contractual commitments

The Group has entered into a number of key contracts as part of its operation of the DeGrussa Copper Mine located in Western Australia. The minimum expected payments in relation to these contracts which were not required to be recognised as liabilities at 30 June 2013 amount to approximately $5.6 million (undiscounted).

Other Contractual commitments

Posco Australia Pty Ltd (POSA)

On 2 May 2008, the Company entered into a commercial agreement with Posco Australia Pty Ltd (POSA), whereby POSA, or POSA nominated affiliates, has the right to purchase 30% of the Company’s future mineral production, excluding gold and diamond production, at fair market value. The rights under the commercial agreement remain for as long as POSA has at least a 10% holding of Sandfire ordinary shares and entitles POSA to a 7.5% discount on the first $100 million of offtake. A contract for 40,000 tonnes of concentrate up to March 2014 has been entered into, representing an estimated $70 million of product which will result in a $5 million discount in the 2014 financial year.

25 Events after the balance sheet date

There have been no events that have occurred subsequent to the reporting date which have significantly affected or may significantly affect the Group’s operations, results or state of affairs in future periods.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

26 Auditor remuneration

The auditor of Sandfire Resources NL is Ernst & Young.

The auditor of Sandfire Resources NL is Ernst & Young.
Amounts received or due and receivable by Ernst & Young (Australia) for: An audit and review of the financial report of the entity Other services in relation to the entity Taxation services – Research & Development Tax Concession	2013 $ 2012 $
	271,800 232,066
	24,741 31,533
	296,541 263,599

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DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2013

In accordance with a resolution of the directors of Sandfire Resources NL, I state that:

1. In the opinion of the directors:

2. a) the financial statements and notes of Sandfire Resources NL for the financial year ended 30 June 2013 are in accordance with the Corporations Act 2001 , including:

   • (i) Giving a true and fair view of its financial position as at 30 June 2013 and of its performance for the year ended on that date; and

   • (ii) complying with Accounting Standards and the Corporations Regulations 2001 ;

3. b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(a); and

4. 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.

5. This declaration has been made after receiving the declarations required to be made to the directors by the chief executive officer and chief financial officer in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2013.

On behalf of the Board

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Derek La Ferla Non-executive Chairman

Karl M. Simich Managing Director and Chief Executive Officer

West Perth, 28 August 2013

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INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2013

Ernst & Young Tel: +61 8 9429 2222 11 Mount Bay Road Fax: +61 8 9429 2436 Perth WA 6000 Australia ey.com/au GPO Box M939 Perth WA 6843

Independent auditor's report to the members of Sandfire Resources NL

Report on the financial report

We have audited the accompanying financial report of Sandfire Resources NL, which comprises the consolidated statement of financial position as at 30 June 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.

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INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2013

Opinion

In our opinion:

• a. the financial report of Sandfire Resources NL 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 30 June 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 the directors' report for the year ended 30 June 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 Sandfire Resources NL for the year ended 30 June 2013, complies with section 300A of the Corporations Act 2001 .

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Ernst & Young

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D S Lewsen Partner Perth 28 August 2013

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