o p p o r t u n i t y r e d e f i n e d

2 0 1 4 a n n u a l r e p o r t

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co rp o r at e d irec to ry

DIRECTORS

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

MANAGEMENT & COMPANY SECRETARY

Michael Spreadborough Chief Operating Officer Matthew Fitzgerald Chief Financial Officer & Joint Company Secretary Robert Klug Chief Commercial Officer & Joint Company Secretary

PRINCIPAL PLACE OF BUSINESS & REGISTERED OFFICE

Level 1, 31 Ventnor Avenue West Perth WA 6005 T: +61 8 6430 3800 F: +61 8 6430 3849 E: [email protected] W: www.sandfire.com.au

SHARE REGISTRY

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 T: +61 8 9315 2333 F: +61 8 9315 2233 E: [email protected]

AUDITORS

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

HOME EXCHANGE

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

ABN

55 105 154 185

ASX CODE

Ordinary fully paid shares: SFR

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Boa rD o F D Irec to rs (Left to right) Robert Scott, Soocheol Shin, Derek La Ferla, Paul Hallam, Karl Simich, W John Evans.

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Mr Derek La Ferla

Independent Non-Executive Chairman

Qualifications B.Arts, B.Juris, B.Law, Fellow of AICD

Mr La Ferla has been a corporate lawyer for over 25 years and is a partner with international law firm, Norton Rose Fullbright. He is the National team leader for the firm’s Corporate Advisory Group (which includes mining and resources) and the National leader of the Infrastructure, Mining and Commodotres Industry Headlight Group. Mr La Ferla also has considerable experience as a company director and 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.

Mr Karl Simich

Managing Director and Chief Executive Officer

Qualifications B.Com, FCA, F.Fin

Mr Simich is an experienced international mining executive who has been involved in the financing, construction, development and operation of five mining projects in New Zealand, Australia and Africa. Specialising in resource finance and corporate management, Mr Simich has been a Director of and held senior executive positions with a number of ASX-listed mining companies. 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.

Mr W John Evans Non-Executive Director

Qualifications B.Sc

Mr Evans graduated from the University of Auckland New Zealand in 1970 with B.Sc Major in geology. Between 1970 and 1987, he was employed by various divisions of CRA Limited, including being in charge of field operations for iron ore exploration 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.

Mr Robert Scott

Independent Non-Executive Director

Qualifications FCA

Mr Scott is a Chartered Accountant with 35 years experience as an adviser on corporate services and taxation. 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. Mr Scott serves on the boards of Lonestar Resources Limited, Homeloans Limited and Manas Resources Limited.

Mr Soocheol Shin

Non-Executive Director

Qualifications B.A. Public Administration

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.

Mr Paul Hallam

Independent Non-Executive Director

Qualifications BE (Hons) Mining, FAICD, FAusIMM

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.

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s enI o r m a n ag emen t

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Mr Michael Spreadborough Chief Operating Officer

Qualifications BE (Mining) MBA, Member of AICD

Mr Spreadborough is a highly experienced Mining Engineer with over 20 years experience across a range of commodities and sizes of operations including most recently as Chief Operating Officer for Inova Resources Ltd (formerly Ivanhoe Australia Ltd). Mr Spreadborough was also the General Manager – Coastal Operations for Rio Tinto for five years with accountability for the operation of the Cape Lambert and Dampier ports with capacity of 220 million tonnes, and a workforce of over 1,000 employees and contractors. Earlier in his career, he was General Manager Mining for WMC and later Vice President – Mining for BHP Billiton at the world-class Olympic Dam Mine in South Australia. Mr Spreadborough holds a Bachelor of Mining Engineering from the University of Queensland and an MBA from Deakin University, as well as a WA First Class Mine Manager’s Certificate of Competency. He is a member of the Australian Institute of Company Directors.

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Mr Matthew Fitzgerald Chief Financial Officer and Joint Company Secretary Qualifications B.Com, CA

Mr Fitzgerald is a chartered accountant with extensive experience in the resources industry. He began his career in the Assurance & Advisory division of KPMG, before joining ASX-listed Kimberley Diamond Company NL in 2003, where he held the position of Financial Controller and later Chief Financial Officer and Director until July 2008. Mr Fitzgerald holds a Bachelor of Commerce from the University of Western Australia.

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Mr Robert Klug Chief Commercial Officer and Joint Company Secretary Qualifications B.Com, LL.B

Mr Klug has held accounting, senior legal and corporate finance roles in his 20 year career. Initially trained as an auditor with KPMG Perth, Mr Klug worked in London as a corporate lawyer after having completed his law degree at Murdoch University in Perth. Upon his return to Perth, he joined Freehills Perth Office, where he worked almost exclusively with small and mid cap resource companies. After a number of years at Freehills Mr Klug worked in corporate finance as a Director of Carmichael Capital Markets, the Corporate Finance arm of DJ Carmichael Stockbrokers. In 2005, Mr Klug became General Manager Business Development with St Barbara Limited until St Barbara relocated its head office to Melbourne in early 2007 when he joined Heron Resources Limited in a senior management role.

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o u r V IsI o n

Deliver superior returns to our owners from the premier high-grade DeGrussa Copper mine

Foster and develop long-term strategic relationships with raw material endusers and traders

Maintain the highest standards of safety, integrity and quality at all times

Discover additional VMS deposits within the emerging Doolgunna mineral field
Explore for, develop and mine key raw materials , in Australia and overseas

Develop a world-class mining company

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H I g H lI g H t s & acHIe V em en t s

The payment of our maiden dividend is a tremendous milestone for Sandfire, coming just two years after we completed construction of our flagship degrussa Copper mine in western australia and less than a year after we successfully completed the ramp-up of the underground mine and Concentrator and achieved commercial steady-state production.

OPERatiOnS

The degrussa Copper mine produced 67,690t of copper and 33,893oz of gold for the 12 months to 30 June 2014, from underground mining operations, at a C1 cash operating cost of uS$1.18 per pound of payable copper.
underground mining and milling rates exceeded 1.5mtpa, with optimisation programs underway to further enhance the performance of the degrussa Concentrator.
development of the Conductor 1 and Conductor 4/5 declines progressed during the year, with the aim of establishing multiple ore sources into future years. over 22km of underground development had been completed by 30 June 2014.
Production guidance for fY2015 of 65-70,000t of copper and 35-40,000oz of gold at C1 cash operating costs in the range of uS$1.15-1.25/lb.

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ExPLORatiOn

an updated high-grade mineral resource estimate of 13.0mt grading 4.5% copper and 1.8g/t gold containing 588,000t of copper and 764,000oz of gold was completed for degrussa, resulting in the addition of 29,000t of copper and 41,000oz of gold to the underground mineral resource net of mining depletion to march 2014.
mineral resource definition drilling was undertaken to upgrade the Central and Eastern portions of the Conductor 4 deposit from inferred to indicated mineral resource status. drilling targeting extensions to Conductor 5 and newly-identified offhole conductors down-plunge of Conductor 1 is scheduled to commence in the first half of fY2015.
Extensive exploration programs including geophysics and aircore drilling commenced at the Springfield Project under a $15m joint venture with Talisman mining (aSx: TLm) to explore along the expanded 65km long degrussa mine corridor.
diamond drilling and metallurgical assessment commenced at the Thaduna Copper Project under a joint venture with Ventnor resources (aSx: Vrx) to advance assessment of the near-surface resource for treatment at degrussa’s proposed oxide Copper Project.

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BuSinESS DEVELOPMEnt

Sandfire acquired a 37% interest in TSx-V listed company wCb resources Ltd through a a$5.9m private share placement in april 2014, enabling the Company to participate in a potentially world-class porphyry copper-gold opportunity on misima island, Png. deep diamond drilling commenced during the September 2014 Quarter.
in august, Sandfire acquired a 36% stake in copper developer Tintina resources (TSx-V: Tau), with an ability to increase its stake to 53% via a series of warrants. The investment gives Sandfire significant exposure to one of the highest grade undeveloped copper deposits in the uSa, the black butte Project in central montana.

CORPORatE anD FinanCiaL

Sandfire posted an annual net profit after income tax of $78.2m for the 12 months to 30 June 2014 on sales revenue of $531.2m. The profit was underpinned by strong cash flow from operating activities of $223.0m and translated to earnings per share of 50.22cps (basic).
a maiden final dividend of 10.0cps (unfranked) was paid on 10 october 2014.
Sandfire completed $125m of scheduled repayments to the degrussa Project finance facility, reducing the remaining balance to $160m as at 30 June 2014.

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cH a Irm a n ’ s le t t er

dear Shareholder,

following another strong year of consistent production and sales from our flagship degrussa Copper mine in western australia, i am pleased to say that Sandfire has continued to build on and enhance its reputation as a professional, focused and successful mid-tier australian mining company.

most importantly, we have been able to do so while maintaining an excellent safety record throughout all of our operations and continuing to develop a culture of teamwork, professionalism and cooperation across the organisation. This reflects the strong and inclusive leadership provided by our senior management team, led by our managing director, Karl Simich. despite a backdrop of global economic uncertainty and ongoing volatility in commodity prices, Sandfire has continued to mature and develop as a mining house, moving from strength to strength thanks to the robustness of the degrussa mine, which is now firmly established as a low-cost, highmargin operation.

during the year, we passed the significant milestone of generating over $1 billion in revenues from degrussa since its start-up in 2012. The achievement of our second successive annual profit enabled the board to declare a maiden dividend payment to shareholders – a final unfranked dividend of 10 cents per share for the 2014 financial year.

This is a remarkable achievement (and one which we are justifiably proud of) coming just two years after we completed construction at degrussa and less than a year after we successfully completed the ramp-up of the mine to achieve steady-state production.

“This is an exciting time for everyone involved with Sandfire. With our core DeGrussa mining operation in excellent shape and generating strong cash flows, we are working hard to make the most of the opportunities in front of us, by investing not only in the future of DeGrussa but also in the longer term future of the Company.”

The payment of our maiden dividend is consistent with our overriding philosophy as a Company, which is to create value for our shareholders. aside from continuing to operate degrussa in an efficient and profitable manner, we believe that the best way to create value is to strategically allocate our cash flow between: the operating needs of our business, indirect shareholder returns (investing in attractive exploration and business development opportunities designed to create capital growth); and direct shareholder returns (dividends and the like).

in keeping with this philosophy, significant investment has been made over the past 12 months in each of these growth pillars. at degrussa, a major capital development program continues with the aim of ensuring that our mine development remains well ahead of our ore delivery requirements; this also allows us to establish new drilling platforms to target potential zones of mineralisation below the existing resource areas.

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we have adopted an appropriately conservative yet strategic approach to managing our balance sheet, directing significant funds to aggressively reduce our debt, while maintaining an active focus on exploration and business development, which has yielded a number of exciting growth opportunities during the year.

foremost of these has been our efforts to expand our strategic footprint in the bryah basin. This has seen Sandfire enter into new regional exploration joint ventures during the year, including a $15 million joint venture with Talisman mining on its adjoining Springfield Project which gives us access to a significantly expanded strike length of the degrussa mine Corridor.

our business development team continues to identify and evaluate quality business development opportunities. Two of these have recently come to fruition in the form of cornerstone investments in a potential world-class porphyry copper-gold project on misima island, Png and an exceptional, high-grade copper asset in north america.

i would like to sincerely thank our staff and contractors whose tireless efforts and hard work on the Company’s behalf has enabled us to achieve what we have during the year. i would also like to thank you, our shareholders, for your valued ongoing support and to wish you well for the year ahead.

Yours faithfully

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Derek La Ferla

Chairman

This is an exciting time for everyone involved with Sandfire. with our core degrussa mining operation in excellent shape and generating strong cash flows, we are working hard to make the most of the opportunities in front of us by investing not only in the future of degrussa but also in the longer term future of the Company.

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m a n ag In g D Irec to r ’ s rep o rt

dear Shareholders

i am very pleased to report on what has been another very busy and successful year for Sandfire, during which we have continued to move forward in a measured and purposeful manner to strengthen our business, expand our organic growth potential and build a meaningful pipeline of business development opportunities for the future.

balancing these various objectives and ensuring an appropriate allocation of funding support and management attention across these different components of our growing business remains the key to ensuring that Sandfire continues on its growth path; towards becoming a truly diversified international mining company.

i believe that, with the assistance of my dedicated and hardworking management team, we have struck the right balance between these different elements during the course of the year, giving each part of our business the best chance of delivering successful outcomes for shareholders. Key milestones and achievements for the 2014 financial year have included:

Maintaining underground mining and milling at DeGrussa at the targeted rate of 1.5 million tonnes per annum, enabling us to achieve production of 67,690 tonnes of copper and 33,893 ounces of gold for fY2014 at a C1 cash operating cost of uS$1.18 per pound of payable copper. This strong and consistent performance has been achieved against the backdrop of a challenging environment which has seen continued volatility in commodity prices and a persistently high australian dollar. we have worked hard to keep a tight rein on costs, and to optimise and improve our operations to build strong foundations for the Company’s future growth;

“We have worked extremely hard to optimise and improve our operations to build strong foundations for the Company’s future growth….I believe the Company has taken great strides forward in these areas this year, and I look forward to another 12 months of successful production, growth and development.”

Making a significant ongoing investment in underground capital development , with the development of the new Conductor 1 and Conductor 4/5 declines now well advanced from junctions off the Evans decline to provide access to the deeper portions of Conductor 1 and the Conductor 4 and 5 deposits. This will ensure that degrussa can source ore from multiple underground locations, providing stability and consistent production into the future. development of both of these new declines is progressing on schedule, and total underground development had exceeded the 22km mark at the time of this report;
Successfully changing the underground mining contractor to byrnecut australia Pty Ltd under a new three-year contract which was awarded following a competitive tender process. This seamless changeover was completed without significant interruption to our continued mine production – a remarkable achievement by our site team, led by our Chief operating officer michael Spreadborough. The implementation of the new contract is expected to reduce gross mining costs at degrussa by over 10 per cent during the 2015 financial year;

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Commencement of a number of improvement projects to increase copper recoveries and enhance the performance of the degrussa Concentrator. These include the installation of a Pebble Crusher to optimise the performance of the plant, a Column flotation Cell to increase copper recoveries and a screen arrangement as part of the Sag mill system to improve overall control and performance of the plant;
achievement of a net annual profit of $78.2 million for the 12 months to 30 June 2014, our second successive year of strong profitability following the start-up of the degrussa Copper mine. This result was achieved on strong sales revenue of $531.2 million from metal sales of 67,719 tonnes of copper and 31,788 ounces of gold. The degrussa operation delivered cash flow from operating activities of $223.0 million and a profit before net finance and income tax of $125.6 million;
announcement of a maiden final unfranked dividend of 10 cents per share . This dividend was paid on 10 october 2014 and marks a tremendous milestone for the Company, coming just two years after we completed construction of the degrussa Project and less than a year after achieving steady-state production;
Repayment of $125 million in project debt , including an accelerated prepayment of $20 million against the degrussa Project finance facility, reflecting the strong operating cash flows and robustness of the degrussa Project. with the satisfaction of the financing completion test during the year, the Company decided to simplify its banking arrangements, moving from a syndicate to a single funding bank. This saw anZ banking Corporation become the Company’s sole financier;
Completion of an updated high-grade Mineral Resource estimate of 13.0mt grading 4.5% copper and 1.8g/t gold containing 588,000t of copper and 764,000oz of gold was completed for degrussa, resulting in the addition of 29,000t of copper and 41,000oz of gold to the underground mineral resource net of mining depletion to march 2014;
Ramp-up of major underground resource definition and extensional drilling programs , including drilling to upgrade the Central and Eastern portions of the Conductor 4 deposit from inferred to indicated resource status. drilling targeting Conductor 5 extensions and newly-identified off-hole conductors down-plunge of Conductor 1 is scheduled to commence in the first half of fY2015;
announcement of important new regional farm-in joint venture agreements with Talisman mining (aSx: TLm) to farm into its three key doolgunna copper-gold projects immediately adjacent to degrussa and with Ventnor resources (aSx: Vrx) to secure up to an 80% interest in the Thaduna/green dragon Copper Project, located 40km east of degrussa. This provides Sandfire with a strong strategic footprint in the doolgunna/bryah basin region and exciting pipeline of regional exploration and resource development opportunities; and

Subsequent to the end of the financial year, we added further significant momentum to our global business development push after reaching agreement to acquire a cornerstone 36% interest in Toronto-listed company Tintina resources (TSx.V: Tau), giving us significant exposure to one of the highest grade undeveloped copper deposits in the uSa.

we are very much looking forward to working with the team at Tintina to progress the evaluation, exploration and ultimately development of this premier north american copper asset, which represents a complementary medium-term opportunity for us to grow beyond degrussa.

OutLOOK

Looking to the year ahead, our production guidance for the 2015 financial year is generally consistent with the year just passed. as a result, and subject to movements in commodity prices and exchange rates, this should provide a solid foundation to continue to generate strong operating cash flows, enabling us to make further significant inroads into reducing our debt while at the same time funding our exploration and business development programs.

Exploration is ramping up at degrussa and regionally – and we are confident of achieving further additions to our existing resource inventory and potentially making the breakthrough we have been working hard to achieve. Plus we also have a number of promising business development initiatives underway which could deliver us with a very well stocked organic growth pipeline for the future.

The successes and achievements of the past 12 months are a direct result of the enormous effort of our dedicated and hardworking team of staff and contractors. in conclusion, i would like to extend my sincere thanks to each and every one of them for their extraordinary efforts on behalf of the Company and our shareholders.

Sandfire has been one of the great success stories of the mid-tier mining industry of the past five years. we remain very conscious of the fact that we need to continue to work hard to make the most of the opportunities we have been given and to remain “ahead of the curve” in terms of our operational, corporate and financial development.

i believe the Company has made great strides forward in all of these areas this year and i look forward to another year of successful production, growth and development in all parts of our business.

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Karl Simich

managing director & CEo

Continued development of a longer term business development pipeline , both through a growing portfolio of exploration joint ventures around australia and a strategic 38% investment in Toronto-listed copper-gold explorer wCb resources, enabling us to participate in a potentially worldclass porphyry copper-gold opportunity on misima island, Png.

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o per at I o ns re V Ie W

DOOLGunna PROJECt, WEStERn auStRaLia (100%)

The doolgunna Project is located 900km north of Perth and approximately 150km north of meekatharra in western australia. The tenement package, known as doolgunna, covers a total area of 400 square kilometeres 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.

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DeGrussa Copper Mine

during the reporting period, Sandfire completed the successful ramp-up of the degrussa underground mine and processing facility to its nameplate capacity of 1.5 million tonnes per annum (mtpa).

Copper production for the 12 months to 30 June 2014 was 67,690 tonnes and gold production was 33,893 ounces. a summary of copper and gold production and sales for the year is provided below:

FY 2014 Production Statistics		tonnes	Grade (% Cu)	Grade (g/t au)	Contained Copper (t)	Contained Gold (oz)
Concentrator	mined	1,496,686	5.0	1.5	74,653	74,103
	milled	1,490,954	5.2	1.5	77,031	72,925
	Production - concentrate	278,454	24.3	3.8	67,690	33,893
	Copper and gold sales	271,079	23.9	3.6	64,719	31,788

note: mining and production statistics are rounded to the nearest 0.1% Cu grade and 0.1 g/t au grade. Errors may occur due to rounding.

underground Mining

underground mining progressed on schedule throughout the 2014 financial Year. The targeted annualised ore production rate of 1.5mtpa was achieved during the reporting period, with a total of 1,496,686 tonnes of underground sulphide ore mined for the 12 months to 30 June 2014.

The performance of the paste-fill plant has generally stabilised and improved, with filling of the primary stopes in the Conductor 1 deposit completed during the reporting period and secondary stopes adjacent to these paste-filled stopes coming on-line during the december 2013 Quarter. The first stope mined beneath a filled stope was completed during the march 2014 Quarter, and to date, full extraction has been achieved without paste dilution from the stope above.

as a result of reliability issues encountered with the paste pump, strategies including improved maintenance schedules and mine design changes were implemented to reduce the need for pumping of the fill. filling for the next couple of years will be completed by gravity filling, eliminating any delays associated with pump reliability.

There was a continued strong focus on underground mine development in both the new Conductor 1 and Conductor 4/5 declines. underground development is proceeding on schedule, with both of these new declines progressing to plan.

The Conductor 1 decline had advanced on schedule during the reporting period, enabling the commencement of additional ventilation rises as well as down-dip drilling within the Conductor 1 deposit. The development of this decline will enable the Conductor 1 deposit to be fully developed and extracted.

The Conductor 4/5 development also advanced following a redesign during the march 2014 Quarter driven by a temporary deterioration of ground conditions and increased water ingress. a detailed geotechnical review and drilling program was

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undertaken to keep the decline within the host siltstone and dolerite rock units. To date, all decline development at degrussa has been undertaken within these rock units and has experienced good ground conditions.

The new decline path has been designed to minimise interference with the Conductor 4 underground diamond drilling program (see below) and will have no material impact on previously announced development timelines and budgeted capital expenditure for the underground mine development.

This decline is expected to reach Conductor 4, located approximately 400m east of Conductor 1, towards the end of the 2014 calendar year and will enable development and mining of both the high-grade Conductor 4 and 5 deposits to occur. at the end of the reporting period, the Conductor 4 decline development advanced 520m with the Conductor 5 decline advancing 123m.

The development of these new declines is important as it will ensure that degrussa can source ore from multiple underground locations, providing stability and consistency of production in the long term. it is also facilitating the establishment of underground diamond drilling platforms from which extensions and potential repeats of the Conductor 4 and 5 deposits can be targeted.

These drill positions are being used to allow grade control 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. underground grade control drilling conducted during the reporting period has brought the majority of the Conductor 1 deposit, down to the 2150mrL, to a ‘mine-ready’ status with further drilling required below this level.

Total development for the underground mine at the end of the reporting period was 22km.

in may 2014, Sandfire awarded a new contract for underground mining services at degrussa to specialist underground mining contractor byrnecut australia Pty Ltd. The contract, which has an estimated value of $200 million, was awarded following a competitive tender process.

The new degrussa underground mining contract has a three-year term, with Sandfire having an option to extend for a further two years. it is the single largest operational contract at degrussa, employing approximately 150 people and utilising some 30 items of underground mining equipment and associated surface support.

The implementation of the new contract is expected to reduce gross mining costs at degrussa by over 10 per cent. This will see a reduction in anticipated mining, decline development and underground sustaining capital. This is consistent with ongoing efforts by Sandfire’s management to reduce costs, improve efficiencies and streamline all aspects of the degrussa operation, and also reflects the lower contract rates currently being experienced across the australian resource sector.

The change-out to the new underground contractor was successfully completed by 1 July 2014 with ramp-up to target production and development rates completed.

Processing

The ramp-up of the degrussa Concentrator to nameplate capacity was completed during the 2014 financial Year with mill throughput now consistently achieving or exceeding the targeted annualised rate of 1.5mtpa.

Key metrics for the degrussa Concentrator for the 2014 financial Year included:

1,490,954 tonnes milled at an average head feed grade of 5.2% Cu;
average copper recovery for the reporting period of 87.9%;
Concentrate production of 278,454 tonnes; and
metal production of 67,690 tonnes of contained copper and 33,893 ounces of gold.

average copper recoveries were restricted to 82% during the September 2013 Quarter as further batches of transitional open pit material were processed on a campaign basis. This material achieved recoveries of 60-65% compared with 85-92% for primary underground sulphide ore. approximately 30,000 tonnes of open pit sulphide ore remains stockpiled for future processing if and when required.

with the cessation of processing of transitional open pit ore in the September 2013 Quarter and increased plant stability, overall copper concentrator recoveries increased during the december 2013 and march 2014 Quarters towards the targeted level of approximately 92%.

average copper recovery fell to 89.5% in the June 2014 Quarter as a result of the lower ore feed grade, and the impact of higher flotation tail grade due to plant instability and a lower copper-sulphur ratio. recoveries are expected to return to the targeted level of +90%, with a number of improvement projects in the process of being implemented.

These include:

installation of a Pebble Crusher in the december 2014 Quarter to facilitate the removal of critical sized material allowing the Sag mill performance to be optimised in terms of throughput and grind size. The Pebble Crusher, which will be installed at a cost of $6.4 million, will efficiently re-handle and crush the critical-sized material prior to re-feeding into the Sag mill. The operation of the Sag mill in ‘scatting out’ mode since march 2014 has confirmed the benefits of removing this material;
a Column flotation Cell will be installed in the december 2014 Quarter. Pilot test work performed over the last two quarters confirms that the tails contains entrained copper as a consequence of insufficient residence time in the flotation cells. additional cell capacity will be installed via a column flotation cell with forecast copper recovery improvement of over 1% from current performance; and

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 1 3 ]

OperatiOns review (continued)

in association with the column flotation cell, a screen arrangement will be installed as part of the Sag mill system in lieu of the current cyclones. Testwork has confirmed that the current classification arrangement is resulting in over-grinding of a portion of the ore feed resulting in low recovery of this finer copper fraction in the flotation plant. The Sag classification screen will allow better control of the feed size returned into the Sag mill, thereby preventing the formation of fine particles. The column flotation cell and Sag screen plus additional improvements in process control will cost $6.8 million.

Production Guidance

fY2015 targeted copper production is expected to be within the range of 65-70,000 tonnes of contained copper metal and gold production within the range of 35-40,000oz. Headline C1 cash operating costs are expected to be with the range of uS$1.15-1.25/lb.

Sales & Marketing

Copper Concentrate

a total of 271,079 tonnes of plant concentrate containing 64,719 tonnes of payable copper was sold for the 2014 financial Year. gold sales totalled 31,788 ounces.

Shipments were completed from both Port Hedland and geraldton.

Feasibility Studies

Oxide Copper Feasibility Study

work continued during the reporting period to progress the feasibility Study on a heap leach/solvent extraction and electro-winning (Sx-Ew) recovery option for the stockpiled copper oxide ore at degrussa. The Sandfire oxide Copper Project at degrussa has been extensively tested and the project is being evaluated on the following basis:

Existing stockpiled oxide material will be scrubbed to remove fine clays;
The -150um material will be deposited in a purpose-built additional tailings storage facility and the +150um material will be all in crushed to -24mm for heap leaching;
The heap leach will be a combination of a traditional sulphuric acid leach coupled with bio-leaching; and
The pregnant liquor from the heap leach will be concentrated in a solvent extraction circuit with the strong electrolyte fed to an electrowinning circuit to produce 99.99-99.999% copper cathode.

in december 2013, Sandfire signed a joint venture agreement with Ventnor resources at the Thaduna/green dragon Copper Project (see below). Ventnor has significant oxide material which has the potential to be processed through the oxide facility being proposed for degrussa.

geological investigation and metallurgical testing will be undertaken as part of the joint venture with Ventnor.

following this, the oxide Copper Project financial analysis will be updated to reflect the potential oxide material from this joint venture being processed by the oxide Copper facility.

The Thaduna Project has the potential to increase the copper units to the oxide Copper Project, increasing the life of the project. Project commitment will await completion of this detailed Ventnor work.

near-mine Exploration

during the reporting period, Sandfire continued to progress a tightly focused, multi-disciplined exploration campaign to test for extensions to the known cluster of VmS deposits at degrussa and to unlock the broader potential of the doolgunna region for additional VmS (volcanogenic massive sulphide) deposits or clusters of deposits.

Key components of the Company’s exploration activity at degrussa during the reporting period included:

underground diamond drilling from newly established drilling platforms off the Conductor 1 and Conductor 4/5 declines to test for extensions of the known mineralisation in the near-mine environment;
underground drilling focusing on C4 resource definition and updating the structural model of the degrussa deposits;
deep surface drilling to test for the presence of the VmS stratigraphic horizon below the Conductor 4/5 positions;
Preparation of an updated mineral resource for the degrussa Project incorporating the results of successful extensional drilling down-plunge of Conductor 4 and net of mining depletion to 31 december 2013. The ore reserve inventory and mine Plan will be updated in the second half of CY14;
Completion of a program of co-funded deep diamond drilling to test for extensions of the prospective degrussa volcanic horizon near the path of the gascoyne river;
ongoing aircore drilling and regional geochemical sampling and mapping to define the interpreted volcanic host sequence across the broader doolgunna tenement holding;
follow-up reverse Circulation (rC) drilling at a number of more advanced targets;
Continued development of the Company’s mine-scale exploration model; and
Continued exploration of the host stratigraphy for potential accumulations of VmS mineralisation away from the known ore zones.

[ 1 4 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

The aggregate metres drilled on Sandfire Tenements for the 2014 financial Year is shown below:

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|||||||
|---|---|---|---|---|---|
|aC/RaB|RC|uG Diamond|Surface Diamond|total|
|Drilling|Drilling|Drilling|Drilling|Drilling|
|drilling (m)|136,729|8,462|12,600|7,835|168,626|

----- End of picture text -----

near-mine Extensional Exploration

underground diamond drilling was undertaken during the reporting period targeting strike and dip extensions to the Conductor 1 East Zone, which has allowed the Company’s exploration team to refine the geological model and subsequent mine design on the periphery of the orebody. drilling targeting the Conductor 1 Zone down-dip was also undertaken as drilling positions became available.

The establishment of new underground drilling positions from the Conductor 4/5 decline allowed underground diamond drilling to commence, initially targeting the stratigraphically continuous zone immediately down-plunge from Conductor 4, followed by resource definition drilling to upgrade the Central and Eastern portions of the C4 orebody from inferred to indicated resource status.

The drilling confirmed the grade and geological continuity of the C4 orebody, and identified what is interpreted to be local “ribs” of massive sulphide displaying local lithological thickening and some thinning within the ore zone.

detailed geological analysis of footwall alteration recognised zones of intensely silicified, quartz-chalcopyrite stockwork veining which are interpreted to represent the original sub-seafloor feeder pipes to the massive sulphide mineralisation. These discrete feeder pipes will be further investigated to understand how they fit into the larger mineralised system and if they are of any potential economic significance.

increase in high-grade Mineral Resource

as a result of successful underground drilling programs targeting extensions to existing mineralisation in the C1, C4 and degrussa lenses, the Company completed an updated mineral resource estimate for the degrussa Project, which was announced on 17 april 2014. The updated mineral resource inventory is summarised below:

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|||||||
|---|---|---|---|---|---|
|tonnes|Copper|Copper|Contained|Contained|
|Mineral Resource|(Mt)|(%)|(%)|Copper (t)|Gold (oz)|
|underground mine|10.2|5.4|2.1|554,000|676,000|
|open pit - Stockpiles|2.8|1.2|1.0|33,000|88,000|
|March 2014 - total|13.0|4.5|1.8|588,000|764,000|

----- End of picture text -----

an additional 29,000 tonnes of contained copper and 41,000oz gold has been added to degrussa’s underground mineral resource (after mining depletion to the end of march 2014), with the additional mineral resource to be incorporated into the degrussa ore reserve and mine Plan later this year. depletion totalled 75,000 tonnes of contained copper and 72,000 ounces of gold for the 12 months to 31 march 2014.

The previously published mineral resource (in Situ and stockpiles) stated as at 31 march 2013 was 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, of which 10.2 million tonnes grading 5.7% Cu and 2.1g/t au for 586,000 tonnes of contained copper and 688,000oz of contained gold related to underground operations.

The increase in tonnage and contained metal has come from the successful underground drilling programs targeting extensions to existing mineralisation in the C1, C4 and degrussa lenses. drilling of the C4 lens commenced in the first half of CY2014 as planned, undertaken from underground drilling positions that are more practical and more efficient given the depth of these ore bodies.

fifty percent of the underground mineral resource is classified as measured and is at a mining-ready state. of the total resource only 25% of the resource tonnes remain as inferred, with planned in-fill drilling of the C4 and C5 lenses to be completed in the coming year to upgrade the category of these resources.

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OperatiOns review (continued)

DeGrussa Mine - Underground Mineral Resource - as at 31 March 2014

as at 31 March 2013

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

Reserve tonnes Copper Gold Contained Contained Resource tonnes Copper Gold Contained Contained
Deposit category (Mt) (%) (g/t) Copper (t) Gold (oz) category (Mt) (%) (g/t) Copper (t) Gold (oz)
degrussa measured 1.1 8.0 2.5 89,000 90,000 measured 1.0 7.4 2.3 73,000 72,000
indicated <0.1 2.2 0.7 1,000 1,000 indicated 0.4 9.4 2.4 34,000 28,000
Conductor 1 measured 3.6 5.5 2.0 196,000 233,000 measured 1.3 6.5 2.2 86,000 92,000
indicated 1.4 4.2 1.8 60,000 81,000 indicated 3.7 5.1 1.9 190,000 231,000
inferred 0.2 4.1 1.9 7,000 10,000 inferred 0.2 4.6 1.8 11,000 14,000
Conductor 4 measured 0.4 3.9 1.7 15,000 22,000 measured - - - - -
indicated 1.0 4.7 1.8 48,000 58,000 indicated 1.0 5.3 1.8 54,000 59,000
inferred 0.9 4.9 1.7 45,000 50,000 inferred 1.1 4.4 1.7 48,000 60,000
Conductor 5 inferred 1.4 6.2 2.8 88,000 129,000 inferred 1.4 6.2 2.8 88,000 129,000
Stockpiles measured 0.1 4.2 1.1 5,000 4,000 measured <0.1 7.9 3.0 2,000 3,000
Measured 5.2 5.9 2.1 305,000 348,000 Measured 2.3 6.9 2.2 161,000 167,000
indicated 2.5 4.4 1.8 109,000 139,000 indicated 5.1 5.4 1.9 278,000 318,000
inferred 2.5 5.6 2.3 140,000 189,000 inferred 2.8 5.3 2.3 147,000 203,000
total 10.2 5.4 2.1 554,000 676,000 total 10.2 5.7 2.1 586,000 688,000
----- End of picture text -----

DeGrussa Mine - Open Pit Mineral Resource - as at 31 March 2014

as at 31 March 2013

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

Reserve tonnes Copper Gold Contained Contained Resource tonnes Copper Gold Contained Contained
Deposit category (Mt) (%) (g/t) Copper (t) Gold (oz) category (Mt) (%) (g/t) Copper (t) Gold (oz)
Conductor 1 indicated - - - - - indicated 0.1 3.9 1.8 2,000 3,000
Stockpiles measured 2.8 1.2 1.0 33,000 88,000 measured 3.1 1.5 1.1 45,000 104,000
Measured 2.8 1.2 1.0 33,000 88,000 Measured 3.1 1.5 1.1 45,000 104,000
indicated - - - - - indicated 0.1 3.9 1.8 2,000 3,000
inferred - - - - - inferred - - - - -
total 2.8 1.2 1.0 33,000 88,000 total 3.1 1.5 1.1 48,000 108,000
----- End of picture text -----

DeGrussa Total Mineral Resource - as at 31 March 2014

as at 31 March 2013

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

Reserve tonnes Copper Gold Contained Contained Resource tonnes Copper Gold Contained Contained
Deposit category (Mt) (%) (g/t) Copper (t) Gold (oz) category (Mt) (%) (g/t) Copper (t) Gold (oz)
degrussa measured 1.1 8.0 2.5 89,000 90,000 measured 1.0 7.4 2.3 74,000 72,000
indicated <0.1 2.2 0.7 1,000 1,000 indicated 0.4 9.4 2.4 34,000 28,000
Conductor 1 measured 3.6 5.5 2.0 196,000 233,000 measured 1.3 6.5 2.2 86,000 92,000
indicated 1.4 4.2 1.8 60,000 81,000 indicated 3.8 5.1 1.9 192,000 234,000
inferred 0.2 4.1 1.9 7,000 10,000 inferred 0.3 4.6 1.8 12,000 15,000
Conductor 4 measured 0.4 3.9 1.7 15,000 22,000 measured - - - - -
indicated 1.0 4.7 1.8 48,000 58,000 indicated 1.0 5.3 1.8 54,000 59,000
inferred 0.9 4.9 1.7 45,000 50,000 inferred 1.1 4.4 1.7 48,000 60,000
Conductor 5 inferred 1.4 6.2 2.8 88,000 129,000 inferred 1.4 6.2 2.8 88,000 129,000
Stockpiles measured 2.9 1.2 1.0 38,000 92,000 measured 3.1 1.5 1.1 47,000 107,000
Measured 8.0 4.2 1.7 338,000 436,000 Measured 5.4 3.8 1.6 206,000 271,000
indicated 2.5 4.4 1.8 109,000 139,000 indicated 5.2 5.4 1.9 280,000 321,000
inferred 2.5 5.6 2.3 140,000 189,000 inferred 2.8 5.3 2.3 148,000 203,000
total 13.0 4.5 1.8 588,000 764,000 total 13.4 4.7 1.9 634,000 795,000
----- End of picture text -----

[ 1 6 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

Ore Reserve and Mine Plan update

The ore reserve and mine Plan is expected to be updated at the end of CY2014 once drilling is advanced in and around the C4 and C5 lenses. The Company continues to incorporate the inferred mineral resource from Conductor 4 and 5 into its mine Plan due to the geological continuity and high copper grade nature of these deposits.

DeGrussa Mine - Underground Ore Reserve - as at 31 March 2013

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

Reserve tonnes Copper Gold Contained Contained
Deposit category (Mt) (%) (g/t) Copper (t) 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
Conductor 1 Proved 1.4 5.4 1.8 76,000 82,000
Probable 3.9 4.4 1.7 174,000 210,000
Conductor 4 Probable 1.0 4.3 1.5 43,000 47,000
Stockpiles Proved <0.1 7.9 3.0 2,000 3,000
Proved 2.6 5.6 1.8 145,000 151,000
Probable 5.3 4.7 1.7 248,000 282,000
total 7.9 5.0 1.7 393,000 434,000
----- End of picture text -----

DeGrussa Mine - Open Pit Ore Reserve - as at 31 March 2013

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

Reserve tonnes Copper Gold Contained Contained
Deposit category (Mt) (%) (g/t) Copper (t) Gold (oz)
Stockpiles Proved 3.1 1.5 1.1 45,000 104,000
total 3.1 1.5 1.1 45,000 104,000
DeGrussa Mine - Total Ore Reserve - as at 31 March 2013
Reserve tonnes Copper Gold Contained Contained
Deposit category (Mt) (%) (g/t) Copper (t) 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
Conductor 1 Proved 1.4 5.4 1.8 76,000 82,000
Probable 3.9 4.4 1.7 174,000 210,000
Conductor 4 Probable 1.0 4.3 1.5 43,000 47,000
Stockpiles Proved 3.1 1.5 1.1 47,000 107,000
Proved 5.7 3.4 1.4 190,000 256,000
Probable 5.3 4.7 1.7 248,000 282,000
total 11.0 4.0 1.5 439,000 538,000
----- End of picture text -----

Review of Financial Results

Please refer to page 50 of the financial report for a review of the Company’s financial results.

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 1 7 ]

OperatiOns review (continued)

DeGrussa Regional Exploration

The greater doolgunna Project, which now includes the Talisman Joint Venture, has an aggregate area of 725km2 and incorporates over 65km strike length of prospective VmS-hosting lithologies. much of this stratigraphy is obscured beneath transported alluvium and requires systematic aircore drilling to test bedrock geochemistry and identify prospective host horizon stratigraphy.

==> picture [453 x 130] intentionally omitted <==

Talisman Joint Venture

in december 2013, Sandfire reached agreement with Talisman mining Limited (aSx: TLm; “Talisman”) to farm into its three key doolgunna copper-gold projects. under the agreement, Sandfire can earn up to a 70% interest in Talisman’s Springfield, Halloween and Halloween west Projects by spending a minimum of $15 million on exploration over 5.5 years, with a minimum expenditure commitment of $5 million within two years.

The Springfield Project lies immediately along strike to the east from the degrussa Copper-gold mine. The Halloween and Halloween west Projects abut the doolgunna Project to the west. The projects contain extensions of the volcanic rock package which hosts the degrussa VmS deposits.

during the June 2014 Quarter, Sandfire commenced the first phase of ground-based exploration activities at the Springfield Project, comprising high-powered down-hole electromagnetic (dHEm) surveys and fixed loop electromagnetic (fLEm) surveys. Three diamond and one reverse Circulation drill-holes previously drilled by Talisman at the Homer Prospect were selected by Sandfire for the application of high energy dHEm to test for the presence of conductors that may indicate accumulations of massive sulphides.

in addition, Sandfire commenced a high-powered fLEm survey at the Homer Prospect, covering approximately 1.6km of the prospective degrussa host horizon, to better test for conductors beyond the extent of previous ground electromagnetic surveys. following receipt of the initial results, data from Stage 1 of the high-energy fLEm survey and the four initial dHEm surveys was integrated with existing data and analysed with input from the Company’s geophysical consultants, newexco. This analysis resulted in the identification of a late-time conductor which is interpreted to sit within the projected extension of the prospective degrussa stratigraphic horizon. This conductor is located approximately 5km east of the degrussa Copper mine.

Sandfire subsequently completed a single deep diamond drill hole with the aim of intersecting the modelled conductor at a target depth of 400m below surface. This drill hole will also be used to establish a platform for further down-hole Em surveys to test for additional conductors both at depth and away from this principal Em target. The next three stages of the fLEm survey at the Homer Prospect re-commenced in mid-July 2014.

Thaduna Project Joint Venture

during the reporting period, Sandfire reached agreement to secure up to an 80% interest in the Thaduna/green dragon Copper Project, located 40km east of degrussa, through a farm-in and joint venture with Ventnor resources Limited (aSx: Vrx) and its wholly-owned subsidiary delgare Pty Ltd.

The Thaduna Project represents the largest copper resource in the doolgunna-bryah basin region outside of Sandfire’s degrussadoolgunna Project (7.9mt @ 1.8% Cu for 142,000 tonnes of contained copper).

under the agreement, Sandfire acquired an immediate 35% interest in the Project and formed a joint venture with delgare by paying $3 million cash directly to Ventnor to enable it to meet its short-term funding requirements.

under the terms of the joint venture, Sandfire can earn up to a further 45% (total of 80%) interest in the Project in two stages within a four-year period, namely:

a 16% interest for a total of 51% by sole funding up to $3 million of expenditure within two years; and
a further 29% interest for a total of 80% by sole funding a further $3 million of expenditure within four years.

Ventnor has completed over 50,000m of drilling at the Project since april 2011. Ventnor’s drilling has returned sulphide intersections at depth, indicating the potential to extend the mineralisation and increase the higher grade sulphide component.

[ 1 8 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

Sandfire is currently assessing two development opportunities at the Thaduna Project:

an oxide project, with ore to be treated through the proposed degrussa Copper oxide Heap Leach; and
a sulphide project, with ore to be treated through the existing degrussa flotation Processing Plant.

during the June 2014 Quarter, Sandfire completed a diamond drilling programme at Thaduna which was designed to provide core for metallurgical testwork. The drilling programme, which comprised eight shallow-dipping PQ-sized diamond drill holes for 808.5m advance, was targeted directly beneath the existing Thaduna open pit to generate oxide, mixed and sulphide dominant samples. metallurgical testwork is underway examining the heap leach and flotation response of the differing styles of mineralisation intersected. The results of the testwork and the completion of revised resource model will be used to evaluate potential mining and processing options for extraction of the copper resource.

auStRaLian & intERnatiOnaL ExPLORatiOn

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==> picture [96 x 143] intentionally omitted <==

auStRaLian ExPLORatiOn

Sandfire has a number of exploration projects including joint ventures around Australia. Sandfire is targeting prospective belts with potential for major base metal discoveries in known belts that can be drill tested rapidly and if successful, permitted and developed into operations.

The Company works closely with all the communities in which we operate to manage the direct and indirect impact of its activities on the local environment and people. Sandfire is committed to conducting its activities in a sustainable and socially responsible manner to minimise and mitigate these impacts.

in order to achieve its sustainability objectives, Sandfire applies the same high standards and commitment to safety in the workplace, environmentally sound practices and transparent social responsibility at its exploration joint ventures as it does at its degrussa Copper mine in western australia.

northern territory Borroloola Project

The Borroloola Project is located north of the McArthur River Mine (Xstrata), and is prospective for base metals, sedimentary manganese and iron ore. Sandfire has signed two farm-out Joint Venture agreements to advance the Borroloola Project. The Batten Trough JV covering the eastern portion of the tenements is under an option and joint venture agreement with MMG Exploration Pty Ltd, which can earn up to an 80% interest. The Borroloola West JV covering the western portion is under an agreement with Pacifico Minerals Ltd in alliance with Cliffs Natural Resources, which has the right to earn up to an 80% interest.

mmg Exploration are targeting sediment hosted zinc deposits, they completed a detailed review of all the previously collected exploration data and commenced a large helicopter supported stream sediment and mapping program. drilling programs are planned for the start of the field season later in 2014.

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 1 9 ]

OperatiOns review (continued)

Pacifico minerals completed a drilling program in the second half of 2013 exploring for manganese and base metals. Programs of mapping and soil sampling were completed during 2014 with airborne geophysical surveys and drilling planned for the remainder of 2014.

Sandfire completed a short drilling program at the Hells gate prospect targeting near surface iron ore along extensions of the roper bar iron ore mine. Partners are being sought to continue exploration on the project.

Queensland Projects

A number of projects are held in the eastern succession of the Mount Isa region south and east of Cloncurry in north-west Queensland which are prospective for Broken Hill style lead-zinc-silver deposits such as the Cannington deposit (BHP) and the Ernest Henry Iron Oxide copper-gold deposits (Xstrata)

The Altia Project includes an option to Joint Venture into two areas encompassing 43.7 km2 with Minotaur Exploration Limited (ASX: MEP) to earn up to 80% of the project and includes the Altia Deposit, where previous exploration has defined a shallow leadsilver resource.

a significant program of shallow rC and deeper diamond drilling was completed at the altia JV project. Exploration targeted broken Hill Type deposits along strike from the known altia deposit testing a number of extensional, geophysical and geochemical targets along the prospective horizon. deeper drilling and downhole geophysical testing was completed at the altia north, Capricorn and boralis targets. further drilling is planned for the 2014 field season.

a highly prospective 100% owned tenement package has been built up in the Eastern Succession prospective for large base metal deposits under shallow cover covering a significant portion of the prospective stratigraphy. one deep hole was drilled at the 100% owned Lilleyvale magnetic target and further drilling is planned at the 100% wilgunya project, further targets will be tested when the remaining tenements are granted.

new South Wales Projects

A number of project areas are held in the Lachlan Fold Belt of New South Wales near West Wyalong which are prospective for porphyry copper-gold mineralisation as found at Northparkes (China Moly), Cadia (Newcrest) and Cowal (Barrick).

Farm-in agreements to earn up to 80% are held with Straits Resources Ltd (ASX: SRQ) on the Bland Creek project and with Gold Fields Australasia Pty Ltd on the Marsden South project.

Exploration continued at the bland Creek JV with drilling targeting prospective regions for porphyry copper-gold deposits.

a highly prospective 100% owned tenement package has been built up in the Lachlan fold belt prospective for porphyry copper and gold deposits under shallow cover in a number of intrusive centres from south of west wyalong to narromine.

a Joint Venture agreement was signed with gold fields australasia during the year over the prospective marsden South Project that lies within the Cowal intrusive complex hosting a number of known porphyry and epithermal deposits. drill ready targets have been defined.

regional and in-fill drilling programs are planned at the 100%-owned wingrunner Project and on the bland Creek and marsden South Joint Ventures.

alford Project

The Alford Project on the Yorke Peninsula lies 20km NE of Wallaroo, South Australia in the southern portion of the Gawler Craton. The tenements are prospective for iron oxide copper-gold mineralisation as found at Prominent Hill (OZ Minerals), Olympic Dam (BHP) and Hillside (Rex Minerals). The Project includes an option to Joint Venture into the Alford project (EL3969, PM268) with Argonaut Resources (ASX: ARE) to earn up to 75% of the project.

a significant program of ground geophysical, aircore, rC and diamond drilling was completed at the alford JV testing for iron oxide copper-gold deposits under shallow cover. a number of high priority targets were defined and tested with large alteration systems defined but were predominantly only weakly mineralised.

a reduced program is planned for the next field season.

intERnatiOnaL ExPLORatiOn

Sandfire is assessing opportunities worldwide to secure high quality growth opportunities in base metals and gold that are strategic fits for the companies growth profile. The Company has invested in two listed entities to gain exposure to their high quality assets and their district potential. The exploration tenements in Peru have not been renewed after initial reconnaissance exploration. The Company ensures that its’ high corporate standards, commitment to safety in the workplace, environmentally sound practices and transparent social responsibility are maintained in its investment companies.

investment in WCB Resources

Sandfire has invested in wCb resources Ltd (“wCb”; TSx-V: wCb), a Toronto-listed copper-gold explorer, by subscribing for shares in a a$5.9m private share placement and now holds a 37% interest in the company.

[ 2 0 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

wCb is earning a 70% interest in the misima island exploration lease through a joint venture with Pan Pacific Copper (“PPC”), an integrated copper mining and smelting company that is jointly owned by Jx nippon mining & metals.

Corporation and mitsui mining & Smelting Company Ltd. The misima Project is located within a porphyry belt which contains four of the world’s richest primary grade copper and gold porphyries including grasberg (4.9 billion tonnes @ 0.8% Cu and 0.7g/t au), ok Tedi (1.7 billion tonnes @ 0.7% Cu and 0.6g/t au), golpu (1 billion tonnes at 0.9% Cu and 0.6g/t au) and Panguna (1.4 billion tonnes @ 0.5% Cu and 0.6g/t au)*

The primary target is a potential Tier-1 copper-gold porphyry target at mt Sisa located adjacent to an historical gold mine formerly owned by Placer dome asia Pacific which produced 4.0moz of gold and 20moz of silver. at mt Sisa a very large 1km2 copper soil anomaly coincides with extensive copper anomolous rock chips, shallow drilling and a deep strong magnetic anomaly with skarn mineralisation and halo veining at surface.

investment in tintina Resources

Subsequent to 30 June 2014, the Company secured the opportunity to participate in the ongoing evaluation, exploration and development of one of the highest grade undeveloped copper deposits in north america after acquiring a cornerstone interest in Vancouver-based copper development company Tintina resources (“Tintina”; TSx.V: Tau).

as part of its global business development strategy of securing quality growth opportunities in base metals and gold, Sandfire subscribed for 80 million shares in a private placement at C$0.20 per share. The C$16 million placement has given Sandfire an initial 36% interest in Tintina.

in addition, Tintina issued Sandfire 20 million two-year Class a warrants exercisable at C$0.28 per share, 20 million three-year Class b warrants exercisable at C$0.32 per share and 40 million five-year Class C warrants exercisable at C$0.40 per share. if these warrants are exercised, Sandfire’s interest would increase to 53% (undiluted) giving it a clear path to control of the Company and the project.

Sandfire is Tintina’s largest shareholder (36%), alongside other strategic shareholders including Quantum Partners LP (~21%) and Electrum Strategic metals LLC (~16%).

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mr bruce Hooper, Sandfire’s current Chief Exploration & business development officer, has been appointed President and Chief Executive officer and a director of Tintina on a secondment basis.

funds contributed by Sandfire will be used to complete a feasibility Study for the black butte Project (“Project”) and to pursue project permitting, as well as to fund further exploration in the district.

the Black Butte Copper Project

Tintina’s key asset is a 100% interest in the premier, high-grade black butte Copper Project, located near Helena in the State of montana in the united States. The project is located close to existing road, power and rail infrastructure, with the ability to access a residential workforce located nearby and competitive sources of materials and power.

Located on private ranch land in central montana, the black butte Project copper resource consists of three flat-lying sedimentary hosted copper deposits which have been extensively drilled by Tintina (over 53,000m of diamond drilling).

an updated Technical report and Preliminary Economic assessment (PEa) completed by Tintina in July 2013 was based on reported ni 43-101 measured and indicated resources totalling 15.7 million tonnes grading 3.4% Cu, 0.1% Co and 14g/t ag for 533,600 tonnes of contained copper and inferred resources totalling 2.3 million tonnes grading 2.8% Cu, 0.09% Co and 14g/t ag for 63,500 tonnes of contained copper (calculated using a 1.6% copper cut-off grade) for the Johnny Lee upper Zone and Lowry deposits, and a 1.5% Cu cut-off for the Johnny Lee Lower Zone).

Please refer to Tintina’s website - http://www.tintinaresources.com/home, for the mineral resource inventory contained in the PEa. The PEa confirmed that the deposit has the potential to underpin a robust underground mining operation with forecast life-of-mine production of ~30,000tpa of copper-in-concentrate over a mine life of ~11 years, based on total mill throughput of 11.8 million tonnes at an average head grade of 3.1% Cu.

The Project, as described in the PEa, would have an on-site concentrator with minimal surface footprint. indicative capital costs were estimated in the PEa at uS$218 million, comprising direct costs of uS$152 million, indirect/owner’s costs of uS$32 million and contingency of uS$33 million, plus life-of-mine sustaining capital of uS$115 million. forecast cash costs were estimated at uS$1.80/lb (inclusive of royalties) with the project generating strong economic returns, with an estimated pre-tax nPV of uS$218 million at an 8% discount rate and internal rate of return (irr) of 30% based on a copper price of uS$3.05/lb Cu.

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 2 1 ]

He a lt H a n D s a Fe t y

at Sandfire we believe safety is integral to great business. our commitment to achieving strong health and safety performance and investing in health and safety management is at the forefront of our business directives. a safe workplace and the wellbeing of employees, contractors and visitors is fundamental to our success.

To achieve these aims the Company:

recognises that everyone’s involvement in health and safety is essential;
Ensures leadership is the key driver of a zero harm culture;
Continually seeks to improve safety management systems and risk management practices;
rigorously identifies and controls risks;
is actively involved in the continued improvement in practices and procedures;
undertakes training and preparedness which is critical to a safe workplace;
demands that working safety is a condition of service for everyone; and
meets and strives to exceed statutory requirements and industry standards.

our safety performance is supported by the introduction of our Health and Safety management System Elements. further development of Standards, management Plans, Procedures and Standard work Practices will continue over the next twelve months. The introduction of our improved risk assessment standard ensures a focus on principal hazards and critical controls to fulfil our aim of rigorously identifying and controlling risks and ensuring we focus appropriately on high risk potential situations.

Central to our approach is effective leaders who are safety focused and engage with their teams to build a strong safety culture. we encourage our leaders to be visible and passionate champions for health and safety. our safety slogan “ Don’t Walk Past ” depicts the workplace we strive to create, a culture in which all workers are supported to ensure safety is always the first job with the highest priority.

we continued to reduce our injury rates across the company during the 2013/2014 fY. our total recordable injury frequency rate (Trifr[1] ) was 12.0, a significant reduction from the previous year which was 18.1. our lost time injury frequency rate (LTifr[1] ) was 3.8, a reduction from 4.2 the previous year.

1 Calculation for Trifr and LTifr is total number of injuries (for the 12 month period) / total hours worked (for the 12 month period) multiplied by 1,000,000.
Lost Time injury - an injury which results in the person being declared (by a medical Practitioner) as being unfit to perform their normal duties for a shift, after the shift in which the injury was sustained.
Total recordable injury - The combination of fatalities, Lost Time injuries, restricted work injuries and medical Treated injuries.

[ 2 2 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

o u r peo ple

People are our number one resource, which is why we are dedicated to maintaining the highest standards of safety, integrity and quality in all that we do. These values are fundamental to our work practices, dealings with individuals and cultures and in our approach to sustainability and the environment.

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it is imperative that our people are fit for the work that they perform in a supportive, productive and harmonious workplace. To achieve these aims the Company:

actively encourages a high level of teamwork, leadership, collaboration and celebrates success;
Values and nurtures our unique culture as we continue to grow and diversify;
Has embedded accountability and innovation in our culture to enhance our ongoing success;
Empowers leaders to make the right decisions;
Consistently demonstrates a high standard of integrity, respect and emotional intelligence in all of our dealings;
Ensures that effective reward and recognition policies and processes are applied consistently, integral to our commitment to our employees and values;
attracts and retains quality people and adopts employment practices that aim to employ people who are appropriately skilled and fit and able to undertake assigned tasks;
is an equal opportunity employer committed to providing a workplace free of discrimination, harassment and bullying and upholding relevant laws;
Ensures that all staff are treated with dignity, courtesy and respect and recognises the importance of valuing the many differences in background, cultures and demographic characteristics of employees, including their family responsibilities;
is flexible, innovative and committed to aboriginal employment, providing opportunities in employment and career development throughout the organisation and our operating site;
Values diversity in a dynamic and challenging working environment;
is dedicated to the training and development of our employees ensuring that all personnel that work at Sandfire sites are appropriately inducted, trained, developed and competent to carry out their work safely and to their full capacity;
Provides opportunities and encourages career development, supporting ongoing training, personal development and further education of our people;
is committed to a performance management system that aligns individual and team KPi’s to organisational goals, strategies and values, linking reward and performance and enabling employees to achieve their full potential;
Ensures that effective reward and recognition policies and processes are applied consistently, integral to our commitment to our employees and values;
understands the importance of ongoing effective communication and feedback in our work processes and practices;
focuses on the health and wellness of our people;
incorporates fitness for work principles into all that we do ensuring that no-one in our workplaces will be under the influence of alcohol, drugs (including prescription medication), illness, stress or fatigue, which may impair performance, personal safety or the safety of others;
Provides confidential counselling and other support services;
Ensures all employees and contractors are skilled and educated in their individual responsibilities; and
regularly reviews policies, procedures and practices.

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 2 3 ]

sus ta In a B IlI t y a nD en V Iro nm en t

Sandfire is committed to supporting a Sustainable management framework that ensures:

The health and well-being of our workforce;
The provision of economic benefit to communities in which we operate;
we manage the sustainable use of our natural resources; and
The return of value for our stakeholders and shareholders.

Strategies are in place to meet our Sustainability objectives and commitments by:

Promoting a strong safety and healthy work environment and culture across all areas of the business;
never compromising on the safety and well-being of our personnel;
delivering superior value and returns to shareholders;
dealing ethically, fairly and equitably with stakeholders;
Ensuring the safe storage, handling and transport of our materials and products;
Preventing or minimising impact on the environment and promoting the efficient use of natural resources;
developing company-wide strategies for exploration and development of mineral endowments;
Encouraging innovation to increase efficiency in discovery, extraction and processing of our mineral resources;
meeting or exceeding our Statutory requirements, commitments and obligations; and
achieving continuous improvement in the management of our risks and opportunities.

Sandfire has in place Policies, business Systems, Health and Safety management Systems, Environmental management Systems and Community management Systems, to meet these commitments and to appropriately manage Sustainability risks.

Environmental Policy

Sandfire is a successful and emerging resources company with interests in exploration, project development, mining, and processing in australia and internationally. Sandfire recognises that some of these activities will impact directly and indirectly on the local environments and communities, and is committed to undertaking its activities in a sustainable and socially responsible manner to minimise and mitigate these impacts.

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[ 2 4 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4
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To achieve this Sandfire is committed to:

Expanding the current Environmental management System (“EmS”) to all Company activities to encourage consistency in environmental protection through proactive environmental management and compliance with statutory requirements in different regulatory domains;
Extending all Environmental Standards for use across Company activities including design, exploration, planning, development, and closure/decommissioning of exiting projects or assessment of acquisition opportunities and new projects;
The continued development of policies, plans and strategies for Sustainability, Stakeholder Engagement, biodiversity management, resource use, Emissions management and Climate Change;
Ensuring that independent bodies assess Sandfire’s policies, processes and plans and define progress in areas such as Sustainability, Emissions and resources use relevant to differing areas of activities;
The continued training and communication to employees and contractors on matters related to Environmental management and the importance of natural resources including soils, vegetation, water, energy, waste and mineral products/by-products;
Engaging with stakeholders in good faith around issues of common and shared interest, whilst working to develop qualitative and quantitative indicators around this engagement;
undertaking rehabilitation and recovery of disturbed areas in a timely manner, consistent with industry standards, regulatory requirements and relevant guidelines;
Providing opportunity for the development and implementation of innovative and sustainable options through a process of continuous improvement; and
Communicating with stakeholders, regulatory authorities, employees and community on environmental performance and progress in activities.

an iSo 14001 aligned EmS is in place to manage all environmental aspects of the degrussa Copper mine. The Environmental management Plans (“EmP”) for the Company’s Exploration and development Projects will be included in the consolidation of Sandfire activities under a single Sandfire EmS.

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Environmental Performance and Planning
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Measure	2013/14	2012/13
Signifcant incidents1	-	-
Signifcant regulatory non-compliances – Environment2	-	-
Energy Consumed gj3	1,356,960	1,158,983
water extracted from borefelds (mL)4	4125	1,151
reclaimed water used in processing (mL)6	440	-
waste rock mined (million tonnes)7	1.81	13.5
Tailings produced (tonnes)8	585,683	214,089
Paf waste materials (tonnes)9	25,000	-
Total approved footprint (Ha)10	518	518
footprint of disturbance (Ha)11	364	348
Land under rehabilitation (Ha)12	39	10

Significant incidents of Level 3 or greater. Level 3 incidents are required to be reported to the government.
Significant incidents with a requirement to report to government.
reported in the 2012/2013 annual national greenhouse and Energy report (“ngEr”), and estimated for 2013/2014 ngEr (in preparation). 4. reported in internal monthly reports, water from bore used in operations.
Excludes dewatering bore 195kl discharge.
2013/14 water balance, excludes dewatering bore discharge. 2012/13 – not recorded.
reported in the annual Environmental report to department of mines and Petroleum (dmP), includes open pit and underground waste rock.
reported in the annual Environmental report to dmP and internal monthly reporting.

Estimated potentially acid forming (“Paf”) paste backfill removed from underground to surface and placed in Paf encapsulation area in integrated waste landform.

based on tenure area approved for disturbance.
as calculated for annual reports and mine rehabilitation fund (“mrf”) reporting.
as reported in the mrf reporting.

Environmental Planning

Key Environmental Planning for 2014/15 includes:

further improving efficiency in Company water use and reporting;
Preliminary studies in utilising solar energy at the degrussa Copper mine;
development of key long term targets and objectives for environmental performance at the degrussa Copper mine beyond statutory requirements; and
The ongoing development of the Sandfire Environmental management System (EmS).

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 2 5 ]

com mu nI t y rel at I o ns

one of Sandfire’s key sustainability goals is to ensure that our local communities receive real benefit from our activities.

at degrussa the aboriginal Engagement Coordinator and Senior management regularly meet with the local community in meekatharra to discuss activities and the needs of the community. Sandfire recognises that we have a duty to give back to the communities where we operate.

Sandfire supports local community initiatives including:

Community based events (Town festival);
Local welfare organisations (Scouts, girl guides, Youth Centre);
Karalundi School;
meekatharra Sporting Clubs (race Club, gymkhana Club);
meekatharra Hospital auxiliary; and
Local aboriginal Community development initiatives.

on site at the doolgunna Project and the degrussa Copper mine, Sandfire supports:

Environment and sustainability programs (mine site rehabilitation and recycling programs); and
Cultural awareness Programs.

regional community support initiatives include:

royal flying doctor Service;
St John’s ambulance;
State Emergency Service; and
organisations addressing health issues related to fifo lifestyle.

Community initiatives and Sponsorships

Sandfire resources’ donations, Sponsorship and Partnership Policy is designed to evaluate requests for financial assistance from non-profit organisations that are recognised as stakeholders in Sandfire activities or that have a purpose closely aligned to Sandfire’s business profile or its activities.

The aim of the policy is to ensure that requests for contributions or assistance from stakeholders and community organisations are processed in a consistent manner across the entire organisation.

Sandfire contributes either directly or indirectly to a wide range of community-based organisations and charities, with a strong emphasis on regional and community organisations, charities and causes in the region surrounding the degrussa Copper mine. we actively invest in the community, through sponsorships and attending local events. Sandfire resources is the major Sponsor for the meekatharra races and the meekatharra annual golf Event, and also sponsors other organisations that are recognised as stakeholders in Sandfire activities or that have a purpose closely aligned to Sandfire’s business profile or its activities such as the Young australian (and indigenous) art and writers awards, fire services, helicopter rescue services and educational organisations such as the get into resources Event and Careers in geoscience event. we encourage support for locally organised initiatives that provide long-term benefit to our local communities which are aligned with the wishes of these communities. our sponsorship guidelines, available on our website, details our approach to investing in community development.

indigenous Recognition, training and Recruitment

To date, Sandfire has carried out over 50 aboriginal Heritage surveys on the Company’s tenements in the various jurisdictions in which it operates. These surveys are carried out in conjunction with members of the native Title Claimant groups, aboriginal representative Councils and professional anthropologists and archaeologists.

Land access agreements have been negotiated and implemented between Sandfire and two native Title Claimant groups at the degrussa Copper mine. while details of these agreements remain confidential, they deliver substantial benefits to members of the native Title Claimant groups and surrounding communities.

Sandfire has held numerous Cross Cultural workshops at the doolgunna Project and has plans in place to extend this exposure across its entire workforce.

The Company actively encourages its contractors and service providers to include aboriginal Engagement content in their workforce. The contract catering company at degrussa, Cater Care Services, commenced an indigenous Traineeship Program in mid-2013.

members of the native Title Claimant groups in the doolgunna region are encouraged to enter into arrangements with contractors to gain a foothold in local business development programs.

[ 2 6 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

scH eD u le o F e xplo r at I o n a nD m In In g t enem en t s

			area Hectares (Ha),
State	Project	tenement	Km2 or Graticular Blocks	Grant Date	interest
wa	doolgunna	E51/1582	1	29/11/13	100%
		E51/1583	1	29/11/13	100%
		E51/1647	1	application	application
		E52/1698	7	1/08/05	100%
		E52/1699	53	1/08/05	100%
		E52/1712	1	5/02/04	option
		E52/1715	54	22/06/05	100%
		E52/1928	1	2/05/06	option
		E52/2208	1	5/01/09	100%
		E52/2209	1	5/01/09	100%
		E52/2358	1	6/04/09	100%
		E52/2401	10	7/07/09	100%
		E52/2846	1	application	application
		E52/2880	9	19/06/14	100%
		E52/2881	1	19/06/14	100%
		E52/2927	20	11/02/14	100%
		E52/2996	5	16/12/13	100%
		E52/3023	4	9/01/14	100%
		E52/3046	1	29/04/14	100%
		E52/3047	2	29/04/14	100%
		E52/3101	2	application	application
		E52/3106	7	application	application
		L52/122	41 Ha	23/11/10	100%
		L52/125	69 Ha	21/04/11	100%
		L52/127	41 Ha	22/04/11	100%
		L52/133	2 Ha	21/09/11	100%
		L52/134	1,256 Ha	application	application
		L52/135	99 Ha	application	application
		L52/137	510 Ha	7/02/12	100%
		L52/138	2 Ha	3/01/12	100%
		L52/140	80 Ha	7/02/12	100%
		L52/146	6 Ha	28/06/12	100%
		L52/151	3 Ha	25/02/13	100%
		L52/152	2 Ha	25/02/13	100%
		L52/156	16 Ha	1/10/13	100%
		L52/160	3 Ha	application	application
		m52/1046	1,704.50 Ha	8/12/13	100%
		P51/2885	156 Ha	application	application
		P51/2886	200 Ha	application	application
		P51/2887	195 Ha	application	application
		P52/1433	127 Ha	application	application
		P52/1434	144 Ha	31/01/14	100%
		P52/1457	183 Ha	24/01/14	100%
		P52/1458	194 Ha	24/01/14	100%
		P52/1459	104 Ha	24/01/14	100%
		P52/1460	167 Ha	24/01/14	100%
		P52/1461	197 Ha	24/01/14	100%
		P52/1462	192 Ha	24/01/14	100%
		P52/1463	178 Ha	24/01/14	100%
		P52/1464	152 Ha	24/01/14	100%
		P52/1465	131 Ha	24/01/14	100%
		P52/1484	149 Ha	23/05/14	100%
	Thaduna/green dragon	m52/1060	48 Ha	29/04/13	35%
		m52/1061	555 Ha	29/04/13	35%
		L52\149	21 Ha	2/05/13	35%
		L52\150	16 Ha	2/05/13	35%
	Springfeld/Halloween	E52/2275	6 Ha	9/02/09	farm-in
		E52/2282	70 Ha	25/11/09	farm-in
		E52/2313	14 Ha	25/11/09	farm-in
		E52/2466	14 Ha	6/04/10	farm-in
		E52/1241	200 Ha	18/03/08	farm-in

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 2 7 ]

schedule Of explOratiOn and mining tenements (continued)

			area Hectares (Ha),
State	Project	tenement	Km2 or Graticular Blocks	Grant Date	interest
nSw	bland Creek	EL5792	52	9/11/00	farm-in
		EL7982	77	18/10/12	100%
		EL8025	53	29/11/12	100%
		EL8291	63	20/08/14	100%
		EL8292	20	20/08/14	100%
		ELa5055	35	application	application
	wingrunner	EL8173	109	3/10/13	100%
		EL8195	104	31/10/13	100%
		EL8196	52	31/10/13	100%
		EL8241	22	4/03/14	100%
		EL8274	9	3/06/14	100%
		EL8293	18	20/08/14	100%
	Three rivers	EL8253	66	3/04/14	100%
		ELa5087	63	application	application
	marsden South	EL6554	12	3/04/06	farm-in
		EL6937	28	8/11/07	farm-in
nT	borroloola	mLn624	16.18 Ha	24/08/71	farm-out
		EL24401	87	3/06/05	farm-out
		EL25501	37	application	application
		EL26299	52	application	application
		EL26555	103	11/09/08	100%
		EL26587	20	11/09/08	farm-out
		EL26599	326	application	application
		EL26831	212	9/06/09	farm-out
		EL26833	183	9/06/09	farm-out
		EL26835	208	9/06/09	farm-out
		EL26836	178	9/06/09	farm-out
		EL26837	107	9/06/09	farm-out
		EL26938	140	9/06/09	farm-out
		EL26939	68	9/06/09	farm-out
		EL28508	12	20/07/11	farm-out
		EL28534	4	7/09/11	farm-out
		EL28540	4	7/09/11	farm-out
		EL28541	3	7/09/11	farm-out
		EL28656	39	27/10/11	farm-out
		EL28657	45	27/10/11	farm-out
		EL26858	117	27/10/11	farm-out
		EL28659	20	27/10/11	farm-out
		EL29022	53	25/07/12	farm-out
		EL30048	90	3/06/05	farm-out
		EL30098	69	application	application
		EL30137	99	9/06/05	farm-out
		EL30152	159	9/06/09	farm-out
		EL30156	169	9/06/09	farm-out
		EL30157	26	9/06/09	farm-out
		EL30158	161	9/06/09	farm-out
		EL30302	113	9/06/09	farm-out
		EL30305	23	9/06/09	farm-out

[ 2 8 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

			area Hectares (Ha),
State	Project	tenement	Km2 or Graticular Blocks	Grant Date	interest
QLd	Kennedy	EPm19418	36	30/11/12	100%
		EPm19453	19	12/03/13	100%
		EPm19542	97	16/10/13	100%
		EPm25516	99	application	application
		EPm25517	13	application	application
	altia	EPm17838	99	3/05/10	farm-in
		EPm19832	20	25/09/13	100%
		EPm25388	10	17/07/14	100%
		mdL431	790 Ha	1/06/13	farm-in
		mdL432	18 Ha	1/06/13	farm-in
	Cannington	EPm25123	21	application	application
		EPm25263	5	application	application
		EPm25341	5	7/04/14	100%
		EPm25404	3	application	application
		EPm25423	6	application	application
		EPm25444	22	4/09/14	100%
		EPm25453	12	application	application
		EPm25475	9	application	application
	breena Plains	EPm25201	3	6/02/14	100%
		EPm25222	2	6/02/14	100%
		EPm25340	43	8/04/14	100%
		EPm25447	33	7/07/14	100%
		EPm25476	55	application	application
		EPm25543	5	application	application
		EPm25620	22	application	application
		EPm25723	19	application	application
	blackrock	EPm25339	32	7/04/14	100%
		EPm25450	32	6/07/14	100%
		EPm25782	80	application	application
	Kevin downs	EPm25345	14	7/04/14	100%
		EPm25446	31	7/07/14	100%
		EPm25780	8	application	application
Sa	alford	EL5212	477 Km2	5/11/12	farm-in
		EL5273	40 Km2	20/06/13	100%
		EL5361	17 Km2	7/01/14	100%
		EL5362	35 Km2	7/01/14	100%
		Pm268	193 Ha	5/12/74	farm-in
Peru	arena	01-01429-12	500 Ha	28/09/12	100%
		01-01430-12	300 Ha	28/09/12	100%
		01-01431-12	500 Ha	31/07/12	100%
		01-01432-12	400 Ha	31/10/12	100%
		01-01433-12	600 Ha	31/07/12	100%
		01-01434-12	700 Ha	28/09/12	100%
		01-01435-12	500 Ha	28/09/12	100%
		01-01436-12	900 Ha	31/07/12	100%
		01-01437-12	600 Ha	28/09/12	100%
		01-01438-12	900 Ha	23/10/12	100%

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 2 9 ]

co rp o r at e g oV ern a n ce s tat em en t

The board of directors of Sandfire resources nL (Sandfire or Company) is responsible for establishing the corporate governance framework of the Company having regard to the aSx Corporate governance Council published guidelines as well as its corporate governance principles and recommendations. The board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. in performing its responsibilities, the board acts in the best interests of Sandfire, honestly, fairly and diligently and in accordance with the duties and obligations imposed upon it by Sandfire’s Constitution and the law.

This statement reports on Sandfire resources nL’s (Sandfire or the Company) governance framework, principles and practices for the year ended 30 June 2014. These principles and practices are reviewed regularly and revised as appropriate to reflect change in the law and best practice corporate governance. The Company’s website at www.sandfire.com.au also contains a corporate governance section including copies of the Company’s corporate governance policies and board committee charters referred to in this statement.

Recommendation		Comply
Principle 1	Lay solid foundations for management and oversight
1.1	Companies should establish the functions reserved to the board and those delegated to senior	Yes
	executives and disclose those functions.
1.2	Companies should disclose the process for evaluating the performance of senior executives.	Yes
1.3	Companies should provide the information indicated in the guide to reporting on Principle 1.	Yes

Role of the Board

The board has adopted a written Charter to provide a framework for the effective operation of the board which sets out:

the board’s composition;
the board’s role and responsibilities;
delegation of duties and powers;
board process; and
review and performance evaluation.

Specialist committees are able to focus on a particular responsibility and provide informed feedback to the board. To this end the board has established the following committees:

audit and risk; and
remuneration and nomination.

The roles and responsibilities of these committees are discussed throughout this corporate governance statement. The board’s role is to:

represent and serve the interests of shareholders by overseeing and appraising the Company’s strategies, policies and performance. This includes overseeing the financial and human resources the Company has in place to meet its objectives, as well as reviewing management performance;
protect and optimise Company performance and build sustainable value for shareholders in accordance with any duties and obligations imposed on the board by law and the Company’s constitution and with a framework of effective controls that enable risk to be assessed and managed;
set, review and ensure compliance with the Company’s values and governance framework (including establishing and observing high ethical standards); and
ensure shareholders are kept informed of the Company’s performance and major developments affecting its state of affairs.
matters which are specifically reserved for the board or its committees include:
appointment of a Chair;
appointment and removal of managing director and Chief Executive officer;
appointment of directors to fill a vacancy or as additional directors;
establishment of board committees, their membership and delegated authorities;
approval of dividends;
approval of major capital expenditure, significant indebtedness, acquisitions and divestitures in excess of authority levels delegated to management;
calling of meetings of shareholders; and
any other specific matters nominated by the board from time to time.

[ 3 0 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

Delegation to Management

under the board Charter, the board has delegated responsibility for the day-to-day management of the Company’s business and affairs to the managing director and Chief Executive officer. This responsibility is subject to an approved delegation of authority which is reviewed regularly. internal control processes are in place to allow management to operate within the delegations approved by the board and the managing director and Chief Executive officer cannot commit the Company to activities or obligations outside these delegated authorities without the specific approval of the board.

Evaluation of Senior Executives

Each director of the Company has entered into a formal letter of appointment which clearly sets out what is expected of each director. Senior executives have service agreements containing detailed duties and responsibilities which are complimented by key performance indicators. The performance of the key executives is reviewed regularly against both measurable and qualitative indicators.

during the reporting period, the remuneration and nomination Committee conducted performance evaluations that involve an assessment of each senior executive’s performance against specific and measurable qualitative and quantitative performance criteria. The performance criteria against which executives are assessed are aligned with the financial and non-financial objectives of Sandfire. details of how the Company assesses the performance of the managing director and Chief Executive officer and the executive management team are set out in the remuneration report included in the directors report.

Principle 2	Structure the Board to add value	Comply
Recommendation
2.1	a majority of the board should be independent directors.	no
2.2	The chair should be an independent director.	Yes
2.3	The roles of chair and chief executive offcer (CEo) should not be exercised by the same individual.	Yes
2.4	The board should establish a nomination committee.	Yes
2.5	Companies should disclose the process for evaluating the performance of the board, its committees and	Yes
	individual directors.
2.6	Companies should provide the information indicated in the guide to reporting on Principle 2.	Yes

Board Composition

The skills, experience and expertise held by each director in office at the date of the financial report are included in the directors’ report. information regarding each director’s responsibility on board committees and attendance at board and committee meetings is also set out in the director’s report.

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cOrpOrate gOvernance statement (continued)

Skills of the Board

The board actively seeks to ensure that the board and its committees have the right mix of background, skills, knowledge and experience necessary to guide and govern the Company effectively and in accordance with highest standards.

The board considers that its members have the range of skills, knowledge and experience, including an in depth understanding of mining, geology, legal, accounting, risk and people management issues necessary to direct the activities of the Company. The following chart demonstrates educational qualifications of the current board across the range of attributes that are relevant to Sandfire’s business.

==> picture [357 x 175] intentionally omitted <==

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

Educational Qualifications
Mining and Geology
Finance and Accounting
Legal and Adminstration
----- End of picture text -----

independence

directors of Sandfire are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgement. The board will consider the materiality of any given relationship on a case-by-case basis and has adopted guidelines to assist in this regard (refer Section 2.2 of the board Charter). The board, guided by the board Charter, considers thresholds of materiality for the purposes of determining independence in accordance with aSx recommendations, having regard to both quantitative and qualitative principles. an item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount. it is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. overriding the quantitative assessment is the qualitative assessment. Specifically, the board will consider whether there are any factors or considerations which may mean that the director’s interest, business or relationship could, or could be reasonably perceived to, materially interfere with the director’s ability to act in the best interests of the Company.

in accordance with the definition of independence above, and the materiality thresholds set, the following directors of Sandfire are considered to be independent:

name	Position
derek L ferla	non-Executive Chairman
robert n Scott	non-Executive director
Paul d Hallam	non-Executive director

accordingly, the board does not consist of a majority of independent directors. The Sandfire board consists of six directors and three are considered independent. as such, the Company does not have a majority of independent directors, nor does it have a minority of independent directors. The board acknowledges the Corporate governance Council’s recommendation that the majority of the board should be comprised of independent directors. Consideration will be given to the appointment of an additional independent director in the next 12 months. any such appointment will be considered in the light of continuing to add to a diverse mix of skill sets on the board.

[ 3 2 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

Chairman

The roles of Chair and Chief Executive officer (CEo) are not exercised by the same individual.

Remuneration and nomination Committee

The board has established a remuneration and nomination Committee which operates under a Charter approved by the board. The remuneration and nomination Committee comprised the following members throughout the year:

name	Position
Paul d Hallam	Committee Chairman, non-Executive director (independent)(a)
derek L ferla	non-Executive director (independent)
robert n Scott	non-Executive director (independent)

(a) mr Hallam was appointed chairman of the remuneration and nomination Committee on 18 february 2014, replacing mr La ferla. all directors on the remuneration and nomination Committee are independent.

The functions of the remuneration and nomination Committee are set out in the remuneration and nomination Committee Charter. The main functions of the Committee in relation to nomination are to review and make recommendations to the board in relation to:

board succession planning generally,
induction and continuing professional development programs for directors;
the development and implementation of a process for evaluating the performance of the board, its Committees and directors;
the process for recruiting a new director, including evaluating the balance of skills, knowledge, experience, independence and diversity of the board;
the appointment and re-election of directors; and
ensuring there are plans in place to manage the succession of the CEo and other Executives.

Evaluation of the Performance of the Board and individual Directors

The board, with the assistance of the remuneration and nomination Committee, regularly monitors the performance of the board and individual directors throughout the year and conducts a review of their performance on an annual basis. This may occur through a process of internal review led by the Chairman, or, be performed with the assistance of external advisers as considered appropriate. The 2014 financial year review was led by the Chairman by way of a questionnaire, followed up where applicable with one-on-one discussions. any improvements identified will be implemented during the year.

Principle 3	Promote ethical and responsible decision-making	Comply
Recommendation
3.1	Companies should establish a code of conduct and disclose the code or a summary of the code	Yes
	as to:
	•the practices necessary to maintain confdence in the company's integrity;
	•the practices necessary to take into account their legal obligations and the reasonable
	expectations of their stakeholders; and
	•the responsibility and accountability of individuals for reporting and investigating reports of
	unethical practices.
3.2	Companies should establish a policy concerning diversity and disclose the policy or a summary of that	Yes
	policy. The policy should include requirements for the board to establish measurable objectives for
	achieving gender diversity and for the board to assess annually both the objectives and progress in
	achieving them.
3.3	Companies should disclose in each annual report the measurable objectives for achieving gender	Yes
	diversity set by the board in accordance with the diversity policy and progress towards achieving
	them.
3.4	Companies should disclose in each annual report the proportion of women employees in the whole	Yes
	organisation, women in senior executive positions and women on the board.
3.5	Companies should provide the information indicated in the guide to reporting on Principle 3.	Yes

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cOrpOrate gOvernance statement (continued)

Code of Conduct

The board recognises the need to observe the highest standards of corporate practice and business conduct. accordingly, the board has established a Code of Conduct which applies to directors, employees, temporary employees and contractors of Sandfire.

They key principles underpinning the Code of Conduct are:

our actions must be governed by the highest standards of integrity and fairness;
our decisions must be made in accordance with the spirit and letter of applicable law; and
our business must be conducted honestly and ethically, with our best skills and judgement, and for the benefit of our people, clients, shareholders, stakeholders and Sandfire alike.

The objective of the Code of Conduct is to:

provide a benchmark for professional behaviour throughout Sandfire;
support Sandfire’s business reputation and corporate image within the community; and
make employees aware of the consequences if they breach the Code.

The Company has adopted a whistleblower Protection Policy. a whistleblower is someone who discloses reportable conduct to people that have the power to take corrective action. Sandfire recognises that a genuine commitment to detecting and preventing illegal and other undesirable conduct must include a mechanism whereby personnel can report their concerns freely and be protected from reprisals.

Diversity

Sandfire is committed to providing a diverse and inclusive work environment in which everyone is treated fairly and with respect. Sandfire is committed to recruiting, training and promoting individuals based on competence and to attracting the best people in their fields, regardless of their gender, religion, race, ethnicity, language, cultural background, sexual orientation, disability and age.

The board believes that the promotion of diversity within the organisation generally:

broadens the pool for recruitment of high quality employees;
is likely to support employee retention;
is likely to encourage greater innovation, enhances work practices and productivity; and
is socially and economically responsible governance practice.

The remuneration and nomination Committee has developed, and the board has approved, the Company’s diversity Policy. This policy applies to directors and all employees of Sandfire. in summary, the diversity Policy provides guidelines in relation to Sandfire’s commitment to diversity, the establishment of measurable objectives for achieving gender diversity and the progress made towards achieving the objectives set and the responsibilities of the remuneration and nomination Committee to consider the diversity Policy.

The proportion of women employed by the Company as at 30 June 2014 is listed below:

all employees: 25% (2013: 20%);
• management positions: 33% (2013: 29%); • Senior executive positions: nil% (2013: nil%); and • board: nil% (2013: nil%).

approximately 13.9%[1] of employees in the resource industry are females, and as such, Sandfire exceeds the industry average by approximately 11.1%. The Company acknowledges that improving female representation needs to occur at all levels within the Company, and has set measurable objectives to achieve this and also improve female representation in key decision making roles within the Company. Please refer to the table below – 2015 gender diversity measurable objectives.

Sandfire offers equal remuneration for all of our employees, reflective of the type of job, years of experience and the period for which employees have held their position. we annually review the earnings of our employees by gender and job band level to provide assurance that our employee’s remuneration remains equitable and in line with market trends.

1 as reported by the australian mines and metals association, for the year ending may 2014.

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2015 Gender Diversity Measurable Objectives

1	Continue to exceed the resource industry average female participation rates.
2	Establish and promote the women in Sandfre group.
3	identify and develop high performing women for career progression, as part of the company’s succession planning process.
4	Ensure Company representatives continue to participate in mentoring programs such as the women in mining mentoring
	Program established by wimwa and the Chairmen’s mentoring Program, run by the australian institute of Company
	directors.
5	Promote an inclusive culture that treats the workforce with fairness and respect.
6	Conduct a gender pay audit by december 2014 and implement actions to address any variances (when applicable).
7	when identifying potential candidates for the next board position, consider a balance of male and female candidates, if
	appropriate.

2014	Gender Diversity Measurable Objectives	achieved
1	Ensure recruitment policies and procedures refect Sandfre’s policy on diversity.	Yes
2	Human resources manager to provide an initial status report, and then to report on a half yearly basis	Yes
	including recommendations for future workplace participation rates.
3	implement diversity education and training for all employees and contractors, and conduct awareness	Yes
	sessions on issues relating to equal opportunities in the workplace.
4	issue guidance notes on Sandfre’s commitment to diversity to all external agencies engaged to provide	Yes
	recruitment services.

in addition to achieving the objectives above, Sandfire had the following initiatives to increase female participation rates during the year ended 30 June 2014:
The Chief operating officer, mr Spreadborough, and the Human resources manager participated in the women in mining mentoring Program established by woman in mining and resources wa (wimwa). The aim of this mentoring program is to support professional wimwa mentees though career guidance and direction by sharing mentor/mentee experiences, developing career goals and forging exceptional mentoring relationships.
The Chairman, mr La ferla, participates in the Chairmen’s mentoring Program run by the australian institute of Company directors. This program is designed to introduce highly experienced and qualified emerging female directors (mentees) to aSx 200 chairmen and senior directors (mentors). The program aims to assist mentees, though the provision of advice, guidance and support of a mentor, towards achieving their professional goals of a non-Executive director career on a range of australian boards.
Consistent promotions of female employees.
Starting to establish a women in Sandfire group. The purpose of this group is to:
promote internal and external networking events;
provide access to mentoring opportunities;
provide a forum for sharing experiences;
showcase the achievements of Sandfire women;
advocate the education and development of women; and
promote Sandfire as an employer of choice for women.

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cOrpOrate gOvernance statement (continued)

Principle 4	Safeguard integrity in fnancial reporting	Comply
Recommendation
4.1	The board should establish an audit committee.	Yes
4.2	The audit committee should be structured so that it:
	•consists only of non-executive directors;
	•consists of a majority of independent directors;
	•is chaired by an independent chair, who is not chair of the board; and
	•has at least three members.
4.3	The audit committee should have a formal chair.	Yes
4.4	Companies should provide the information indicated in the guide to reporting on Principle 4.	Yes

audit and Risk Committee

The board has established an audit and risk Committee which operates under a Charter approved by the board. The Committee must have at least three members, a majority of whom (including the Chair) must be independent and all of whom must be nonExecutive directors.

The audit and risk Committee comprised the following members throughout the year:

The audit and risk	Committee comprised the following members throughout the year:
name	Position
robert n Scott	Committee Chairman, non-Executive director (independent)
derek L ferla	non-Executive director (independent)
Paul d Hallam	non-Executive director (independent)

The functions of the audit and risk Committee are set out in the audit and risk Committee Charter. The Committee’s primary roles in respect to audit are:

to assist the board in relation to the reporting of financial information (including review of the Company’s financial statements for accuracy and to ensure that they reflect a true and fair view, as a basis for recommendation to and adoption by the board);
to assist the board in determining the appropriate application and amendment of accounting policies;
to review the independence and the procedures for the appointment and compensation of the external auditor; and
to provide a link between the external auditors, the board and management of the Company.

External Auditor

under the Committee Charter it is the policy of Sandfire that its external auditing firm must be independent of it. The Committee reviews and assesses the independence of the external auditor on an annual basis. The Charter contains an External audit Policy, which provides information on procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement partners, presently every 5 years, unless otherwise approved by the audit and risk Committee and the board of Sandfire. in line with the Company’s policy on auditor rotation, the external audit engagement partner retired after 5 years service on 28 august 2014.

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Principle 5	Make timely and balanced disclosure	Comply
Recommendation
5.1	Companies should establish written policies designed to ensure compliance with aSx Listing rule	Yes
	disclosure requirements and to ensure accountability at a senior executive level for that compliance
	and disclose those policies or a summary of those policies.
5.2	Companies should provide the information indicated in the guide to reporting on Principle 5.	Yes

Disclosure and Communication Policy

The board has endorsed a disclosure and Communication Policy, which establishes procedures aimed at ensuring that directors and management are aware of and fulfill their obligations in relation to the timely disclosure of material price sensitive information.

Policy for Dealing in Securities

Sandfire has significant obligations under the Corporations act 2001 (Clth) and the Listing rules of the aSx Limited to keep the market informed of information which may have a material effect on the price or value of the Company’s securities.

Sandfire has adopted a Policy for dealing in Securities which explains the prohibited types of conduct in relation to dealings in securities under the Corporations act and to establish a best practice procedure in relation to dealings by directors, management and personnel.

Subject to the overriding restriction that persons may not deal in the Company’s securities while they are in possession of materially price sensitive information, directors, management and personnel are not permitted to deal in the Company’s securities during the following “blackout periods”:

from the close of trading on the aSx on 30 June each year, or if that date is not a trading day, the last trading day before that day, until the close of trading on the day following the announcement to aSx of the Company’s full year results;
from the close of trading on the aSx on 31 december each year, or if that date is not a trading day, the last trading day before that day, until close of trading on the day following the announcement of the Company’s half-yearly results;
from the close of trading on the aSx on 30 September or 31 march, or if that date is not a trading day, the last trading day before that day, until close of trading on the day following the announcement of the Company’s quarterly reports; and
any other period that the board specifies from time to time.

outside of these periods, directors and management must receive clearance for any proposed dealing in the Company’s securities. in all instances, buying or selling shares is not permitted at any time by any person who possesses price sensitive information.

Principle 6	Respect the rights of shareholders	Comply
Recommendation
6.1	Companies should design a communications policy for promoting effective communication with	Yes
	shareholders and encouraging their participation at general meetings and disclose their policy or a
	summary of that policy.
6.2	Companies should provide the information indicated in the guide on reporting on Principle 6.	Yes

Shareholder Communication

The board has endorsed a Shareholder Communication Strategy (attachment 4 of the disclosure and Communication Policy). The Company aims to ensure that shareholders are kept informed of all major developments affecting the state of affairs of the Company. additionally, the Company recognises that potential investors and other interested stakeholders may wish to obtain information about the Company from time to time. To achieve this, the Company communicates information regularly to shareholders and other stakeholders through a range of forums and publications.

Website

one of the Company’s key communication tools is its website located at www.sandfire.com.au. The investor section of the website includes details of the following:

the Company’s Constitution; board and board Committee Charters; and the Company’s key policies and procedures;
press releases, external presentation and announcements made by the Company; and
financial information about the Company.
The website also contains a facility for shareholders to direct inquiries to the Company.

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cOrpOrate gOvernance statement (continued)

forums or measures for communicating the following important aspects of the Company’s affairs include:

notice of meeting;
annual general meeting;
annual report;
announcements lodged with the aSx; and
presentations.

The Company provides a telephone helpline facility (+61 (8) 6430 3800) and an online e-mail inquiry service to assist shareholders with any queries. information is also communicated to shareholders via periodic mail outs, or by email to shareholders who have provided their e-mail address.

note that the Company’s external auditor will attend the agm and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report. The external auditor will also be allowed a reasonable opportunity to answer written questions submitted by shareholders to the auditor as permitted under the Corporations act.

Principle 7	Recognise and manage risk	Comply
Recommendation
7.1	Companies should establish policies for the oversight and management of material business risks	Yes
	and disclose a summary of those policies.
7.2	The board should require management to design and implement the risk management and internal	Yes
	control system to manage the Company’s material business risks and report to it on whether those
	risks are being managed effectively. The board should disclose that management has reported to
	it as to the effectiveness of the Company’s management of its material business risks.
7.3	The board should disclose whether it has received assurance from the Chief Executive offcer (CEo) and the Chief financial offcer (Cfo) that the declaration provided in accordance with	Yes
	section 295a of the Corporations act is founded on a sound system of risk management and
	internal control and that the system is operating effectively in all material respects in relation to fnancial reporting risks.
7.4	Companies should provide the information indicated in the guide to reporting on Principle 7.	Yes

audit and Risk Committee

The functions of the audit and risk Committee are set out in the audit and risk Committee Charter. The Committee’s specific function in respect to risk are to review and report to the board that:

the Company’s ongoing risk management program effectively identifies all areas of potential risk;
adequate mitigation activities are designed and implemented to manage identified risks; and
there are regular reviews on the progress of the implementation of designed risk mitigation activities.

Management of Risks

The group’s business and operational risks; health, safety and environment risks; mineral resource, ore reserve and mine plan risks; and financial risks are outlined in section 5.3 of the director’s report.

Sandfire has adopted a governance and risk management Policy. The board is commited to reviewing and overseeing the risk management strategy for Sandfire and for ensuring the Company has an appropriate corporate governance structure, in order to support the achievement of business objectives.

The identification and effective management of risk, including calculated risk-taking is viewed as an essential part of the Company’s approach to creating long-term shareholder value.

The board determines the Company’s risk profile and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The board oversees an annual assessment of the effectiveness of risk management and internal compliance and control. The tasks of undertaking and assessing risk management and internal control effectiveness are delegated to the audit and risk Committee.

management through the CEo is responsible for the day to day design and implementation of the Company’s risk management and internal control system. management reports to the board on the Company’s key risks and the extent to which it believes these risks are being adequately managed.

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internal Control Framework

The key controls that the Company has in place to ensure that its risks are managed effectively and to protect the Company’s interests and to ensure the integrity of its financial reporting include the following:

board approval of strategic planning, which encompasses the Company’s vision, mission and strategy statements, designed to meet stakeholders’ needs and manage business risk;
implementation of board approved operating plans and budgets and board monitoring of progress against these budgets, including the establishment and monitoring of key performance indicators of both a financial and non-financial nature; and
underpinning these efforts is a comprehensive set of policies and procedures directed towards achieving the following objectives in relation to the requirements of Principle 7:
an effective and efficient use of the Company’s resources;
compliance with laws and regulations; and
preparation of reliable published information.

CEO and CFO Certification

in accordance with section 295a of the Corporations act, the CEo and Cfo have provided a written statement to the board that:

their view provided on the Company’s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the board; and
the Company’s risk management and internal compliance and control system is operating effectively in all material respects.

The board agrees with the views of the aSx on this matter and notes that due to its nature, internal control assurance from the CEo and Cfo can only be reasonable rather than absolute. This is due to such factors as the need for judgement, the use of testing on a sample basis, the inherent limitations in internal control and because much of the evidence available is persuasive rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in control procedures.

Principle 8	Remunerate fairly and responsibly	Comply
Recommendation
8.1	The board should establish a remuneration committee.	Yes
8.2	The remuneration committee should be structured so that it:	Yes
	• consists of a majority of independent directors;
	• is chaired by an independent Chair; and
	• has at least three members.
8.3	Companies should clearly distinguish the structure of non-executive directors’ remuneration from	Yes
	that of executive directors and senior executives.
8.4	Companies should provide the information indicated in the guide to reporting on Principle 8.	Yes

Remuneration Practices

The remuneration and nomination Committee’s remuneration strategy is designed to attract, motivate and retain employees, contractors and non-Executive directors by identifying and rewarding high performers and recognising the contribution of each employee to the continued growth and success of the Company. for further details please see the remuneration report included in the directors’ report.

Non-Executive Director Remuneration

The Company clearly distinguishes the structure of non-Executive directors’ remuneration from that of Executive directors and Senior Executives. The 2014 remuneration report provides a separate table outlining the structure of Executive statutory remuneration disclosures and non-Executive director fees. non-Executive director fees consist of director fees and committee fees. non-Executive directors do not receive retirement or termination benefits and do no participate in any incentive plans. The aggregate amount of fees that may be paid to non-Executive directors in any one year is capped at a level approved by shareholders.

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direCTOrs’ rePOrTFin a n ci a l rep o rt

The Directors present their report on the consolidated entity (referred to as the Group) consisting of the Parent entity, Sandfire F o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 4 Resources NL (Sandfire or the Company), and the entities it controlled at the end of, or during, the year ended 30 June 2014 (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:

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 Executive Technical Director

Appointed Non-Executive Director 1 January 2013 Previously Executive Technical Director from 2 October 2007 to 1 January 2013

Mr robert N scott Appointed 30 July 2010 Independent Non-Executive Director COnTenTs Mr soocheol shin Appointed 28 February 2012 Non-Executive Director 41 D ire c t o r s ’ Rep o r t Mr Paul Hallam Appointed 21 May 2013 Independent Non-Executive Director 57 Au di t o r ’s In dep e n de n c e D e cl ar at i o n ~~5 8 Re mun e r at i o n Rep o r t~~ The qualifications, experience, other directorships and special responsibilities of the Directors in office at the date of this report are: 76 C o n s o li date d S t ate m e nt o f C o mp re h e n si ve In c o m e Derek La Ferla 7 7 C o n s o li date d S t ate m e nt o f F in an ci al Po si t i o n independent Non-executive chairman Qualifications78 C o n s o li date d S t ate m e nt o f C h an g e s in E qui t y B. Arts, B.Juris, B.Law, Fellow of AICD Experience7 9 C o n s o li date d S t ate m e nt o f C a sh F l o w s 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 the National team leader for the firm’s Corporate Advisory 8 0 N o te s t o t h e F in an ci al S t ate m e nt s Group (which includes mining and resources) and the National leader of the Infrastructure, Mining and Commodities Industry Headlight Group. Mr La Ferla also has considerable experience as a 124 D ire c t o r s’ D e cl ar at i o n company director and 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 125 In dep e n de nt Au di t o r ’s Rep o r t listed investment company, Katana Capital Limited. He is a fellow of the Australian Institute of Company Directors.

Other current listed company directorships Other current listed company directorships

Special responsibilities Member of the Remuneration and Nomination Committee. Member of the Audit and Risk Committee. Karl M simich Managing Director and chief executive officer Qualifications B.Comm, FCA, F.Fin Experience Mr Simich is an experienced international mining executive who has been involved in the financing, construction, development and operation of five mining projects in New Zealand, Australia and Africa. Specialising in resource finance and corporate management, Mr Simich has been a director of and held senior positions with a number of ASX-listed mining companies. 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 W John Evans Non-Executive Director

Experience

Mr Evans graduated from the University of Auckland New Zealand in 1970 with B.Sc Major in geology. 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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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 2014 (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:

Name	Period of Directorship
Mr Derek La Ferla	Appointed 17 May 2010
Independent Non-Executive Chairman
Mr Karl simich	Appointed Director 27 September 2007
Managing Director & Chief Executive Offcer	Managing Director and Chief Executive Offcer since 1 July 2009
Mr W John evans	Appointed Non-Executive Director 1 January 2013
Non-Executive Director	Previously Executive Technical Director from 2 October 2007
Mr robert scott	Appointed 30 July 2010
Independent Non-Executive Director
Mr soocheol shin	Appointed 28 February 2012
Non-Executive Director
Mr Paul 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
Qualifcations	B. Arts, B.Juris, B.Law, Fellow of AICD
Experience	Mr La Ferla has been a corporate lawyer for over 25 years and is a partner with international law
	frm, Norton Rose Fulbright. He is the National team leader for the frm’s Corporate Advisory
	Group (which includes mining and resources) and the National leader of the Infrastructure, Mining
	and Commodities Industry Headlight Group. Mr La Ferla also has considerable experience as a
	company director and is the chairman of Cashmere Iron Limited and OTOC Limited. He has also
	previously served on the Norton Rose Australia national board (while the frm was Deacons) and
	listed investment company, Katana Capital Limited. He is a fellow of the Australian Institute of
	Company Directors.
Other current listed company directorships	Non-Executive Chairman of OTOC Limited (since 28 October 2011).
Special responsibilities	Member of the Remuneration and Nomination Committee.
	Member of the Audit and Risk Committee.
Karl M simich	Managing Director and chief executive offcer
Qualifcations	B.Com, FCA, F.Fin
Experience	Mr Simich is an experienced international mining executive who has been involved in the fnancing,
	construction, development and operation of fve mining projects in New Zealand, Australia and
	Africa. Specialising in resource fnance and corporate management, Mr Simich has been a
	director of and held senior positions with a number of ASX-listed mining companies. 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 fnance.
W John evans	Managing Director and chief executive offcer
Qualifcations	B.Sc
Experience	Mr Evans graduated from the University of Auckland New Zealand in 1970 with B.Sc Major in
	geology. Between 1970 and 1987, he was employed by various divisions of CRA Limited, including
	being in charge of feld operations for iron ore exploration 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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direCTOrs’ rePOrT (continued)

1 Directors (continued)

1 Directors (continued)
robert scott	independent Non-executive Director
Qualifcations	FCA
Experience	Mr Scott is a Chartered Accountant with over 35 years of experience as an advisor on corporate
	services and taxation. 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 listed company 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 Director of RTG Mining Inc (since March 2013).
Former listed company directorships in	Non-Executive Chairman of Manas Resources Ltd (January 2013 to March 2014).
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).
Special responsibilities	Chairman of the Audit and Risk Committee.
	Member of the Remuneration and Nomination Committee.
soocheol shin	Non-executive Director
Qualifcations	B.A. Public Administration
Experience	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 listed company directorships	Non-Executive Director of Jupiter Mines Ltd (since March 2012).
Former listed company directorships in	Non-Executive Director of Cockatoo Coal Ltd (March 2012 to August 2013).
last three years
Paul Hallam	independent Non-executive Director
Qualifcations	BE (Hons) Mining, FAICD, FAusIMM
Experience	Mr Hallam is a highly experienced resource industry executive with more than 35 years of
	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 qualifed mining engineer and holds a BE
	(Hons) from Melbourne University and a Certifcate 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 listed company directorships	Non-Executive Director of Altona Mining Ltd (since March 2013).
	Non-Executive Director of Gindalbie Metals Ltd (since December 2011).
Former listed company directorships in	Non-Executive Director of Enterprise Metals Ltd (November 2011 to May 2014).
last three years
Special responsibilities	Chairman of the Remuneration and Nomination Committee.
	Member of the Audit and Risk Committee.

[ 4 2 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

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

(a) Expiring 27 November 2014.

2 coMPaNy secretary

Matthew L Fitzgerald	Joint company secretary and chief Financial offcer
Qualifcations	B.Com, CA
Experience	Mr Fitzgerald was appointed to the position of Company Secretary on 22 February 2010. Mr
	Fitzgerald is a Chartered Accountant with extensive experience in the resources industry. 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 Offcer and
	Director until July 2008.
robert Klug	Joint company secretary and chief commercial offcer
Qualifcations	B.Com, LLB
Experience	Mr Klug was appointed to the position of joint Company Secretary on 7 November 2013. Mr
	Klug has held accounting, senior legal and corporate fnance roles in his 20 year career. Initially
	trained as an auditor with KPMG Perth, Mr Klug worked in London as a corporate lawyer after
	having completed his law degree at Murdoch University in Perth. Upon his return to Perth, he
	joined Freehills Perth Offce, where he worked almost exclusively with small and mid-cap resource
	companies. After a number of years at Freehills Mr Klug worked in corporate fnance as a director
	of Carmichael Capital Markets, the Corporate Finance arm of DJ Carmichael Stockbrokers. In
	2005, Mr Klug became General Manager Business Development with St Barbara Ltd until St
	Barbara relocated its head offce to Melbourne in early 2007 when he joined Heron Resources Ltd
	in a senior management role.

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 & risk remuneration & Nomination a B a B
Derek La Ferla 8 8 Karl Simich 8 8 W John Evans 6 8 Robert Scott 7 8 Soocheol Shin 7 8 Paul Hallam 8 8	3 3 2 2 - - - - - - - - 3 3 2 2 - - - - 3 3 2 2

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.

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direCTOrs’ rePOrT (continued)

3 Directors’ MeetiNgs (continued)

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 & risk	remuneration & Nomination
Robert Scott - Chairman	Paul Hallam – Chairman(a)
Derek La Ferla	Derek La Ferla
Paul Hallam	Robert Scott

(a) Mr Hallam was appointed chairman of the Remuneration and Nomination Committee on 18 February 2014, replacing Mr La Ferla in that role.

4 DiviDeNDs

Since the end of the financial year, the Board of Directors has resolved to pay an unfranked dividend of 10 cents per share, to be paid on 10 October 2014. The record date for entitlement to this dividend is 12 September 2014. The financial impact of this dividend amounting to $15,564,000 has not been recognised in the Financial Statements for the year ended 30 June 2014 and will be recognised in subsequent Financial Statements.

No dividends were paid or declared by the Group during the 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; 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

Overview

During the reporting period, Sandfire completed the successful ramp-up of the DeGrussa underground mine and processing facility to its nameplate capacity of 1.5 million tonnes per annum (Mtpa).

Copper production for the 12 months to 30 June 2014 was 67,690 tonnes and gold production was 33,893 ounces. A summary of copper and gold production and sales for the year is provided below:

==> picture [450 x 80] intentionally omitted <==

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

grade grade contained contained
Fy 2014 Production statistics tonnes (% cu) (g/t au) copper (t) gold (oz)
Concentrator Mined 1,496,686 5.0 1.5 74,653 74,103
Milled 1,490,954 5.2 1.5 77,031 72,925
Production 278,454 24.3 3.8 67,690 33,893
Copper and gold sales 271,079 23.9 3.6 64,719 31,788
----- End of picture text -----

Note: Mining and production statistics are rounded to the nearest 0.1% Cu grade and 0.1 g/t Au grade. Errors may occur due to rounding.

Underground Mining

Underground mining progressed on schedule throughout the 2014 Financial Year. The targeted annualised ore production rate of 1.5Mtpa was achieved during the reporting period, with a total of 1,496,686 tonnes of underground sulphide ore mined for the 12 months to 30 June 2014.

The performance of the paste-fill plant has generally stabilised and improved, with filling of the primary stopes in the Conductor 1 deposit completed during the reporting period and secondary stopes adjacent to these paste-filled stopes coming on-line during the December 2013 Quarter. The first stope mined beneath a filled stope was completed during the March 2014 Quarter, and to date, full extraction has been achieved without paste dilution from the stope above.

[ 4 4 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.1 ProJect revieW, strategies aND Future ProsPects (continued)

As a result of reliability issues encountered with the paste pump, strategies including improved maintenance schedules and mine design changes were implemented to reduce the need for pumping of the fill and, following a planned campaign of paste filling during the September 2014 Quarter using the pump, all filling for the next couple of years will be completed by gravity filling, eliminating any delays associated with pump reliability.

There was a continued strong focus on underground mine development in both the new Conductor 1 and Conductor 4/5 Declines. Underground development is proceeding on schedule, with both of these new declines progressing to plan.

The Conductor 1 Decline had advanced on schedule during the reporting period, enabling the commencement of additional ventilation rises as well as down-dip drilling within the Conductor 1 deposit. The development of this decline will enable the Conductor 1 deposit to be fully developed and extracted.

The Conductor 4/5 development also advanced following a redesign during the March 2014 Quarter driven by a temporary deterioration of ground conditions and increased water ingress. A detailed geotechnical review and drilling program was undertaken to keep the decline within the siltstone and dolerite rock units. To date, all decline development at DeGrussa has been undertaken within these rock units and has experienced good ground conditions.

This Decline is expected to reach Conductor 4, located approximately 400m east of Conductor 1, towards the end of the 2014 calendar year and will enable development and mining of both the high-grade Conductor 4 and 5 deposits to occur. At the end of the reporting period, the Conductor 4 decline development advanced 520m with the Conductor 5 decline advancing 123m.

The development of these new declines is important as it will ensure that DeGrussa can source ore from multiple underground locations, providing stability and consistency of production in the long term. It is also facilitating the establishment of underground diamond drilling platforms from which extensions and potential repeats of the Conductor 4 and 5 deposits can be targeted.

These drill positions are being used to allow grade control drilling to define mining shapes in Conductor 4 and 5 and to conduct infill drilling to enable conversion of Inferred Mineral Resources to Ore Reserves in these deposits. Underground grade control drilling conducted during the reporting period has brought the majority of the Conductor 1 deposit, down to the 2150mRL, to a ‘mine-ready’ status with further drilling required below this level.

Total development for the underground mine at the end of the reporting period was 22km.

In May 2014, Sandfire awarded a new contract for underground mining services at DeGrussa to specialist underground mining contractor Byrnecut Australia Pty Ltd. The contract, which has an estimated value of $200 million, was awarded following a competitive tender process.

The new DeGrussa underground mining contract has a three-year term, with Sandfire having an option to extend for a further two years. It is the single largest operational contract at DeGrussa, employing approximately 150 people and utilising some 30 items of underground mining equipment and associated surface support.

The implementation of the new contract is expected to reduce gross mining costs at DeGrussa by over 10 per cent. This will see a reduction in anticipated mining, decline development and underground sustaining capital. This is consistent with ongoing efforts by Sandfire’s management to reduce costs, improve efficiencies and streamline all aspects of the DeGrussa Operation, and also reflects the lower contract rates currently being experienced across the Australian resource sector.

The change-out to the new underground contractor was successfully completed by 1 July 2014 with ramp-up to target production and development rates completed.

Processing

The ramp-up of the DeGrussa Concentrator to nameplate capacity was completed during the 2014 Financial Year with mill throughput now consistently achieving or exceeding the targeted annualised rate of 1.5Mtpa. Key metrics for the DeGrussa Concentrator for the 2014 Financial Year included:

1,490,954 tonnes milled at an average head feed grade of 5.2% Cu;
Average copper recovery for the reporting period of 87.9%;
Concentrate production of 278,454 tonnes; and
Metal production of 67,690 tonnes of contained copper and 33,893 ounces of gold.

Average copper recoveries were restricted to 82% during the September 2013 Quarter as further batches of transitional open pit material were processed on a campaign basis. This material achieved recoveries of 60-65% compared with 85-92% for primary underground sulphide ore. Approximately 30,000 tonnes of open pit sulphide ore remains stockpiled for future processing if and when required.

With the cessation of processing of transitional open pit ore in the September 2013 Quarter and increased plant stability, overall copper concentrator recoveries increased during the December 2013 and March 2014 Quarters towards the targeted level of approximately 92%.

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direCTOrs’ rePOrT (continued)

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.1 ProJect revieW, strategies aND Future ProsPects (continued)

Average copper recovery fell to 89.5% in the June 2014 Quarter as a result of the lower ore feed grade, and the impact of higher flotation tail grade due to plant instability and a lower copper-sulphur ratio. Recoveries are expected to return to the targeted level of +90%, with a number of improvement projects in the process of being implemented. These include:

Installation of a Pebble Crusher in the December 2014 Quarter to facilitate the removal of critical sized material allowing the SAG mill performance to be optimised in terms of throughput and grind size. The Pebble Crusher, which will be installed at a cost of $6.4 million, will efficiently re-handle and crush the critical-sized material prior to re-feeding into the SAG mill. The operation of the SAG mill in ‘scatting out’ mode since March 2014 has confirmed the benefits of removing this material;
A Column Flotation Cell will be installed in the December 2014 Quarter. Pilot test work performed over the last two quarters confirms that the tails contains entrained copper as a consequence of insufficient residence time in the flotation cells. Additional cell capacity will be installed via a column flotation cell with forecast copper recovery improvement of over 1% from current performance; and
In association with the column flotation cell, a screen arrangement will be installed as part of the SAG mill system in lieu of the current cyclones. Testwork has confirmed that the current classification arrangement is resulting in over-grinding of a portion of the ore feed resulting in low recovery of this finer copper fraction in the flotation plant. The SAG classification screen will allow better control of the feed size returned into the SAG mill, thereby preventing the formation of fine particles. The column flotation cell and SAG screen plus additional improvements in process control will cost $6.8 million.

Production Guidance

FY2015 targeted copper production is expected to be within the range of 65-70,000 tonnes of contained copper metal and gold production within the range of 35-40,000oz. Headline C1 cash operating costs are expected to be with the range of US$1.151.25/lb.

Sales & Marketing

Copper Concentrate

A total of 271,079 tonnes of plant concentrate containing 64,719 tonnes of payable copper was sold for the 2014 Financial Year. Gold sales totaled 31,788 ounces.

Shipments were completed from both Port Hedland and Geraldton.

Feasibility Studies

Oxide Copper Feasibility Study

Work continued during the reporting period to progress the Feasibility Study on a heap leach/solvent extraction and electro-winning (SX-EW) recovery option for the stockpiled copper oxide ore at DeGrussa. The Sandfire Oxide Copper Project at DeGrussa has been extensively tested and the project is being evaluated on the following basis:

Existing stockpiled oxide material will be scrubbed to remove fine clays;
The -150um material will be deposited in a purpose-built additional tailings storage facility and the +150um material will be all in crushed to -24mm for heap leaching;
The heap leach will be a combination of a traditional sulphuric acid leach coupled with bio-leaching; and
The pregnant liquor from the heap leach will be concentrated in a solvent extraction circuit with the strong
electrolyte fed to an electrowinning circuit to produce 99.99-99.999% copper cathode.

In December 2013, Sandfire signed a joint venture agreement with Ventnor Resources at the Thaduna/Green Dragon Copper Project (see below). Ventnor has significant oxide material which has the potential to be processed through the oxide facility being proposed for DeGrussa.

Geological investigation and metallurgical testing will be undertaken as part of the joint venture with Ventnor.

Following this, the Oxide Copper Project financial analysis will be updated to reflect the potential oxide material from this joint venture being processed by the Oxide Copper facility.

The Thaduna Project has the potential to increase the copper units to the Oxide Copper Project, increasing the life of the project. Project commitment will await completion of this detailed Ventnor work.

Near-mine Exploration

During the reporting period, Sandfire continued to progress a tightly focused, multi-disciplined exploration campaign to test for extensions to the known cluster of VMS deposits at DeGrussa and to unlock the broader potential of the Doolgunna region for additional VMS (volcanogenic massive sulphide) deposits or clusters of deposits.

[ 4 6 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.1 ProJect revieW, strategies aND Future ProsPects (continued)

Key components of the Company’s exploration activity at DeGrussa during the reporting period included:

Underground diamond drilling from newly established drilling platforms off the Conductor 1 and
Conductor 4/5 Declines to test for extensions of the known mineralisation in the near-mine environment;
Underground drilling focusing on C4 resource definition and updating the structural model of the DeGrussa deposits;
Deep surface drilling to test for the presence of the VMS stratigraphic horizon below the Conductor 4/5 positions;
Preparation of an updated Mineral Resource for the DeGrussa Project incorporating the results of successful extensional
drilling down-plunge of Conductor 4 and net of mining depletion to 31 December 2013. The Ore Reserve inventory and Mine Plan will be updated in the second half of the year;
Completion of a program of co-funded deep diamond drilling to test for extensions of the prospective DeGrussa volcanic horizon near the path of the Gascoyne River;
Continued first-pass regional exploration over a number of exploration targets within the broader Doolgunna tenement holding;
Follow-up Reverse Circulation (RC) drilling at a number of more advanced targets;
Ongoing aircore drilling and regional geochemical sampling and mapping to define the interpreted volcanic host
sequence across the broader Doolgunna tenement holding;
Continued development of the Company’s mine-scale exploration model; and
Continued development of the host stratigraphy for potential accumulations of VMS mineralisation away from the known ore zones.

The aggregate metres drilled on Sandfire Tenements for the 2014 Financial Year is shown below:

	ac/raB Drilling	rc Drilling	ug Diamond Drilling	surface Diamond Drilling	total Drilling
Drilling (m)	136,729	8,462	12,600	7,835	168,626

Near-mine Extensional Exploration

Underground diamond drilling was undertaken during the reporting period targeting strike and dip extensions to the Conductor 1 East Zone, which has allowed the Company’s exploration team to refine the geological model and subsequent mine design on the periphery of the orebody. Drilling targeting the Conductor 1 Zone down-dip was also undertaken as drilling positions became available.

The establishment of new underground drilling positions from the Conductor 4/5 Decline allowed underground diamond drilling to commence, initially targeting the stratigraphically continuous zone immediately down-plunge from Conductor 4, followed by resource definition drilling to upgrade the Central and Eastern portions of the C4 orebody from Inferred to Indicated Resource status.

Detailed geological analysis of footwall alteration recognised zones of intensely silicified, quartz-chalcopyrite stockwork veining which are interpreted to represent the original sub-seafloor feeder pipes to the massive sulphide mineralisation. These discrete feeder pipes will be further investigated to understand how they fit into the larger mineralised system and if they are of any potential economic significance.

Geophysical consultants Newexco re-ran down-hole electro-magnetic (DHEM) modelling for several holes which intersected weak mineralisation down-plunge of Conductor 1 (holes DGDD241, DGDD296 and DGDD393). The emphasis of this work was to constrain any geophysical signature from known conductors in the area.

Newexco’s work has resulted in the identification of a subtle off-hole conductor in hole DGDD241, with the EM plate located on the footwall of the projected Conductor 1 horizon. This is a promising exploration target, which will be tested by a series of underground diamond drill holes to be completed as underground drilling positions become available in 2H CY2014, subject to grade control and resource definition drilling priorities.

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direCTOrs’ rePOrT (continued)

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.1 ProJect revieW, strategies aND Future ProsPects (continued)

Increase in high-grade Mineral Resource

As a result of successful underground drilling programs targeting extensions to existing mineralisation in the C1, C4 and DeGrussa lenses, the Company completed an updated Mineral Resource estimate for the DeGrussa Project, which was announced on 17 April 2014. The updated Mineral Resource inventory is summarised below:

Mineral resource	tonnes (Mt)	copper (%)	gold (g/t)	contained copper (t)	contained gold (oz)
Underground Mine	10.2	5.4	2.1	554,000	676,000
Open pit - Stockpiles	2.8	1.2	1.0	33,000	88,000
March 2014 - total	13.0	4.5	1.8	588,000	764,000

An additional 29,000 tonnes of contained copper and 41,000oz gold has been added to DeGrussa’s Underground Mineral Resource (after mining depletion to the end of March 2014), with the additional Mineral Resource to be incorporated into the DeGrussa Ore Reserve and Mine Plan later this year. Depletion totalled 75,000 tonnes of contained copper and 72,000 ounces of gold for the 12 months to 31 March 2014.

The previously published Mineral Resource (In Situ and stockpiles) stated as at 31 March 2013 was 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, of which 10.2 million tonnes grading 5.7% Cu and 2.1g/t Au for 586,000 tonnes of contained copper and 688,000oz of contained gold related to Underground Operations.

The increase in tonnage and contained metal has come from the successful underground drilling programs targeting extensions to existing mineralisation in the C1, C4 and DeGrussa lenses. Drilling of the C4 lens commenced in the first half of CY2014 as planned, undertaken from underground drilling positions that are more practical and more efficient given the depth of these ore bodies.

50% of the Underground Mineral Resource is classified as Measured and is at a mining-ready state. Of the total resource only 25% of the resource tonnes remain as Inferred, with planned in-fill drilling of the C4 and C5 lenses to be completed in the coming year to upgrade the category of these resources.

Ore Reserve and Mine Plan update

The Ore Reserve and Mine Plan is planned to be updated around the end of CY2014 once drilling is advanced in and around the C4 and C5 lenses. The Company continues to incorporate the Inferred Mineral Resource from Conductor 4 and 5 into its Mine Plan due to the geological continuity and high copper grade nature of these deposits.

DeGrussa Regional Exploration

The Greater Doolgunna Project, which now includes the Talisman Joint Venture, has an aggregate area of 725km[2] and incorporates over 65km strike length of prospective VMS-hosting lithologies. Much of this stratigraphy is obscured beneath transported alluvium and requires systematic aircore drilling to test bedrock geochemistry and identify prospective rock-types.

Talisman Joint Venture

In December 2013, Sandfire reached agreement with Talisman Mining Limited (ASX: TLM; “Talisman”) to farm into its three key Doolgunna copper-gold projects. Under the agreement, Sandfire can earn up to a 70% interest in Talisman’s Springfield, Halloween and Halloween West Projects by spending a minimum of $15 million on exploration over 5.5 years, with a minimum expenditure commitment of $5 million within two years.

The Springfield Project lies immediately along strike to the east from the DeGrussa Copper-Gold mine. The Halloween and Halloween West Projects abut the Doolgunna Project to the west. The projects contain extensions of the volcanic rock package which hosts the DeGrussa VMS deposits.

During the June 2014 Quarter, Sandfire commenced the first phase of ground-based exploration activities at the Springfield Project, comprising high-powered down-hole electromagnetic (DHEM) surveys and fixed loop electromagnetic (FLEM) surveys. Three Diamond and one Reverse Circulation drill-holes previously drilled by Talisman at the Homer Prospect were selected by Sandfire for the application of high energy DHEM to test for the presence of conductors that may indicate accumulations of massive sulphides.

In addition, Sandfire commenced a high-powered FLEM survey at the Homer Prospect, covering approximately 1.6km of the prospective DeGrussa host horizon, to better test for conductors beyond the extent of previous ground electromagnetic surveys.

[ 4 8 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.1 ProJect revieW, strategies aND Future ProsPects (continued)

Following receipt of the initial results, data from Stage 1 of the high-energy FLEM survey and the four initial DHEM surveys was integrated with existing data and analysed with input from the Company’s geophysical consultants, Newexco. This analysis resulted in the detection of a late-time conductor which is interpreted to sit within the extension of the prospective DeGrussa stratigraphic horizon. This conductor is located approximately 5km east of the DeGrussa Copper Mine.

Sandfire subsequently completed a single deep diamond drill hole with the aim of intersecting the modelled conductor at a target depth of 400m below surface. This drill hole will also be used to establish a platform for further down-hole EM surveys to test for additional conductors both at depth and away from this principal EM target.

The next three stages of the FLEM survey at the Homer Prospect re-commenced in mid-July.

Thaduna Project Joint Venture

During the reporting period, Sandfire reached agreement to secure up to an 80% interest in the Thaduna/Green Dragon Copper Project, located 40km east of DeGrussa, through a farm-in and joint venture with Ventnor Resources Limited (ASX: VRX) and its wholly-owned subsidiary Delgare Pty Ltd.

The Thaduna Project represents the largest copper resource in the Doolgunna-Bryah Basin Region outside of Sandfire’s DeGrussaDoolgunna Project (7.9Mt @ 1.8% Cu for 142,000 tonnes of contained copper).

Under the agreement, Sandfire acquired an immediate 35% interest in the Project and formed a joint venture with Delgare by paying $3 million cash directly to Ventnor to enable it to meet its short-term funding requirements.

Under the terms of the joint venture, Sandfire can earn up to a further 45% (total of 80%) interest in the Project in two stages within a four-year period, namely:

A 16% interest for a total of 51% by sole funding up to $3 million of expenditure within two years; and
A further 29% interest for a total of 80% by sole funding a further $3 million of expenditure within four years.

Ventnor has completed over 50,000m of drilling at the Project since April 2011. Ventnor’s drilling has returned sulphide intersections at depth, indicating the potential to extend the mineralisation and increase the higher grade sulphide component. A Scoping Study completed by Ventnor in February 2013 outlined a potential production profile of 15,000tpa of copper over an anticipated mine life of 10 years.

Sandfire is currently assessing two development opportunities at the Thaduna Project:

An oxide project, with ore to be treated through the proposed DeGrussa Copper Oxide Heap Leach; and
A sulphide project, with ore to be treated through the existing DeGrussa Flotation Processing Plant.

During the June 2014 Quarter, Sandfire completed a diamond drilling programme at Thaduna which was designed to provide core for metallurgical testwork. The drilling programme, which comprised eight shallow-dipping PQ-sized diamond drill holes for 808.5m advance, was targeted directly beneath the existing Thaduna open pit.

Metallurgical testwork is underway examining the heap leach and flotation potential of the intersected mineralisation. The results of the testwork and the completion of revised resource model will be used to evaluate potential mining and processing options for extraction of the copper resource.

austraLiaN & iNterNatioNaL eXPLoratioN

Misima Project

The Company reached agreement to acquire a 38.38% interest in WCB Resources Ltd (TSX-V: WCB), a Toronto-listed copper-gold explorer. The Group was issued 22,222,222 shares for a total cost of AU$5,891,000 as part of a private share placement. In addition, the Group was issued with 11,111,111 warrants with an exercise price of CA$0.40 per share expiring 7 October 2015 and 11,111,111 warrants with an exercise price of CA$0.60 per share expiring 7 April 2017. Each warrant entitles the holder to acquire one additional common share of the Company.

The proceeds from this private placement will be used to progress exploration including upcoming drilling programs at WCB’s Misima Copper-Gold Project. WCB is earning a 70% interest in this project through a joint venture with Pan Pacific Copper (“PPC”), an integrated copper mining and smelting company that is jointly owned by JX Nippon Mining & Metals Corporation and Mitsui Mining & Smelting Company Ltd.

This investment provides Sandfire with exposure to a potential Tier-1 porphyry copper-gold exploration opportunity with outstanding upside. WCB has identified a substantial copper-gold porphyry target at Misima located adjacent to an historical gold mine formerly owned by Placer Dome Asia Pacific which produced 4.0Moz of gold and 20Moz of silver.

The main exploration target is the Misima Porphyry at Mt Sisa, where a very large 1km2 copper soil anomaly coincides with extensive rock chips, shallow drilling and a deep strong magnetic anomaly with skarn mineralisation and halo veining at surface. WCB Resources plans to commence drilling at Mt Sisa in the September Quarter.

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direCTOrs’ rePOrT (continued)

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.2 revieW oF FiNaNciaL resuLts

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Degrussa other
copper Mine a operations group
12 months ended 30 June 2014 $ million $ million $ million
Sales revenue 531.2 - 531.2
Profit (loss) before net finance expense and income tax 168.6 (43.0) 125.6
Profit before income tax 111.9
Net profit 78.2
Basic earnings per share 50.22 cents
Diluted earnings per share 50.15 cents
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A Includes the exploration, corporate and treasury segments.

The DeGrussa Copper Mine contributed profit before net finance and income tax of $168.6 million (2013: $194.5 million) from underground mining and concentrator operations. The result for the comparative period to 30 June 2013 included open pit operations and concentrator commissioning and ramp up.

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 $43.0 million (2013: loss of $52.4 million). The Group declared an unfranked maiden dividend of 10 cents per share on 29 August 2014. The Group did not declare or pay a dividend during the current or previous financial year.

sales revenue

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Degrussa copper
Mine
12 months ended 30 June 2014 $ million
Revenue from sales of copper in concentrate 484.1
Revenue from sales of gold in concentrate 43.2
Revenue from sales of silver in concentrate 3.9
531.2
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Sales revenue during the period came from plant concentrate produced by the 1.5Mtpa processing plant.

Copper sales for the period totalled 64,719 tonnes (contained copper production: 67,690 tonnes) and gold sales totalled 31,788 ounces (contained gold production: 33,893 ounces). Copper represents in excess of 90% of revenue derived from the DeGrussa Mine at current metals prices. An additional sale planned for June 2014 shipped in early July 2014, resulting in $18 million of revenue being recognised in the financial year ending 30 June 2015.

The base metals market commonly works on Quotational Periods (QP) for the final pricing of metal content shipped to smelters for treatment and refining. The Group’s QP settlements are usually completed within a range of 1 to 4 months following the month of shipment, at which time the market price of metal content is derived and the value of final sales becomes fixed. From time to time the Group may utilise QP hedging to either fix the price of sales at the time of shipment or to reduce the length of the QP, therefore reducing the short and medium term exposure to the market price of metal for completed or imminent shipments. No QP hedging transactions were entered into by the Group during the financial year ended 30 June 2014.

operations costs

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Degrussa
copper Mine
12 months ended 30 June 2014 $ million
Mine operations costs 126.1
Employee benefit expenses 30.9
Freight, treatment and refining expenses 82.9
Changes in inventories of finished goods and work in progress 2.8
242.7
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Operations costs have been incurred in the underground mining and plant operations on site as well as in the transport and shipping of copper concentrate to international markets from the ports of Port Hedland and Geraldton in Western Australia.

[ 5 0 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.2 revieW oF FiNaNciaL resuLts (continued)

Posco australia Pty Ltd (Posa)

In 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 at fair market value excluding gold and diamond production. The rights under the commercial agreement remain for as long as POSA has at least a 10% holding of Sandfire ordinary shares and entitled POSA to a 7.5% discount on the first $100m of purchased production. During the period sales to POSA’s nominated sales customer resulted in a discount of $5.4 million, which is included within Freight, Treatment and Refining Expenses during the period. As at 30 June 2014, POSA’s remaining contractual entitlement in relation to the 7.5% discount was $2.1 million.

unit costs

Unit costs have generally reduced in line with increasing copper production since the commencement of plant commissioning and ramp up in October 2012. Operating costs are predominantly driven by the physical quantity of ore moved in mining and processing operations, irrespective of variations in the copper content of that ore. As a result, unit operating costs tend to vary inversely with head grade as gross operating costs spread over higher copper production.

The Group has provided cost guidance for the 2015 Financial Year in the range US$1.15-1.25 per pound of payable copper production (after gold and silver credits).

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 (net of allowable deductions).

The Group 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 in previous reporting periods. Refer to Note 26 of the financial report for more details.

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 2014 the Group’s Exploration segment contributed a loss before net financing expense and income tax of $27.3 million (2013: $31.2 million). In accordance with the Group’s accounting policy, exploration and evaluation expenditure is expensed as incurred. Please refer to Note 2(l) of the financial report for further details.

Depreciation and amortisation

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Depreciation and
WDv WDv amortisation
June 2014 June 2013 during the year
$ million $ million $ million
Mine development 191.0 172.7 59.6
Property, plant and equipment 205.5 231.0 32.9
Rehabilitation, restoration and dismantling 15.7 20.0 2.6
total depreciation and amortisation 95.1
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income tax expense

Income tax expense of $33.8 million for the period is based on the corporate tax rate of 30% on taxable income of the Group, adjusted for differences in tax and accounting treatments. No tax is payable in respect to the current reporting period due to the utilisation of tax losses from prior periods. Cash tax payments are expected to commence during the second half of the year ending 30 June 2015.

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direCTOrs’ rePOrT (continued)

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 $80.2 million to $291.8 million during the reporting period.

Cash balance

Cash on hand was $57.6 million, including $11.4 million held in a Debt Service Reserve Account (DSRA) to cover the September 2014 scheduled facility repayment plus interest costs. $20.0 million previously held in a cost overrun account was released to operating bank accounts during the period on the achievement of formal project completion under the Group’s finance facility.

Trade and other receivables

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) due to a planned June 2014 sale completing shipment in early July 2014. Ore stockpiles and consumables are within with normal operating ranges.

Mine properties

Further investment has been made in underground mine development to establish decline and development access to the sulphide ore bodies ahead of stoping activities, with mine properties at cost increasing by $77.4 million to $360.5 million.

Property, plant and equipment

Property, plant and equipment at cost increased by $18.5 million to $291.6 million at the end of the period. Other financial assets

The Group has an equity investment in Minotaur Exploration Ltd (ASX: MEP), the carrying value of which as at 30 June 2014 was $248,000.

The Group sold its 17.4% interest in junior explorer White Star Resources Ltd (ASX: WSR) during the period. The net sale proceeds of $452,000 have been recognised as a reversal of impairment losses in the statement of comprehensive income.

The Group acquired an interest in WCB Resources Ltd (“WCB”; TSX-V: WCB), a Toronto-listed copper-gold explorer, by subscribing for shares in a $5.9 million private share placement. The proceeds from this private placement will be used to progress exploration including upcoming drilling programs at WCB’s Misima Copper-Gold Project.

Deferred tax assets and deferred tax liabilities

Income tax on profitable operations has resulted in the utilisation of carried forward tax losses recognised as a deferred tax asset. As a result, the Group is in a net deferred tax liability position at balance date. The Group is not required to make any income tax payments relating to the reporting period due to availability of carried forward tax losses.

Interest bearing liabilities

The Group’s fully secured $390.0 million project finance facility was established in 2011 to fund the development and construction of the DeGrussa Copper Mine, including $380.0 million in project construction and working capital funding and $10.0 million for environmental bonding.

A total of $220 million has now been repaid against the original $380 million DeGrussa Project Finance Facility, with a total of $125 million repaid for FY2014, and at the end of the reporting period the outstanding balance of the facility stood at $160 million.

With the repayment of debt achieved over the past 12 months, the achievement of steady-state operations and the satisfaction of the DeGrussa financing completion test, Sandfire restructured its banking arrangements with ANZ Banking Corporation to become its sole financier, replacing the previous banking syndicate.

The Company also secured a new $50 million working capital facility with ANZ which can be drawn down against the value of saleable copper concentrate inventories held by the Company at the mine and ports. The facility is designed to reduce the potential cash flow impact of timing of concentrate shipments and cash receipts. The new facility follows usual financing conditions, terms and pricing.

[ 5 2 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.2 revieW oF FiNaNciaL resuLts (continued)

The following table summarises the facility transactions during the reporting period, as well as the currently scheduled repayment and cash reserve account obligations, excluding interest, for future financial years:

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closing
opening scheduled closing current Non-current on deposit balance
Financial balance repayment balance liability liability (Dsra) deposit
year $ million $ million $ million $ million $ million $ million $ million
2013/2014 285.0 (125.0) 160.0 75.0 85.0 (10.0) 150.0
2014/2015 160.0 (75.0) 85.0 85.0 - (25.0) 60.0
2015/2016 85.0 (85.0) - - - - -
----- End of picture text -----

The consolidated statement of financial position has $75.0 million disclosed within current liabilities, prior to offset for capitalised finance establishment costs, representing the 2014/2015 financial year scheduled quarterly repayments. A further $85.0 million is disclosed within non-current liabilities, prior to offset for capitalised finance establishment costs, representing the scheduled repayments from 1 July 2015 to the facility end date of 31 December 2015.

Cash Flows

Operating activities

Net cash inflow from operating activities was $223.0 million for the period. Net cash flow from operating activities prior to exploration and evaluation activities was $249.4 million for the period.

Investing activities

Net cash outflow from investing activities of $103.2 million for the period includes payments for property, plant and equipment purchases ($16.7 million) and mine properties ($77.9 million).

Financing activities

Net cash outflow from financing activities of $139.3 million for the period includes finance facility repayments ($125.0 million) and interest and other costs of finance ($13.2 million).

5.3 risKs

The Group’s operational and financial performance is subject to a range of assumptions and expectations all of which contain some level of risk. The Group’s risk management framework is designed to identify, monitor and mitigate the risks applicable to the Group. The Audit and Risk Committee and the full Board is ultimately responsible for the residual risk exposure of the Group.

In addition to the discussion contained above on the Group’s operational and financial reviews, performance and associated risks, the following risks have been identified as at the date of the Directors Report which may affect the Group’s future operational and financial performance.

Business and operational

DeGrussa is the Group’s sole operating mine and profitable operating segment. DeGrussa derives approximately 90% of its revenue from the sale of copper contained within its concentrate, with the remainder derived from gold and silver.

The DeGrussa operation consists of an underground mine (operating from a single portal and primary decline), processing plant, paste plant and village accommodation facilities. Concentrate is transported to Geraldton and Port Hedland via road and shipped to international trader and smelter customers. The Group’s operational and financial performance is heavily reliant on the successful integrated operation of its various business elements.

Production and capital costs affect financial performance and are subject to a variety of factors including, but not limited to, variability in input costs and consumables, changes in economic conditions and changes in operating strategy.

As is common in the mining and exploration industry, many of the Group’s activities are conducted using contractors. The Company’s operational and financial results are impacted by the performance of contractors, their efficiency and costs and associated risks. The Group actively manages its contractors to the extent possible working within its agreements with them.

The DeGrussa underground mine is subject to geotechnical risk which, if left unmitigated, could result in a mine collapse, cave-ins or other failures to mine infrastructure and significantly reduced operational performance and increased costs.

The operation ensures that through appropriately qualified and experienced internal geotechnical, geological and mining engineering persons that the geotechnical risks are managed through its technical and operational procedures and activities. Regular audits conducted by external consultants are used to valid assumptions and ensure all risks are managed.

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 5 3 ]

direCTOrs’ rePOrT (continued)

5 PriNciPaL activities, oPeratiNg aND FiNaNciaL revieW (continued)

5.3 risKs (continued)

Health, safety and environment

Mining operations involve safety risk, including but not limited to areas such as explosives, underground operations including the risk of rock fall, work involving confined spaces, areas where heavy and light vehicles interact, manual handling and operating at height. The occurrence of significant safety incidents could result in regulatory investigations or restrictions which may impact operating performance and negatively impact morale. The company manage these risks through the requirements of its Health and Safety Management System and accompanying policies, procedures, and standards. Company personnel are trained in the assessment of risks and hazards and the operating procedures required to operate safely.

The Group operates under a range of environmental regulation and guidelines. Environmental regulations and health guidelines for certain products and by-products produced or to be produced are generally becoming more onerous. Increased environmental regulation of the Company’s products and activities or any changes to the environmental regulations could have an adverse effect on the Company’s financial performance and position. The Group is required to close its operations and rehabilitate the land affected by the operation at the conclusion of mining and processing activities. Actual closure costs in the future may be higher than currently estimated.

The Group works closely with local communities affected by its mining and exploration activities, and has compensation agreements in place with indigenous communities affected by its mining activities. The Group also manages and relies on maintenance of good title over the authorisations, permits and licences which allow it to operate. Loss of good title or access due to challenges instituted by issuers of authorisations, permits or licences, such as government authorities or land owners may result in disruptions to operating performance.

Mineral resource, ore reserve and Mine Plan

The estimation of the Group’s Mineral Resource and Ore Reserve involves analysis of drilling results, associated geological and geotechnical interpretations, metallurgical performance evaluation, mining assessment, operating cost and business assumptions as well as a reliance on commodity price assumptions. As a result, the assessment of Mineral Resource and Ore Reserve involve areas of significant estimation and judgement. The ultimate level of recovery of minerals and commercial viability of deposits cannot be guaranteed.

The Group’s Mine Plan is based on the Mineral Resource at DeGrussa and changes to it caused by changes in underlying assumptions may impact on the future financial and operational performance of the Group.

DeGrussa’s mine life has been successfully extended since original discovery through expenditure on exploration and evaluation activities. The current Mine Life extends to 2020, representing the mining of currently identified mineralisation.

Financial

The marketability of the concentrates is dependent on mine supply, smelter demand and quality of the product.

The prices received are dictated by global commodity and currency markets. Commodity prices and exchange rates have a direct and material impact on the Company’s financial performance. The Group may from time to time seek to hedge risk in commodity and foreign currency risk on its US dollar dominated sales for current shipments to be priced over a 1-4 month quotational period. The Group selectively utilises letters of credit to mitigate risk of receipt of sales funds and receives provisional payments prior to shipments arriving at their destination port.

The majority of the Group’s costs are incurred in Australian dollars, funded through the conversion of US dollar sales proceeds to Australian dollars on receipt from customers.

The Group funded the majority of the construction and development of the DeGrussa mine through a fully secured debt finance facility. While the current debt levels are considered appropriate for the targeted operating and financial performance of the DeGrussa operations over the Mine Plan, financial risk remains in the areas of quarterly compliance measures, repayment obligations and working capital management. The Group’s inability to manage these risks could lead to facility review or default events, and ultimately demand for payment of facility balances currently disclosed as current and non-current liabilities in the Consolidated Statement of Financial Position.

The Group’s approach to managing liquidity is to ensure that it has 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 and updates of the timing of cash flows in order to ensure sufficient funds are available to meet its obligations and debt covenants.

5.4 corPorate

Mr Michael Spreadborough was appointed Chief Operating Officer effective 12 August 2013, replacing Mr Martin Reed as Chief Operating Officer.

[ 5 4 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

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

Dividends

On 29 August 2014, the Directors of the Company announced a final dividend on ordinary shares in respect of the 2014 financial year. The total amount of the dividend is $15,564,000 which represents an unfranked dividend of 10 cents per share. The dividend has not been provided for in the 30 June 2014 financial statements.

investment in tintina resources inc

Subject to the approval of the TSX Venture Exchange, Sandfire has entered into agreements with Tintina Resources Inc (Tintina: TSX-V: TAU) whereby Sandfire will subscribe for 80 million shares in a private share placement at CA$0.20 per share. The CA$16 million placement will give Sandfire an initial 36% interest in Tintina.

In addition, Tintina will issue Sandfire with 20 million two-year Class A warrants exercisable at CA$0.28 per share, 20 million three-year Class B warrants exercisable at CA$0.32 per share and 40 million five-year Class C warrants exercisable at CA$0.40 per share. If these warrants are exercised, Sandfire’s interest would increase to 53% (undiluted) giving it a clear path to control of the Company and the project.

Tintina has also granted Sandfire the right to appoint two representatives to the Tintina Board, including an appointment to fulfill the role of President and Chief Executive Officer.

8 LiKeLy DeveLoPMeNts aND eXPecteD resuLts

The Group will continue 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.

During the financial year, Sandfire has submitted numerous environmental reports and statements to regulators detailing Sandfire’s environmental performance and level of compliance with relevant instruments. These includes Sandfire’s Annual Environment Report submitted to the Department of Environment Regulation, Annual Environmental Report submitted to the Department of Mines and Petroleum and the Annual Aquifer Review Reports submitted to the Department of Water.

Sandfire complies with the Australian Government National Greenhouse and Energy Reporting Act 2007 (Cth), and the Energy Efficiency Opportunities Act 2006 (Cth). Note that the Government has announced its intention to repeal the Energy Efficiency Opportunities Act 2006 (Cth) with effect from 29 June 2014. Sandfire is committed to proactively managing energy use efficiency and reducing greenhouse gas emissions wherever practical and is guided by internal policy and guidelines.

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

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 5 5 ]

direCTOrs’ rePOrT (continued)

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	310,000
27 November 2014	$5.44	310,000
27 November 2014	$6.22	310,000
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
15 July 2018	$7.60	565,000
15 July 2018	$8.80	565,000
15 July 2018	$10.00	565,000

10.2 sHare oPtioNs issueD

The following options over ordinary shares were issued by the Company during the financial year:

expiry Date	exercise Price	Number
15 July 2018	$7.60	565,000
15 July 2018	$8.80	565,000
15 July 2018	$10.00	565,000

10.3 sHares issueD as a resuLt oF tHe eXercise oF oPtioNs

No options were exercised to ordinary shares during or since the end of the financial year.

11 iNDeMNiFicatioN aND iNsuraNce oF Directors, oFFicers aND auDitors

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 Directors of the Company are not aware of any proceedings or claim brought against Sandfire Resources NL as at the date of this report.

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.

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.

[ 5 6 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

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:

	2014
	$
Taxation services	29,446
Other advisory services	38,110
	67,556

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 5 7 ]

direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD)

This remuneration report for the year ended 30 June 2014 outlines the remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 (Cth) (the Act) and its regulations. This information has been audited as required by section 308 (3C) of the Act.

The Remuneration Report is presented as follows:

contents	Page
14.1 remuneration snapshot	59
•Key Management Personnel (KMP)
•Executive remuneration philosophy
•Actual remuneration outcomes for FY14
•Outlook for FY15
14.2 remuneration governance framework	60
•Remuneration and Nomination Committee composition and responsibilities
•Remuneration approval process
•Use of remuneration consultants
14.3 executive remuneration principles and framework	61
•Remuneration components
•Fixed remuneration
•Short-term Performance bonus
•Long-term Indexed Bonus Plan (Executive Directors)
•Long-term Option Plan (Executives)
14.4 Linkage between incentive pay and company performance	66
14.5 executive statutory remuneration disclosures	68
14.6 executive contracts	69
14.7 Non-executive Director (NeD) fees	70
•Policy
•Structure
•Statutory NED fee disclosures
14.8 share-based payment disclosures	72
•Option disclosures
•Rights disclosures
•Share disclosures
14.9 other transactions and balances with KMP and their related parties	74

[ 5 8 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

14 reMuNeratioN rePort (auDiteD) (continued)

14.1 reMuNeratioN sNaPsHot (continued)

Key Management Personnel (KMP)

The following Non-Executive Directors and Executives of the Group were classified as KMP during the 2014 financial year. Unless otherwise indicated, they were classified as KMP for the entire year.

Name	Position
*Non-Executive Directors*
Derek La Ferla	Chairman (Independent)
W John Evans	Director
Paul Hallam	Director (Independent)
Robert Scott	Director (Independent)
Soocheol Shin	Director
executives
*Executive Directors*
Karl Simich	Managing Director and Chief Executive Offcer
*Other Executives*
Matthew Fitzgerald	Chief Financial Offcer and Joint Company Secretary
Robert Klug	Chief Commercial Offcer and Joint Company Secretary
Michael Spreadborough	Chief Operating Offcer_(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.

executive remuneration philosophy

Sandfire’s remuneration strategy is designed to attract, motivate and retain employees, contractors and Non-Executive Directors 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;
Achieve the broader outcome of creating value for shareholders by aligning the interests of Executives, including employees and contractors, with shareholders; and
Align Executive remuneration to shareholder returns.

cash value of earnings realised - outcome for Fy14

The following table shows the cash value of earnings realised by the Executives during FY14. This disclosure is in addition to and different from the disclosures required by the Corporations Act and Accounting Standards, particularly in relation to LTI. As a general principle, the Accounting Standards require a value to be placed on long-term incentives (LTI) (options and rights) based on probabilistic calculations at the time of grant in the case of options and at the time of grant and at each reporting date in the case of rights, which are reflected in the remuneration report. The amount included as remuneration in the remuneration report is not related to or indicative of the benefit (if any) that individual KMP may in fact ultimately receive.

By contrast, the following table values the LTI, in the case of options, only if the options vest and are exercised resulting in the issue of shares to the Executive, and is calculated on the basis of the difference between the exercise price and the market price on the date of exercise of the options. In the case of rights, a value is attributed only if the rights vest and shares are issued or cash is provided to the Executive, on the basis of their value on the date of vesting.

The Company believes that the additional information provided in this table is useful to investors. The Productivity Commission, in its Report on Executive Remuneration in Australia, noted that the usefulness of remuneration reports to investors was diminished by complexity and omissions, and in particular recommended that the report should include reporting of pay ’actually realised’ by the Executives named in the report.

The cash value of earnings realised include cash salary and fees, superannuation and cash bonuses received in cash during the year and the intrinsic value of LTI vesting during the financial year.

The statutory remuneration tables, which are prepared consistent with Australian Accounting Standards and the Corporations Act 2001 (Cth), are outlined later in this report (refer page 68 in Section 14.5).

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direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD) (continued)

14.1 reMuNeratioN sNaPsHot (continued)

	Fixed	short-term	Long-term	total actual
	remunerationa	Bonus PlanB	incentivec	remuneration
executive	($)	($)	($)	($)
Karl Simich	1,050,000	380,150	-	1,430,150
Matthew Fitzgerald	448,808	166,348	-	615,156
Robert Klug	407,959	151,459	-	559,418
Michael Spreadborough	449,787	78,576	-	528,363

A Fixed remuneration includes base salary and superannuation. It reflects the total of “salary and fees” and “superannuation” in the statutory remuneration table.

B Short-term Bonus Plan represents the amount that the Executives earned in the financial year based on achievement of KPIs in

accordance with the Short-term Bonus Plan. It includes the entire bonus irrespective of whether it was delivered as cash or superannuation. The figures reflect the same figures that are disclosed in the statutory remuneration table under “cash bonus”.

C No amounts were awarded as cash or issued as shares to Executives under the Company’s Long-term Indexed Bonus Plan and no options were exercised by Executives in FY14.

14.2 reMuNeratioN goverNaNce FraMeWorK

remuneration and Nomination committee composition and responsibilities

The Remuneration and Nomination Committee (Committee) comprises three independent NEDs. Members acting on the Committee during the financial year are below. Mr Hallam became Chairman of the Committee on 18 February 2014, replacing Derek La Ferla. All NEDs were members of the Committee for the entire financial year.

role	Name
Chairman	Paul Hallam
Members	Derek La Ferla
	Robert Scott

The 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 attraction and retention of high performing Directors and Executives. In determining the level and composition of Executive remuneration, the Committee engages external advisors to provide independent advice where considered appropriate.

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

remuneration approval process

The Board approves the remuneration arrangements of the CEO and Executives and awards made under the short-term and longterm incentive plans, and sets the maximum aggregate NED fees (which is subject to shareholder approval) and the individual NED fee levels, following recommendations from the Committee.

use of remuneration consultants

To ensure the Committee is fully informed when making remuneration decisions, it seeks external remuneration advice. The Board’s appointed remuneration advisors are Psytec Consultants Pty Limited (Psytec) and Ernst & Young (EY).

When the remuneration advisors provide remuneration recommendations to the Company, the Committee has established protocols to ensure that such recommendations would be made free from bias and undue influence by members of the KMP to whom the recommendations may relate. In these instances, the Chairman of the Committee directly engages the remuneration consultant, and receives all reports directly from the remuneration consultant. The remuneration consultant does not provide any remuneration recommendations to management.

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14 reMuNeratioN rePort (auDiteD) (continued)

14.2 reMuNeratioN goverNaNce FraMeWorK (continued)

During the 2014 financial year:

Psytec provided market data to the Company (sourced from McDonald & Company (Australasia)) in respect of NonExecutive Director fees and Executive remuneration levels. The market data was industry-specific relating to Australian
mining companies. Based on the market data, Psytec provided a remuneration recommendation to the Company in respect of NED fees and Executive remuneration levels. The Company paid Psytec $35,636 for the remuneration recommendations during the financial year ended 30 June 2014. Based upon the protocols that were followed, and Psytec’s declaration that their remuneration recommendations were not unduly influenced by any of the Company’s KMP throughout the course of their engagement, the Board is satisfied that Psytec’s remuneration recommendations were made free from undue influence by the KMP.
Psytec also provided the Company with other human resources (HR) and remuneration services in FY14 that did not contain remuneration recommendations. The fee for these services was $40,909; and
EY provided additional market data to the Company in respect of remuneration levels for CEO, CFO and Company Secretary, Chief Operating Officer and Chief Commercial Officer. The market data was based on a market capitalisation and industry peer group. No remuneration recommendation was made.

14.3 eXecutive reMuNeratioN PriNciPLes aND FraMeWorK

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.

remuneration components

During FY14, the remuneration framework for Executives consisted of:

Fixed remuneration; and
Variable remuneration.

The table below illustrates the structure of these remuneration arrangements:

remuneration
component	Design	Purpose
Fixed	•Base salary and superannuation contributions if applicable.	•To attract and retain Executives.
remuneration		•Annual review considers market competitiveness
		as well as Company and individual performance.
variable	Short-term Bonus Plan	•Motivates Executives to achieve both Company and
remuneration	•Award for achieving performance measures based on safety,	individual performance targets.
	production, cost and individual objectives.	•Encourages collaboration across the Executive team,
	•Depending upon measures, assessed either quarterly or annually. •Paid in cash, or can be salary sacrifced into superannuation.	while also providing rewards for the achievement of measures within the Executive’s line of sight.
	Long-term Indexed Bonus Plan	•Align Executive Director rewards with shareholder
	•Provided as a grant of conditional rights to Executive Directors. While	value creation.
	the intention is that the conditional rights will be settled in cash, they	•Retain Executive Directors.
	can also be settled in ordinary shares at the Company’s discretion.
	•Rights vest in three equal tranches after 1.67, 2.67 and 3.67 years.
	•The initial notional value (INV) for the three tranches is set at a 20%,
	40% and 60% premium to the share price at the date of grant.
	•Participants only realise value from the rights if the share price
	exceeds the INV on vesting date, or subsequent test price
	on re-testing.
	Long-term Employee Incentive Option Plan	•Align Executive rewards with shareholder
	•Provided as a grant of options over ordinary shares to Executives	value creation.
	(excluding Executive Directors).	•Retain Executives.
	•Options vest in three equal tranches after 1, 2 and 3 years.
	•The exercise price for the three tranches is set at a 20%, 40% and
	60% premium to the share price at the date of grant.
	•Participants only realise value from the options if the share price
	exceeds the exercise price during the exercise period and the
	options are exercised.

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direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD) (continued)

14.3 eXecutive reMuNeratioN PriNciPLes aND FraMeWorK (continued)

The Executives are not subject to any shareholding guidelines. That is, the Executives are not required to hold a minimum number of shares in the Company.

Fixed remuneration

Fixed remuneration includes base pay and superannuation contributions, if applicable. Fixed remuneration is reviewed annually by the Committee. The process considers:

Internal equity/fairness: Remuneration levels are related directly to the job responsibilities and size.
Market rates: Comparative external remuneration data, including market benchmarks from McDonald and Company (Australasia) Pty Ltd and EY. The Remuneration and Nomination Committee’s policy is to position fixed remuneration
between the median and the upper quartile for the Executives, against its defined market to ensure a competitive offering.
The market used by the Company is companies in the Australian mining industry, having regard to gross revenue, employee numbers, shareholder equity, net income and market capitalisation.
Reward for performance: the Committee may find it reasonable to shift the market positioning from the median based on an assessment of Company and individual performance.

There are no guaranteed fixed remuneration increases.

short-term Bonus Plan

The Company operates a 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 key performance indicators (KPIs). Depending upon the nature of the KPI, the measurement period is either quarterly or annually.

For Executives (including the CEO), the maximum total incentive opportunity is limited to 57.5% of fixed remuneration. The Committee has set the maximum total incentive opportunity at this level so as to provide sufficient incentive to Executives to achieve the KPIs. Actual short-term payments awarded to each Executive depend on the extent to which the KPIs are met, and can vary from 0 to 57.5% of fixed remuneration as determined by the Committee.

The KPIs cover financial, non-financial, company and individual objectives, chosen as they represent the key drivers for the shortterm success of the business and provide a framework for delivering long-term value. The KPIs for the CEO and Executives are:

				Period of
Measure	Weighting	KPis		assessment	rationale
Safety	12%	•	Primarily measured as the Total	Quarterly	•Safety is paramount and the inclusion
			Recordable Injury Frequency Rate		of safety in the incentive plan refects the
			(TRIFR) for the Group, including		Company’s commitment to provide
			contractors.		an incident-free work environment for its
		•	The Company intends to introduce		employees and contractors.
			leading safety indicators for FY15.		•TRIFR is a key safety measure in the mining
					industry.
Production	12%	•	Measured as copper metal tonnes	Quarterly	•Key proftability driver.
			produced per quarter.
Costs	10%	•	Measured as the cost per tonne of ore	Quarterly	•Key proftability driver.
			processed based on a measure of Site
			Operating Costs.
Individual	66%	•	Measured based on individual objectives	Annually (over	•Drives a focus on key performance elements
			which assist the Company in meeting its	calendar year)	that align to overall Company performance
			overall performance targets.		targets yet are within the Executive’s control.
		•	Measures can be fnancial or non-
			fnancial oriented and are within the
			control of the Executive. Example
			measures include those related to
			safety, development, operations and
			people leadership.

Safety, Production and Cost KPIs have a threshold, target and stretch level of performance and are assessed on a quarterly basis. Individual KPIs have a range of performance levels, from unsatisfactory to outstanding, and are assessed annually by the Committee. The award is determined by actual performance against the KPI. No payments are made for below threshold or unsatisfactory performance. This includes if the employee’s performance is rated as ‘unsatisfactory’.

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14 reMuNeratioN rePort (auDiteD) (continued)

14.3 eXecutive reMuNeratioN PriNciPLes aND FraMeWorK (continued)

The Board and Executive team have the right to withhold payments or suspend the plan at any time. The CEO has discretion to reduce awards in respect of the Safety, Production and Cost KPIs to nil in the event of a serious incident or inadequate safety performance. The Remuneration Committee has discretion to reduce awards in respect of the individual KPIs in the same circumstances.

Long-term indexed Bonus Plan (for executive Directors)

For Executive Directors, long-term incentives in the form of rights are provided through the Long-term Indexed Bonus Plan. This plan was approved by the Committee in FY11 and there is currently only one Executive Director.

The rights are granted in three tranches and are all premium-priced. The participant only begins to receive value from each tranche once the Company share price has increased by at least 20%, 40% and 60% respectively. They therefore provide a strong incentive for Executive Directors to increase shareholder wealth.

A diagram showing the key features of the plan in the context of FY14 is below:

==> picture [405 x 168] intentionally omitted <==

Further information on the operation of the Long-term Indexed Bonus Plan is below:

Frequency and timing of	•	Grants have historically been made to Executive Directors every second year. The last allocation was made on
awards		14 October 2013.
Instrument	•	Grants are in the form of rights.
	•	In the event of vesting, the participant can receive, at the Company’s sole discretion, either ordinary shares in the
		Company (subject to any shareholder approval required under the Corporations Act 2001 (Cth) and the ASX Listing
		Rules) or the cash equivalent. It is the current intention of the Board that the rights will be settled in cash and all
		historical grants that have vested have been cash-settled.
Quantum and allocation	•	The Company uses the Portfolio Model as a method of determining Executive Director entitlements under the
methodology		Long-term Indexed Bonus Plan.
	•	The Executive Director’s LTI grant is calculated as a multiplier of Total Fixed Remuneration.
	•	To determine the total number of LTI rights, the value of the LTI grant is divided by the volume weighted
		average share price.
	•	The resulting number of LTI rights to be awarded is granted in three equal tranches at 20%, 40% and 60%
		premium to the volume weighted average share price.
	•	The ultimate value realised from the LTI rights is uncapped as it is dependent on the share price at the relevant
		testing dates. In this way, rewards under the plan are directly aligned to increases in and proportional to
		shareholder value.

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direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD) (continued)

14.3 eXecutive reMuNeratioN PriNciPLes aND FraMeWorK (continued)

Performance and vesting	•	The rights vest in three equal tranches.
conditions and rationale	•	The INV is set at a premium to the share price at the date of grant and therefore provides a strong
		incentive for Executive Directors to increase shareholder wealth. Specifcally:
		- the INV for the frst tranche (which vests after 1.67 years) is set at a 20% premium to the 5-day
		volume weighted average price (VWAP) prior to the date of grant;
		- the INV for the second tranche (which vests after 2.67 years) is set at a 40% premium to the 5-day
		VWAP prior to the date of grant; and
		- the INV for the third tranche (which vests after 3.67 years) is set at a 60% premium to the 5-day
		VWAP prior to the date of grant.
	•	For rights issued during FY14, the Board imposed service based conditions to encourageretention.
		There was also the challenging market performance hurdle related to share price growth inherent in
		the INV. The structure of the plan ensures that Executive Directors are strongly aligned with
		shareholder interests as Executive Directors only begin to realise value from each tranche once the
		Company share price has increased by at least 20%, 40% and 60% respectively.
Testing dates and	•	Where the rights vest, the participant receives the difference between the 5-day VWAP of the Company
realised value		share price prior to the date of vesting (test price) and the INV.
	•	The structure of the plan ensures that Executive Director rewards are strongly aligned with shareholder
		interests as value is only realised from tranche 1 once the share price has increased by at least 20%
		(with tranche 2 and tranche 3 only realising value for the participant once the share price has
		increased by 40% and 60% respectively).
	•	Following the relevant vesting date, the rights continue to be tested every 6 months on
		15 December and 15 June up until the rights expire (typically after 5 years).
	•	In order for participants to receive any value from the rights at the subsequent test dates, the 5-day
		VWAP needs to exceed the higher of the initial INV or the highest test price that occurred prior to that
		test date.
	•	The Board believes it is appropriate to have this testing schedule as it focuses Executive Directors
		on continuing to increase the Company’s share price beyond the initial test date. Ultimate awards are
		aligned to increases in and proportional to shareholder value over the longer term.
Treatment of dividends	•	Holders of rights are not entitled to dividends over the term of the relevant vesting period.
Expiry	•	The rights typically expire after 5 years.
Treatment of unvested	•	Where a participant ceases to be an employee or contractor of the Company through resignation prior
rights on termination of		to vesting of their award, all outstanding rights will expire and cease to carry any rights or benefts.
employment	•	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 fnal test date to be the date on which the 180 day notice period expires.
Treatment of unvested	•	In the event of a change of control of the Company, the vesting period will be brought forward to the
rights on change of		date of the change of control and rights will automatically vest.
control	•	The participant will only realise value from the rights if the offer price is above the initial INV or the
		subsequent test price.

Long-term incentive option Plan (executives other than executive Directors)

Executives are eligible to receive long-term incentives in the form of options under the Long-term Incentive Option Plan, which was most recently approved by shareholders at the 2013 AGM.

The options are granted in three tranches and are all premium-priced. Participants only begin to realise value from each tranche once the Company share price has increased by at least 20%, 40% and 60% respectively and the participant exercises the option. They therefore provide a strong incentive for Executives to increase shareholder wealth.

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14 reMuNeratioN rePort (auDiteD) (continued)

14.3 eXecutive reMuNeratioN PriNciPLes aND FraMeWorK (continued)

A diagram showing the key features of the plan in the context of FY14 is below:

==> picture [426 x 132] intentionally omitted <==

Further information	on	the key terms and conditions of the plan are outlined below.
Frequency	•	Every year, the Remuneration Committee will consider whether it is appropriate to make an option award in light of
and timing		Company’s circumstances at that time. However, in practice, option awards are generally made on a less frequent basis
of awards		(e.g. every second or third year). The last allocation was made in October 2013.
	•	No grants have been made to Executive Directors since 2009. It is the Committee’s intention to only grant long-term
		incentive awards to the Executive Directors under the Long-term Indexed Bonus Plan going forward.
Instrument	•	Grants are in the form of options. That is, a contract that gives the holder a right, but not the obligation, to acquire an
		ordinary share at a fxed price (exercise price) over a specifed period of time. Each option carries the right to subscribe
		for one fully paid ordinary share.
Quantum and	•	Options under the plan are provided to Executives based on their level of seniority and position within the Company.
allocation methodology	•	The Board may issue options with consideration of: - 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.
	•	The Company uses the Portfolio Model as a method of determining Executive entitlements under the Long-term
		Incentive Option Plan.
	•	The Executive’s grant is calculated as a multiplier of Total Fixed Remuneration.
	•	To determine the total number of options, the value of the grant is divided by the volume weighted average share price.
	•	The resulting number of options to be awarded is granted in three equal tranches at 20%, 40% and 60% premium to
		the volume weighted average share price.
Exercise price	•	The options are premium-priced. Specifcally:
		- the exercise price for the frst tranche of options is set at a 20% premium to the 5-day VWAP at the date of grant;
		- the exercise price for the second tranche of options is set at a 40% premium to the 5-day VWAP at the date of grant;
		and
		- the exercise price for the third tranche of options is set at a 60% premium to the VWAP at the 5-day date of grant.
Performance and	•	The Board may impose certain conditions, including performance-related and service based conditions, on the right of
vesting conditions		the participant to exercise any option granted.
and rationale	•	For options issued during FY14, the Board imposed service based conditions to encourage retention. 1/3 of the options
		vest equally after approximately 1, 2 and 3 years. There was also the challenging market performance hurdle related
		to share price growth inherent in the exercise price. The structure of the plan ensures that Executive rewards are
		strongly aligned with shareholder interests as Executives only begin to realise value from each tranche once the
		Company share price has increased by at least 20%, 40% and 60% respectively and the participant exercises the
		options.
Treatment of	•	Holders of options are not entitled to dividends over the term of the relevant vesting period, and until exercised
dividends		into shares.
Hedging	•	Executives are not permitted to limit or offset their exposure to market risk in relation to securities issued.

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direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD) (continued)

14.3 eXecutive reMuNeratioN PriNciPLes aND FraMeWorK (continued)

Expiry	•	Options typically expire 4-5 years after grant.
Treatment of unvested	•	Where a participant ceases to be an employee or contractor of the Company for any reason (including voluntary of
options on termination of		involuntary resignation) prior to vesting of their award, the participant will be entitled to exercise the options granted
employment		as a result of the offer, for a period up to 180 days following the end of the required notice period, with the fnal
		vesting date to be the date on which the 180 day notice period expires.
	•	For the participant to realise any value from the options, the Company share price needs to be above the
		exercise price.
Treatment of unvested	•	In the event of a change of control of the Company, the vesting period for the options will be brought forward to the
options on change of		date of the change of control and awards will automatically vest. However, the participant will only realise value
control		from the options if the Company’s share price is above the exercise price.

14.4 LiNKage BetWeeN iNceNtive Pay aND coMPaNy PerForMaNce

The following table outlines the Company’s respective earnings and financial year end share price from the period 1 July 2009 to 30 June 2014. On 29 August 2014, the Directors of the Company announced a final dividend on ordinary shares in respect of the 2014 financial year. The total amount of the dividend is $15,564,000 which represents an unfranked dividend of 10 cents per share. The dividend has not been provided for in the 30 June 2014 financial statements.

Net proft (loss) ($) Closing ASX share price Dividend per share	30 Jun 10 30 Jun 11 30 Jun 12 30 Jun 13 30 Jun 14
	(29,546,000) (27,051,000) (23,883,000) 87,998,000 78,158,000 $3.24 $7.05 $7.16 $5.12 $6.22 - - - - 10 cents

The Company uses variable remuneration components to motivate Executives to achieve certain performance outcomes and ultimately to create value for shareholders.

The table below provides a summary of how the Company’s incentive plans are aligned to Company performance.

remuneration component	alignment to company performance
Short-term Bonus Plan	The plan is aligned to Company performance because it includes safety, production and cost KPIs, which are
	all key performance drivers.
	This plan also includes individual KPIs within the Executive’s control that contribute to shareholder value
	creation.
Long-term Indexed Bonus Plan	These plans are aligned to Company performance because participants will only begin to receive value from
	the tranche 1 allocations under the plans once the Company’s share price has increased by at least 20%.
Long-term Employee Incentive	Value will only be received from tranche 2 and tranche 3 allocations once the Company’s share price has
Option Plan	increased by at least 40% and 60% respectively.

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14 reMuNeratioN rePort (auDiteD) (continued)

14.4 LiNKage BetWeeN iNceNtive Pay aND coMPaNy PerForMaNce (continued)

short-term Bonus Plan outcomes

The graph below illustrates the average achievement against the individual and company KPIs over the year. Achievement of 100% of the KPIs results in a Short-term Bonus Plan award of 57.5% of the Executive’s fixed remuneration.

==> picture [415 x 344] intentionally omitted <==

The CEO exercised his discretion and scaled down bonus outcomes in the September and March quarter based on safety performance.

Based on performance against the pre-agreed individual and Company KPIs, the percentage of the available bonus that was paid in the financial year, and the percentage that was forfeited because the Executive did not meet the performance criteria, is set out below.

	awarded	Forfeited
Name	(%)	(%)
Karl Simich	65%	35%
Matthew Fitzgerald	65%	35%
Robert Klug	65%	35%
Michael SpreadboroughA	52%	48%

A Mr Spreadborough was appointed Chief Operating Officer with effect from 12 August 2013. The percentage awarded and forfeited is based

on performance assessment only. Actual dollar awards have been pro-rated for time served over the financial year.

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direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD) (continued)

14.5 eXecutive statutory reMuNeratioN DiscLosures

Financial year	short-term benefts Post employment share-based payments (sBP) total remuneration that consists of options Performance based remuneration
	salary & fees cash abonus super- annuation options share appreciation rights $ $ $ $ $ $ % %
executive Directors Karl SimichB 2014 2013 other executives Matthew Fitzgerald 2014 2013 Robert KlugD 2014 2013 Michael SpreadboroughE 2014 Former executive Directors W John EvansF 2013 Former executives Martin ReedG 2013	1,050,000 380,150 - - 688,958 2,119,108 - 17.94 1,000,000 450,000 - - (597,181) 852,819 - N/AC 425,505 166,348 23,303 247,028 - 862,184 28.65 19.29 408,000 183,697 22,000 - - 613,697 - 29.93 373,418 151,459 34,541 247,028 - 806,446 30.63 18.78 183,486 - 16,514 - - 200,000 - - 432,012 78,576 17,775 705,795 - 1,234,158 57.19 6.37 162,546 128,500 22,454 - (421,428) (107,928) - N/AC 400,579 220,500 21,621 - - 642,700 - 34.31
total 2014 2013	2,280,935 776,533 75,619 1,199,851 688,958 5,021,896 23.89 15.46 2,154,611 982,697 82,589 - (1,018,609) 2,201,288 - N/AC

A Amounts included in cash bonus represent the amount that were earned in the financial year based on achievement of KPIs in accordance

with the Short-term Bonus Plan. It includes the entire bonus irrespective of whether it was delivered as cash or superannuation. No

amounts vest in future financial years in respect of the Short-term Bonus Plan for the 2014 financial year. For FY13, this figure also includes amounts paid under the Producer Status Bonus.

B Mr Simich’s salary is paid to Resource Development Company Pty Ltd.

C Percentage not disclosed given the negative value in the share appreciation rights.

D Mr Klug met the definition of a KMP on his appointment as Chief Commercial Officer on 1 January 2013. Accordingly, FY13 remuneration only reflects the period from 1 January 2013 to 30 June 2013.

E Mr Spreadborough was appointed Chief Operating Officer with effect from 12 August 2013. Accordingly, FY14 remuneration

only reflects the period from 12 August 2013 to 30 June 2014. There is no comparative information.

F On 1 January 2013, Mr Evans resigned from his position as Executive Technical Director and was appointed as Non-Executive Director.

G Mr Reed resigned with effect from 30 June 2013.

[ 6 8 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

14 reMuNeratioN rePort (auDiteD) (continued)

14.5 eXecutive statutory reMuNeratioN DiscLosures (continued) relative proportions of fixed and variable remuneration for Fy14

executive Fixed remuneration	variable remuneration
	short-term Performance Bonus Long-term indexed Bonus Plan Long-term incentive option Plan
Karl Simich 50% Robert Klug 50% Michael SpreadboroughC 37% Matthew Fitzgerald 52%	18% 32%A N/AB 19% N/AD 31%E 6% N/AD 57%E 19% N/AD 29%E

A While 32% of remuneration consisted of awards made under the Long-term Indexed Bonus Plan, Mr Simich received no cash value from this plan in FY14.

B Only Executives (excluding Executive Directors) are eligible to participate in the Long-Term Incentive Option Plan (since 2010).

C Mr Spreadborough was appointed Chief Operating Officer with effect from 12 August 2013.

D Only Executive Directors are eligible to participate in the Long-term Indexed Bonus Plan.

E While a percentage of the Executive’s remuneration consisted of options, no options were exercised during FY14.

Accordingly, none of the Executives received any cash value from the Long-term Incentive Option Plan in FY14.

14.6 eXecutive coNtracts

Remuneration arrangements for KMP are formalised in employment agreements or service contracts. The key terms of the Executive’s agreements / contracts are:

		Notice period from	Notice period
		the company (other	from the
	contract	than for serious	employee /
Name	duration	misconduct)a	contractor	treatment of sti and Lti upon termination
Karl Simich	Rolling	12 months	6 months	short-term Performance Bonus paymentsmay be paid on
	service			a pro-rata basis or may be forfeited at the discretion of the
	contract			Company.
				rights:Where Mr Simich terminates his engagement with the
				Group prior to vesting of his awards, all outstanding rights will
				expire and cease to carry any rights or benefts.
				Where the Group initiates the termination 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 fnal vesting date to be the date on which the 180 day
				notice period expires.
Matthew Fitzgerald	Ongoing	6 months	6 months	short-term Performance Bonus paymentsmay be paid on
				a pro-rata basis or may be forfeited at the discretion of the
Robert Klug	Ongoing	6 months	3 months	Company.
Michael Spreadborough	Ongoing	6 months	3 months	options:Where the Executive ceases to be an employee or contractor of the Group for any reason (including voluntary or involuntary resignation), the executive 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.

A The Company may make payment in lieu of notice and must pay statutory entitlements (e.g. accrued annual leave) together with superannuation benefits. No notice period or payment in lieu of notice applies if termination was due to serious misconduct.

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direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD) (continued)

14.7 NoN-eXecutive Director Fees

Policy

Aggregate NED fees are set 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 fees 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 reviewing NED fees.

structure

NED fees consist of Director fees and committee fees. NEDs do not receive retirement or termination benefits and do not participate in any incentive plans. The aggregate amount of fees that may be paid to NEDs in any year is capped at a level approved by shareholders. The current maximum aggregate fee pool of $750,000 per annum was approved by shareholders at the 2013 annual general meeting.

The Board and Committee fees over FY14 are set out below for all NEDs other than Mr Evans. These are inclusive of superannuation.

		annual fee	annual fee
		(from 1 July 2013 to	(from 1 January 2014 to
Board / committee	role	31 December 2013)	30 June 2014)
Board	Chairman1	$170,000	$190,000
	Non-Executive Director	$85,000	$95,000
Remuneration and Nomination Committee	Chair	$20,000	$20,000
	Member	Nil	Nil
Audit and Risk Committee	Chair	$20,000	$20,000
	Member	Nil	Nil

1 The Chairman is not entitled to any additional fees for service on board committees.

The fee structure for Mr Evans is below. These fees are inclusive of superannuation. Mr Evans is on the same base NED fee as the other NEDs from 1 July 2014.

	annual fee	annual fee
	(from 1 July 2013 to	(from 1 January 2014 to
Nature of fees	31 December 2013)	30 June 2014)
Director fees	$55,000	$60,000
Management contract fees1	$120,000	$120,000

1 The management contract fees are for the additional time that Mr Evans spends on work related matters above and beyond what is normally

required from a NED. For FY14, these fees are related to his transition out of being an Executive (Technical Executive Director – Exploration) to becoming a NED, specifically in relation to exploration and business development matters.

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14 reMuNeratioN rePort (auDiteD) (continued)

14.7 NoN-eXecutive Director Fees

statutory NeD fee disclosures

NED fees for the year ended 30 June 2014 and 30 June 2013 are set out below.

Name year	short-term benefts Post-employment salary & fees $ otherc $ superannuation $ total $
Derek La Ferla 2014 2013 W John EvansA 2014 2013 Paul HallamB 2014 2013 Robert Scott 2014 2013 Soocheol Shin 2014 2013	162,324 155,963 - - 17,676 14,037 180,000 170,000 57,500 27,500 120,000 60,000 - - 177,500 87,500 100,300 8,059 - - 8,241 725 108,541 8,784 105,132 100,665 - - 4,868 4,335 110,000 105,000 90,000 85,000 - - - - 90,000 85,000
total remuneration 2014 2013	515,256 377,187 120,000 60,000 30,785 19,097 666,041 456,284

A Mr Evans became a NED on 1 January 2013. Accordingly, his FY13 fees reflect 6 months only.

B Mr Hallam was appointed a Non-Executive Director on 21 May 2013, and was appointed Chairman of the Remuneration and Nomination Committee on 18 February 2014.

C Other refers to fees paid under the management contract (as described above).

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direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD) (continued)

14.8 sHare BaseD PayMeNt DiscLosures

option disclosures

Number and value of options granted, vested and forfeited during the year[A]

executivesB	options granted options vested during the year value of options granted during the year
	Number grant date Fair value per option at grant datec exercise price expiry date vesting date Number % value granted ($)D
Matthew Fitzgerald	70,000 18-Oct-13 $1.08 $7.60 15-Jul-18 30-Sep-14 - - 75,616 70,000 18-Oct-13 $1.17 $8.80 15-Jul-18 30-Sep-15 - - 82,144 70,000 18-Oct-13 $1.28 $10.00 15-Jul-18 30-Sep-16 - - 89,268 266,667 11-Mar-11 $1.28 $11.70 28-Feb-16 28-Feb-14 266,667 100 N/A
Robert KlugE	70,000 18-Oct-13 $1.08 $7.60 15-Jul-18 30-Sep-14 - - 75,610 70,000 18-Oct-13 $1.17 $8.80 15-Jul-18 30-Sep-15 - - 82,144 70,000 18-Oct-13 $1.28 $10.00 15-Jul-18 30-Sep-16 - - 89,268 83,333 2-Aug-12 $0.81 $11.70 28-Feb-16 28-Feb-14 83,333 100 N/A 83,333 11-Mar-11 $1.28 $11.70 28-Feb-16 28-Feb-14 83,333 100 N/A
Michael Spreadborough	200,000 18-Oct-13 $1.08 $7.60 15-Jul-18 30-Sep-14 - - 216,046 200,000 18-Oct-13 $1.17 $8.80 15-Jul-18 30-Sep-15 - - 234,699 200,000 18-Oct-13 $1.28 $10.00 15-Jul-18 30-Sep-16 - - 255,050

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 24 of the financial report.

B Options were not issued to any other Executive or Executive Director.

C 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 indicative of the benefit (if any) that the individual KMP may in fact receive.

D This is based on the grant date fair value of the grant multiplied by the number of options.

E Mr Klug met the definition of a KMP on his appointment as Chief Commercial Officer on 1 January 2013. The issue of 2012 options to

Mr Klug was prior to his appointment as Chief Commercial Officer. The options were all expensed prior to his appointment as a KMP.

No options were forfeited during FY14. There were no alterations to the terms and conditions of options awarded as remuneration since their award date. The minimum value of the options is nil.

option holdings

The movement during the reporting period in the number of options over ordinary shares in the Company held, directly, indirectly or beneficially, by each KMP, including their related parties is shown below:

executive Balance at 1-Jul-13 Number granted as remuneration options exerciseda Balance at 30-Jun-14	vested and exercisable unvested
Karl Simich 600,000 - - 600,000 W John Evans 330,000 - - 330,000 Matthew Fitzgerald 933,334 210,000 - 1,143,334 Robert Klug 750,000 210,000 - 960,000 Michael Spreadborough - 600,000 - 600,000	600,000 - 330,000 - 933,334 210,000 750,000 210,000 - 600,000

A No options were exercised during the year. Accordingly, disclosures in respect of the value of options exercised, and the number of shares issued on exercise of options, are not applicable.

[ 7 2 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

14 reMuNeratioN rePort (auDiteD) (continued)

14.8 sHare BaseD PayMeNt DiscLosures (continued)

rights disclosures

Rights granted, modified and vested during the year

	terms and conditions for each grant rights vested during the year rights tested during the yearD Maximum value of unvested rightse Number grant / Modifcation Date Fair valueB iNvc / test price expiry date initial vesting date Number 15-Dec-13 15-Jun-14 Number % test price test price
executive
Karl Simich total	200,000 14-Oct-2013 $0.56 - $1.89 $7.60 15-Dec-2018 15-Jun-2015 - - - - - $271,611 200,000 14-Oct-2013 $0.75 - $1.60 $8.80 15-Dec-2018 15-Jun-2016 - - - - - $249,915 200,000 14-Oct-2013 $0.89 - $1.36 $10,00 15-Dec-2018 15-Jun-2017 - - - - - $223,562
	266,666A 8-Aug-2011 $0.19 - $0.70 $8.04 15-Dec-2015 15-Jun-2011 - - 266,666 $5.94 $6.12 $46,561 266,667A 8-Aug-2011 $0.19 - $0.70 $8.04 15-Dec-2015 15-Jun-2012 - - 266,667 $5.94 $6.12 $46,561 266,667A 8-Aug-2011 $0.71 - $1.29 $6.21 15-Dec-2015 15-Jun-2013 - - 266,667 $5.94 $6.12 $70,222
	500,000 8-Aug-2011 $0.09 - $0.89 $9.00 15-Dec-2016 15-Jun-2013 - - 500,000 $5.94 $6.12 $150,447 500,000 8-Aug-2011 $0.03 - $0.67 $10.30 15-Dec-2016 15-Jun-2014 500,000 100 500,000 - $6.12 $120,517 500,000 8-Aug-2011 $0.09 - $0.50 $11.70 15-Dec-2016 15-Jun-2015 - - - - - $94,193
	2,900,000 $1,272,589

A The terms and conditions of the rights, initially granted 2 July 2010, were modified 8 August 2011 to align with the terms of the second grant made on 8 August 2011.

B 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 VWAP 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 24 of the financial report.

C Initial Notional Value.

D Rights tested relate to the same grant as that shown on the left hand side of the table. Nil values mean that the grant is not yet eligible for ‘ vesting.

E This is based on the value of rights that have yet to vest.

No rights were forfeited during the year.

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direCTOrs’ rePOrT (continued)

14 reMuNeratioN rePort (auDiteD) (continued)

14.8 sHare BaseD PayMeNt DiscLosures (continued)

rights holdings

The movement during the reporting period in the number of rights held, directly, indirectly or beneficially, by each KMP, including their related parties is shown below. It is the intention that these rights will be settled in cash, but they may also be settled in ordinary shares at the Company’s discretion.

	Balance at	granted as	settled in	Balance at
Namea	1-Jul-13	remuneration	cash or equity	30-Jun-14
Karl Simich	2,300,000	600,000	-	2,900,000

A Mr Simich is the only Executive Director (or Executive) who receives rights.

share disclosures

Share holdings

The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by each KMP, including their related parties, is shown below:

	Balance at		exercise of		Balance at
Name	1-Jul-13	Purchases	options	sales	30-Jun-14
Non-executive Directors
Derek La Ferla	21,668	-	-	-	21,668
Robert Scott	5,000	-	-	-	5,000
executives
Karl Simich	6,009,735	-	-	-	6,009,735
W John Evans	1,315,215	-	-	-	1,315,215
Matthew Fitzgerald	-	-	-	-	-
Robert Klug	2,000	-	-	-	2,000

14.9 otHer traNsactioNs aND BaLaNces WitH KMP aND tHeir reLateD Parties

Certain KMP, or their related parties, hold positions in other entities that result in them having control or significant influence 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 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 Sandfire Resources NL was a junior explorer.

[ 7 4 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

14 reMuNeratioN rePort (auDiteD) (continued)

14.9 otHer traNsactioNs aND BaLaNces WitH KMP aND tHeir reLateD Parties (continued)

Transactions during the 2014 financial year relating to KMP and their related entities over which they have control or significant influence are outlined below:

KMP and their director related entity transaction	transactions value year ended 30 June Balance outstanding as at 30 June 2014 $ 2013 $ 2014 $ 2013 $
Karl simich– Tongaat Pty Ltd Lease of corporate offce parking premises Karl simich– Resource Development Company Pty Ltd Lease of corporate offce parking premises Karl simich– Resource Development Company Pty Ltd Corporate and fnancial services soocheol shin– Posco Australia Pty Ltd (POSA) Commercial agreement	12,600 12,600 - - 12,600 12,600 - - 622,630 567,476 40,012 - 5,383,683 - 1,442,804 -
	6,031,513 592,676 1,482,816 -

Signed in accordance with a resolution of the Directors.

==> picture [126 x 44] intentionally omitted <==

==> picture [171 x 41] intentionally omitted <==

Derek La Ferla Non-executive Chairman

Karl M. Simich Managing Director and Chief Executive Officer

West Perth, 28 August 2014

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CONSOLIDATED STATEMENT OF COMprEhENSIvE INCOME FOr ThE YEAr ended 30 June 2014

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

2014 2013
Note $000 $000
Sales revenue 6 531,230 507,331
Realised and unrealised metal and price adjustment losses 6 (2,407) (14,573)
Changes in inventories of finished goods and work in progress (2,854) 26,888
Mine operations costs (126,112) (83,203)
Employee benefit expenses 7 (44,509) (38,716)
Freight, treatment and refining expenses (82,886) (78,563)
Royalties expense (25,031) (20,986)
Exploration and evaluation expenses (19,696) (22,079)
Depreciation and amortisation expenses 7 (95,097) (125,849)
Share of net loss of associate - (1,106)
Reversal of impairment expense (impairment expense) 16 452 (500)
Administrative expenses (7,062) (6,299)
Other expenses (412) (209)
Profit before net finance and income tax 125,616 142,136
Finance income 8 3,114 3,051
Finance expense 8 (16,782) (19,519)
Net finance expense (13,668) (16,468)
Profit before income tax 111,948 125,668
Income tax expense 9 (33,790) (37,670)
Net profit for the year 78,158 87,998
Other comprehensive income for the period, net of tax - -
total comprehensive income for the period 78,158 87,998
earnings per share
Basic earnings per share attributable to ordinary equity holders (cents) 10 50.22 57.48
Diluted earnings per share attributable to ordinary equity holders (cents) 10 50.15 57.38
----- End of picture text -----

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

[ 7 6 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

CONSOLIDATED STATEMENT OF FINANCIAL pOSITION AS AT 30 June 2014

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

2014 2013
Note $000 $000
assets
Cash and cash equivalents 11 57,590 77,070
Trade and other receivables 12 14,531 8,491
Inventories 13 36,501 38,298
Other current assets 2,005 1,954
total current assets 110,627 125,813
Receivables 12 174 84
Inventories 13 11,698 11,698
Mine properties 14 194,894 177,752
Property, plant and equipment 15 227,022 245,924
Investments accounted for using the equity method 16 5,891 -
Other financial assets 248 183
Exploration and evaluation assets 17 3,148 -
Deferred tax assets 9 - 2,939
total non-current assets 443,075 438,580
totaL assets 553,702 529,650
LiaBiLities
Trade and other payables 18 45,359 43,932
Interest bearing liabilities 19 75,979 163,906
Provisions 20 2,672 2,151
total current liabilities 124,010 209,989
Trade and other payables 18 763 553
Interest-bearing liabilities 19 84,616 119,542
Provisions 20 21,654 22,654
Deferred tax liability 9 30,851 -
total non-current liabilities 137,884 142,749
totaL LiaBiLities 261,894 352,738
Net assets 291,808 211,655
eQuity
Issued capital 21 219,391 219,391
Reserves 21,24 8,109 6,114
Retained profits (accumulated losses) 64,308 (13,850)
totaL eQuity 291,808 211,655
----- End of picture text -----

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

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CONSOLIDATED STATEMENT OF ChANgES IN EquITY FOr ThE YEAr ended 30 June 2014

at 1 July 2013 Proft for the period Other comprehensive income	Note	issued capital $000 219,391 - -	share based payments reserve $000 6,114 - -	retained profts (accumulated losses) $000 (13,850) 78,158 -	total equity $000 211,655 78,158 -
total comprehensive income for the period transactions with owners in their capacity as owners: Share based payments recognised at fair value	24	- -	- 1,995	78,158 -	78,158 1,995
at 30 June 2014		219,391	8,109	64,308	291,808
	Note	issued capital $000	share based payments reserve $000	accumulated losses $000	total equity $000
at 1 July 2012		213,007	6,077	(101,848)	117,236
Proft for the period		-	-	87,998	87,998
Other comprehensive income		-	-	-	-
total comprehensive income for the period		-	-	87,998	87,998
transactions with owners in their capacity as owners:
Exercise of options	21	5,531	-	-	5,531
Share issue costs net of income tax beneft		(69)	-	-	(69)
Transfer from share-based payments reserve on exercise of options		922	(922)	-	-
Share based payments recognised at fair value	24	-	959	-	959
at 30 June 2013		219,391	6,114	(13,850)	211,655

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

[ 7 8 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

CONSOLIDATED STATEMENT OF CASh FLOwS FOr ThE YEAr ended 30 June 2014

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

2014 2013
Note $000 $000
cash flows from operating activities
Cash receipts 523,911 469,634
Cash paid to suppliers and employees (276,718) (201,057)
Payments for exploration and evaluation (26,425) (22,213)
Interest received 2,267 3,866
Net cash inflow from operating activities 22 223,035 250,230
cash flows from investing activities
Payments for exploration and evaluation assets (3,148) -
Payments for property, plant and equipment (16,681) (68,367)
Payments for mine properties (77,881) (119,573)
Payments for investments 16 (5,891) (600)
Proceeds from sale of investments 452 -
Payments for security deposits and bonds (90) (81)
Net cash outflow from investing activities (103,239) (188,621)
cash flows from financing activities
Proceeds from the conversion of options to shares - 5,531
Share issue costs - (98)
Proceeds from borrowings - 30,000
Repayment of borrowings (125,000) (95,000)
Payment of finance lease liabilities (1,092) (931)
Interest and other costs of finance paid (13,184) (24,430)
Net cash outflow from financing activities (139,276) (84,928)
Net decrease in cash and cash equivalents (19,480) (23,319)
Cash and cash equivalents at the beginning of the period 77,070 100,389
cash and cash equivalents at the end of the period 11,22 57,590 77,070
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The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

1 corPorate iNForMatioN

The consolidated financial statements of Sandfire Resources NL for the year ended 30 June 2014 were authorised for issue in accordance with a resolution of the Directors on 28 August 2014.

Sandfire Resources NL (the Parent) is a for profit 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 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, except for trade receivables and available-forsale (AFS) investments which have been measured at fair value.

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

The consolidated financial statements provide comparative information in respect of the previous period and 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.

(a) coMPLiaNce WitH iFrs

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

(B) cHaNges iN accouNtiNg PoLicy, DiscLosures, staNDarDs aND iNterPretatioNs

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.

(i) New and amended standards and interpretations

The following mandatory accounting standards were required to adopted by the Group as of 1 July 2013:

AASB 10 Consolidated Financial Statements which has been issued and is effective for accounting periods beginning
on or after 1 January 2013. AASB 10 provides a revised approach to determining which investees should be consolidated. The standard changes the requirements for determining whether an entity is consolidated by revising the definition of control and adding further guiding principles. The application of AASB 10 did not have any impact on the amounts recognised in the consolidated financial statements.
AASB 11 Joint Arrangements which has been issued and is effective for accounting periods beginning on or after 1 January 2013. AASB 11 removes the option to account for jointly controlled entities (‘JCEs’) using proportionate consolidation. Instead JCEs that meet the definition of a joint venture under AASB 11 must be accounted for using the equity method. The application of AASB 11 did not have any impact on the Group’s financial statements.
AASB 12 Disclosure of Interests in Other Entities which has been issued and is effective for accounting periods beginning on or after 1 January 2013. AASB 12 includes all of the disclosures that were previously in AASB 127 Consolidated and Separate Financial Statements and AASB 131 Interest in Joint Ventures . These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. The revised standard requires a number of additional disclosures in certain circumstances however has no impact on the Group’s financial position or performance.
AASB 13 Fair value measurement , which has been issued and is effective for accounting periods beginning on or after 1 January 2013. AASB 13 establishes a single source of guidance under accounting standards for all fair value measurements. AASB 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under AASBs when fair value is required or permitted. The application of AASB 13 did not have a material impact on the amounts recognised in the consolidated financial statements, other than in the Group’s carrying value assessment. For details refer to Note 27 of the financial statements.

In addition AASB 119, Employee Benefits (Revised 2011) , AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures – Offsetting Financial Assets and Financial Liabilities – Amendments to AASB 7, AASB 2012-5 Improvements to AASBs 2009-2011 Cycle , AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2011-4 Amendments to Australian accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements to AASB 124, were issued and required to be adopted by the Group. The adoption of these standards did have not a material impact on the consolidated financial statements.

[ 8 0 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(B) cHaNges iN accouNtiNg PoLicy, DiscLosures, staNDarDs aND iNterPretatioNs (continued)

(ii) 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 2014, are outlined in the table below.

application date and impact on the group’s financial report

			application date and impact
reference	title	summary	on the group’s fnancial report
AASB 2012-3	Amendments to	AASB 2012-3 adds application guidance to AASB 132 Financial	The amendments which
	Australian Accounting	Instruments: Presentation to address inconsistencies identifed	become mandatory for the
	Standards - Offsetting	in applying some of the offsetting criteria of AASB 132, including	Group’s 30 June 2015 fnancial
	Financial Assets and	clarifying the meaning of “currently has a legally enforceable	statements are not expected
	Financial Liabilities	right of set-off” and that some gross settlement systems may be	to have any impact on the
		considered equivalent to net settlement.	fnancial statements.
AASB 9	Financial Instruments	On 24 July 2014 The IASB issued the fnal version of IFRS	The Group has not assessed
		9 which replaces IAS 39 and includes a logical model for	the impact of the amendments,
		classifcation and measurement, a single, forward-looking	which become mandatory for
		‘expected loss’ impairment model and a substantially-reformed	the Group’s 30 June 2019
		approach to hedge accounting.	fnancial statements.
		IFRS 9 is effective for annual periods beginning on or after
		1 January 2018. However, the Standard is available for early
		application. The own credit changes can be early applied in
		isolation without otherwise changing the accounting for fnancial
		instruments.
		The fnal version of IFRS 9 introduces a new expected-loss
		impairment model that will require more timely recognition
		of expected credit losses. The new Standard requires entities
		to account for expected credit losses from when fnancial
		instruments are frst recognised and to recognise full lifetime
		expected losses on a more timely basis.

The AASB is yet to issue the final version of AASB 9. A revised version of AASB 9 (AASB 2013-9) was issued in December 2013 which included the new hedge accounting requirements, including changes to hedge effectiveness testing, treatment of hedging costs, risk components that can be hedged and disclosures.

AASB 9 includes requirements for a simplified approach for classification and measurement of financial assets compared with the requirements of AASB 139.

The main 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.

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nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(B) cHaNges iN accouNtiNg PoLicy, DiscLosures, staNDarDs aND iNterPretatioNs (continued)

			application date and impact
reference	title	summary	on the group’s fnancial report
AASB 9		d. Where the fair value option is used for fnancial liabilities the
(continued)		change in fair value is to be accounted for as follows:
		-The change attributable to changes in credit risk are
		presented in other comprehensive income (OCI); and
		-The remaining change is presented in proft or loss.
		AASB 9 also removes the volatility in proft or loss that was caused
		by changes in the credit risk of liabilities elected to be measured
		at fair value. This change in accounting means that gains caused
		by the deterioration of an entity’s own credit risk on such liabilities
		are no longer recognised in proft 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, AASB 2010-10 and AASB 2014-1 – Part E.
AASB 2013-3	Amendments	AASB 2013-3 amends the disclosure requirements in AASB	The amendments which
	to AASB 136	136 Impairment of Assets. The amendments include the	become mandatory for the
	– Recoverable	requirement to disclose additional information about the fair value	Group’s 30 June 2015 fnancial
	Amount Disclosures for	measurement when the recoverable amount of impaired assets is	statements are not expected
	Non-Financial Assets	based on fair value less costs of disposal.	to have any impact on the
			fnancial statements.
AASB 2013-4	Amendments to	AASB 2013-4 amends AASB 139 to permit the continuation of	The amendments which
	Australian Accounting	hedge accounting in specifed circumstances where a derivative,	become mandatory for the
	Standards – Novation	which has been designated as a hedging instrument, is novated	Group’s 30 June 2015 fnancial
	of Derivatives and	from one counterparty to a central counterparty as a consequence	statements are not expected
	Continuation of Hedge	of laws or regulations.	to have any impact on the
	Accounting [AASB 139]		fnancial statements.
AASB 2014-1	Amendments to	This standard sets out amendments to Australian Accounting	The amendments which
Part A - Annual	Australian Accounting	Standards arising from the issuance by the International	become mandatory for the
Improvements	Standards Part A	Accounting Standards Board (IASB) of International Financial	Group’s 30 June 2015 fnancial
2010-2012	Annual Improvements	Reporting Standards (IFRSs) Annual Improvements to IFRSs	statements are not expected
Cycle	to IFRSs 2010–2012 Cycle	2010-2012 Cycle and Annual Improvements to IFRSs 2011-2013 Cycle.	to have any impact on the fnancial statements.
		The following items are addressed by this standard:
		• AASB 2 - Clarifes the defnition of ‘vesting conditions’ and
		‘market condition’ and introduces the defnition of
		‘performance condition’ and ‘service condition’.
		• AASB 3 - Clarifes the classifcation requirements for
		contingent consideration in a business combination by
		removing all references to IAS 37.
		• AASB 8 - Requires entities to disclose factors used to identify
		the entity’s reportable segments when operating segments
		have been aggregated. An entity is also required to provide
		a reconciliation of total reportable segments’ asset to the
		entity’s total assets.
		• AASB 116 & AASB 138 - Clarifes that the determination of
		accumulated depreciation does not depend on the selection of
		the valuation technique and that it is calculated as the
		difference between the gross and net carrying amounts.
		• AASB 124 - Defnes a management entity providing
		KMP services as a related party of the reporting entity. The
		amendments added an exemption from the detailed disclosure
		requirements in paragraph 17 for KMP services provided by
		a management entity. Payments made to a management entity
		in respect of KMP services should be separately disclosed.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(B) cHaNges iN accouNtiNg PoLicy, DiscLosures, staNDarDs aND iNterPretatioNs (continued)

			application date and impact
reference	title	summary	on the group’s fnancial report
AASB 2014-1		Annual Improvements to IFRSs 2011–2013 Cycle addresses the
Part A - Annual		following items:
Improvements		• AASB13 - Clarifes that the portfolio exception in paragraph
2011–2013		52 of AASB 13 applies to all contracts within the scope
Cycle		of AASB 139 or AASB 9, regardless of whether they meet the
(continued)		defnitions of fnancial assets or fnancial liabilities as defned
		in AASB 132.
		• AASB40 - Clarifes that judgment is needed to determine
		whether an acquisition of investment property is solely
		the acquisition of an investment property or whether it is the
		acquisition of a group of assets or a business combination in
		the scope of AASB 3 that includes an investment property.
		That judgment is based on guidance in AASB 3.
AASB 1031	Materiality	The revised AASB 1031 is an interim standard that cross-	The amendments which
		references to other Standards and the Framework (issued	become mandatory for the
		December 2013) that contain guidance on materiality.	Group’s 30 June 2015 fnancial
		AASB 1031 will be withdrawn when references to AASB 1031 in	statements are not expected
		all Standards and Interpretations have been removed. AASB 2014-1 Part C issued in June 2014 makes amendments to	to have any impact on the fnancial statements.
		eight Australian Accounting Standards to delete their references to
		AASB 1031. The amendments are effective from 1 July 2014.
AASB 2013-9	Amendments to	The Standard contains three main parts and makes amendments	Part B of the amendments
	Australian Accounting	to a number Standards and Interpretations.	which become mandatory for
	Standards – Conceptual Framework, Materiality	Part A of AASB 2013-9 makes consequential amendments arising from the issuance of AASB CF 2013-1 (effective 30 June 2014).	the Group’s 30 June 2015 fnancial statements and Part
	and Financial		C of the amendments which
	Instruments	Part B makes amendments to particular Australian Accounting Standards to delete references to AASB 1031 and also makes minor editorial amendments to various other standards.	become mandatory for the Group’s 30 June 2016 fnancial statements, are not expected
		Part C makes amendments to a number of Australian Accounting	to have any impact on the
		Standards, including incorporating Chapter 6 Hedge Accounting	fnancial statements.
		into AASB 9 Financial Instruments.
Amendments to	Clarifcation of	IAS 16 and IAS 38 both establish the principle for the basis of	The amendments which
IAS 16 and IAS	Acceptable Methods	depreciation and amortisation as being the expected pattern of	become mandatory for the
38 *	of Depreciation	consumption of the future economic benefts of an asset.	Group’s 30 June 2017 fnancial
	and Amortisation (Amendments to IAS 16 and IAS 38)	The IASB has clarifed that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an	statements are not expected to have any impact on the fnancial statements.
		asset generally refects factors other than the consumption of the
		economic benefts embodied in the asset.
		The IASB also clarifed that revenue is generally presumed
		to be an inappropriate basis for measuring the consumption
		of the economic benefts embodied in an intangible asset.
		This presumption, however, can be rebutted in certain limited
		circumstances.
IFRS 15 *	Revenue from	IFRS 15 establishes principles for reporting useful information	The Group has not assessed
	Contracts with	to users of fnancial statements about the nature, amount,	the impact of the amendments,
	Customers	timing and uncertainty of revenue and cash fows arising from	which become mandatory for
		an entity’s contracts with customers. IFRS 15 supersedes: (a)	the Group’s 30 June 2018
		IAS 11 Construction Contracts; (b) IAS 18 Revenue; (c) IFRIC	fnancial statements are not
		13 Customer Loyalty Programmes; (d) IFRIC 15 Agreements for	expected to have any impact on
		the Construction of Real Estate; (e) IFRIC 18 Transfers of Assets	the fnancial statements.
		from Customers; and (f) SIC-31 Revenue—Barter Transactions
		Involving Advertising Services.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(B) cHaNges iN accouNtiNg PoLicy, DiscLosures, staNDarDs aND iNterPretatioNs (continued)

			application date and impact
reference	title	summary	on the group’s fnancial report
IFRS 15		The core principle of IFRS 15 is that an entity recognises revenue
(continued) *		to depict the transfer of promised goods or services to customers
		in an amount that refects the consideration to which the entity
		expects to be entitled in exchange for those goods or services. An
		entity recognises revenue in accordance with that core principle
		by applying the following steps:
		a) Step 1: Identify the contract(s) with a customer;
		b) Step 2: Identify the performance obligations in the contract;
		c) Step 3: Determine the transaction price;
		d) Step 4: Allocate the transaction price to the performance
		obligations in the contract; and
		e) Step 5: Recognise revenue when (or as) the entity satisfes a
		performance obligation.

These IFRS amendments have not yet been adopted by the AASB.

(c) Basis oF coNsoLiDatioN

The consolidated financial statements comprise the financial statements of Sandfire Resources NL and its subsidiaries (as outlined in Note 4). Interests in associates are equity accounted (see accounting policy Note 2(e)). Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.

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

The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights.

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

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

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

De-recognises the assets (including goodwill) and liabilities of the subsidiary;
De-recognises the carrying amount of any non-controlling interests;
De-recognises the cumulative translation differences recorded in equity;
Recognises the fair value of the consideration received;
Recognises the fair value of any investment retained;
Recognises any surplus or deficit in profit or loss; and
Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as
appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

[ 8 4 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(D) BusiNess coMBiNatioNs

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered in the determination of goodwill.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of AASB 139 Financial Instruments: Recognition and Measurement , will be measured at fair value with changes in fair value recognised either in either profit or loss or as a change to OCI. If the contingent consideration is not within the scope of AASB 139, it will be measured in accordance with the appropriate AASB. Contingent consideration that is classified as equity is not re-measured and subsequent settlement is accounted for within equity.

(e) iNvestMeNt iN aN associate

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group’s investment in its associate is accounted for using the equity method.

Under the equity method, the investment in the associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. 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. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, 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 aggregate of the Group’s share of profit or loss of an associate is shown on the face of the income statement outside operating profit and represents profit or 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.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, then recognises the loss as an impairment expense in the income statement.

Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

(F) curreNt versus NoN-curreNt cLassiFicatioN

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

Expected to be realised or intended to be sold or consumed in normal operating cycle;
Held primarily for the purpose of trading;
Expected to be realised within twelve months after the reporting period; or
Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

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nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(F) curreNt versus NoN-curreNt cLassiFicatioN (continued)

All other assets are classified as non-current. A liability is current when:

It is expected to be settled in normal operating cycle;
It is held primarily for the purpose of trading;
It is due to be settled within twelve months after the reporting period; or

There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

(g) 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 chief operating decision makers 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.

(H) ForeigN curreNcy traNsLatioN

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 ($).

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.

Group companies

On consolidation, the assets and liabilities of foreign operations are translated into dollars at the rate of exchange prevailing at the reporting date and their income statements are translated at exchange rates prevailing at the dates of the transactions. The exchange differences that may arising on translation for consolidation are recognised in other comprehensive income. There was no material exchange differences arising on translation for consolidation for the financial year ended 30 June 2014.

On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation will be recognised in profit or loss.

(i) 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 – copper 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 concentrate represents the bill of lading date when the concentrate is delivered for shipment.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(i) 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 concentrate sales contracts with third parties contain provisional pricing arrangements. The selling price for metal in concentrate 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. Accordingly, the Company has designated the receivable at fair value through profit and loss (see Note 2q). Subsequent changes in fair value of the receivable is 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 (generally 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.

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 forward 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) 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.

(J) 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.

(K) iNveNtories

Stores and consumables, ore and concentrate are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and a proportion of variable and fixed overhead expenditure which is directly related to the production of inventories.

Costs are assigned to individual items of inventory on the basis of weighted average costs. Cost includes direct material, mining, processing, labour, related transportation costs to the point of sale and other fixed and variable costs directly related to mining and processing 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.

(L) eXPLoratioN aND evaLuatioN

(i) Exploration and evaluation assets

Exploration and evaluation assets comprise acquired mineral rights including ore reserves and mineral resources and are recognised at cost. As the assets are not yet ready for use they are not depreciated. Exploration and evaluation assets are assessed for impairment if:

sufficient data exists to determine technical feasibility and commercial viability; or
other facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

Once the technical feasibility and commercial viability of the assets are demonstrable, exploration and evaluation assets are first tested for impairment and then reclassified to mine properties as development assets.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(L)

eXPLoratioN aND evaLuatioN (continued)

(ii) Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred on licenses where the technical feasibility and commercial viability of extracting mineral resources has not yet been established is expensed and recognised in the income statement 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 includes pre-licence costs, costs associated with exploring, investigating, examining and evaluating 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

Other than the acquisition of mineral rights, cash flows arising from exploration and evaluation expenditure are included in the statement of cash flows as an operating activity.

(M) 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. Any ongoing costs associated with mining which are considered to benefit mining operations in future periods are capitalised.

Amortisation

The Group amortises mine property and development assets from the commencement of commercial production. The Group amortises mine property and development assets on a units of ore extracted basis over the life of mine.

(N) 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.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(o) Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date. The arrangement is assessed for whether 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.

(P) 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.

(Q) FiNaNciaL iNstruMeNts – iNitiaL recogNitioN aND suBseQueNt MeasureMeNt

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

(i) Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, trade and other receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

Subsequent measurement

For purposes of subsequent measurement financial assets are classified in four categories:

Financial assets at fair value through profit or loss;
Trade and other receivables;
Held-to-maturity investments; or
Available-for-sale financial investments.

Financial assets at fair value through profit or loss

The Group did not have any financial assets at fair value through profit or loss at reporting date.

Trade and other receivables

This category is the most relevant to the Group.

Trade receivables are carried at fair value. 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 60-120 days. Sales of copper concentrate are recognised in accordance with Note 2(i).

After initial measurement, other receivables are subsequently measured at amortised cost using the effective interest method.

Held-to-maturity investments

The Group did not have any held-to-maturity investments at reporting date.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(Q) FiNaNciaL iNstruMeNts – iNitiaL recogNitioN aND suBseQueNt MeasureMeNt (continued)

Available-for-sale (AFS) financial investments

AFS financial investments include equity investments. Equity investments classified as AFS are those that are neither classified as held for trading nor designated at fair value through profit or loss.

After initial investment, AFS financial investments are subsequently measured at fair value with unrealised gains or losses recognised as OCI and credited in the AFS reserve until the investment is de-recognised, 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 AFS reserve to the income statement.

The Group evaluates whether the ability and intention to sell its AFS 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.

For a financial asset reclassified from the AFS 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 either (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.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

ii) Impairment of financial assets

The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred ‘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.

Trade and other receivables

Collectability of trade and other receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. An impairment allowance 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.

Available for sale (AFS) financial investments

For AFS financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(Q) FiNaNciaL iNstruMeNts – iNitiaL recogNitioN aND suBseQueNt MeasureMeNt (continued)

In the case of equity investments classified as AFS, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ”Significant” is evaluated against the original cost of the investment and ”prolonged” against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss – is removed from OCI and recognised in the statement of profit or loss. Impairment losses on equity investments are not reversed through the statement of profit or loss; increases in their fair value after impairment are recognised directly in OCI.

iii) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables and loans and borrowings.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss

The Group did not have any financial liabilities at fair value through profit or loss at reporting date.

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.

Loans and borrowings

This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the statement of profit or loss.

This category generally applies to interest-bearing loans and borrowings. For more information refer Note 19.

De-recognition

A financial liability is de-recognised when the obligation under the liability is discharged or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement or profit or loss.

iv) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

(r) 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 of disposal 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.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(r) iMPairMeNt oF NoN-FiNaNciaL assets (continued)

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 of disposal, recent market transactions are taken into account. 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 up to seven years form reporting date.

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.

An assessment is made at each reporting date to determine 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.

(s) ProvisioNs

(i) 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.

(ii) 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.

(iii) 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. There Group did not have a material obligation with respect to long service leave as at 30 June 2014.

(iv) 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(l).

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.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(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 24.

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 new award is treated as if they were a modification of the cancelled award (as described in the previous paragraph).

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted loss per share (see Note 10).

(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.

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(t) sHare-BaseD PayMeNt traNsactioNs (continued)

The fair value of the liability is determined, initially and at each reporting date until it is settled, by applying the Black-Scholes 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 24).

(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) taXes

(i) Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the group operates and generates taxable income.

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.

(ii) Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

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 differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred 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.

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.

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2 suMMary oF sigNiFicaNt accouNtiNg PoLicies (continued)

(v) taXes (continued)

(iii) 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.
When receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables 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 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 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) Fair vaLue MeasureMeNt

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to or by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; or
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

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

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

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3 sigNiFicaNt accouNtiNg JuDgeMeNts, estiMates aND assuMPtioNs

The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made in determining the carrying amounts of assets and liabilities. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

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 AASB 116 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 amount, that portion of the increase is charged directly to the income statement.

Ore Reserve and Mineral 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 2014 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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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 24.

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.

Fair value of financial instruments

When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 27 for further disclosures.

4 iNForMatioN reLatiNg to suBsiDiaries

The consolidated financial statements of the Group include:

Name Note country of incorporation SFR Copper & Gold Peru S.A. (i) Peru	% equity interest
	2014 2013 100.00 100.00

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

5 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 the Group’s chief operating decision makers is prepared in conformity with the accounting policies adopted for preparing the financial statements of the Group.

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nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

5 segMeNt iNForMatioN (continued) segMeNt resuLts

*in $000*	Degrussa Mine	exploration	corporate	treasury	group
income statement for the year ended 30 June 2014
Sales revenue	531,230	-	-	-	531,230
Net metal and price adjustments gains (losses)	-	-	-	(2,407)	(2,407)
Changes in inventories of fnished goods and work in progress	(2,854)	-	-	-	(2,854)
Mine operations costs	(126,112)	-	-	-	(126,112)
Employee beneft expenses	(30,892)	(7,170)	(6,447)	-	(44,509)
Freight, treatment and refning expenses	(82,886)	-	-	-	(82,886)
Royalties expense	(25,031)	-	-	-	(25,031)
Exploration and evaluation expenses	-	(19,696)	-	-	(19,696)
Depreciation and amortisation expenses	(94,332)	(432)	(333)	-	(95,097)
Reversal of impairment expense	-	-	517	-	517
Administrative expenses	-	-	(7,062)	-	(7,062)
Other expenses	(477)	-	-	-	(477)
Proft (loss) before net fnance and income tax	168,646	(27,298)	(13,325)	(2,407)	125,616
Finance income				3,114	3,114
Finance expense				(16,782)	(16,782)
Proft (loss) before income tax	168,646	(27,298)	(13,325)	(16,075)	111,948
Income tax expense					(33,790)
Net proft for the year					78,158
*in $000*	Degrussa Mine	exploration	corporate	treasury	group
income statement for the year ended 30 June 2013
Sales revenue	507,331	-	-	-	507,331
Net metal and price adjustments gains (losses)	(6,878)	-	-	(7,695)	(14,573)
Changes in inventories of fnished goods and work in progress	26,888	-	-	-	26,888
Mine operations costs	(83,203)	-	-	-	(83,203)
Employee beneft expenses	(26,459)	(8,342)	(3,915)	-	(38,716)
Freight, treatment and refning expenses	(78,563)	-	-	-	(78,563)
Royalties expense	(20,986)	-	-	-	(20,986)
Exploration and evaluation expenses	-	(22,079)	-	-	(22,079)
Depreciation and amortisation expenses	(123,409)	(806)	(1,634)	-	(125,849)
Share of net loss of associates	-	-	(1,106)	-	(1,106)
Impairment expense	-	-	(500)	-	(500)
Administrative expenses	-	-	(6,299)	-	(6,299)
Other expenses	(209)	-	-	-	(209)
Proft (loss) before net fnance and income tax	194,512	(31,227)	(13,454)	(7,695)	142,136
Finance income				3,051	3,051
Finance expense				(19,519)	(19,519)
Proft (loss) before income tax	194,512	(31,227)	(13,454)	(24,163)	125,668
Income tax expense					(37,670)
Net proft for the year					87,998

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5 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

	australia	asia	group
	$000	$000	$000
revenues from external customers
year ended 30 June 2014
Sales of copper in concentrate	-	484,124	484,124
Sales of gold in concentrate	-	43,243	43,243
Sales of silver in concentrate	-	3,863	3,863
Total sales revenue	-	531,230	531,230
year ended 30 June 2013
Sales of copper in concentrate	-	446,627	446,627
Sales of gold in concentrate	-	41,349	41,349
Sales of silver in concentrate	-	1,190	1,190
Sales of gold in laterite	18,151	-	18,151
Specimen sales	14	-	14
Total sales revenue	18,165	489,166	507,331

The copper-gold concentrate revenue arises from sales to customers in various countries. A majority of the product was sent to China for processing (85%), a portion was sent to South Korea (11%) and the remainder was sent to India. During 2013, 100% of the product was sent to China for processing.

Major customers who individually accounted for more than ten percent of total revenue contributed approximately 83% of total revenue (2013: 60%).

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2014 2013
$000 $000
6 saLes reveNue, reaLiseD aND uNreaLiseD MetaL
aND Price aDJustMeNt gaiNs (Losses)
sales revenue
Sales of copper in concentrate 484,124 446,641
Sales of gold in concentrate 43,243 41,349
Sales of silver in concentrate 3,863 1,190
Sales of gold in laterite - 18,151
531,230 507,331
realised and unrealised metal and price adjustment gains (losses)
Copper metal and price adjustment (2,204) (12,257)
Gold metal and price adjustment (501) (2,365)
Silver metal and price adjustment 214 188
Copper and gold foreign exchange adjustment 84 (139)
(2,407) (14,573)
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6 saLes reveNue, reaLiseD aND uNreaLiseD MetaL aND Price aDJustMeNt gaiNs (Losses) (continued)

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 (generally 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 $2,407,000 (2013: $14,573,000) mark-to-market adjustment to profit or loss for the year ended 30 June 2014.

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2014 2013
Note $000 $000
7 eXPeNses
Profit before income tax includes the following expenses:
Depreciation
Plant and equipment 31,797 21,336
Motor vehicles 172 222
Leased equipment 900 829
Rehabilitation, restoration and dismantling 1,948 1,407
15 34,817 23,794
Less depreciation capitalised to mine properties - (150)
Total depreciation 34,817 23,644
Amortisation
Mine development 59,626 31,809
Development phase stripping - 57,289
Production stripping - 12,375
Rehabilitation, restoration and dismantling 654 732
Total amortisation 14 60,280 102,205
Total depreciation and amortisation 95,097 125,849
Lease payments included in statement of comprehensive income
Minimum lease payments – operating lease 26 861 810
Cost of goods sold 278,678 216,322
Net loss on sale of property, plant and equipment 14 -
Consultant share-based payments 24 176 642
employee benefits expenses
Wages and salaries 37,996 38,098
Defined contribution superannuation expense 3,353 2,854
Employee share-based payments 24 2,507 (702)
Other employee benefits expense 2,374 2,392
46,230 42,642
Less employee benefits expenses capitalised to mine properties and property, plant and equipment (1,721) (3,926)
44,509 38,716
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2014 2013
Note $000 $000
8 FiNaNce iNcoMe (eXPeNse)
Finance income
Interest on bank deposits 2,267 3,866
Less interest on bank deposits capitalised to mine properties and property, plant and equipment - (1,013)
2,267 2,853
Foreign exchange gain 847 198
3,114 3,051
Finance (expense)
Interest charges (13,096) (22,574)
Less interest charges capitalised to mine properties and property, plant and equipment - 5,865
(13,096) (16,709)
Foreign exchange loss (697) (633)
Unwinding of discount on provisions (746) (500)
Finance establishment costs amortisation (2,243) (2,242)
Less finance establishment costs capitalised to mine properties and property, plant and equipment - 565
(16,782) (19,519)
9 iNcoMe taX
components of income tax are:
Income taxes
Current income tax expense 27,028 60,123
Under (over) provision for prior year (i) (30,895) 211
Deferred income tax
Origination and reversal of temporary differences 7,235 (22,121)
Under (over) provision for prior year (i) 30,422 (543)
Income tax expense reported in statement of comprehensive income 33,790 37,670
amounts charged (credited) directly to equity
Deferred income tax related to items charged (credited) directly to equity
Share issue costs - (29)
Income tax expense (benefit) reported in equity - (29)
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(i) The under/(over) provision reflected in the 2014 financial year is primarily a result of the finalisation of the tax review of costs capitalised to

Mine Development as part of Mine Properties and Plant & Equipment. The review was finalised during the 2014 financial year and identified

that the initial estimates used in the 2013 financial report were required to be adjusted due to immediately deductible capital costs and

differing rates of decline in value for tax purposes within those asset categories. Whilst the net tax expense impact of this review was nil it resulted in a once off reallocation of deferred and current balances.

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2014 2013
$000 $000
9 iNcoMe taX (continued)
reconciliation of tax expense recognised in the statement of comprehensive income and tax expense
calculated per the statutory income tax rate
Profit before tax 111,948 125,668
Income tax expense using domestic corporate tax rate of 30% (2013: 30%) 33,584 37,700
Increase (decrease) in income tax due to:
Non-deductible expenses 621 51
Current year capital losses not recognised 933 -
Movement in unrecognised temporary differences with respect to investments (876) 482
Over provision for prior year (472) (332)
Other deductible expenses - (231)
Income tax expense 33,790 37,670
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recognised deferred tax assets and liabilities

recognised deferred tax assets and liabilities
in $000	2014 2013
	current tax payable Deferred income tax current tax payable Deferred income tax
Opening balance Charged to income Charged to equity	- 2,939 - 40,580 - (33,790) - (37,670) - - - 29
Closing balance	- (30,851) - 2,939
Tax expense (beneft) in the statement of comprehensive income	33,790 37,670
Amounts recognised in the statement of fnancial position: Deferred tax asset Deferred tax liability	- 2,939 (30,851) -
	(30,851) 2,939

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2014 2013
$000 $000
9 iNcoMe taX (continued)
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Mine properties 23,436 17,607
Property, plant & equipment 32,783 4,236
Other 96 58
Gross deferred tax liabilities 56,315 21,901
Set-off of deferred tax assets (25,464) 21,901
Net deferred tax liabilities 30,851 -
Deferred tax assets
Employee benefits provision 802 645
Inventories 1,256 1,980
Other payables and accruals 714 327
Rehabilitation, restoration and dismantling provision 6,496 6,796
Share issue costs reflected in equity 305 741
Revenue losses available for offset against future taxable income 14,825 10,957
Unused tax credits 1,010 495
Unrealised metal and price adjustments - 2,856
Other 56 43
Gross deferred tax assets 25,464 24,840
Set-off of deferred tax assets (25,464) (21,901)
Net deferred tax assets - 2,939
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Unrecognised temporary differences and capital losses

The Company has temporary differences and capital losses for which no deferred tax asset is recognised in the statement of financial position of $1,181,000 (2013: $1,123,000) that have not been recognised as the statutory requirements for recognising those deferred tax assets have not been met.

The current tax liability on taxable income has been reduced to $nil for the year ended 30 June 2014 as it has been offset in full against carry forward losses from prior periods that were previously brought to account as deferred tax assets.

10 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:

	2014 $000 2013 $000
Net proft attributable to ordinary equity holders	78,158 87,998

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2014 2013
Number Number
10 earNiNgs Per sHare (continued)
Weighted average number of ordinary shares for basic earnings per share 155,640,968 153,081,977
Effect of dilution:
Share options 201,875 266,136
Weighted average number of ordinary shares adjusted for the effect of dilution 155,842,843 153,348,113
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There are 7,005,000 share options (refer to Note 21) excluded from the calculation of diluted earnings per share that could potentially dilute basic earnings per share in the future because they are anti-dilutive for the current period. There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these financial statements.

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2014 2013
Note $000 $000
11 casH aND casH eQuivaLeNts
Cash at bank and on hand 46,190 7,070
Debt service reserve account (i) 11,400 50,000
Cost overrun account - 20,000
57,590 77,070
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(i) Under the terms and conditions of the Group’s DeGrussa Project Loan Facility (see Note 19), the Group must maintain a cash debt service reserve amount equal to or greater than the next quarter’s scheduled amortisation payment and projected interest payment.

12 traDe aND otHer receivaBLes

12 traDe aND otHer receivaBLes
current
Trade receivables	11,870	6,151
Other receivables	2,661	2,340
	14,531	8,491
Non-current
Security and environmental bonds	174	84

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 25 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.

13 iNveNtories

13 iNveNtories
current
Concentrate – at cost	18,067	14,566
Ore stockpiles – at cost	12,575	18,930
Stores and consumables – at cost	6,545	5,011
	37,187	38,507
Allowance for obsolete stock – stores and consumables	(686)	(209)
	36,501	38,298
Non-current
Oxide copper ore stockpiles – at cost	11,698	11,698

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14 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:

	Development		rehabilitation,
Mine	phase	Production	restoration and
development	stripping	stripping	dismantling	total
$000	$000	$000	$000	$000
2014 Opening carrying amount 172,710 Additions 77,880 Disposals - Amortisation (59,626) Infation and discount rate adjustments -	- - - - -	- - - - -	5,042 - - (654) (458)	177,752 77,880 - (60,280) (458)
Closing carrying amount 190,964	-	-	3,930	194,894
at 30 June 2014 Cost 282,400 Accumulated amortisation (91,436)	60,438 (60,438)	12,375 (12,375)	5,315 (1,385)	360,528 (165,634)
Net carrying amount 190,964	-	-	3,930	194,894

		Development		rehabilitation,
	Mine	phase	Production	restoration and
	development	stripping	stripping	dismantling	total
	$000	$000	$000	$000	$000
2013
Opening carrying amount	106,172	39,669	12,375	5,454	163,670
Additions	104,937	17,620	-	320	122,877
Disposals	-	-	-	-	-
Amortisation	(31,809)	(57,289)	(12,375)	(732)	(102,205)
Transfers to property, plant and equipment (Note 15)	(6,590)	-	-	-	(6,590)
Closing carrying amount	172,710	-	-	5,042	177,752
at 30 June 2013
Cost	204,519	60,438	12,375	5,774	283,106
Accumulated amortisation	(31,809)	(60,438)	(12,375)	(732)	(105,354)
Net carrying amount	172,710	-	-	5,042	177,752

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15 ProPerty, PLaNt aND eQuiPMeNt

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

				rehabilitation,
Plant and	Motor	Leased	assets under	restoration and
equipment	vehicles	equipment	construction	dismantling	total
$000	$000	$000	$000	$000	$000
2014 Opening carrying amount 223,353 Additions 1,440 Disposals (14) Transfers 10,298 Depreciation (31,797) Infation and discount rate adjustments -	42 - - 388 (172) -	2,878 - - 5 (900) -	4,678 15,776 - (10,691) - -	14,973 - - - (1,948) (1,287)	245,924 17,216 (14) - (34,817) (1,287)
Closing carrying amount 203,280	258	1,983	9,763	11,738	227,022
at 30 June 2014 Cost 261,291 Accumulated depreciation (58,011)	1,250 (992)	4,198 (2,215)	9,763 -	15,092 (3,354)	291,594 (64,572)
Net carrying amount 203,280	258	1,983	9,763	11,738	227,022

					rehabilitation,
	Plant and	Motor	Leased	assets under	restoration and
	equipment	vehicles	equipment	construction	dismantling	total
	$000	$000	$000	$000	$000	$000
2013
Opening carrying amount	2,548	513	2,193	187,504	9,474	202,232
Additions	256	74	1,467	52,193	6,906	60,896
Disposals	-	-	-	-	-	-
Transfers from mine properties (Note 14)	6,324	266	-	-	-	6,590
Transfers	235,561	(589)	47	(235,019)	-	-
Depreciation	(21,336)	(222)	(829)	-	(1,407)	(23,794)
Closing carrying amount	223,353	42	2,878	4,678	14,973	245,924
at 30 June 2014
Cost	246,622	1,227	4,197	4,678	16,380	273,104
Accumulated depreciation	(23,269)	(1,185)	(1,319)	-	(1,407)	(27,180)
Net carrying amount	223,353	42	2,878	4,678	14,973	245,924

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2014 2013
Note $000 $000
16 iNvestMeNts accouNteD For usiNg
tHe eQuity MetHoD
investment in associates - WcB resources Ltd (i)
Opening carrying amount - -
Acquisition at cost 5,891 -
closing carrying amount 5,891 -
investment in associates - White star resources Ltd (ii)
Opening carrying amount - 1,189
Share of losses after income tax - (1,106)
Impairment - (83)
closing carrying amount - -
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(i) WCB Resources Limited

The Group acquired a 38.38% interest in junior explorer WCB Resources Ltd (TSX-V: WCB), a Toronto listed copper-gold explorer, on 7 April 2014. The Group was issued 22,222,222 shares for a total cost of AU$5,891,000 as part of a private share placement. In addition, the Group was issued with 11,111,111 warrants with an exercise price of CA$0.40 per share expiring 7 October 2015 and 11,111,111 warrants with an exercise price of CA$0.60 per share expiring 7 April 2017. Each warrant entitles the holder to acquire one additional common share of the Company.

The share price of WCB as at 30 June 2014 was CA$0.28. The Group accounts for the investment in WCB using the equity method of accounting.

The Group did not recognise any adjustment with respect to the equity method of accounting during the current financial year as the Group’s share of WCB’s change in net assets for the period from acquisition date to financial year end was not considered material.

At the date of this report, WCB has not completed its full year financial statements for the period ended 30 June 2014 and therefore summarised financial information on WCB at 30 June 2014 is not included in these financial statements. The following information is based on the WCB’s interim financial statements for the nine months ended 31 March 2014, which are WCB’s latest public issued and available financial statements:

*in CAD$000*	assets	Liabilities	revenue	Net loss after tax
WCB Resources Ltd	4,110	918	1	(680)

(ii) White Star Resources Limited

The Group disposed of its 17.4% interest in junior explorer White Star Resources Ltd (ASX: WSR) during April 2014. The net sale proceeds of $452,000 have been recognised as a reversal of impairment losses in the statement of comprehensive income.

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2014 2013
$000 $000
17 eXPLoratioN aND evaLuatioN assets
Exploration assets 3,148 -
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Exploration assets represent acquisition of a 35% interest in the Thaduna/Green Dragon Copper Project (Project), acquired from Ventnor Resources Ltd during October 2013.

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2014 2013
Note $000 $000
18 traDe aND otHer PayaBLes
current
Trade payables and accruals 43,119 43,276
Other payables 71 31
Interest payable - 87
Related party payables – cash-settled share-based payments 24 686 207
Related party payables – KMP related entities 23 1,483 331
45,359 43,932
Non-current
Related party payables – cash-settled share-based payments 24 763 553
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Terms and conditions of the above financial liabilities:

Trade and other payables and accruals are non-interest bearing and are normally settled on 60-day terms.
For terms and conditions relating to cash-settled share-based payments, refer to Note 24.
For terms and conditions relating KMP related entities, refer to Note 23.
For explanations on the Group’s credit risk management processes, refer to Note 25.

19 iNterest-BeariNg LiaBiLities
current interest-bearing loans and borrowings
Obligations under fnance leases and hire purchase contracts	966 1,024
Insurance premium funding	1,594 1,133
Secured bank loan
DeGrussa Project Loan Facility	(i) 75,000 165,000
Capitalised fnance establishment costs (net of amortisation) offset against Project Loan Facility	(1,581) (3,251)
Total current interest-bearing loans and borrowings	75,979 163,906
Non-current interest-bearing loans and borrowings
Obligations under fnance leases and hire purchase contracts	1,407 1,906
Secured bank loan
DeGrussa Project Loan Facility	(i) 85,000 120,000
Capitalised fnance establishment costs (net of amortisation) offset against Project Loan Facility	(1,791) (2,364)
Total non-current interest-bearing loans and borrowings	84,616 119,542
(i) Finance facilities
The Group had access to the following facilities at reporting date:
DeGrussa Project Loan Facility	160,000 285,000
Working Capital Facility	50,000 -
Bond Facility	10,000 10,000
	220,000 295,000
Facilities utilised at reporting date:
DeGrussa Project Loan Facility	160,000 285,000
Working Capital Facility	- -
Bond Facility	4,035 4,145
	164,035 289,145
Facilities not utilised at reporting date:
DeGrussa Project Loan Facility	- -
Working Capital Facility	50,000 -
Bond Facility	5,965 5,855
	55,965 5,855

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19 iNterest BeariNg LiaBiLities (continued)

Finance facilities

DeGrussa Project Loan Facility

The Group reached agreement to restructure its banking arrangements with ANZ Banking Corporation (ANZ) to become its sole financier, replacing the previous syndicate.

The Group’s financing arrangements are provided under a secured loan facility with ANZ 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 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 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 Department for environmental restoration and property managers for security deposits and does not involve the provision of funds.

Working Capital Facility

The Company has also secured a new $50 million working capital facility with ANZ which can be drawn down up to the value of saleable copper concentrate inventories held by the Company at the mine and ports. This facility is designed to reduce the potential cash flow impact of timing of concentrate shipments and cash receipts. This new facility, which follows usual financing conditions, terms and pricing, was undrawn at 30 June 2014 and at the date of this report.

interest rate and liquidity risk

Information regarding interest rate and liquidity risk exposure is set out in Note 25.

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2014 2013
$000 $000
20 ProvisioNs
current
Employee benefits 2,672 2,151
Non-current
Rehabilitation, restoration and dismantling 21,654 22,654
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Movement in provisions

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

		rehabilitation,
		restoration
	employee	and
	benefts	dismantling	total
	$000	$000	$000
At 1 July 2013	2,151	22,654	24,805
Arising during the year	3,449	-	3,449
Utilised	(2,928)	-	(2,928)
Unwinding of discount	-	746	746
Infation and discount rate adjustments	-	(1,746)	(1,746)
At 30 June 2014	2,672	21,654	24,326

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nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

	2014 $000	2013 $000
21 issueD caPitaL aND reserves
Ordinary and paid up capital	219,391	219,391
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.

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2014 2013
Number Number
Movement in ordinary shares on issue
On issue at 1 July 155,640,968 151,237,635
Conversion of options to shares - 4,403,333
On issue at 30 June 155,640,968 155,640,968
Posco australia Pty Ltd (Posa)
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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

		exercise	on issue			on issue
options expiring on or before	Note	Price	30 Jun 13	issued	exercised	30 Jun 14
27 November 2014	(i)	$4.66	310,000	-	-	310,000
27 November 2014	(i)	$5.44	310,000	-	-	310,000
27 November 2014		$6.22	310,000	-	-	310,000
15 June 2015	(i)	$3.80	33,333	-	-	33,333
15 June 2015	(i)	$4.40	133,333	-	-	133,333
15 June 2015	(i)	$5.00	333,335	-	-	333,335
28 February 2016		$9.00	1,749,995	-	-	1,749,995
28 February 2016		$10.30	1,666,665	-	-	1,666,665
28 February 2016		$11.70	1,583,340	-	-	1,583,340
15 July 2018	(ii)	$7.60	-	565,000	-	565,000
15 July 2018	(ii)	$8.80	-	565,000	-	565,000
15 July 2018	(ii)	$10.00	-	565,000	-	565,000
			6,430,001	1,695,000	-	8,125,001

(i) The options are considered to be dilutive for the purposes of calculating the Group’s diluted earnings per share. Refer to Note 10 for details.

(ii) The options were issued to senior employees and officers of the Group. Refer to Note 24 for details.

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21 issueD caPitaL aND reserves (continued)

capital management

The primary objective of the Group’s capital management is to maximise shareholder value. In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the Company’s interest-bearing loans and borrowings (see Note 19) and maintain a strong liquidity position in order to support its business. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

The Group is not subject to externally imposed capital requirements other than restrictions relating to the Group’s cash debt service reserve account as part of the Group’s Project Loan Facility. See Note 11 and 19 for more details.

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. No changes were made in the objectives, policies and processes for managing capital, during the years 30 June 2014 and 2013.

Nature and purpose of reserves

The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration (refer Note 24 for details of the plans).

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2014 2013
Note $000 $000
22 casH FLoW stateMeNt recoNciLiatioN
Cash and cash equivalents in the statement of cash flows 11 57,590 77,070
reconciliation of cash flows from operating activities
Profit for the period 78,158 87,998
Adjusted for:
Loss on sale of assets 14 -
Depreciation and amortisation included in statement of comprehensive income 97,340 125,849
Capitalised interest revenue - 1,013
Interest and other costs of finance paid 13,096 16,709
Share based payments (credit) expense 2,683 (1,148)
Unrealised price adjustments and FX adjustments (13,208) 9,519
Income tax expense (benefit) 33,790 37,670
Other non cash items 230 3,992
operating loss before changes in working capital and provisions 212,103 281,602
Change in assets and liabilities:
Decrease (increase) in trade and other receivables 7,117 (12,653)
Decrease (increase) in inventories 1,797 (36,446)
Increase in trade and other payables 1,035 15,712
Increase in interest bearing liabilities 462 503
Increase in provisions 521 1,512
Net cash inflow from operating activities 223,035 250,230
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23 reLateD Party DiscLosures

The ultimate parent entity within the Group is Sandfire Resources NL.

subsidiaries

The parent entity’s interest in subsidiaries is set out in Note 4 to the consolidated financial statements.

associates

Information in relation to investments in associates is set out in Note 16 of the consolidated financial statements.

Joint arrangements

As at 30 June 2014, the Group did not have an interest in a joint venture or joint operation that met the definition of a joint arrangement under AASB 11.

transactions with related parties other than KMP

There were no transactions with related parties other than KMP during the current or previous financial year.

compensation of key management personnel of the group

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2014 2013
$ $
Short-term employee benefits 3,679,880 3,574,495
Post-employment benefits 119,249 101,686
Share-based payments 1,888,809 (1,018,609)
Total compensation 5,687,938 2,657,572
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The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

transactions with KMP

A number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence 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.

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:

			transactions value	transactions value	Balance outstanding
			year ended 30 June		as at 30 June
			2014	2013	2014	2013
KMP and their related entity	transaction	Note	$	$	$	$
Karl simich –Tongaat Pty Ltd	Lease of corporate offce		12,600	12,600	-	-
	parking premises
Karl simich –Resource Development	Lease of corporate offce		12,600	12,600	-	-
Company Pty Ltd	parking premises
Karl simich –Resource Development	Corporate and fnancial		622,630	567,476	40,012	-
Company Pty Ltd	services
soocheol shin –Posco Australia Pty	Commercial agreement	26	5,383,683	-	1,442,804	-
Ltd (POSA)
			6,031,513	592,676	1,482,816	-

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23 reLateD Party DiscLosures (continued)

interests held by Key Management Personnel under the senior executive Plan

Share options held by key management personnel under the Long-term Incentive Option Plan (IOP) to purchase ordinary shares have the following expiry dates and exercise prices:

issued date	expiry date	exercise price	2014	2013
Financial year			Number	Number
ended 30 June			outstanding	outstanding
2009	2014	$4.66	310,000	310,000
2009	2014	$5.44	310,000	310,000
2009	2014	$6.22	310,000	310,000
2010	2015	$3.80	-	33,333
2010	2015	$4.40	-	133,333
2010	2015	$5.00	133,334	266,668
2011, 2013	2016	$9.00	599,999	716,665
2011, 2013	2016	$10.30	516,667	633,334
2011, 2013	2016	$11.70	433,334	550,001
2014	2018	$7.60	340,000	-
2014	2018	$8.80	340,000	-
2014	2018	$10.00	340,000	-
total			3,633,334	3,263,334

Refer to Note 24 for further details on the IOP.

24 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:

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2014 2013
Note $000 $000
Equity-settled employee share-based payments 24(a) 1,819 317
Equity-settled consultant share-based payments 24(a) 176 642
Cash-settled employee share-based payments 24(b) 688 (1,019)
Total arising from share-based payments 2,683 (60)
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(a) equity-settled 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 for no consideration. Each option carries the right to subscribe for one fully paid ordinary share in Sandfire Resources NL and awards under the plan are made to employees and other key talent who have an impact on the Group’s performance.

Options issued under the plan are premium-priced and therefore provide a strong incentive for employees and other key talent to increase shareholder wealth.

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

Further information on the key terms and conditions of the plan are outlined in the Remuneration Report.

Listed below are the terms and conditions of issues made by the Group during the current financial year.

			service based
grant date	Number	exerciseprice	vesting condition	contractual life
Option grant on 14 Oct 2013, expiring 15 Jul 2018	565,000	$7.60	30 Sep 2014	4.5 years
	565,000	$8.80	30 Sep 2015	4.5 years
	565,000	$10.00	30 Sep 2016	4.5 years

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24 sHare BaseD PayMeNts (continued)

(a) equity-settled share-based payments (continued)

Option pricing model

The fair value of options issued is 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 table lists the assumptions used in determining the fair value of options granted during the current and previous financial year.

	14 october 2013
30 June 2013	employee and consultant grant
Fair value at grant date	$1.08 $1.17 $1.28
Option exercise price	$7.60 $8.80 $10.00
Grant date	14 Oct 13 14 Oct 13 14 Oct 13
Dividend yield	0.00% 0.00% 0.00%
Expected volatility	40.00% 40.00% 40.00%
Risk-free interest rate	2.76% 3.00% 3.20%
Expected life	2 years 3 years 4 years
Share price on date of grant	$6.30 $6.30 $6.30

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

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 during the year

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:

	2014	2014	2013	2013
	Number	WaeP	Number	WaeP
Outstanding at 1 July	6,430,001	$9.16	9,583,334	$5.40
Granted during the year	1,695,000	$8.80	1,250,000	$10.15
Exercised during the yearA	-	-	(4,403,333)	$1.26
Outstanding at 30 JuneB	8,125,001	$9.08	6,430,001	$9.16
Exercisable at 30 June	6,180,001	$9.05	4,846,661	$8.33

A The weighted average share price at the date of exercise is $nil (2013: $7.54).

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24 sHare-BaseD PayMeNts (continued)

(a) equity-settled share-based payments (continued)

B The outstanding balance at 30 June 2014 is represented by:

		on issue
options expiring on or before	exercise Price	30 Jun 14
27 November 2014	$4.66	310,000
27 November 2014	$5.44	310,000
27 November 2014	$6.22	310,000
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
15 July 2018	$7.60	565,000
15 July 2018	$8.80	565,000
15 July 2018	$10.00	565,000
		8,125,001

The weighted average remaining contractual life for share options outstanding as at 30 June 2014 is 1.97 years (2013: 2.43 years).

The weighted average fair value of options granted during the year was $1.18 (2013: $0.77).

The range of exercise prices for options outstanding at the end of the year was $3.80 - $11.70 (2013: $3.80 - $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.

(b) cash-settled share-based payments

Long-term Indexed Bonus Plan

For Executive Directors, long-term incentives in the form of rights are provided through the Long-term Indexed Bonus Plan (LT plan).

Rights issued under the LT plan are long term in nature, granted in three equal tranches and are premium-priced and therefore provide a strong incentive for Executive Directors to increase shareholder wealth.

The Company sets an initial indexed notional value (INV) for rights issued under the LT 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.

Further information on the key terms and conditions of the plan are outlined in the Remuneration Report. Listed below are the terms and conditions of issues made by the Group during the current financial year.

grant date				Number	indexed notional value	initial vesting date	test dates	contractual life
Rights grant on	14	Oct	2013	200,000	$7.60	15 Jun 2015	15 Jun and 15 Dec	4.5 years
							from 2015 to 2018
				200,000	$8.80	15 Jun 2016	15 Jun and 15 Dec from 2016 to 2018	4.5 years
							15 Jun and 15 Dec
				200,000	$10.00	15 Jun 2017	from 2017 to 2018	4.5 years

Pricing model

The ultimate cost of the rights, representing the fair value at settlement date, will be equal to the cash paid to the participants or, subject to any shareholder approval required under the Corporations Act 2011 and the ASX Listing Rules, the value of ordinary Company shares issued.

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24 sHare-BaseD PayMeNts (continued)

(b) cash-settled 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 following table lists the assumptions used in determining the fair value of the rights outstanding as at 30 June 2014.

		grant 14 oct 2013	grant 14 oct 2013
	tranche 1	tranche 2	tranche 3
Fair value at reporting date	$0.56 - $1.89	$0.75 - $1.60	$0.89 - $1.36
Notional value	$7.60	$8.80	$10.00
Dividend yield	0.00%	0.00%	0.00%
Expected volatility	40.00%	40.00%	40.00%
Risk-free interest rate	2.54 – 2.91	2.54 – 2.91	2.69 – 2.91
Expected life (years)	1.0 – 4.5	2.0 – 4.5	3.0 – 4.5
Share price at reporting date	$6.22	$6.22	$6.22

		grant 8 aug 2011		grant 2 Jul	2010 (modifed 8	aug 2011)
	tranche 1	tranche 2	tranche 3	tranche 1	tranche 2	tranche 3
Fair value at reporting date	$0.09 - $0.89	$0.03 - $0.67	$0.09 - $0.50	$0.19 - $0.70	$0.19 - $0.70	$0.71 - $1.29
Notional value or test price	$9.00	$10.30	$11.70	$8.04	$8.04	$6.21
Dividend yield	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Expected volatility	40.00%	40.00%	40.00%	40.00%	40.00%	40.00%
Risk-free interest rate	2.54 - 2.71%	2.54 - 2.71%	2.54 - 2.60%	2.60 – 2.71%	2.60 – 2.71%	2.60 – 2.71%
Expected life (years)	0.5 – 2.5	0.5 – 2.5	1.0 – 2.5	0.5 – 1.5	0.5 – 1.5	0.5 – 1.5
Share price at reporting date	$6.22	$6.22	$6.22	$6.22	$6.22	$6.22

Movements during the year

The following table illustrates the number and weighted average prices (WAP) of, and movements in, rights during the year:

	2014	2014	2013	2013
	Number	WaP	Number	WaeP
Outstanding at 1 July	2,300,000	$9.32	2,600,000	$8.94
Granted during the year	600,000	$8.80	-	-
Outstanding at 30 JuneB	2,900,000	$9.21	2,600,000	$9.32

A The weighted average price of rights represents the INV or test price as relevant.

[ 1 1 6 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

24 sHare-BaseD PayMeNts (continued)

(b) cash-settled share-based payments (continued)

B The outstanding balance at 30 June 2014 is represented by:

	iNv/test	on issue
rights expiring on	Price	30 Jun 14
15 December 2015	$8.04	266,667
15 December 2015	$8.04	266,667
15 December 2015	$6.21	266,666
15 December 2016	$9.00	500,000
15 December 2016	$10.30	500,000
15 December 2016	$11.70	500,000
15 December 2018	$7.60	200,000
15 December 2018	$8.80	200,000
15 December 2018	$10.00	200,000
		2,900,000

In accordance with the terms and conditions of the plan, the Company paid $nil (2013: $1,090,000) in cash-settled awards for the year ended 30 June 2014, representing vesting of long-term rights. The Company also recognised an expense of $689,000 (2013: credit $2,108,000) during the current financial year relating to the valuation of the long term rights in accordance with AASB 2.

25 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 also holds available-for-sale investments.

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 activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group’s policies and risk objectives.

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 2014, 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 risk for the Group comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity price risk. Financial instruments affected by market risk include loans and borrowings, trade receivables, cash and short-term deposits and available-for-sale investments.

The sensitivity analysis in the following sections relate to the position as at 30 June 2014 and 2013.

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 shortterm deposits.

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nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

25 FiNaNciaL risK MaNageMeNt oBJectives aND PoLicies (continued)

At 30 June 2014 the interest rate profile of the Group’s interest-bearing financial instruments was:

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
Financial assets Cash and cash equivalents 2.85 57,590 Financial liabilities Interest bearing liabilities 4.77 160,000
	- - - 57,590

	2,560 1,407 - 163,967

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

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
Financial assets Cash and cash equivalents 3.04 77,070 Financial liabilities Interest bearing liabilities 5.90 285,000	- - - 77,070 2,157 1,906 - 289,063

The following table demonstrates the sensitivity to a reasonably possible change in interest rates. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings and cash and short-term deposits, as follows:

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effect on profit before tax
2014 2013
$000 $000
0.25% increase (2013: 0.25% increase) (256) (520)
0.25% decrease (2013: 0.50% decrease) 251 1,004
----- End of picture text -----

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 of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group is exposed to foreign currency exchange risk that arises from the sale of metal concentrate products denominated in US dollars.

As at 30 June 2014, the Group did not use any form of derivatives to hedge its exposure to foreign currency risk.

The following tables demonstrate the sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant.

==> picture [455 x 64] intentionally omitted <==

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

effect on profit before tax
2014 2013
$000 $000
10% increase (2013: 10% increase) (1,086) (412)
10% decrease (2013: 10% decrease) 1,195 454
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The impact on the Group’s profit 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 concentrate sales made by its DeGrussa Copper Mine that arises from sale of metal in concentrate products such as copper and gold, which are priced on, or benchmarked to, open market exchanges. As at 30 June 2014 and 30 June 2013, the Group did not use any form of derivatives to hedge its exposure to commodity price risk.

[ 1 1 8 ] s a n d f i r e a n n u a l r e p o r t 2 0 1 4

25 FiNaNciaL risK MaNageMeNt oBJectives aND PoLicies (continued)

The Group’s trade receivables are carried at fair value using a Level two valuation method as stipulated by AASB 13 Fair value measurement which involves observable market prices for commodities, adjusted for terms as per sales contracts.

The following table demonstrates the sensitivity to a reasonably possible change in commodity prices from the 30 June 2014 LME (London Metals Exchange) forward curve, with all other variables held constant.

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

effect on profit before tax
2014 2013
$000 $000
10% increase (2013: 10% increase) 8,720 7,792
10% decrease (2013: 10% decrease) (8,714) (7,792)
----- End of picture text -----

The impact on the Group’s profit before tax is due to changes in fair value of provisionally priced sales contracts outstanding at year end totaling $82,007,000 (2013: $91,767,000). The sensitivity analysis 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 60-120 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 is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities.

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.

The following table lists the contractual maturities of the Group’s financial liabilities as at 30 June 2014. The contractual cash flows reflect the undiscounted amounts and include both interest and principal cash flows.

		Within 6 months	12 months	1 to 5 years	total
	Note	$000	$000	$000	$000
year ended 30 June 2014
Trade and other payables	18	44,673	-	-	44,673
DeGrussa Project Loan Facility	19	30,595	46,963	90,772	168,330
Other interest bearing liabilities	19	1,893	754	1,534	4,181
		77,161	47,717	92,306	217,184
year ended 30 June 2013
Trade and other payables	18	43,674	51	-	43,725
DeGrussa Project Loan Facility	19	92,354	84,594	124,842	301,790
Other interest bearing liabilities	19	1,675	677	2,044	4,396
		137,703	85,322	126,886	349,911

The Group also has access to a number of finance facilities, as detailed below. Refer to Note 19 for more details on the Group’s finance arrangements.

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 1 1 9 ]

nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

25 FiNaNciaL risK MaNageMeNt oBJectives aND PoLicies (continued)

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

2014 2013
$000 $000
The Group had access to the following facilities at reporting date:
DeGrussa Project Loan Facility 160,000 285,000
Working Capital Facility 50,000 -
Bond Facility 10,000 10,000
220,000 295,000
Facilities utilised at reporting date:
DeGrussa Project Loan Facility 160,000 285,000
Working Capital Facility - -
Bond Facility 4,035 4,145
164,035 289,145
Facilities not utilised at reporting date:
DeGrussa Project Loan Facility - -
Working Capital Facility 50,000 -
Bond Facility 5,965 5,855
55,965 5,855
----- End of picture text -----

26 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.

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 2014.

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:

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

2014 2013
$000 $000
Within one year 735 759
After one year but not more than five years 1,991 2,811
Total minimum lease payments 2,726 3,570
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26 coNtiNgeNt LiaBiLities aND coMMitMeNts (continued)

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 $1,983,000 (2013: $2,878,000). These lease contracts expire within 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:

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

2014 2013
Note $000 $000
Within one year 1,052 1,186
After one year but not more than five years 1,534 2,044
Total minimum lease payments 2,586 3,230
Less amounts representing finance charges (213) (300)
Present value of minimum lease payments 2,373 2,930
Included in the financial statements as:
Current interest bearing liabilities 19 966 1,024
Non-current interest bearing liabilities 19 1,407 1,906
Total included in interest-bearing liabilities 2,373 2,930
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contractual commitments

Posco Australia Pty Ltd (POSA)

As at 30 June 2014, POSA’s remaining contractual entitlement to the 7.5% discount was $2,116,000.

Other 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 2014 amount to approximately $28,941,000 (undiscounted).

27 Fair vaLue MeasureMeNt

The carrying amount of all financial assets and all financial liabilities, except for the Group’s secured bank loan, recognised in the Balance Sheet approximates their fair value. The fair value of the Group’s secured bank loan is represented by the face value of the liability, prior to capitalised finance establishment costs. Refer to Note 19 for more details.

Fair value hierarchy

The Group uses various methods in estimating the fair value of financial instruments. The methods comprise:

Level 1 – Fair value is calculated using quoted market prices in an active market (that are unadjusted) for identical assets or liabilities.
Level 2 – Fair value is estimated using inputs other than quoted market prices included in Level 1 that are observable for the financial asset or financial liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – Fair value is estimated using inputs for the financial asset or financial liability that are not based on observable market data.

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

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nOTes TO THe COnsOLidaTed finanCiaL sTaTeMenTs

27 Fair vaLue MeasureMeNt (continued)

The fair value of the financial instruments as at 30 June 2014, as well as the method used to calculate/estimate the fair value are summarised in the table below:

		Level 1	Level 2	Level 3	total
	Note	$’000	$’000	$’000	$000
Financial assets measured at fair value
Available-for-sale investments – listed equity securities		248	-	-	248
Trade receivables	(i)	-	11,870	-	11,882
		248	11,870	-	12,130

(i) Trade receivables includes the embedded derivative for concentrate sale contracts that are still subject to price adjustments where the final consideration to be received will be determined based on prevailing London Metals Exchange (LME) metal prices at the final settlement

date. The embedded derivative for sales that are still subject to price adjustments at balance date is fair valued by estimating the final settlement price using the LME forward metals prices at balance date. The receivable represents the expected proceeds to be received, determined using the prevailing forward metal prices at reporting date.

There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements, during the year ended 30 June 2014.

The fair value of the financial instruments as at 30 June 2013, as well as the method used to calculate/estimate the fair value are summarised in the table below:

summarised in the table below:
	Level 1	Level 2	Level 3	total
	$’000	$’000	$’000	$000
Financial assets measured at fair value
Available-for-sale investments – listed equity securities	183	-	-	183
Trade receivables	-	6,151	-	6,151
	183	6,151	-	6,334

28 eveNts aFter tHe BaLaNce sHeet Date

Dividends

investment in tintina resources inc

Tintina has also granted Sandfire the right to appoint two representatives to the Tintina Board, including an appointment to fulfill the role of President and Chief Executive Officer.

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29 auDitor’s reMuNeratioN

The auditor of Sandfire Resources NL is Ernst & Young.

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

2014 2013
$ $
amounts received or due and receivable by ernst & young (australia) for:
An audit and review of the financial report of the entity and any other entity in the consolidated group 277,851 271,800
Other services in relation to the entity and any other entity in the consolidated group:
Taxation services 29,446 24,741
Other advisory services 38,110 -
345,407 296,541
----- End of picture text -----

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DIrECTOrS’ DECLArATION FOr ThE YEAr ended 30 June 2014

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

In the opinion of the Directors:
a) the financial statements and notes of Sandfire Resources NL for the financial year ended 30 June 2014 are in accordance with the Corporations Act 2001 , including:
- (ii) Giving a true and fair view of its financial position as at 30 June 2014 and of its performance for the year ended on that date; and
- (ii) complying with Accounting Standards and the Corporations Regulations 2001 ;
b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2(a); and
c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
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 2014.

On behalf of the Board

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==> picture [171 x 42] intentionally omitted <==

Derek La Ferla Non-executive Chairman

Karl M. Simich Managing Director and Chief Executive Officer

West Perth, 28 August 2014

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INDEpENDENT AuDITOr’S rEpOrT FOr ThE YEAr ended 30 June 2014

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INDEpENDENT AuDITOr’S rEpOrT FOr ThE YEAr ended 30 June 2014

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a SX a d d i t i o n a l inFo rM at i o n

capital

Share capital comprised 155,640,968 fully paid ordinary shares on 10 September 2014.

shareholder details

At 10 September 2014 the Company had 3,318 holders of ordinary fully paid shares.

Distribution of equity security holders at 10 september 2014

ranges	Number of investors	Number of shares	issued capital (%)
1 – 1,000	1,575	641,431	0.41
1,001 – 5,000	1,139	2,832,150	1.82
5,001 – 10,000	268	2,037,267	1.31
10,001 – 100,000	287	7,894,241	5.07
100,001 – and over	49	142,235,879	91.39

The number of ordinary fully paid shareholders holding less than a marketable parcel at 10 September 2014 was 407.

ordinary fully paid shareholders – top 20 investors at 10 september 2014

Holder Name	Number of shares	(%)
OZ Minerals Investments Pty Ltd	29,915,090	19.22
J P Morgan Nom Aust	28,531,006	18.33
POSCO Australia Pty Ltd	23,756,338	15.26
National Nominees Ltd	17,154,475	11.02
HSBC Custody Nominees Australia Ltd	15,978,233	10.27
Citicorp Nominees Pty Ltd	4,651,174	2.99
Tongaat Pty Ltd	2,409,984	1.55
BNP Paribas Nominees Pty Ltd	2,318,051	1.49
AMP Life Ltd	1,780,122	1.14
Resource Development Company Pty Ltd	1,586,786	1.02
HSBC Custody Nominees Australia Ltd	1,575,484	1.01
Kape Securities Pty Ltd	1,554,750	1.00
UBS Nominees Pty Ltd	1,498,974	0.96
UBS Wealth Management Australia Nominees Pty Ltd	902,651	0.58
Citicorp Nominees Pty Ltd	727,543	0.47
Zero Nominees Pty Ltd	669,000	0.43
Mr William John Evans and Mrs Carolina Maria Theresia Evans	665,215	0.43
Mr William John Evans	650,000	0.42
RBC Investor Services Australia Nominees	548,209	0.35
P S Thomas and S A Goodwin	445,051	0.29
total	137,318,136	88.23

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asX addiTiOnaL infOrMaTiOn (continued)

substantial shareholders of sandfire resources NL

POSCO Australia Pty Ltd advised that as at 14 March 2013, it and its associates had an interest in 23,756,338 shares, which represented 15.46% of Sandfire capital at that time.

OZ Minerals Ltd advised that as at 2 February 2011, it and its associates had an interest in 28,021,018 shares, which represented 18.89% of Sandfire capital at that time.

voting rights

The voting rights to security holders of the Company are set out in the Company’s Constitution and, in summary, each member has one vote for each fully paid share held by the member in the Company. Holders of options do not have voting rights.

unquoted options on issue at 10 september 2014

expiry Date	exercise Price	Number	Holders
27 November 2014	$4.66	310,000	2
27 November 2014	$5.44	310,000	2
27 November 2014	$6.22	310,000	2
15 June 2015	$3.80	33,333	1
15 June 2015	$4.40	133,333	1
15 June 2015	$5.00	333,335	3
28 February 2016	$9.00	1,749,995	14
28 February 2016	$10.30	1,666,665	14
28 February 2016	$11.70	1,583,340	14
15 July 2018	$7.60	565,000	8
15 July 2018	$8.80	565,000	8
15 July 2018	$10.00	565,000	8

on-market buy back

The Company does not have a current buy-back plan.

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imp o rta n t info rm at i o n a nd d iscl a imer

COMPETENT PERSON’S STATEMENT – MINERAL RESOURCES

The information in this report that relates to Mineral Resources 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 – EXPLORATION RESULTS

The information in this report that relates to Exploration Results is based on information compiled by Mr. Shannan Bamforth who is a Member of The Australasian Institute of Mining and Metallurgy. Mr. Bamforth 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 Bamforth consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

EXPLORATION AND RESOURCE TARGETS

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

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 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.

s a n d f i r e a n n u a l r e p o r t 2 0 1 4 [ 1 2 9 ]

AI assistant

SANDFIRE RESOURCES LIMITED — Annual Report 2014

65773_rns_2014-10-21_fae66c9d-9127-4b2e-963e-a19a05622d00.pdf

o p p o r t u n i t y r e d e f i n e d

co rp o r at e d irec to ry

DIRECTORS

MANAGEMENT & COMPANY SECRETARY

PRINCIPAL PLACE OF BUSINESS & REGISTERED OFFICE

SHARE REGISTRY

AUDITORS

HOME EXCHANGE

ABN

ASX CODE

co n t en t s

Mr Derek La Ferla

Independent Non-Executive Chairman

Mr Karl Simich

Managing Director and Chief Executive Officer

Mr W John Evans Non-Executive Director

Qualifications B.Sc

Mr Robert Scott

Independent Non-Executive Director

Mr Soocheol Shin

Non-Executive Director

Mr Paul Hallam

Independent Non-Executive Director

s enI o r m a n ag emen t

Mr Michael Spreadborough Chief Operating Officer

Mr Matthew Fitzgerald Chief Financial Officer and Joint Company Secretary Qualifications B.Com, CA

Mr Robert Klug Chief Commercial Officer and Joint Company Secretary Qualifications B.Com, LL.B

o u r V IsI o n

H I g H lI g H t s & acHIe V em en t s

OPERatiOnS

ExPLORatiOn

BuSinESS DEVELOPMEnt

CORPORatE anD FinanCiaL

cH a Irm a n ’ s le t t er

Derek La Ferla

m a n ag In g D Irec to r ’ s rep o rt

dear Shareholders

OutLOOK

Karl Simich

o per at I o ns re V Ie W

DOOLGunna PROJECt, WEStERn auStRaLia (100%)

DeGrussa Copper Mine

underground Mining

Processing

OperatiOns review (continued)

Production Guidance

Sales & Marketing

Copper Concentrate

Feasibility Studies

Oxide Copper Feasibility Study

near-mine Exploration

near-mine Extensional Exploration

increase in high-grade Mineral Resource

OperatiOns review (continued)

DeGrussa Mine - Underground Mineral Resource - as at 31 March 2014

as at 31 March 2013

as at 31 March 2013

Ore Reserve and Mine Plan update

DeGrussa Mine - Underground Ore Reserve - as at 31 March 2013

DeGrussa Mine - Open Pit Ore Reserve - as at 31 March 2013

Review of Financial Results

OperatiOns review (continued)

DeGrussa Regional Exploration

Talisman Joint Venture

Thaduna Project Joint Venture

auStRaLian & intERnatiOnaL ExPLORatiOn

auStRaLian ExPLORatiOn

northern territory Borroloola Project

OperatiOns review (continued)

Queensland Projects

new South Wales Projects

alford Project

intERnatiOnaL ExPLORatiOn

investment in WCB Resources

investment in tintina Resources

the Black Butte Copper Project

He a lt H a n D s a Fe t y

SANDFIRE RESOURCES LIMITED Annual Report 2014