STREAMPLAY STUDIO LIMITED — Annual Report 2014

Oct 14, 2014

2014

ANNUAl RePORt ABN 31 004 766 376

COnTEnTS

Chairman’s Report	1
Review of Operations	2
Financial Statements	10
Directors’ Report	11
Auditor’s Independence Declaration	21
Consolidated Statement of Proft or Loss and Other Comprehensive Income	22
Consolidated Statement of Financial Position	23
Consolidated Statement of Cash Flows	24
Consolidated Statement of Changes in Equity	25
Notes to the Financial Statements	26
Directors’ Declaration	64
Independent Auditor’s Report	65
ASX Additional Information	67
Corporate Governance	69

CHAIRMAN'S REPORT

The Company has progressed towards a financing of the Abu Dabbab tantalum‐tin‐feldspar Project during the past year. This progress is evident in the form of Lycopodium Engineering Pty Ltd’s update of the operating and capital cost estimates for the Project, the development of an investment strategy whereby the Company is seeking to attract investment funds linked to provision of the project development funding, and the signing of a non‐binding MoU with a major international smelting company for the toll smelting of tantalum‐tin concentrates planned to be produced at Abu Dabbab.

At the end of the period, introductions and meetings were in progress with a selected group of investors from the MENA region. At the time of this report a major Dubai‐based Investment bank has been mandated to procure the funds to complete the feasibility and commence development work however no term sheet has been agreed with any party at this time.

It is hoped that the involvement of a major international smelting company will assist to reduce the technical risk, particularly during the critical start‐up phase, which will facilitate the financing of the Project and support its success and will also defer significant capital expenditure that was allocated to the construction of the smelter and support infrastructure.

We believe that the existing Off‐take Agreement with the German tantalum major HC Starck GmbH together with projected tin production from the Abu Dabbab Tin‐Tantalum Project will assist us to negotiate a finance package which will contribute toward the long‐term success of the Project.

Significant management and financial resources were devoted to the under‐performing Abu Dabbab alluvial tin mining project during the year, before productivity issues forced the closure of the operation in early September 2014. It is hoped that the experiences gained from this operation will be valuable in planning the operation of the larger scale hard‐rock Abu Dabbab Project.

Once again, the Company acknowledges the high level of support it enjoys from its Egyptian partners. In particular, I wish to acknowledge and thank His Excellency Eng. Sharif Ismaeil, Minister of the Egyptian Ministry of Petroleum and Mineral Resources, Geologist Dr. Omar Toaimeh,, the Chairman of the Egyptian Mineral Resources Authority and Geologist Dr. Mustafa Al Qadi,, the Chairman of the Egyptian Company for Mineral Resources.

The Company would like to thank The Minister of Energy and Mines, Mr Alem Kibreab, Director General, Department of Mines and Mr Mebrahtu Okbazghi, Director of Mineral Resources Management, of the Ministry of Energy and Mines for their high level of support for the Company in The State of Eritrea.

I would like to particularly acknowledge the efforts of Gippsland’s Managing Director, Mike Rosenstreich, who was appointed during the year and has brought to the Company greater focus and direction, Mr Brian Talbot, Project Development Manager, for providing a solid technical operating plan for the completion of the Feasibility Study and the development of the Project, and Mr. Ayman Ayyash our MENA Regional Manager.

I have continued to support the Company financially during the year via the provision of unsecured loans now totalling in excess of $3 million. I have done this based solely on my belief that we will ultimately be successful in financing the Abu Dabbab Project. I trust that you, my fellow shareholders, will continue to be patient and supportive whilst we work very hard to ensure the financing of Abu Dabbab.

Yours sincerely,

Ian Gandel ‐ Chairman

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 1

REVIEW OF OPERATIONS

OVERVIEW

Gippsland’s activities are primarily focussed on the geological terrain known as the Arabian‐Nubian Shield located in the Middle East‐North Africa (MENA) region, which is particularly prospective for tantalum, gold and base metal mineralisation.

The Company’s core asset is a 50% controlling interest in the large scale Abu Dabbab Tantalum‐Tin‐Feldspar Project located in southern Egypt. This is held through its wholly owned subsidiary, Tantalum International Pty Ltd, which in turn owns 50% of the shares in Tantalum Egypt JSC (TE) an Egyptian registered company. The Government of Egypt, through several agencies holds the other 50% of TE.

The Abu Dabbab Licence area also hosts alluvial tin deposits which were being mined by TE through the 2014 financial year and were closed in September 2014.

The Company maintains a small corporate office in Perth, Western Australia and a regional headquarters in Cairo. In June it closed its regional exploration office in Eritrea though maintains its interest in several exploration projects there.

CORPORATE

An investment strategy has been developed whereby the Company is seeking to attract investment funds through divestment of a portion of Gippsland’s 100% owned holding company, linked to provision of the project development funding. At the end of the period, introductions and meetings were in progress with a selected group of investors from the MENA region. At the time of this report a major Dubai based Investment bank has been mandated to procure the funds to complete the feasibility and commence development work however no term sheet has been agreed with any party at this time.

In early April, the Company relocated its head office in Perth to significantly smaller premises and the exploration office in Eritrea was closed. This is part of an overall restructuring and cost saving process to ensure that the Company is focussed solely on the development of the Abu Dabbab Project.

Over the year, the Company borrowed $2,572,000 from Gandel Metals Pty Ltd, a company controlled by the Company’s Chairman, Mr Ian Gandel. At the date of lodgement of this report the outstanding balance is $3,192,000. Gandel Metals Pty Ltd has provided a letter of support to Gippsland in relation to providing further funding during the period to 1 December 2014. The letter of support is conditional on the Company continuing to make positive progress with respect to financing of the Project.

On 24 March, 2014 Mr Mike Rosenstreich was appointed Managing Director of the Company. Also, Mr Brian Talbot was appointed as Development Manager of the Abu Dabbab Project presently based in Egypt. He has been based in Egypt since September 2013 as Operations Manager of the Alluvial Tin Project. Mr Talbot has a strong operational background as a metallurgist and operations manager predominantly through Africa.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

2

REVIEW OF OPERATIONS

ABU DABBAB TANTALUM‐TIN‐FELDSPAR PROJECT (50% INTEREST)

Gippsland provides financial and technical management to the Abu Dabbab Tantalum‐Tin‐Feldspar Project (the Project). It has undertaken several phases of extensive feasibility study work on behalf of TE which is culminating in the finalisation of a Definitive Feasibility Study planned to be completed by mid‐2015.

The base case development scenario involves open pit mining of 2 million tonnes of ore per year which is crushed, screened and stockpiled for processing through a gravity concentrator plant and subsequent cleaning by a 2 stage acid leach and electromagnetic separation. This will produce approximately 2,750 tonnes per year of a primary concentrate grading approximately 10% Ta2O5 and 50% tin. The primary concentrate will be the feedstock to a smelting process to produce tin metal and a tantalum glass grading 20% to 30% Ta2O5. The tantalum glass will be sold into an existing offtake agreement with H.C. Starck GmbH, a major global manufacturer of tantalum based products. The base case scenario forecasts annual production of approximately 600,000 lbs of tantalum (as tantalum pentoxide as a glass) and an average 1,300 tonnes of LME grade tin metal.

Development Strategy

The Company continues to work through a project development and financing strategy centred around a “low‐ capital” development model utilising contractors and suppliers to undertake activities such as mining, crushing and screening the ore and supplying water, power and other services on a “through the fence” basis. During April and May of 2014, negotiations with preferred supplier and contractor groups continued and the tendered prices have been utilised by Gippsland for its internal modelling and development of its Project Development Plan.

Running in parallel with this process, Gippsland engaged Lycopodium Engineering Pty Ltd in March 2014 to update the operating and capital cost estimates associated with the processing plant of the 2008 Abu Dabbab Feasibility Study which is based on a 2Mtpa ore treatment rate.

The outcomes of the 2014 updated Processing Plant Feasibility Study (2014 PPFS), updating capital and operating costs for the process plant and associated infrastructure are summarised in Tables 1 and 2 below. Whilst the estimates are to a feasibility study standard according to Lycopodium, the summations do not represent estimates to complete the entire project; these are “work in progress figures”. However from a capital cost perspective, given the intent to utilise contractor mining services, they do represent the majority or the core of the expected total expenditure.

The key omissions are capital and operating cost estimates related to mining and smelting. The Lycopodium scope did not include review of the mining plan or the construction or utilisation of an on‐site smelter as explained below:

• Mining: There appear to be many opportunities to improve on the existing mine design and schedule and with the anticipated involvement of a local mining contractor, the Company considered there was little value in undertaking this process prematurely.

• Smelting: In regard to the smelter, Gippsland is assessing opportunities to initially utilise toll smelting services as an important risk reduction strategy. There is a strong concern that introducing two major processing plants; the gravity concentrator and the smelter simultaneously introduces major operational and

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 3

REVIEW OF OPERATIONS

implementation risks. Aside from the deferral of capital, the Company considers that there may also be opportunities to install a smelter closer to power, labour and transport hubs rather than at the Abu Dabbab site where all of those inputs come at a considerable cost premium. A Memorandum of Understanding (MoU) for a toll smelting arrangement was signed in August 2014 (refer below).

Table 1: Comparison of the 2008 and 2014 Feasibility Studies (Excluding mining and smelter costs)

US$ ‐ millions	2008 FS 1	2014 PPFS 2	2014 PPFS (Adjusted) 3		Variance 1 and 2 (2‐1)	Variance 2 and 3 (3‐2)
Cost Centre
Site Establishment & Construction Costs	5.85	7.73	5.52		1.88	‐2.21
Treatment Plant Costs	67.71	62.22	56.04		‐5.49	‐6.18
Infrastructure Costs	37.57	76.95	23.74		39.38	‐53.21
Management Costs Owners Costs	21.58 10.35	25.56 15.03	15.55 11.18		3.98	‐10.01
					4.68	‐3.85
General Working Capital	5.52	13.10	13.10		7.58	0.00
Total	148.58	200.59	125.13		52.01	‐75.46
Contingency ‐ the 2014 PPFS numbers include an item by item contingency of between 13% and 20% with an average of approximately 15%.

Capital Cost Estimates

Comparison of the 2008 FS with the 2014 PPFS indicates an overall escalation in the capital costs covered, of US$52 million between late 2008 and early 2014, focussed mainly around the costs of power and water desalination utilities.

Given the adoption of a project development model to outsource utilities and crushing and screening of the ore, adjustments were made by Gippsland to the 2014 PPFS estimates as shown in Table 1, column 3. The impact was to remove US$75.5 million of capital expenditure from the Project schedule, comprising mainly the removal of US$59.4 million for outsourced capital items such as utilities and ore feed preparation. Not included in the adjusted summation above are further reductions that Gippsland considers are available subject to further evaluation which total approximately US$15 million and comprise cost items such as reduced EPCM, utilisation of some second hand equipment and modified tails dam design and construction.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

4

REVIEW OF OPERATIONS

Operating Cost Estimates

An operating cost for that part of the Project incorporating ore processing and input services has been estimated by Lycopodium and presented in Table 2 below. This does not include the mining or smelting costs which may be undertaken on a toll basis but does include the cost of running the various utilities.

Table 2: Processing and Utility Input Operating Costs

Comparative Cases	US$/t ore
2008 FS	9.95
2014 PPFS	22.05

There is a significant $12.10/t increase in the estimated operating cost, much of which is attributable to the treatment of fuel costs. The 2014 PPFS operating cost estimates above do not assume eligibility to any Government fuel subsidies, which have recently been reduced causing the price of diesel fuel to increase 64% to US$0.25/litre compared to the non‐subsidised cost of approximately US$0.98/litre. However, the 2008 FS did incorporate fuel subsidies, explaining a large part of the operating cost increase.

The move to outsourcing is regarded as an important “de‐risking” strategy, however it does not mitigate the ongoing exposure to fuel prices via international price movements or changes to Government fuel subsidies. As with the capital cost estimates, given the move toward outsourcing various inputs such as power, water, mining and feed preparation, these figures are indicative and regarded as “work in progress” subject to completing the final feasibility study.

Planned Future Program

Gippsland considers that there are several opportunities to improve the Project economics which are currently under investigation and include:

• Increased mining and processing rate of 3Mtpa of ore;

• Ore beneficiation prior to the gravity separation stage which reduces the scale of the gravity plant and costs such as water usage;

• Reduced power consumption through design improvements has the potential to reduce operating costs significantly as power accounts for 50 to 55 % of the total operating cost;

• Improved recovery of fine grained Ta and Sn minerals as 50% of the Sn and Ta report to the minus‐38 micron size fraction; and

• Reduction in the use of desalinated water, by using raw seawater for dust suppression and possibly process water.

This will be the focus for the feasibility study program expected to take approximately 6 months to complete from the settlement of the current financing process.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 5

REVIEW OF OPERATIONS

The Company also plans to progress the non‐binding MoU that TE signed in August 2014 with a major international smelting company (SmelterCo) for the toll smelting of tantalum‐tin concentrates planned to be produced at the Project.

The key motivating factors for TE to pursue the MoU were to:

• a. Reduce the technical risk, particularly during the critical start‐up phase, which will facilitate the financing of the Project and support its success;

• b. Defer $15 to $20 million of capital expenditure that was allocated to the construction of the smelter and support infrastructure; and

• c. Provide time to allow a full assessment of all smelting alternatives;

• which could include smelter sites in Egypt, the Middle East or elsewhere with competitive advantages in terms of;

• cheaper power costs; at Abu Dabbab the smelter accounts for approximately 16% of the installed power allocation and approximately 23% of the variable power cost;

• proximity to infrastructure, transport hubs and ports; the tantalum‐tin concentrate production is modest volume wise at approximately 4‐5ktpa and is easily containerised and transportable, whilst being very high value;

• proximity to skilled labour and support services; and

• new, improved smelting technologies and feedstock (from the “hard‐rock” gravity plant) available for piloting.

SmelterCo is one of the top 10 global smelting companies and has specific experience in tantalum recovery from tin concentrates; however given the non‐binding nature of the MoU and “closed” structure of the tantalum market both parties prefer to keep the identity of SmelterCo confidential until a binding arrangement is negotiated. The broad terms and conditions include:

• TE supplies a tantalum‐tin concentrate to SmelterCo for processing into tantalum glass and crude tin.

• TE will pay SmelterCo various fixed charges for utilisation of their smelting facilities. SmelterCo currently has under‐utilised furnaces suitable for processing TE’s concentrate.

• SmelterCo will deliver to TE the tantalum glass for supply to HC Starck GmbH, with which TE has a 10 year Tantalum Sales and Purchase Agreement and SmelterCo will have a first right to purchase all tin product at LME benchmarked prices.

• The initial term for the toll smelting arrangement is to be four years, with an 18 month notice period required from either party to terminate the arrangement.

• TE will be able to second its people to SmelterCo’s smelter for training and supervision purposes.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

6

REVIEW OF OPERATIONS

• Whilst SmelterCo will not be taking technical risk, an incentive payment structure will be agreed whereby SmelterCo will share in any “over budget” performance such as recovery.

• Based on preliminary smelting fees and product specifications TE considers that there will be no cost penalty to the Project cash flows arising from the toll smelting arrangement. Indeed the MoU terms suggest a modest cost saving over the initial period with a toll smelting cost of approximately $2.50/t of ore compared to a $2.60/t of ore cost if TE purchased and operated its own smelter from start‐up.

ALLUVIAL TIN OPERATIONS

Mining and processing of several alluvial tin deposits located on the Project licences commenced in March 2012. Since that time a total of 183,971 tonnes of treatable material has been mined and 221,795 tonnes have been crushed, screened and washed producing total of 340 tonnes of tin concentrate recovered through the gravity concentration plant. Total contained tin recovered was 154 tonnes before the operation was closed in early September 2014 (refer Table 3).

Table 3: Production Summary ‐Abu Dabbab Alluvial Tin Project

	Units	FY2015 (to date)	FY2014	Project to Date
Mined‐2mm size fraction	t	‐	81,842	183,971
Head Grade	% Sn	0.08	0.11	0.13
Processed*	t	5,550	159,101	259,506
Tin Concentrate	t	6.5	202	340
Concentrate Grade	% Sn	49	42	54
Contained Tin	t	3.2	85	154

• Note: tonnes processed includes reprocessed tails material.

The project has significantly underperformed since inception with the subsisting underlying issue being the major over‐call of the contained tin estimates from the extensive original Russian data provided by EMRA upon which the resource estimates supporting the operations were based. In some respects the technical outcomes achieved in the later months of the operation in the spiral plant were quite exceptional considering the low feed grades and clayey nature of the material. Ultimately productivity issues forced the closure of the operation somewhat prematurely in early September 2014. However, the experiences gained from this operation in terms of availability of support and contract services, labour issues, import and export, tax regime and all the other compliance and operating process are considered to be very valuable in considering the operation of the larger scale hard‐rock Abu Dabbab project.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 7

REVIEW OF OPERATIONS

EXPLORATION & MINERAL RESOURCES

Gippsland holds exploration interests in Egypt and Eritrea via various subsidiary holding companies.

The main projects in Egypt are:

• Abu Dabbab – Tantalum‐tin‐feldspar

• Nuweibi – Tantalum‐feldspar

• Wadi‐Allaqi – gold and base metals

Current Mineral Resource Inventory

A resource update was completed in July 2008 based on the Ordinary Kriging grade estimation technique. The estimate was prepared according to the 2004 JORC Code, but has not yet been updated to conform to the 2012 JORC Reporting Code. Mineral Resources for the Abu Dabbab and the Nuweibi deposits, 17 km to the south of Abu Dabbab are set out in Tables 4 and 5 below.

Table 4: Abu Dabbab Mineral Resource Summary (Gippsland 50%) (Gippsland 50% - cut-off grade 100g/t Ta205)

Category	Million Tonnes	Ta2O5 (g/t)	Sn (%)
Measured	15.2	290	0.143
Indicated	17.3	250	0.078
Inferred	12	200	0.03
TOTAL	44.5	250	0.09

Table 5: Nuweibi Mineral Resource Summary (Gippsland 50%) (Gippsland 50% - cut-off grade 100g/t Ta205)

Table 5: Nuweibi Mi	neral Resource Summary	(Gippsland 50%) (Gippsland 50% - cut-of
Category	Million Tonnes	Ta2O5 (g/t)
Indicated	48	147
Inferred	50	138
TOTAL	98	143

A key component of the updated feasibility study planned to be completed in early 2015 is an updated mine plan, schedule and budget that will generate a revised ore reserve for the Project. Therefore the Company has decided not to report the former Ore Reserve table.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

8

REVIEW OF OPERATIONS

The Wadi Allaqi Project consists of nine small Exploration Licences located approximately 160 km southeast of Aswan in the south‐western part of the Eastern Desert of Egypt held by Gippsland's 100% subsidiary, Nubian Resources Plc. These Exploration Licences have a total area of 144 km[2] . The status of these tenements is in dispute with EMRA which the Company plans to resolve through the grant of a large Exploration Licence area that encompasses all of the disputed tenements. This application for a 980 km[2] tenement is pending. On this basis the Company is not reporting any “equitable interest” in these tenements at present nor presenting any Mineral Resource data.

In Eritrea the Company holds the Adobha Exploration Licence covering 1,056 km[2] and the Gerasi South Exploration covering 100km[2] . The licence areas cover an area considered highly prospective for volcanogenic massive sulphide mineralisation and structurally controlled gold deposits. The Company has recently scaled down its exploration office and staff in Eritrea due to financial constraints against the backdrop of uncertainty around the existing mining laws.

COMPETENT PERSONS COMPLIANCE STATEMENT

The information in this announcement that relates to Exploration Targets, Exploration Results or Mineral Resources is based on, and fairly represents, information and supporting documentation prepared and compiled by Dr John Chisholm, a Competent Person who is a Fellow of the Australasian Institute of Mines and Metallurgy. Dr Chisholm is employed by Mandu Pty Limited which provides geological consulting services to the Company. Mandu Pty Limited holds 125,000 ordinary shares in the Company. Mandu Superannuation Fund Pty Limited of which Dr Chisholm is director and shareholder holds 3,362,963 ordinary shares in the Company. Dr Chisholm has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the “Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves”. Dr Chisholm consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 9

==> picture [330 x 67] intentionally omitted <==

Gippsland Limited and its Controlled Entities ABN 31 004 766 376

Annual Financial Report

30 June 2014

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

10

DIRECTORS’ REPORT

Your Directors present their report with respect to the results of Gippsland Limited ("Gippsland" or "the Company") and its controlled entities (”the Group”) for the year ended 30 June 2014 ("the Balance Date") and the state of affairs of the Company and the Group at Balance Date.

DIRECTORS

The names of the Directors in office at any time during or since the end of the year are as below. Directors were in office for this entire period unless otherwise stated.

Mr Ian Jeffrey Gandel Mr Michael Benjamin Rosenstreich (appointed 24 March 2014) Mr Jon Starink Mr John Damian Kenny

Names, qualifications, experience and special responsibilities

Ian Jeffrey Gandel - Chairman (Non-executive) LLB, BEc, FCPA, FAICD

Mr Gandel was appointed Director and non-executive chairman on 24 June 2009. He is also Chairman of the Company's Remuneration Committee and a member of the Audit Committee.

Mr Gandel is a Melbourne businessman with extensive experience in retail management and retail property. He has had an involvement in the construction and leasing of Gandel shopping centres and has been a director of Gandel Retail Trust. He has previously been involved in the Priceline retail chain and the CEO chain of serviced offices.

Mr Gandel has been an investor in the mining industry since 1994, and is currently a substantial shareholder of a number of publicly listed Australian companies and is involved in exploration in his own right in Victoria, New South Wales and Western Australia.

During the past three years Mr Gandel has served as a Director of the following listed companies: Alliance Resources Limited – Appointed 15 October 2003 Alkane Resources Ltd – Appointed 25 July 2006

Octagonal Resources Ltd* - Appointed 10 November 2010

Michael Benjamin Rosenstreich – Managing Director BSC (Hons), MEE, FAusIMM, MAICD

Mr Rosenstreich was appointed Managing Director on 24 March 2014.

Mr Rosenstreich has a technical background and has worked in corporate finance and management of listed companies over the past 30 years including:

• 13 years as an exploration and mine geologist in senior roles;

• 6 years as a resource financier with NM Rothschild & Sons;

• 2 years as a technical consultant with Snowden and independently; and

• 9 years through to 2013 as Managing Director of ASX listed Bass Metals from pre IPO stage through exploration success and culminating in over 5 years of base and precious metals production.

During the past three years Mr Rosenstreich has served as a Director of the following listed companies: Bass Metals Ltd – Appointed 15 December 2004; Ceased 4 October 2013

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

1 4 11

DIRECTORS’ REPORT

Jon Starink – Director (Executive)

BSC (Hons), BChemE(Hons), MApplSc, FAusIMM, FIEAust, FIChemE, MRACI, MTMS, CPEng, CChem, CSci

Mr Starink was appointed Director on 8 May 2007. He is also a member of the Audit Committee and Remuneration Committee.

Mr Starink is a Chartered Professional Engineer, a Chartered Scientist and a Chartered Industrial Chemist, a Fellow of the Institution of Engineers Australia, a Fellow of the Australasian Institute of Mining and Metallurgy, a Fellow of the Institution of Chemical Engineers, a Member of The Metallurgical Society and a Member of the Royal Australian Chemical Institute.

Mr Starink has over 30 years experience in the mining industry in the role of both Executive and Non-Executive Director. His extensive practical and operational experience includes engineering design and project management; mining exploration management; science and engineering research development and process innovation development.

Mr Starink served in senior technical and engineering roles with the Sons of Gwalia Ltd Greenbushes tantalum-tin project for 10 years where he was directly responsible for process development, project design and construction management for the tin smelter and tantalum extraction projects.

During the past three years Mr Starink has served as a Director of the following listed company: Macarthur Minerals Limited* – Appointed 28 June 2011

John Damian Kenny – Director (Non-executive)

B Com (Hons), LLB

Mr Kenny was appointed Director on 2 September 1999. He is also a member of the Company's Remuneration Committee and is Chairman of the Company's Audit Committee.

Mr Kenny is a corporate and resources lawyer with a specialised interest in venture capital, initial public offerings and mergers and acquisitions. He has extensive experience in public equity fundraisings and the pricing of equity, debt and derivative securities.

During the past three years Mr Kenny has served as a Director of the following listed companies: The ARK Fund Limited* - Appointed 18 June 2003

Indus Coal Limited - Appointed 13 September 2011; Resigned 7 February 2014 Sun Resources Limited - Appointed 1 March 2012; Resigned 19 November 2013 Winchester Energy Limited – Appointed 17 March 2014

• denotes current directorship

Interest in Shares and Options of the Company and related bodies corporate

As at the date of this report, the interest of the directors in the shares and options of Gippsland Limited were:

	Number of Ordinary	Number of Options
	Shares	over Ordinary Shares
IJ Gandel	586,788,200	-
MB Rosenstreich	-	-
JD Kenny	5,165,819	-
J Starink	3,085,715	-

OPTIONS

At the date of this report, there were no options on issue.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

42

12

DIRECTORS’ REPORT

COMPANY SECRETARY

The following person held the position of company secretary at the end of the financial year:

Rowan St John Caren BCom, CA

Mr Caren was appointed Company Secretary on 15 August 2006.

Mr Caren was employed by the chartered accountancy firm PricewaterhouseCoopers in Australia and overseas for six years and has been directly involved in the minerals exploration industry for a further 18 years. He also provides company secretarial and corporate advisory services to several exploration companies and is a member of the Institute of Chartered Accountants in Australia.

MEETINGS OF DIRECTORS

During the financial year, 6 meetings of directors were held. Attendances by each director during the year were as follows:

	Directors'	Meetings	Audit	Committee	Remuneration	Committee
	Eligible to	Attended	Eligible to	Attended	Eligible to	Attended
	Attend		Attend		Attend
IJ Gandel	6	6	3	3	-	-
MB Rosenstreich	1	1	-	-	-	-
JD Kenny	6	5	3	2	-	-
J Starink	6	6	3	2	-	-

PRINCIPAL ACTIVITIES

The principal activities of the entities within the Group during the year were exploration and development of commercially and economically viable mineral resources. There were no significant changes in the nature of the Group's principal activity during the year.

CONSOLIDATED RESULTS

The consolidated operating loss of the Group after providing for income tax amounted to $5,849,058 (2013: loss of $7,999,617).

Review of Operations

During the year the Company continued to focus on the development of the Abu Dabbab Tantalum-Tin-Feldspar Project (the Project) and production at the Alluvial Tin Project located on the same licences in Egypt. Gippsland has a 50% interest in the Exploitation Licences underlying both these projects through its 50% shareholding in the Egyptian registered joint venture company Tantalum Egypt JSC (TE JSC). The other 50% is held by the Government of Egypt through the Ministry of Petroleum and Minerals. The following activities were undertaken in relation to TE JSC:

• Completed an advanced and comprehensive project review examining various financing opportunities for the development of the Project. This review process highlighted significant opportunities for TE JSC to significantly reduce its direct capital costs by outsourcing to contractors mining and crushing operations, the provision of utilities including desalinated water and power and services including camp services.

• The Company, which is responsible for the procurement of project development funding, implemented an investment strategy to attract funds for the completion of the 2014 Abu Dabbab definitive feasibility study and initial site work. The investment opportunity is being marketed to selected investment groups in the Gulf region.

• During the year, TE JSC sold approximately 101 tonnes of contained tin in concentrates from the Alluvial Tin Project and received total gross proceeds (before deduction of toll treatment charges) of US$2,155,275. During the second half of the year, tin operations were suspended due to ongoing technical problems and further delays in relation to TE JSC’s permits to export product and import spare parts. The import and export permits were reinstated in May,

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

43 13

DIRECTORS’ REPORT

however, the alluvial mining and processing operations were decommissioned in September 2014 due to technical and productivity issues.

In addition, the Company’s operations included:

• In Eritrea, the area of the Adobha Exploration Licence was reduced by 50% to a retained area of 1,056 km[2] in compliance with the requirements of the third year of the licence. The area of the Gerasi South Exploration Licence remains at 100 km[2] . The exploration office in Eritrea was closed during the year in order for the Company to focus on its project in Egypt. The Company retains the exploration licences and is represented in Eritrea by its Country Manager.

Financial Position

The net assets of the Group have decreased by $6,067,047 to $1,074,338 at 30 June 2014 due largely to the following factors:

• impairment of the mine properties in relation to the Group’s Alluvial Tin Project totalling $969,711;

• impairment of the plant and equipment in relation to the Group’s Alluvial Tin Project totalling $850,071;

• under performance of the Group’s Alluvial Tin Project resulting in cost of sales exceeding revenue by $994,281; and

• funding for operations and working capital provided as loans from Gandel Metals Pty Ltd totalling $2,572,016.

As at Reporting Date the group had a working capital deficit of $3,788,750 (2013: deficit of $411,843).

DIVIDENDS

No dividends were declared or paid during the financial year.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

The following significant changes in the state of affairs of the Company occurred during the financial year:

• a) Mr MB Rosenstreich was appointed Managing Director of the company on 24 March 2014; and

• b) Loan funding received from Gandel Metals Pty Ltd, a company associated with Mr Ian Gandel, during the year totalled $2,572,016.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

Gandel Metals Pty Ltd, a company associated with Mr Ian Gandel, has entered into agreements to provide loan funding to Gippsland for a total of $620,000 for working capital.

The terms of the agreements are as follows:

(a) the interest rate for the loans is equal to the ANZ facility interest rate, as varied (currently 5.33%);

(b) the loans are unsecured; and

• (c) the loans are repayable the earlier of:

• 1 November 2014; and

• 5 business days after completion of a capital raising by Gippsland for an amount equal to or greater than $500,000 more than the overall level of indebtedness to Gandel Metals at the time each loan agreement was entered into (currently the overall level of indebtedness to Gandel Metals is $3,192,000).

In August 2014, the Board of TEJSC approved and signed a non-binding agreement with a major smelting company for toll smelting the tantalum-tin concentrates planned to be produced from the Abu Dabbab Tantalum-Tin-Feldspar Project.

On 10 September 2014, the Company ceased operations at its Alluvial Tin Project joint venture in Egypt.

No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4

14

ABN 31 004 766 376

DIRECTORS’ REPORT

FUTURE DEVELOPMENTS

The consolidated entity’s activities will continue to focus on securing finance, completing the feasibility study and commencing development of the Abu Dabbab Tantalum-Tin-Feldspar Project.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group's operations are not currently subject to any significant environmental regulations under either Australian, Eritrean or Egyptian legislation. However, the board is committed to achieving a high standard of environmental performance, and regular monitoring of potential environmental exposures is undertaken by management. The board considers that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the Group.

An environmental and social impact assessment was updated during the 2012 financial year for the Abu Dabbab Project in Egypt.

The Group is required to carry out its activities in accordance with the Mining Laws and regulations in the areas in which it undertakes its exploration activities.

INDEMNITY AND INSURANCE OF OFFICERS

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

• The Company has paid premiums to insure any director or officer of Gippsland Limited against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director or officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium is $12,047 (2013: $13,051).

• The Company has entered into “Deeds of Indemnity, Access and Insurance” with directors and officers in which the Company agrees to indemnify the directors and officers in respect of certain liabilities incurred by the director or officer while acting in their capacity for the Company and to insure the director or officer against certain risks they are exposed to as a director or officer of the Company.

PROCEEDINGS ON BEHALF OF COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. No proceedings have been brought or intervened in or on behalf of the Company with leave of the court under section 237 of the Corporations Act 2001.

NON-AUDIT SERVICES

No non-audit services were provided by the Company’s current auditor, Deloitte Touche Tomatsu (“Deloitte”).

AUDITOR’S INDEPENDENCE DECLARATION

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 for the year ended 30 June 2014 has been received and can be found on page 21 of the directors’ report.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

45 15

DIRECTORS’ REPORT

REMUNERATION REPORT (Audited)

This report details the nature and amount of remuneration for each director of Gippsland Limited.

Remuneration Policy

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

The board's policy for determining the nature and amount of remuneration for board members and senior executives of the Group is as follows:

• The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, is developed and approved by the board after seeking professional advice from independent external consultants as required. In the years presented, no external consultants have been used.

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

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

The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. In the current year, no advice was sought. The maximum aggregate amount of fees that can be paid to non-executive directors is currently fixed at $250,000 with any change in this amount subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the Group. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the option plan.

No relationship exists between the remuneration policy and the Company’s performance.

At the Company’s most recent Annual General Meeting, the remuneration report for the year ended 30 June 2013 was passed with a greater than 75% vote in favour.

The tables below set out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the five years to 30 June 2014:

	30 June 2014 $	30 June 2013 $	30 June 2012 $	30 June 2011 $	30 June 2010 $
Revenue	2,181,072	8,228	90,820	82,938	64,440
Netprofit/(loss)before tax	(5,849,058)	(7,999,617)	799,359	(2,630,645)	(2,894,769)
Netprofit/(loss)after tax	(5,849,058)	(7,999,617)	799,359	(2,630,645)	(2,894,769)
	30 June 2014	30 June 2013	30 June 2012	30 June 2011	30 June 2010
Shareprice at start ofyear	$0.007	$0.009	$0.032	$0.030	$0.044
Shareprice at end ofyear	$0.003	$0.007	$0.009	$0.032	$0.030
Basic/diluted earnings/(loss) per share	(0.43)cps	(0.67)cps	0.10 cps	(0.43)cps	(0.58)cps

Details of key management personnel

(i) Directors

IJ Gandel - Chairman (Non-Executive) MB Rosenstreich - Managing Director (Appointed 24 March 2014) J Starink - Executive Director J Kenny - Non-Executive Director

46

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

16

ABN 31 004 766 376

DIRECTORS’ REPORT

(ii) Executives

A Ayyash - Regional Manager - Middle East and North Africa

Non-Executive Director Remuneration

IJ Gandel - Chairman (Non-Executive)

• Remuneration: $80,000 per annum.

• Details of remuneration entitlement on termination: Payment of fees up to the date of termination.

J Kenny - Non-Executive Director

• Remuneration: $40,000 per annum.

• Details of remuneration entitlement on termination: Payment of fees up to the date of termination.

Employment Contracts

MB Rosenstreich – Managing Director

• Term of agreement: 24 March 2014 until terminated in accordance with the agreement.

• Remuneration: $211,200 per annum for 4 days work per week.

• Period of notice for termination/resignation: Two months written notice by either party.

• Details of remuneration entitlement on termination: Payment of fees up to the date of termination or payment of two months fees in lieu of notice

J Starink - Executive Director

• Term of agreement: 8 May 2007 until terminated in accordance with the agreement.

• Remuneration: $150,000 per annum for 2.5 days work per week plus additional fees based on hours worked above the base hours as determined by the Remuneration Committee.

• Period of notice for termination/resignation: Three months written notice by either party.

• Details of remuneration entitlement on termination: Payment of consulting fees up to the date of termination or payment of three month’s salary in lieu of notice.

A Ayyash - Regional Manager - Middle East and North Africa

• Term of agreement: 1 October 2010 until terminated in accordance with the agreement.

• Remuneration: $188,600 salary and allowances per annum.

• Period of notice for termination/resignation: Two months written notice by the Company or three months written notice by the Executive.

• Details of remuneration entitlement on termination: Payment of salary and employee entitlements up to the date of termination and one month’s salary for each year worked by the Executive.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

7 4 17

DIRECTORS’ REPORT

Remuneration of key management personnel

Table 1: Remuneration for the year ended 30 June 2014

Key Management	Short-term	Share-based	Post-	Total	Remuneration
Personnel	Benefits	Payment	employment		consisting of
	Cash, salary and	Shares	Benefits		options for the
	commissions		Superannuation		year
	$	$	$	$	%
Non-Executive Directors
Mr IJ Gandel*	80,000	-	-	80,000	0.00%
Mr JD Kenny*	40,000	-	-	40,000	0.00%
Sub-total	120,000	-	-	120,000
Executive Directors
Mr MB Rosenstreich**	102,360	-	-	102,360	0.00%
Mr J Starink	150,000	-	-	150,000	0.00%
Sub-total	252,360	-	-	252,360
Other key management
personnel
Mr A Ayyash	200,241	-	-	200,241	0.00%
Sub-total	200,241	-	-	200,241
Total	572,601	-	-	572,601

• These amounts have not been paid pending an improvement in the Company’s financial position.

** This amount includes consulting fees of $70,200 paid to Mr Rosenstreich during the period prior to his appointment as a director of the Company.

Table 2: Remuneration for the year ended 30 June 2013

Key Management	Short-term	Share-based	Post-	Total	Remuneration
Personnel	Benefits	Payment	employment		consisting of
	Cash, salary and	Shares	Benefits		options for the
	commissions		Superannuation		year
	$	$	$	$	%
Non-Executive Directors
Mr IJ Gandel	80,000	-	-	80,000	0.00%
Mr JD Kenny	40,000	-	-	40,000	0.00%
Sub-total	120,000	-	-	120,000
Executive Directors
Mr J Starink	300,000	-	-	300,000	0.00%
Mr JSF Dunlop (resigned 12/7/14)	-	50,000	-	50,000	100.00%
Sub-total	300,000	50,000	-	350,000
Other key management
personnel
Mr A Ayyash	188,600	-	-	188,600	0.00%
Dr JM Chisholm***	197,400	-	-	197,400	0.00%
Sub-total	386,000	-	-	386,000
Total	806,000	50,000	-	856,000

* Dr Chisholm was not considered a KMP for the 2013-14 year

Compensation Options: Granted and vested during the year (consolidated)

There were no options granted to Directors or other Key Management Personnel during 2013 or 2014.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

48

18

ABN 31 004 766 376

DIRECTORS’ REPORT

Table 3: Shares issued on exercise of compensation options (consolidated)

30 June 2014

	Shares issued	Paid per share	Unpaid per share	Unpaid per share
	No.	$		$
Directors
Nil	-	-		-
30 June 2013
	Shares issued	Paid per share	Unpaid per share
	No.	$		$
Directors
Nil	-	-		-
Share-based payment arrangements in existence
There were no share-based payment arrangements in existence in relation to directors and senior management during the
financial year.
During the financial year:
• There were no grants	of share-based payment compensation		to directors or senior management.
• No directors or senior management exercised options that were granted to them as part of their compensation.
Option holdings of key management personnel (consolidated)
There are no options held in Gippsland Limited by key management personnel.
Table 4: Shareholdings of key management personnel (consolidated)
Shares held in Gippsland Limited (number) by key management personnel are:
30 June 2014	Balance 1.7.2013	Granted as	On exercise of	Net Change	Balance
		remuneration	Options	Other*	30.6.2014
	Ord	Ord	Ord	Ord	Ord
Directors
Mr IJ Gandel	586,788,200	-	-	-	586,788,200
Mr JD Kenny	5,165,819	-	-	-	5,165,819
Mr J Starink	3,085,715	-	-	-	3,085,715
Executives
Mr A Ayyash	974,784	-	-	-	974,784
	596,014,518	-	-	-	596,014,518
30 June 2013	Balance 1.7.2012	Granted as	On exercise of	Net Change	Balance
		remuneration	Options	Other*	30.6.2013
	Ord	Ord	Ord	Ord	Ord
Directors
Mr IJ Gandel	328,601,392	-	-	258,186,808	586,788,200
Mr JD Kenny	2,892,858	-	-	2,272,961	5,165,819
Mr J Starink	2,160,000	-	-	925,715	3,085,715
Mr JSF Dunlop (resigned 12
July 2012)	1,200,000	5,000,000	-	514,286	6,714,286
Executives
Mr A Ayyash	974,784	-	-	-	974,784
Dr JM Chisholm	2,790,370	-	-	697,593	3,487,963
	338,619,404	5,000,000	-	262,597,363	606,216,767

There were no share-based payment arrangements in existence in relation to directors and senior management during the financial year.

• Net change refers to shares purchased or sold during the financial year.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

49 19

DIRECTORS’ REPORT

Related party transactions with key management personnel

Related party transactions with key management personnel, other than those already disclosed in this remuneration report, are as follows:

are as follows:
	2014	2013
	$	$
Gandel Metals Pty Limited – a company associated with Mr IJ
Gandel provided loan funds to Gippsland. The interest rates for
the loans is 5.33%, the loans are unsecured and are outstanding at
the balance date (Refer to Note 15).	2,572,016	-
Gandel Metals Pty Limited – a company associated with Mr IJ
Gandel received interest on its loan funds to Gippsland. The
interest rate for the loan is 5.33%, the loans were unsecured and
are outstanding at the balance date.	50,341	-
Abbotsleigh Pty Limited – a company associated with Mr IJ Gandel
provided loan funds to Gippsland. The interest rate for the loans
was 7.14% (2013), the loans were unsecured and both loans have
been repaid.	-	1,200,000
Abbotsleigh Pty Limited – a company associated with Mr IJ Gandel
was repaid loan funds by Gippsland. The interest rate for the
loans was 7.14% (2013) and the loans were unsecured.	-	1,200,000
Abbotsleigh Pty Limited – a company associated with Mr IJ Gandel
received interest on its loan funds to Gippsland up to the date of
repayment of the loan by Gippsland Ltd. The interest rate for the
loans was 7.14% (2013), the loans were unsecured and both loans
have been repaid.	-	9,215

[END OF REMUNERATION REPORT]

Signed in accordance with a resolution of the Board of Directors.

==> picture [112 x 61] intentionally omitted <==

MB ROSENSTREICH Managing Director

Dated this 30[th] day of September 2014.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

10 4

20

Deloitte Touche Tohmatsu ABN 74 490 121 060

==> picture [123 x 24] intentionally omitted <==

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

The Board of Directors Gippsland Limited Suite 12 186 Hay Street SUBIACO WA 6008

Tel: +61 8 9365 7000 Fax: +61 9365 7001 www.deloitte.com.au

30 September 2014

Dear Board Members

Gippsland Limited

In accordance with section 307C of the Corporations Act 2001 , I am pleased to provide the following declaration of independence to the directors of Gippsland Limited

As lead audit partner for the audit of the financial statements of Gippsland Limited for the financial year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Chris Nicoloff Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

11

Member of Deloitte Touche Tohmatsu Limited

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 21

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2014

	Note	2014	2013
		$	$
Revenue	3(a)	2,146,298	-
Finance revenue	3(a)	1,001	8,228
Other Income	3(b)	33,773	-
Total Income		2,181,072	8,228
Cost of sales		(3,140,579)	-
Other gains and losses	3(c)	-	(1,348,318)
Administration expense	3(d)	(741,955)	(1,454,254)
Employee benefits expense	3(e)	(1,175,831)	(1,041,773)
Foreign exchange gain/(losses)		7,250	(7,136)
Share based payment expense	3(e)	-	(50,000)
Project evaluation expense		(673,528)	(364,283)
Depreciation and amortisation expense		(159,354)	(86,836)
Impairment of exploration and evaluation expenditure	11	(213,973)	(3,645,635)
Impairment of mine properties	12	(969,711)	-
Impairment of property plant and equipment	10	(850,071)	-
Impairment of inventories	8	(55,510)	-
Finance costs		(56,868)	(9,610)
Total expenses		(8,030,130)	(8,007,845)
Loss before income tax		(5,849,058)	(7,999,617)
Income tax expense	4	-	-
Loss after income tax		(5,849,058)	(7,999,617)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange rate differences on translating foreign operations		(217,989)	(69,416)
Total other comprehensive income		(217,989)	(69,416)
Total comprehensive loss for the period		(6,067,047)	(8,069,033)
Loss is attributable to:
Members of the parent		(3,851,672)	(7,818,715)
Non-controlling interest		(1,997,386)	(180,902)
		(5,849,058)	(7,999,617)
Total comprehensive loss is attributable to:
Members of the parent		(4,283,157)	(7,959,875)
Non-controlling interest		(1,783,890)	(109,158)
		(6,067,047)	(8,069,033)
Basic earnings/(loss) per share (cents per share)	5	(0.43)	(0.67)
Diluted earnings/(loss) per share (cents per share)	5	(0.43)	(0.67)

The accompanying notes form an integral part of this Consolidated Statement of Profit or Loss and Other Comprehensive Income.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4

22

ABN 31 004 766 376

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014

	Note	2014	2013
		$	$
ASSETS
Current Assets
Cash and cash equivalents	6	276,698	586,883
Trade and other receivables	7	26,683	313,424
Inventories	8	68,967	94,976
Other assets	9	46,346	55,990
Total Current Assets		418,694	1,051,273
Non-Current Assets
Property, plant and equipment	10	1,030,053	1,938,858
Exploration and evaluation	11	3,833,035	4,040,894
Mine properties	12	-	1,573,476
Total Non-Current assets		4,863,088	7,553,228
TOTAL ASSETS		5,281,782	8,604,501
LIABILITIES
Current Liabilities
Trade and other payables	13	1,521,041	1,355,268
Provisions	14	114,387	107,848
Loans and borrowings	15	2,572,016	-
Total Current Liabilities		4,207,444	1,463,116
TOTAL LIABILITIES		4,207,444	1,463,116
NET ASSETS		1,074,338	7,141,385
EQUITY
Equity attributable to equity holders of the parent
Contributed equity	17(a)	48,530,322	48,530,322
Reserves	18(a)	(1,689,406)	(1,257,921)
Accumulated losses	18(b)	(41,816,060)	(37,964,388)
Non-controlling interest	16	(3,950,518)	(2,166,628)
TOTAL EQUITY		1,074,338	7,141,385

The accompanying notes form an integral part of this Consolidated Statement of Financial Position.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 23

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2014

	Note	2014	2013
		$	$
Cash flows from operating activities
Receipts from sale of alluvial tin		2,123,180	-
Payments to suppliers and employees		(4,172,137)	(2,062,546)
Payments for project evaluation		(337,578)	(364,283)
Interest received		1,073	8,465
Finance costs		(36,252)	(9,610)
Other receipts		33,773	-
Net cash flows (used in) operating activities	6	(2,387,941)	(2,427,974)
Cash flows from investing activities
Receipts from sale of alluvial tin		-	1,052,798
Payments for exploration and evaluation		(374,203)	(1,401,717)
Payments for mine properties		-	(1,790,348)
Payments for plant and equipment		(115,525)	(944,860)
Loans repaid by other entities		8,287	-
Proceeds from sale of financial assets		-	1,916,337
Net cash flows (used in) investing activities		(481,441)	(1,167,790)
Cash flows from financing activities
Proceeds from issue of fully paid shares	17(b)	-	3,032,162
Payment of transaction costs	17(b)	(6,221)	(76,465)
Proceeds from borrowings		2,572,000	1,200,000
Repayment of borrowing		-	(1,200,000)
Net cash flows from financing activities		2,565,779	2,955,697
Net (decrease)/increase in cash and cash equivalents held		(303,603)	(640,067)
Net foreign exchange differences		(6,582)	57,368
Cash and cash equivalents at beginning of period		586,883	1,169,582
Cash and cash equivalents at end of period	6	276,698	586,883

The accompanying notes form an integral part of this Consolidated Statement of Cash Flows.

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~ GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

~~14~~ 4

24

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2014

	Issued	Accumulated	Option	Foreign	Non-	Total
	capital	losses	reserve	currency	controlling	equity
				translation	interest
				reserve
	$	$	$	$	$	$
At 1 July 2012	45,530,847	(30,145,673)	534,662	(1,651,423)	(2,057,470)	12,210,943
Currency translation differences	-	-	-	(141,160)	71,744	(69,416)
Loss for the year	-	(7,818,715)	-	-	(180,902)	(7,999,617)
Total comprehensive income for	-	(7,818,715)	-	(141,160)	(109,158)	(8,069,033)
the year
Transactions with owners in their
capacity as owners
Issue of share capital	3,032,162	-	-	-	-	3,032,162
Transaction costs	(82,687)	-	-	-	-	(82,687)
Cost of share-based payments	50,000	-	-	-	-	50,000
At 30 June 2013	48,530,322	(37,964,388)	534,662	(1,792,583)	(2,166,628)	7,141,385
Currency translation differences	-	-	-	(431,485)	213,496	(217,989)
Loss for the year	-	(3,851,672)	-	-	(1,997,386)	(5,849,058)
Total comprehensive income for	-	(3,851,672)	-	(431,485)	(1,783,890)	(6,067,047)
the year
Transactions with owners in their
capacity as owners
Issue of share capital	-	-	-	-	-	-
Transaction costs	-	-	-	-	-	-
Cost of share-based payments	-	-	-	-	-	-
At 30 June 2014	48,530,322	(41,816,060)	534,662	(2,224,068)	(3,950,518)	1,074,338

The accompanying notes form an integral part of this Consolidated Statement of Changes in Equity.

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~ GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

~~15~~ 4 25

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

1 CORPORATE INFORMATION

The financial report of Gippsland Limited for the year ended 30 June 2014 was authorised for issue in accordance with a resolution of the directors on 30 September 2014.

Gippsland Limited which is the ultimate parent company, is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange.

The nature of the operations and principal activities of the Group is exploration and mine development.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) 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 and applicable Australian Accounting Standards.

The consolidated financial statements have been prepared on the basis of historical cost, except for certain properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted. 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

For the purpose of preparing the financial statements, the consolidated entity is a for-profit entity.

(b) Going Concern

The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

The consolidated entity has incurred a net loss after income tax of $5,849,058 (2013: loss of $7,999,617) and experienced net cash outflows from operations of $2,387,941 (2013: $2,427,974) and net cash outflows from investing activities of $481,441 (2013: $1,167,790) for the year ended 30 June 2014. As at 30 June 2014, the consolidated entity had a working capital deficiency of $3,798,750 and had cash and cash equivalents of $276,698.

The ability of the company and the consolidated entity to continue as going concerns is principally dependent upon raising additional capital to fund project development, the Abu Dabbab project, other commitments, other principal activities and provide additional working capital.

These conditions indicate a material uncertainty that may cast significant doubt about the company and the consolidated entity’s ability to continue as going concerns.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4

26

ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

Subsequent to year end, Gippsland entered into agreements with Gandel Metals Proprietary Limited (a director related entity of Ian Gandel) to provide $620,000 in short-term funding. Details of the terms of this loan have been disclosed in Note 24 to the financial report. To the date of this report, the Company has received $3,192,000 of loan funding. In addition to this loan, Gandel Metals Pty Ltd has provided a conditional letter of support for further loan funding to 30 November 2014 to an amount sufficient to enable Gippsland to meet its debts as and when they fall due for that period, being approximately $362,000.

The directors have prepared a cash flow forecast for the period ending 30 September 2015 which indicates that the current cash resources will not meet expected cash outgoings without additional capital and / or debt funding. The directors anticipate that these requirements will be met through the following:

• i. Obtaining the further loan funding to 30 November 2014 based on the conditional letter of support noted above;

• ii. The continual deferral of amounts currently due and payable to trade creditors and other payables, particularly in respect to the Egyptian operations;

• iii. Strategic sale of an equity interest in the core project for a tranche 1 consideration of $16,950,000 by 1 December 2014;

• iv. Sale of plant and equipment from the Alluvial Mining Project for at least $351,000 by 1 December 2014; and

• v. Obtaining a licence renewal confirmation and deferral on exploration commitments on its Eritrean project from the Eritrean Ministry of Energy and Mines for a period of at least 12 months from the date of the signing of this financial report.

The Company intends to use part of the cash proceeds obtained from the completion of the sale of equity interest to repay the short-term funding provided to the Company by Gandel Metals Proprietary Limited.

Should the company be unable to achieve the initiatives above in the required timeframe, the company and the consolidated entity will need to seek an extension of existing funding arrangements or obtain alternative funding arrangements. The directors are satisfied that they will achieve the matters set out above and therefore the going concern basis of preparation is appropriate.

Should the company and the consolidated entity be unable to achieve the initiatives referred to above, there is a material uncertainty whether the company and the consolidated entity will be able to continue as going concerns and, therefore, whether they will realise their assets and discharge their liabilities in the normal course of business and at the amounts stated in the financial report.

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts and classification of liabilities that might be necessary should the company and the consolidated entity not continue as going concerns.

(c) Statement of Compliance

Compliance with Australian Accounting Standards ensures the financial report, the financial statements and notes comply with International Financial Reporting Standards (“IFRS”).

(d) New Standards and Interpretations Adopted

The consolidated entity has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to their operations and are effective for the current financial reporting period beginning 1 July 2013.

The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported in these financial statements:

	AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements	This standard removes the individual key management personnel disclosure requirements in AASB 124 ‘Related Party Disclosures’. As a result the Group only discloses the key management personnel compensation in total and for each of the categories required in AASB 124. In the current year the individual key management personnel disclosure previously required byAASB 124(note 26 and 27 in the 30 June 2013 financial statements)is

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4 27

ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

	now disclosed in the remuneration report due to an amendment to Corporations Regulations 2001 issued in June 2013.
AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities	The Group has applied the amendments to AASB 7 ‘Disclosures – Offsetting Financial Assets and Financial Liabilities’ for the first time in the current year. The amendments to AASB 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement. The amendments have been applied retrospectively. As the Group does not have any offsetting arrangements in place, the application of the amendments does not have any material impact on the consolidated financial statements.
AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle	The Annual Improvements to AASBs 2009 - 2011 have made a number of amendments to AASBs. The amendments that are relevant to the Group are the amendments to AASB 101 regarding when a statement of financial position as at the beginning of the preceding period (third statement of financial position) and the related notes are required to be presented. The amendments specify that a third statement of financial position is required when: a) an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position. The amendments specify that related notes are not required to accompany the third statement of financialposition.
AASB CF 2013-1 ‘Amendments to the Australian Conceptual Framework’ and AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ (Part A Conceptual Framework)	This amendment has incorporated IASB’s Chapters 1 and 3 Conceptual Framework for Financial Reporting as an Appendix to the Australian Framework for the Preparation and Presentation of Financial Statements. The amendment also included not-for-profit specific paragraphs to help clarify the concepts from the perspective of not-for-profit entities in the private and public sectors. As a result the Australian Conceptual Framework now supersedes the objective and the qualitative characteristics of financial statements, as well as the guidance previously available in Statement of Accounting Concepts SAC 2 ‘Objective of General Purpose Financial Reporting’. The adoption of this amending standard does not have anymaterial impact on the consolidated financial statements.
AASB 10 Consolidated Financial Statements and AASB 2011-7 Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards	AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with consolidated financial statements and Interpretation 112 ‘Consolidation – Special Purpose Entities’. AASB 10 changes the definition of control such that an investor controls an investee when a) it has power over an investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee, and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in AASB 10 to explain when an investor has control over an investee. Some guidance included in AASB 10 that deals with whether or not an investor that owns less than 50 per cent of the voting rights in an investee has control over the investee is relevant to the Group. The adoption of this amending standard does not have any material impact on the consolidated financial statements.
AASB 11 Joint Arrangements and AASB 2011-7 Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards	AASB 11 replaces AASB 131 ‘Interests in Joint Ventures’, and the guidance contained in a related interpretation, Interpretation 113 ‘Jointly Controlled Entities – Non-Monetary Contributions by Venturers’, has been incorporated in AASB 128 (as revised in 2011). AASB 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for. Under AASB 11, there are only two types of joint arrangements – joint operations and joint ventures. The classification of joint arrangements under AASB 11 is determined based on the rights and obligations ofparties to thejoint

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4

28

ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

	arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. Previously, AASB 131 contemplated three types of joint arrangements – jointly controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint arrangements under AASB 131 was primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a separate entity was accounted for as a jointly controlled entity). The adoption of this amending standard does not have any material impact on the consolidated financial statements.
AASB 12 Disclosure of Interests in Other Entities and AASB 2011- 7 Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards	AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of AASB 12 has resulted in more extensive disclosures in the consolidated financial statements.
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13	The Group has applied AASB 13 for the first time in the current year. AASB 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of AASB 13 is broad; the fair value measurement requirements of AASB 13 apply to both financial instrument items and non-financial instrument items for which other AASBs require or permit fair value measurements and disclosures about fair value measurements, except for share based payment transactions that are within the scope of AASB 2 ‘Share- based Payment’, leasing transactions that are within the scope of AASB 117 _‘_Leases’, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes). AASB 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under AASB 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, AASB 13 includes extensive disclosure requirements. AASB 13 requires prospective application from 1 July 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these transitional provisions, the Group has not made any new disclosures required by AASB 13 for the 2013 comparative period. Other than the additional disclosures, the application of AASB 13 does not have any material impact on the amounts recognised in the consolidated financial statements.
AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments	This standard amends AASB 10 and various Australian Accounting Standards to revise the transition guidance on the initial application of those Standards. This standard also clarifies the circumstances in which adjustments to an entity’s previous accounting for its involvement with other entities are required and the timing of such adjustments. The adoption of this amending standard does not have anymaterial impact on the consolidated financial statements.
AASB 119 Employee Benefits (2011) and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119(2011)	In the current year, the Group has applied AASB 119 (as revised in 2011) ‘Employee Benefits’ and the related consequential amendments for the first time. AASB 119 (as revised in 2011) changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations andplan assets. The amendments

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4 29

ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

	require the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of AASB 119 and accelerate the recognition of past service costs. All actuarial gains and losses are recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of AASB 119 are replaced with a ‘net interest’ amount under AASB 119 (as revised in 2011), which is calculated by applying the discount rate to the net defined benefit liability or asset. The adoption of this amending standard does not have any material impact on the consolidated financial statements.
AASB 127 Separate Financial Statements (2011) and AASB 2011-7 Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards	This standard requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and joint ventures are accounted for either at cost, or in accordance with AASB 9 ‘Financial Instruments’. This standard also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements. The adoption of this amending standard does not have any material impact on the consolidated financial statements.
AASB 128 Investments in Associates and Joint Ventures (2011) and AASB 2011-7 Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards	This standard defines 'significant influence' and provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases). It also prescribes how investments in associates and joint ventures should be tested for impairment. The adoption of this amending standard does not have any material impact on the consolidated financial statements.
AASB 2012-6 Amendments to Australian Accounting Standards Mandatory Effective Date of AASB 9 and Transition Disclosures	This standard amends the mandatory effective date of AASB 9 ‘Financial Instruments’ so that AASB 9 is required to be applied for annual reporting periods beginning on or after 1 January 2015 instead of 1 January 2013. It also modifies the relief from restating prior periods by amending AASB 7 ‘Financial Instruments: Disclosures’ to require additional disclosures on transition from AASB 139 ‘Financial Instruments: Recognition and Measurement’ to AASB 9 in some circumstances. The adoption of this amending standard does not have any material impact on the consolidated financial statements.
Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine and AASB 2011-12 Amendments to Australian Accounting Standards arising from Interpretation 20	This interpretation clarifies the requirements for accounting for stripping costs associated with waste removal in surface mining, including when production stripping costs should be recognised as an asset, how the asset is initially recognised, and subsequent measurement. The adoption of this interpretation does not have any material impact on the consolidated financial statements.

Accounting Standards and Interpretations issued but not yet effective

The following Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet effective and have not been adopted by the consolidated entity for the year ended 30 June 2014.

Standard / Interpretation	Effective for annual reporting periods beginning/ending on or after	Expected to be applied be consolidated entity
AASB 9 Financial Instruments, and the relevant amendingstandards	1 January 2018	30 June 2019
AASB 1031 ‘Materiality’ (2013)	1 January 2014	30 June 2015
AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities	1 January 2014	30 June 2015

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4

30

ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

Standard / Interpretation	Effective for annual reporting periods beginning/ending on or after	Expected to be applied be consolidated entity
AASB 2013-3 ‘Amendments to AASB 135 – Recoverable Amount Disclosures for Non-Financial Assets’	1 January 2014	30 June 2015
AASB 2013-4 ‘Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting’	1 January 2014	30 June 2015
AASB 2013-5 Amendments to Australian AccountingStandards – Investment Entities	1 January 2014	30 June 2015
AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materialityand Financial Instruments’	1 January 2014	30 June 2015
INT 21 ‘Levies’	1 January 2014	30 June 2015
AASB 2014-1 ‘Amendments to Australian Accounting Standards’ - Part A: ‘Annual Improvements 2010–2012 and 2011–2013 Cycles’ - Part B: ‘Defined Benefit Plans: Employee Contributions (Amendments to AASB 119)’ - Part C: ‘Materiality’	1 January 2016	30 June 2017
AASB 2014-1 ‘Amendments to Australian Accounting Standards’ – Part D: ‘Consequential Amendments arisingfrom AASB 14’	1 January 2016	30 June 2017
AASB 2014-1 ‘Amendments to Australian Accounting Standards’ – Part E: ‘Financial Instruments’	1 January 2015	30 June 2016
AASB 2014-3 ‘Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations	1 January 2016	30 June 2017
AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation’	1 January 2016	30 June 2017

At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations were also in issue but not yet effective, although Australian equivalent Standards and Interpretations have not yet been issued.

Standard / Interpretation	Effective for annual reporting periods beginning/ending on or after	Expected to be applied be consolidated entity
IFRS 15 ‘Revenue from Contracts with Customers’	1 January 2017	30 June 2018
IFRS 9 Financial Instruments	1 January 2018	30 June 2019
Equity Method in Separate Financial Statements (Amendments to IAS 27)	1 January 2016	30 June 2017

The impact of these recently issued or amended Standards and Interpretation are not expected to have a material impact on the consolidated entity.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 31

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

(e) Basis of consolidation

The consolidated financial statements comprise the financial statements of Gippsland Limited and entities (including special purpose entities) controlled by Gippsland Limited (its subsidiaries).

Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Company reassesses 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 listed above.

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

Adjustments are made to bring into line any dissimilar accounting policies that may exist.

All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

Subsidiaries are consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which control is transferred out of the Group. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which Gippsland Limited has control.

(f) Interests in joint operations

The Group's interest in its joint operations is accounted for by recognising the Group's assets and liabilities from the joint operation, as well as expenses incurred by the Group and the Group's share of income earned from the joint operation, in the consolidated financial statements.

(g) Foreign currency translation

Both the functional and presentation currency of Gippsland Limited and its Australian subsidiaries is Australian dollars ($AU).

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

All differences in the consolidated financial report are taken to the statement of profit or loss and other comprehensive income with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the statement of profit or loss and other comprehensive income.

Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates 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.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

22 4

32

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

The functional currency of the overseas subsidiaries Tantalum Egypt JSC, Nubian Resources JSC and Nubian Resources PLC is Egyptian pounds (EGP).

As at the reporting date the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Gippsland Limited at the rate of exchange ruling at the statement of financial position date and the statements of profit or loss and other comprehensive income are translated at the weighted average exchange rates for the year.

The exchange differences arising on the retranslation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the statement of profit or loss and other comprehensive income.

(h) Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(i) Trade and other receivables

Trade receivables, which generally have 30 day terms, are recognised and carried at original invoice amount which represents fair value at that date less an allowance for any doubtful debts. An allowance of doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.

(j) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-infirst-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Categories of inventory include spare parts and stores.

(k) Other financial assets

Other financial assets in the parent company represent investments in subsidiaries held at cost less any impairment.

(l) Property, plant and equipment

Leasehold improvements, buildings and plant and equipment are stated at cost less accumulated depreciation and any impairment losses recognised.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Leasehold Improvements - over 2 to 5 years Buildings – over 20 years Plant and equipment - over 3 to 10 years

Impairment

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cashgenerating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

23 4 33

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. 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.

Impairment losses are recognised in the statement of profit or loss and other comprehensive income.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued used of the asset.

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 item) is included in the statement of profit or loss and other comprehensive income in the period the item is derecognised.

(m) Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred is recognised as exploration and evaluation assets, measured on the cost basis. The expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

The Group assesses the stage of each mine under construction to determine when a mine moves into the pre-production stage. The criteria used to assess the start date are determined based on the unique nature of each mine construction project, such as the complexity of a plant and its location. The Group considers various relevant criteria to assess when the mine and the processing plant is substantially complete and ready for its intended use. At this time, any costs capitalised to ‘exploration and evaluation’ are reclassified to ‘mine properties’. Some of the criteria will include, but are not limited, to the following:

• Availability of the plant;

• Completion of a reasonable period of testing of the mine plant and equipment;

• Ability to produce metal in saleable form (within specifications); and

• Ability to sustain ongoing production of metal at commercial rates of production.

(n) Mine properties

When a mine construction project moves into the pre-production stage, any costs capitalised to ‘exploration and evaluation’ are reclassified to ‘mine properties’. During this pre-production stage, certain mine construction and commissioning costs continue to be capitalised to mine properties and offset any incidental revenue earned until such time as the project is operating in line with management’s expectation.

When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs ceases and costs are either regarded as inventory or expensed, except for costs that qualify for capitalisation relating to mine asset additions or improvements, mine development or mineable reserve development. It is also at this point that depreciation / amortisation commences.

Mine properties are recorded at cost, less accumulated depreciation and amortisation and any impairment losses.

Amortisation is over the units of production of the economically recoverable reserves (that is, tonnes of ore).

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

24 4

34

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

(o) Recoverable amount of assets

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

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.

(p) 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 unsecured and are usually paid within 30 days of recognition.

(q) Provisions

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.

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

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

(r) Loans and borrowings

Loans and borrowings are initially recognised at the fair value of the consideration received.

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

(s) Contributed equity

Ordinary share capital is recognised at the fair value of the consideration received.

Any transaction costs arising on the issue of shares are recognised directly in equity as a reduction of the share proceeds received.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

25 4 35

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

(t) Share-based payment transactions

The Group provides remuneration to employees (including directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions').

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Gippsland Limited ('market conditions').

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

• The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects - (i) the extent to which the vesting period has expired, and

• (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest.

This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

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

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see note 5).

(u) Leases

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. All other leases are classified as finance leases. Operating lease payments are recognised as an expense in the statement of profit or loss and other comprehensive income on a straight-line basis over the lease term. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(v) Revenue

Revenue is measured at the fair value of the consideration received or receivable. Revenue from the sale of alluvial tin is recognised when the goods are delivered and title has passed, at which time the following conditions are satisfied:

• the Group has received the provisional advance payment from the buyer for the goods; and

• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods.

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~ GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

~~26~~ 4

36

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

(w) Income tax

In principle, deferred income tax is provided on all temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for the financial reporting purposes.

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

• except where the deferred income tax liability 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; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where 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 income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised:

• except where the deferred income tax asset relating to the deductible temporary differences 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; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised 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 income tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

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

Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of profit or loss and other comprehensive income.

(x) Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~

~~27~~ 4 37

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

Financial assets

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

• A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and AASB 139 ‘Financial Instruments: Recognition and Measurement’ permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘other gains and losses’ line item in the consolidated statement of profit or loss and other comprehensive income. Fair value is determined in the manner described in note 29.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~ GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

~~28~~ 4

38

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve.

(y) Other taxes

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

• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables 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 Cash Flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

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

(z) Employee entitlements

Provision is made for the Company's liability for employee benefits arising from services rendered by employees at balance date. Employee benefits expected to be settled within one year, together with entitlements arising from wages and salaries, annual leave and sick leave, which will be settled within one year, have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Contributions are made by the entity to employee superannuation funds and are charged as expenses when incurred.

(aa) Derecognition of financial instruments

The derecognition of a financial instrument takes place when the Group no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent third party.

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~ GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

~~29~~ 4 39

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

(bb)Segment information

Operating segments have been identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. The chief operating decision maker has been identified as the board of directors of the Company.

(cc) Critical accounting judgements and key sources of estimation uncertainty

In the application of Australian Accounting Standards management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

Judgments made by management that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, these relate to impairment of inter-company loans and exploration and evaluation expenditure.

The criteria used by management in determining the impairment is as follows:

• Inter-company loans are impaired by the lending company to the extent that there is uncertainty about the future recoverability of such loans from the borrowing company. Reversal of all or part of prior period impairment losses may be approved by management once a borrowing company has a capacity to repay all or part of such intercompany loans, and

• The ultimate recoupment of exploration and evaluation expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value. Therefore exploration and evaluation expenditure is impaired until such time as the aforementioned can be determined, normally by way of a Feasibility Study or some other event. Reversal of prior period impairment losses may be approved by management once the capacity to exploit or sell has been positively determined.

• The impairment of financial assets is accounted for by revaluing the financial asset to market value at the reporting date. The financial asset consists of shares in an ASX listed company and the market value is determined by using the closing price on the last business day of the reporting period. Any movement in the market value of the financial asset is brought to account in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.

• The Group assesses the stage of each mine under construction to determine when a mine moves into the preproduction stage. The criteria used to assess the start date are determined based on the unique nature of each mine construction project, such as the complexity of a plant and its location. The Group considers various relevant criteria to assess when the mine and the processing plant is substantially complete, ready for its intended use and operating in the manner intended by management. When a mine construction project moves into the preproduction stage, any costs capitalised to ‘exploration and evaluation’ are reclassified to ‘mine properties’.

Mine properties are amortised over the units of production of the economically recoverable reserves.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

(dd)Financial risk management policy

Details of the Group's financial risk management policy are set out in Note 29.

(ee) Compound financial instruments

The Group evaluates the terms of any financial instrument to determine whether it contains both a liability and an equity component. The separate components of a financial instrument that create a financial liability and grant an option to

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~

~~30~~

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

4

40

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

the holder of the instrument to convert it into an equity instrument are recognised separately on the statement of financial position.

(ff) Comparative figures

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

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~ GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

~~31~~ 4 41

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

3 REVENUES, OTHER INCOME AND EXPENSES

3	REVENUES, OTHER INCOME AND EXPENSES
		2014	2013
		$	$
Revenue and expenses from continuing operations
(a)	Revenue
	Revenue from sale of alluvial tin	2,146,298	-
	Finance revenue	1,001	8,228
		2,147,299	8,228
(b)	Other income
	Sundry income	33,773	-
		33,773	-
(c)	Other gains and losses
	Loss on sale of financial assets	-	(1,348,318)
		-	(1,348,318)
(d)	Administration expenses
	Included in administrative expenses:
	Minimum lease payments - operating lease	169,769	198,901
	Consultancy expenses	70,663	198,505
(e)	Employee benefits expenses
	Payroll cost	1,154,993	1,021,544
	Superannuation	20,838	20,229
	As per Statement of Profit or Loss and Other Comprehensive
	Income	1,175,831	1,041,773
	Share-based payments expense	-	50,000
	Total employee benefit expenses	1,175,831	1,091,773
4	INCOME TAX
Statement of Profit or Loss and Other Comprehensive Income
		2014	2013
		$	$
(a)	The components of income tax expense for the years ended
	30 June 2014 and 2013 are:
Statement of Profit or Loss and Other Comprehensive Income
Current income tax
Current income tax charge/(benefit)		-	-
Deferred income tax
Relating to origination and reversal of temporary differences		-	-
Benefit from previously unrecognised tax loss used to reduce
deferred tax expense		-	-
Income tax expense/(benefit) reported in statement of profit or
loss	and other comprehensive income	-	-
Statement of changes in equity
Income tax liability reported in equity		-	-

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES 32 4 ABN 31 004 766 376ABN 31 004 766 376

42

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

A reconciliation of income tax expense (benefit) applicable to accounting profit before income tax at the statutory income tax rate to income tax expense at the Group's effective income tax rate for the years ended 30 June 2014 and 2013 is as follows:

Statement of Profit or Loss and Other Comprehensive Income

	2014	2013
	$	$
Accounting profit (loss) before tax	(5,849,058)	(7,999,617)
At the statutory income tax rate of 30% (2013: 30%)	(1,754,717)	(2,399,885)
Non-deductible expenses	294,178	770,029
Temporary differences and tax losses not recognised	1,460,539	1,629,856
Income tax expense recognised on profit or loss	-	-
	-	-
Effective income tax rate	0%	0%
Unrecognised deferred tax assets and liabilities
Deferred tax assets and liabilities have not been
recognised in respect of the following items:
	2014	2013
	$	$
Deferred tax liabilities
Other assets	(119)	(122)
	(119)	(122)
Deferred tax assets
Business related costs	17,178	19,003
Accrued audit fees	2,929	3,597
Accrued expenses	111,287	112,255
Employee entitlements	34,316	32,355
Foreign exchange loss	438	224,447
Tax losses (domestic)	7,426,858	5,740,810
	7,593,006	6,132,467
Unrecognised deferred tax assets	(7,592,887)	(6,132,345)
	119	122
Net deferred tax	-	-
Tax losses and temporary differences not recognised	7,592,887	6,132,345

The deductible temporary differences and tax losses do not expire under current legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company and Group can utilise benefits.

5 EARNINGS PER SHARE

5 EARNINGS PER SHARE
	2014	2013
	cents	cents
Basic earnings per share	(0.43)	(0.67)
Diluted earnings per share	(0.43)	(0.67)

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

33 4 43

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

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

(a) Reconciliation of earnings used in calculating earnings per share

	2014	2013
	$	$
(Loss)/profit attributable to ordinary equity holders of the
Company used in calculating basic and diluted earnings per	(5,849,058)	(7,999,617)
share

(b) Weighted average number of shares used in the denominator

	Shares	Shares
Weighted average number of ordinary shares used as the
denominator in calculating basic earnings per share	1,375,700,081	1,195,966,832
Adjusted weighted average number of ordinary shares used
in calculating diluted earnings per share	1,375,700,081	1,195,966,832

There were no potential ordinary shares as at 30 June 2014 (600,000 for 30 June 2013).

The consolidated entity's options over ordinary shares could potentially dilute basic earnings per share in the future, however they have been excluded from the calculations of diluted earnings per share because they are anti-dilutive and out of the money for the years presented.

6 CASH AND CASH EQUIVALENTS

2014 2013 $ $	2014 2013 $ $
Cash at bank and in hand Short term deposits	276,698 285,883 - 301,000
	276,698 586,883

Cash at bank and in hand earns interest at floating rates based on daily bank rates.

Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

The fair value of cash and cash equivalents is $276,698 (2013: $586,883).

Reconciliation to statement of cash flows

For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents comprise the following at 30 June:

Cash at bank and in hand	276,698	285,883
Short-term deposits	-	301,000
	276,698	586,883

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

34 4

44

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

	2014	2013
	$	$
Reconciliation from the net profit/(loss) after tax to the net cash flows used in
operations
Net (Loss)/Profit after income tax	(5,849,058)	(7,999,617)
Adjustments for:
Depreciation and amortisation	159,354	86,836
Depreciation allocated to cost of sales	168,474	-
Amortisation of mine properties to cost of sales	745,421	-
Impairment losses	2,089,265	3,645,635
Reversal of impairment of loans to other entities	(8,287)	-
Foreign exchange loss (gain)	(106,454)	(35,258)
Share based payment expense	-	50,000
Loss on disposal of financial asset	-	1,348,318
Loss on disposal of assets	-	1,119
Changes in assets and liabilities
(increase)/decrease in trade and other receivables	298,522	(43,502)
(increase)/decrease in other assets	(2,138)	144,813
(increase)/decrease in inventories	(26,008)	(41,125)
(decrease)/increase in provisions	6,539	34,110
(decrease)/increase in trade and other payables	136,429	380,697
Net cash used in operating activities	(2,387,941)	(2,427,974)

Non-cash transactions

During the 2014 financial year, the Group did not enter into any non-cash investing and financing activities which are not reflected in the statement of cash flows.

During the 2013 financial year, the Group entered into the following non-cash investing and financing activities which are not reflected in the statement of cash flows:

• The issue of 5,000,000 ordinary shares on 18 June 2013 at 1 cent per share in relation to director fees payable.

7 TRADE AND OTHER RECEIVABLES (CURRENT)

		2014	2013
		$	$
Trade receivables	(i)	-	241,450
Other receivables	(ii)	26,683	71,974
Loan receivable from Adobha Resources Ltd	(iii)	-	239,885
Allowance for impairment of receivables	(iii)	-	(239,885)
		26,683	313,424

• (i) Trade receivables are non-interest bearing and are generally on 30-day terms.

• (ii) Other receivables relate to GST receivable from the Australian Taxation Office and a refund due from a supplier.

• (iii) Gippsland loaned funds to Adobha Resources Ltd in relation to the proposed Initial Public Offering (“IPO”) of Adobha Resources Ltd. The loan funds were used by Adobha Resources Ltd for establishment costs, IPO costs, working capital and on-loaning funds to Adobha Resources (Eritrea) Pty Ltd for exploration costs. The proposed IPO was terminated in June 2011. The loan has been fully impaired and written off.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

35 4 45

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

8 INVENTORIES

	2014	2013
	$	$
Spare parts and stores – at cost	112,878	94,976
Spare parts in transit – at cost	8,757	-
Provision for impairment – spare parts	(52,668)	-
	68,967	94,976

The cost of inventories recognised as an expense during the year in respect of continuing operations was nil (2013: nil).

9 OTHER ASSETS

	2014	2013
	$	$
Prepayments	38,370	52,779
Rental deposits	7,976	3,139
Accrued revenue	-	72
	46,346	55,990

10 PROPERTY, PLANT AND EQUIPMENT

	Leasehold	Buildings	Plant and
	Improvements		equipment	Total
	$		$	$
Year ended 30 June 2014
Balance at 30 June 2013	1,614	154,241	1,783,003	1,938,858
Additions	-	1,781	107,847	109,628
Reclassification of exploration and evaluation	-	192,014	-	192,014
Depreciation allocated to cost of sales	-	-	(168,474)	(168,474)
Impairment losses recognised in profit or loss	-	-	(850,071)	(850,071)
Foreign Exchange Adjustment	-	(7,381)	(25,166)	(32,547)
Depreciation and amortisation for the year	(1,614)	(36,877)	(120,864)	(159,355)
Balance at 30 June 2014	-	303,778	726,275	1,030,053
At 1 July 2013
Cost	20,175	170,049	2,245,672	2,435,896
Accumulated depreciation and impairment	(18,561)	(15,808)	(462,669)	(497,038)
Net carrying amount	1,614	154,241	1,783,003	1,938,858
At 30 June 2014
Cost	-	355,115	2,147,020	2,502,135
Accumulated depreciation and impairment	-	(51,337)	(1,420,745)	(1,472,082)
Net carrying amount	-	303,778	726,275	1,030,053
Year ended 30 June 2013
Balance at 30 June 2012	1,806	155,359	1,034,946	1,192,111
Additions	-	8,637	923,984	932,621
Disposals	-		(1,520)	(1,520)
Foreign Exchange Adjustment	-	(86)	(97,432)	(97,518)
Depreciation charge for the year	(192)	(9,669)	(76,975)	(86,836)
Balance at 30 June 2013	1,614	154,241	1,783,003	1,938,858

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

36 4

46

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

Due to the closure of the Alluvial Tin Project in September 2014, the Group carried out a review of the recoverable amount of the Alluvial Mining plant and equipment with a view to bring any impairment required to account during the year ended 30 June 2014. These assets are used in the Group’s Tantalum-Tin reportable segment. The review led to the recognition of an impairment loss of $850,071, which has been recognised in profit or loss. This impairment loss was based on the Group’s estimate of the recoverable amount of the Alluvial Mining plant and equipment being the fair value less costs to sell. As it is difficult to obtain market prices for similar plant and equipment due to the small second-hand market for such assets, the Group has used what it considers is a conservative estimate of fair value less costs to sell for the plant and equipment. No impairment assessment was performed in 2013 as there was no indication of impairment.

11 EXPLORATION AND EVALUATION EXPENDITURE

11 EXPLORATION AND EVALUATION EXPENDITURE
	2014	2013
	$	$
Exploration & evaluation expenditure (at cost)	10,785,834	10,944,830
Accumulated amortisation and impairment	(6,952,799)	(6,903,936)
	3,833,035	4,040,894
Movement:
Exploration & evaluation expenditure
Balance at beginning of year	4,040,894	6,458,211
Current year expenditure	405,509	1,360,342
Foreign exchange adjustment	(207,381)	(132,024)
Reclassification of expenditure as Property, Plant and Equipment	(192,014)	-
Impairment	(213,973)	(3,645,635)
Balance at end of year	3,833,035	4,040,894

The ultimate recoupment of exploration and evaluation expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value.

For the year ended 30 June 2014 and 30 June 2013, evaluation expenditure on the Abu Dabbab project was capitalised at cost, until such time production commences and costs are transferred to ‘mine properties’.

For the year ended 30 June 2014 and 30 June 2013, there was no exploration expenditure on the Wadi Allaqi project.

For the year ended 30 June 2014, exploration expenditure in Eritrea in relation to the Group’s current Exploration Licences (Adobha and Gerasi South) of $213,973 (2013: $3,645,635) was impaired. Due to the reduction of exploration activities in Eritrea, the Group assessed the carrying value of the capitialised exploration expenditure in relation to the Adobha Exploration Licence and Gerasi South Exploration Licence and decided to fully impair the asset. The assessment led to the recognition of an impairment loss of $213,973, which has been recognised in profit or loss. Capitalised expenditure of $3,645,635 was fully impaired in 2013.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

37 4 47

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

12 MINE PROPERTIES

12 MINE PROPERTIES
	2014 2013 $ $
Mine properties (at cost) 1,750,059 1,573,476 Accumulated amortisation and impairment (1,750,059) - - 1,573,476 Movement: Mine properties Balance at beginning of year 1,573,476 910,257 Transfer from exploration and evaluation expenditure - Additions - 1,912,019 Net pre-production revenue - (1,236,406) Prior year pre-production revenue adjustment 111,260 - Foreign exchange adjustments 30,396 (12,394) Amortisation (745,421) - Impairment (969,711) - Balance at end of year - 1,573,476	1,750,059 1,573,476 (1,750,059) -
	- 1,573,476
	- 1,573,476

During the year, $745,421 of the net capitalised costs in relation to the Alluvial Tin Project were amortised based on production. This has been treated as a cost of sales.

The Group carried out a review of the recoverable amount of the Alluvial Tin Project and determined that based on the Group’s forecasts, the recoverable amount of the Alluvial Tin Project was significantly less than its carrying value. The Directors decided to fully impair the remaining balance of net capitalised costs of $969,711, which has been recognised as an impairment expense in profit or loss. No impairment assessment was performed in 2013 as there was no indication of impairment. Accordingly, the carrying value of Mine Properties in the financial statements at the end of the year is nil.

13 TRADE AND OTHER PAYABLES (CURRENT)

2014 2013 $ $	2014 2013 $ $
Trade payables and accruals (i)	1,521,041 1,355,268
	1,521,041 1,355,268

(i) Trade payables and accruals are non-interest bearing and are normally settled on repayment terms between 7 and 30 days.

14 PROVISIONS (CURRENT)

2014 2013 $ $	2014 2013 $ $
Provision for annual leave 79,899 83,721 Provision for long service leave 34,488 24,127 114,387 107,848 15 LOANS AND BORROWINGS (CURRENT) 2014 2013 $ $
Loans – unsecured	2,572,016 -
	2,572,016 -

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

38 4

48

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

During the period, Gandel Metals Pty Ltd, a company related to the Company’s Chairman, Mr Ian Gandel, provided unsecured loans to the Company of totalling $2,572,016. The terms of the loan agreements are as follows:

• (a) the interest rate for the loans is equal to the ANZ loan interest rate, as varied (currently 5.33%);

• (b) the loans are unsecured; and

• (c) the loans are repayable by 1 November 2014 or such earlier date that Gippsland completes a capital raising for an amount equal to or greater than $500,000 more than the overall level of indebtedness to Gandel Metals at the time each loan agreement was entered into (currently the overall level of indebtedness to Gandel Metals is $3,192,000) .

During the year, interest paid or payable on the loan was $50,341.

16 NON-CONTROLLING INTEREST

	2014	2013
	$	$
Balance at beginning of year	(2,166,628)	(2,057,470)
Share of profit/(loss) for the year	(1,997,386)	(180,902)
Share of movement in foreign currency translation reserve	213,496	71,744
Balance at end of year	(3,950,518)	(2,166,628)

17 CONTRIBUTED EQUITY	2014 2013 $ $
(a) Ordinary Shares Issued and fully paid	48,530,322 48,530,322

Fully paid ordinary shares carry one vote per share and carry the right to dividends. Issued capital has no par value.

		Number of
		shares	$
(b) Movement in ordinary share capital
At 30 June 2012		975,210,157	45,530,847
Share issue	(i)	230,684,158	1,384,105
Share issue	(ii)	164,805,766	1,648,057
Share issue	(iii)	5,000,000	50,000
Share issue costs			(82,687)
Subtotal (shares issued during year)		400,489,924	2,999,475
At 30 June 2013		1,375,700,081	48,530,322
Share issue		-	-
Share issue costs			-
Subtotal (shares issued during year)		-	-
At 30 June 2014		1,375,700,081	48,530,322

(i) 230,684,158 shares issued on 10 September 2012 for cash at 0.6 cents each.

(ii) 164,805,766 shares issued on 15 April 2013 for cash at 1 cent each.

(iii) 5,000,000 shares issued on 18 June 2013 in relation to fees payable at 1 cent each.

There are no unissued ordinary shares of Gippsland Limited under option.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

39 4 49

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

18 RESERVES AND ACCUMULATED LOSSES

	2014	2013
	$	$
(a) Reserves
Option issue reserve	534,662	534,662
Foreign currency translation reserve	(2,224,068)	(1,792,583)
	(1,689,406)	(1,257,921)
		Foreign currency
		translation
	Option issue reserve	reserve	Total
	$	$	$
Movements in reserves
At 30 June 2012	534,662	(1,651,423)	(1,116,761)
Share based payment	-	-	-
Currency translation differences	-	(141,160)	(141,160)
As at 30 June 2013	534,662	(1,792,583)	(1,257,921)
Currency translation differences	-	(431,485)	(431,485)
As at 30 June 2014	534,662	(2,224,068)	(1,689,406)
	2014	2013
	$	$
(b) Accumulated losses
Movements in accumulated losses were as follows:
Balance 1 July	(37,964,388)	(30,145,673)
Net profit/(loss) for the year	(3,851,672)	(7,818,715)
Balance 30 June	(41,816,060)	(37,964,388)

(c) Nature and purpose of reserves

Option issue reserve

The option issue reserve is used to record items recognised as expenses on grant of share options.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the net investment hedged in these subsidiaries.

19 INTERESTS IN CONTROLLED ENTITIES

The consolidated financial statements include the financial statements of Gippsland Limited and the controlled entities listed in the following table:

	Country of	Percentage of equity interest	Percentage of equity interest	Investment
	incorporation	held by the Group
		2014	2013	2014	2013
		%	%	$	$
Tantalum International Pty Ltd	Australia	100	100	100	100
Here2win.com Pty Ltd	Australia	-	100	-	100
Adobha Resources (Eritrea) Pty Ltd	Australia	100	100	100	100
Oryx Resources Pty Ltd	Australia	-	100	-	100
Gippsland (Jordan) Pty Ltd	Australia	-	100	-	100
Nubian Resources PLC	United Kingdom	100	100	27,388	27,388
Tantalum Egypt JSC	Egypt	50	50	-	-
Nubian Resources JSC	Egypt	100	100	-	-
				27,588	27,888

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

40 4

50

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

Gippsland Limited is the ultimate Australian parent entity and ultimate parent of the Group.

Tantalum Egypt JSC is included in the consolidated financial statements on the basis that Gippsland Limited controls the activities of Tantalum Egypt JSC by way of Gippsland’s casting vote on the Board of Directors.

Here2win.com Pty Ltd, Oryx Resources Pty Ltd and Gippsland (Jordan) Pty Ltd were dormant subsidiaries and were deregistered during the year.

20 INTERESTS IN JOINT OPERATIONS AND BUSINESS UNDERTAKINGS

At 30 June 2014, the Group was a participant in the following joint operations:

Name of joint operations
	2014	2013
	% Interest	% Interest
Seiga – Wadi Allaqi, Egypt	50	50
Um Shashoba – Wadi Allaqi, Egypt	50	50
Haimur – Wadi Allaqi, Egypt	50	50
Nile Valley Block E – Wadi Allaqi, Egypt	50	50
Nile Valley Block A – Wadi Allaqi, Egypt	50	50
Um Garayat – Wadi Allaqi, Egypt	50	50
Koleit – Wadi Allaqi, Egypt	50	50
Um Tiur – Wadi Allaqi, Egypt	50	50
Abu Swayel – Wadi Allaqi, Egypt	50	50

The joint operations are not separate legal entities. They are contractual arrangements between the participants and are of the type where initially one party contributes tenements with the other party earning a specified percentage by funding exploration activities. The joint operations do not hold any assets and accordingly the Company's share of exploration expenditure is accounted for in accordance with the policy set out in Note 2.

The tenements are granted subject to an agreement with the Egyptian Government (EMRA) dated 21 June 2004 however the status of these tenements is in dispute with EMRA which the Company hopes to resolve through the grant of a large Exploration Licence area that encompasses all of the nine disputed tenements. No expenditure has been incurred or undertaken on the disputed tenements.

21 EXPENDITURE COMMITMENTS

(a) Lease expenditure commitments

The Group has entered into commercial leases for office accommodation in Perth, Australia; Asmara, Eritrea; and Cairo, Egypt.

Perth Office Lease

The property lease is a non-cancellable lease with a rolling 3 month term, with rent payable monthly in advance.

Cairo Office Lease

The property lease is a non-cancellable lease with a five year term, with rent payable monthly in advance.

Asmara Office Lease

The property lease was cancelled during the year following the closure of the Eritrean office.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

41 4 51

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

Future minimum rentals payable as at 30 June are as follows:

Within one year After one year but not more than five years	2014 2013 $ $
	33,500 125,600 20,800 40,800
	54,300 166,400

(b) Exploration expenditure commitments

Under Eritrean mining law, expenditure commitments entered into by a tenement holder with respect to a tenement are mandatory. Failure to expend funds in accordance with a commitment may result in a liability to the Eritrean government to the extent of the unexpended portion of the expenditure commitment, or forfeiture of the tenement/s. The Group has received verbal advice from the Eritrean Ministry of Energy and Mines that the minimum expenditure commitments in relation to the exploration licences has been waived and there is no remaining liability in relation to the current or prior year’s expenditure commitments. The Group has received a letter from the Eritrean Ministry of Energy and Mines stating that the Adobha Exploration Licence and the Gerasi South Exploration Licence may be revoked if exploration activities are not recommenced. The Group is in the process of clarifying this matter with the Eritrean Ministry of Energy and Mines including the status of the tenement renewals for the Adobha and Gerasi South Exploration Licences which were due for renewal on 23 July 2014 and 25 August 2014 respectively. As referred to in the Going Concern note (Note 2(b)), the financial forecast of the Group is based on the deferral of exploration commitments on its Eritrean project from the Eritrean Ministry of Energy and Mines for a period of at least 12 months from the date of the signing of this financial report. As at 30 June 2014, the Eritrean exploration licences were fully impaired. The Group has pending applications regarding other exploration licence areas.

During 2011, the Group committed to spend US$300,000 on exploration at its Nuweibi Tantalum-Tin Project by 31 December 2011. Drilling at Nuweibi planned for the December 2011 quarter was deferred due to the lack of a suitable drilling rig. Approximately US$294,400 as at 30 June 2014 is required to be spent in relation to exploration once a suitable drilling rig becomes available in order to meet this expenditure commitment.

The Group has no other minimum exploration expenditure commitments in respect to any mining tenements or projects.

(c) Joint venture expenditure commitments

The Group has no minimum expenditure commitments in respect to any of its mining joint ventures.

(d) Bank guarantee

A subsidiary of the Group has been required to provide a bank guarantee of US$30,000 to the General Authority for Investment and Free Zone in Egypt. The letter of guarantee is valid until 10 August 2015.

(e) Capital Commitments

There are no capital commitments of the Group at 30 June 2014.

22 SHARE BASED PAYMENT PLANS

(a) Recognised share-based payment expenses

The expense recognised for share based payments during the year is shown in the table below:

Expense arising from equity-settled share-based payment transactions	2014 2013 $ $
	- 50,000
	- 50,000

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4

52

ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

(b) Types of share-based payment plans

On 25 November 2011, 1,200,000 options were issued to employees of the Company for nil consideration. The expiry date, exercise price and fair value of the options are shown in the table below.

The following share-based payment arrangements were in existence during the current and prior reporting periods:

Options series	Number	Grant date	Expiry date	Exercise price	Fair value at
					grant date
				$	$
(1) Issued 25 November 2011 (*)	600,000	25/11/11	31/12/12	0.04	0.0032
(2) Issued 25 November 2011 (*)	600,000	25/11/11	31/12/13	0.06	0.0039
Shares	Number	Issue date	Fair value at
			issue date
			$
Ordinary fully paid	5,000,000	18/6/13	0.01

(*) In accordance with the terms of the share-based arrangement, options issued during the financial year ended 30 June 2012, vest at the date of their issue.

(c) Summary of options granted

The following table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options issued during the year.

	2014	2014	2013	2013
	No	WAEP	No	WAEP
Outstanding at the beginning of the year	600,000	0.06	1,200,000	0.05
Granted during the year	-	-	-	-
Exercised during the year	-	-	-	-
Expired during the year	(600,000)	0.06	(600,000)	0.04
Outstanding at the end of the year	-	-	600,000	0.06
Exercisable at the end of the year	-	-	600,000	0.06

(d) Weighted average of remaining contractual life

There are no options outstanding at the end of the year. The weighted average remaining contractual life for the share options outstanding as at 30 June 2013 was 0.50 years.

(e) Range of exercise price

There are no options outstanding at the end of the year. The exercise price for options outstanding at the end of the previous year was $0.06.

(f) Option pricing model

Equity-settled transactions

There were no equity-settled share options granted during the year.

23 CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(a) Contingent Liabilities

The Group did not have any contingent liabilities as at Balance Date.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4 53

ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

(b) Contingent Assets

During 2012, the Company executed a sale and purchase agreement with Stellar Resources Ltd whereby Stellar Resources Ltd acquired the Company’s 40% interest in the Heemskirk Tin Project for 43,528,743 shares in Stellar Resources Ltd and a royalty. The 43,528,743 shares in Stellar Resources Ltd were sold during 2013. Under the Minerals Royalty Deed dated 30 January 2012, the royalty receivable by the Company will be calculated as follows:

Net Realised Price (Tin Price) per tonne Royalty Percentage

Less than $25,000	Nil
$25,000 - $30,000	1% plus 0.0002% for every $1 the Net Realised Price is over $25,000
$30,000 or more	2%

The Group did not have any other contingent assets as at Balance Date.

24 SUBSEQUENT EVENTS

Gandel Metals Pty Ltd, a company associated with Mr Ian Gandel, has entered into agreements to provide loan funding to Gippsland for a total of $620,000 for working capital.

The terms of the agreements are as follows:

• (a) the interest rate for the loans is equal to the ANZ facility interest rate, as varied (currently 5.33%);

• (b) the loans are unsecured; and

• (c) the loans are repayable the earlier of:

• 1 November 2014; and

• 5 business days after completion of a capital raising by Gippsland for an amount equal to or greater than $500,000 more than the overall level of indebtedness to Gandel Metals at the time each loan agreement was entered into (currently the overall level of indebtedness to Gandel Metals is $3,192,000).

In August 2014, the Board of Tantalum Egypt JSC approved and signed a non-binding agreement with a major smelting company for toll smelting the tantalum-tin concentrates planned to be produced from the Abu Dabbab Tantalum-TinFeldspar Project.

On 10 September 2014, the Company ceased operations at its Alluvial Tin Project joint venture in Egypt.

No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

25 REMUNERATION OF AUDITORS

The auditor of Gippsland Limited is Deloitte Touche Tomatsu (“Deloitte”).

		2014	2013
		$	$
Amounts received or due and receivable by Deloitte for:
•	an audit or review of the financial report of the entity and any
	other entity in the Group	40,517	63,892
Amounts received by auditors other than Deloitte for:
•	an audit or review of the financial report of the entity and any
	entity in the Group	30,104	39,632
		70,621	103,524

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

44 4

54

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

26 RELATED PARTY DISCLOSURE

The following table provides the total amount of transactions which have been entered into with related parties for the relevant financial year:

relevant financial year:
	2014	2013
	$	$
Gandel Metals Pty Ltd – a company controlled by Mr IJ Gandel
became entitled to director’s fees and these fees are payable at
the balance date.	80,000*	80,000*
Gandel Metals Pty Limited – a company associated with Mr IJ
Gandel provided loan funds to Gippsland. The interest rates for
the loans is 5.33%, the loans are unsecured and are outstanding at
the balance date (Refer to Note 15).	2,572,016	-
Gandel Metals Pty Limited – a company associated with Mr IJ
Gandel received interest on its loan funds to Gippsland. The
interest rate for the loan is 5.33%, the loans were unsecured and
are outstanding at the balance date.	50,341	-
Abbotsleigh Pty Limited – a company associated with Mr IJ Gandel
provided loan funds to Gippsland. The interest rate for the loans
was 7.14% (2013), the loans were unsecured and both loans have
been repaid.	-	1,200,000
Abbotsleigh Pty Limited – a company associated with Mr IJ Gandel
was repaid loan funds by Gippsland. The interest rate for the
loans was 7.14% (2013) and the loans were unsecured.	-	1,200,000
Abbotsleigh Pty Limited – a company associated with Mr IJ Gandel
received interest on its loan funds to Gippsland up to the date of
repayment of the loan by Gippsland Ltd. The interest rate for the
loans was 7.14% (2013), the loans were unsecured and both loans
have been repaid.	-	9,215
Keystone Resource Development – a business controlled by Mr
MB Rosenstreich received managing director’s fees. This amount
includes consulting fees of $70,200 paid to Mr Rosenstreich
during the period prior to his appointment as a director of the
Company.	102,360*	-
Mandu Pty Ltd – a company controlled by Dr JM Chisholm
received geological consulting fees.	-	197,400*
Ventureworks JDK Pty Ltd – a company controlled by Mr JD Kenny
became entitled to director’s fees and these fees are payable at
the balance date.	40,000*	40,000*
Mr J Starink – received director fees and consulting fees.	150,000*	300,000*
John S Dunlop and Associates Pty Ltd – a company controlled by
Mr JSF Dunlop received directors and mining consulting fees.	-	50,000*

• Note: These amounts are included within the Remuneration Report in the Directors’ Report.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

45 4 55

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2014

27 KEY MANAGEMENT PERSONNEL COMPENSATION

(a) Details of key management personnel

IJ Gandel - Chairman (Non-Executive) MB Rosenstreich - Managing Director J Starink - Executive Director J Kenny - Non-Executive Director A Ayyash - Regional Manager - Middle East and North Africa

(b) Compensation of key management personnel

The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:

	2014	2013
	$	$
Short-term employee benefits	572,601	806,000
Post-employment benefits	-	-
Share-based payment	-	50,000
	572,601	856,000

(c) Other transactions with key management personnel

Please refer to Note 26 regarding loans from key management personnel to the Company.

28 SEGMENT INFORMATION

(a) Reportable segments

The Group operates predominantly in the mining and exploration industry.

Information reported to the Group’s chief operating decision maker for the purpose of resource allocation and assessment of segment performance is focussed on the type of resources being explored for and evaluated or developed. The Group’s reportable segments under AASB 8 are therefore as follows:

• Tantalum

• Gold

• Copper

• • Corporate

The tantalum segment relates to the development of the Group’s Abu Dabbab tantalum-tin project in Egypt. The gold segment relates to the exploration activities at Wadi Allaqi in Egypt. The copper segment relates to the exploration activities at the Adobha project in Eritrea. The corporate segment relates to operations of the corporate head office in Perth, Western Australia.

The following tables present revenue and profit information and certain asset and liability information regarding reportable segments for the years ended 30 June 2014 and 2013.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES 46 4 ABN 31 004 766 376ABN 31 004 766 376

56

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

					Total
		Continuing	Operations		Operations
	Tin/Tantalum	Gold	Copper	Corporate
	$	$	$	$	$
Year ended 30 June 2014
Revenue
Other revenues from external customers	2,146,298	-	-	34,774	2,181,072
Inter-segment transactions	-	-	-	-	-
Total segment revenue	2,146,298	-	-	34,774	2,181,072
Inter-segment elimination					-
Total consolidated revenue					2,181,072
Result
Segment net operating loss after tax	(4,229,413)	(71,768)	(330,408)	(1,217,469)	(5,849,058)
Profit/(loss) before income tax and minority
interest					(5,849,058)
Income tax expense					-
Net profit (loss) for the year					(5,849,058)
Assets and liabilities
Segment assets	4,854,772	18,842	153,341	254,827	5,281,782
Total assets					5,281,782
Segment liabilities	(660,385)	(176,909)	(61,424)	(3,308,726)	(4,207,444)
Total liabilities					(4,207,444)
Other segment information
Capital expenditure	(109,277)	-	-	(351)	(109,628)
Amortisation of mine properties	(745,421)	-	-	-	(745,421)
Depreciation	(91,154)	(11,216)	(39,488)	(17,496)	(159,354)
Depreciation allocated to cost of sales	(168,474)	-	-	-	(168,474)
Impairment losses	(1,875,292)	-	(213,973)	-	(2,089,265)
Year ended 30 June 2013
Revenue
Other revenues from external customers	-	-	-	8,228	8,228
Inter-segment transactions	-	-	-	-	-
Total segment revenue	-	-	-	8,228	8,228
Inter-segment elimination					-
Total consolidated revenue					8,228
Result
Segment net operating loss after tax	(1,264,792)	(37,533)	(3,791,089)	(2,906,203)	(7,999,617)
Profit/(loss) before income tax and minority
interest					(7,999,617)
Income tax expense					-
Net profit (loss) for the year					(7,999,617)
Assets and liabilities
Segment assets	7,802,728	32,855	246,164	522,754	8,604,501
Total assets					8,604,501
Segment liabilities	(752,326)	(163,273)	(40,836)	(506,681)	(1,463,116)
Total liabilities					(1,463,116)
Other segment information
Capital expenditure	(928,881)	-	(1,748)	(1,992)	(932,621)
Depreciation	(27,454)	(8,344)	(38,129)	(12,909)	(86,836)
Impairment losses	-	-	(3,645,635)	-	(3,645,635)

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

47 4 57

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

(b) Geographical information

The Group's geographical areas are determined based on the location of the Group's assets and operations.

The following tables present revenue, expenditure and certain asset information regarding geographical locations for the years ended 30 June 2014 and 2013:

Australia Egypt Eritrea Total $ $ $ $	Australia Egypt Eritrea Total $ $ $ $	Australia Egypt Eritrea Total $ $ $ $
Year ended 30 June 2014 Revenue Other revenues from external customers 34,774 2,146,298 - 2,181,072 Less revenue attributable to discontinued operation - - - - Revenue from continuing operations 34,774 2,146,298 - 2,181,072 Inter-segment sales - - - - Segment revenue 34,774 2,146,298 - 2,181,072 Other segment information Segment assets 254,827 4,873,614 153,341 5,281,782 Total assets 5,281,782 Capital expenditure (351) (109,277) - (109,628)
	34,774 2,146,298 -	2,181,072
		5,281,782
		5,281,782
		(109,628)
Year ended 30 June 2013 Revenue Other revenues from external customers 8,228 - - 8,228 Less revenue attributable to discontinued operation - - - - Revenue from continuing operations 8,228 - - 8,228 Inter-segment sales - - - - Segment revenue 8,228 - - 8,228 Other segment information Segment assets 522,754 7,835,583 246,164 8,604,501 Total assets 8,604,501 Capital expenditure (1,992) (928,881) (1,748) (932,621)		8,228 -
	8,228 - - - - -	8,228 -
	8,228 - -	8,228
		8,604,501
		(932,621)

29 FINANCIAL INSTRUMENTS

(a) Financial risk management policy

The Group's management of financial risk is aimed at ensuring net cash flows are sufficient to:

• meet all financial commitments as and when they fall due, and

• maintain the capacity to fund its forecast project development and exploration strategies.

The Group continually monitors and tests its forecast financial position against these criteria.

The Group's principal financial instruments comprise cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken.

The Group currently has had minimal exposure to commodity price risk but it is expected that as the Group's core Abu Dabbab Tantalum-Tin Project moves into the construction and production phase, the exposure to these risks is expected

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

48 4

58

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

to increase significantly. The main risks arising from the Group's financial instruments presently are interest rate risk, foreign currency risk, credit risk, security risk and liquidity risk.

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 rate and foreign exchange risk and assessments of market forecasts for interest rate, foreign exchange and commodity prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.

(b) Interest rate risk

The following table sets out the carrying amount of the financial instruments exposed to interest rate risk:

	2014	2013
	$	$
FINANCIAL ASSETS
Interest Bearing
Cash at bank	-	416,502
Weighted average interest rate	0.00%	1.60%
Non-Interest Bearing
Cash at bank	276,698	170,381
Trade receivables	26,683	313,424
	303,381	900,307
FINANCIAL LIABILITIES
Interest Bearing
Unsecured loans	2,572,016	-
Weighted average interest rate	5.33%	0.00%
Non-Interest Bearing
Trade and other payables	1,521,041	1,355,268
	4,093,057	1,355,268

The following table summarises the sensitivity of financial assets held at balance date to interest rate risk, following a movement of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below.

		Post-tax gain/(loss)/equity	Post-tax gain/(loss)/equity
		increase/(decrease)
		2014	2013
		$	$
+1% (100	basis points)	-	4,163
-1% (100	basis points)	-	(4,163)

GIPPSLAND LIMITED AND CONTROLLED ENTITIES GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376ABN 31 004 766 376

49 4 59

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

(c) Fair values

Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments recognised in the financial statements.

recognised in the financial statements.
	Carrying	Amount	Fair Value
	2014	2013	2014	2013
	$	$	$	$
Financial Assets
Cash	276,698	586,883	276,698	586,883
Trade and other receivables - current	26,683	313,424	26,683	313,424
Financial Liabilities
Trade and other payables	1,521,041	1,355,268	1,521,041	1,355,268
Unsecured loans	2,572,016	-	2,572,016	-

Cash, cash equivalents and security deposits: The carrying amount approximates fair value because of their short term to maturity

Trade receivables and trade creditors: The carrying amount approximates fair value.

Fair value hierarchy as at 30 June 2014

	Level 1	Level 2	Level 3	Total
Financial assets
Cash	276,698	-	-	276,698
Trade and other receivables - current	-	26,683	-	26,683
Total	276,698	26,683	-	303,381
Financial liabilities
Trade and other payables	-	1,521,041	-	1,521,041
Unsecured loans	-	2,572,016	-	2,572,016
Total	-	4,093,057	-	4,093,057

(d) Credit risk

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, and trade and other receivables. The Group's exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments.

The Group does not hold any credit derivatives to offset its credit exposure.

In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant.

There are no significant concentrations of credit risk within the Group.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4

60

ABN 31 004 766 376

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

(e) Liquidity risk

The Group's liquidity position is managed to ensure sufficient funds are available to meet our financial commitments in a timely and cost-effective manner.

As referred to in the Going Concern note (Note 2(b)), the Group’s liquidity position will depend on several factors, including, but not limited to the following:

• i. Obtaining the further loan funding to 30 November 2014 based on the conditional letter of support noted in Going Concern note (Note 2(b));

• ii. The continual deferral of amounts currently due and payable to trade creditors and other payables, particularly in respect to the Egyptian operations;

• iii. Strategic sale of an equity interest in the core project for a tranche 1 consideration of $16,950,000 by 1 December 2014;

• iv. Sale of plant and equipment from the Alluvial Mining Project for at least $351,000 by 1 December 2014; and

• v. Obtaining a licence renewal confirmation and deferral on exploration commitments on its Eritrean project from the Eritrean Ministry of Energy and Mines for a period of at least 12 months from the date of the signing of this financial report.

The Company continually reviews its liquidity position including cash flow forecast to determine the forecast liquidity position and maintain appropriate liquidity levels.

In addition to commitment disclosure in Note 21(b), the table below reflects the contractual maturity of financial instruments as at 30 June. Cash flows for financial instruments are presented on an undiscounted basis.

		Aging	analysis between		Currency
2014	Total	**<30 days **	**30-60 days **	**>60 days **	AUD	Other
Cash and Cash
Equivalents	(276,698)	(276,698)	-	-	(208,131)	(68,567)
Trade Receivables	(26,683)	(26,683)	-	-	(20,472)	(6,211)
Trade Payables	1,071,110	369,920	94,093	607,097	644,202	426,908
Other Payables	449,932	-	-	449,932	-	449,932
Unsecured Loans	2,572,016	188,000	166,000	2,218,016	2,572,016	-
Total	3,789,677	254,539	260,093	3,275,045	2,987,615	802,062
		Aging	analysis between		Currency
2013	Total	**<30 days **	**30-60 days **	**>60 days **	AUD	Other
Cash and Cash
Equivalents	(586,883)	(586,883)	-	-	(418,134)	(168,749)
Trade Receivables	(313,424)	(313,424)	-	-	(54,455)	(258,969)
Trade Payables	880,990	520,302	48,200	312,488	434,542	446,448
Other Payables	474,278	-	-	474,278	-	474,278
Total	454,961	(380,005)	48,200	786,766	(38,047)	493,008

(f) Foreign Exchange Risk

As a result of operations in Egypt, the Group's statement of financial position can be affected significantly by movements in the EGP/AUD exchange rates. The Group also has transactional currency exposures. Such exposure arises from sales or purchases by an operating entity in currencies other than the functional currency.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 61

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

At 30 June 2014, the Group had the following exposure to foreign currency:

	2014	2013
Financial Assets
US$
Cash and cash equivalents	60,666	99,443
EGP
Cash and cash equivalents	7,611	19,517
Trade Receivables	3,858	258,969
Nakfa
Cash and cash equivalents	290	49,789
Nakfa
Trade Receivables	2,353	49,789
	74,778	427,718
Financial Liabilities
US$
Trade and other payables	151,899	237,932
EGP
Trade and other payables	709,347	651,160
Nakfa
Trade and other payables	5,832	19,644
GBP
Trade and other payables	9,762	11,990
	876,840	920,726
Net exposure	(802,062)	(493,008)

The following sensitivity is based on the most significant foreign currency risk exposures in existence at the statement of financial position date, which is the Australian Dollar moving against the Egyptian Pound (EGP).

At 30 June 2014, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Judgements of reasonably possible movements:

	Post Tax Loss	(Higher)/Lower	Equity	Higher/(Lower)
	2014	2013	2014	2013
	$	$	$	$
AUD/EGP +10%	(403,111)	(40,568)	(1,479,190)	(1,160,772)
AUD/EGP -10%	492,691	49,583	1,807,899	1,418,721

Foreign exchange rates used during the period were as follows:

	2014	2013
	AUD:EGP	AUD:EGP
Rate as at 30 June	6.71700	6.37220
Average Rate for year ended 30 June	6.37300	6.57920

(g) Capital management policy

The Board's policy is to preserve its capital base as much as possible so as to maintain investor, creditor and market confidence and to sustain future development of the business. Short-term funding for the Group has been obtained via loan funding from Gandel Metals Proprietary Limited (a director related entity of Ian Gandel) to fund operations and commitments. As referred to in the Going Concern note (Note 2(b)), a further capital raising of at least $16,950,000 is estimated to be required by December 2014, however, the actual amount of any capital raising will be determined closer to the time and be subject to the operational requirements of the Group.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

62

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

There were no changes in the Group's approach to capital management during the year.

Neither the Company nor any of its controlled entities are subject to externally imposed capital requirements.

(h) Equity price risk

The Group is no longer exposed to equity price risks arising from equity.

30 PARENT ENTITY INFORMATION

The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Refer to Note 2 for a summary of the significant accounting policies relating to the Group.

accounting policies relating to the Group.
	2014	2013
	$	$
(a) Financial Position
Assets
Current assets	248,195	498,977
Non-current assets	34,220	51,665
Total assets	282,415	550,642
Liabilities
Current liabilities	3,308,726	506,681
Non-current liabilities	-	-
Total liabilities	3,308,726	506,681
Equity
Contributed equity	48,530,322	48,530,322
Accumulated losses	(52,091,295)	(49,021,023)
Option issue reserve	534,662	534,662
Total equity	(3,026,311)	43,961
	2014	2013
	$	$
(b) Financial Performance
Profit/(loss) for the year	(3,070,272)	(6,966,347)
Other comprehensive income	-	-
Total comprehensive income	(3,070,272)	(6,966,347)

(c) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries

At the Balance Date there are no guarantees entered into by the Parent Entity in relation to the debts of its subsidiaries (2013: nil).

(d) Contingent liabilities of the parent entity

The Parent Entity did not have any contingent liabilities as at Balance Date.

(e) Commitments for capital expenditure entered into by the parent entity

The Parent Entity did not have any commitments for capital expenditure as at Balance Date.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES

4 63

ABN 31 004 766 376

DIRECTORS' DECLARATION

The directors of Gippsland Limited declare that:

• (a) in the directors’ opinion, the financial statements and notes on pages 2 to 3, and the remuneration disclosures 2 6 that are contained in the Directors' report, set out on pages 6 to 10, are in accordance with the set out on pages 16 to 20, are in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the Consolidated Entity's financial position as at 30 June 2014 and of its performance, for the year ended on that date; and

• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001.

• (b) in the directors’ opinion, the financial report also complies with International Financial Reporting Standards issued by the International Accounting Standards Board as disclosed in Note 2(c) to the financial statements; and

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

The directors have been given the declarations required by Section 295A of the Corporations Act 2001 .

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

Dated 30[th] day of September 2014.

==> picture [118 x 65] intentionally omitted <==

MB Rosenstreich Managing Director

~~GIPPSLAND LIMITED AND CONTROLLED ENTITIES~~ GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376 ABN 31 004 766 376

~~54~~

4

64

Deloitte Touche Tohmatsu ABN 74 490 121 060

==> picture [127 x 25] intentionally omitted <==

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

Independent Auditor’s Report to the Members of Gippsland Limited

Tel: +61 8 9365 7000 Fax: +61 9365 7001 www.deloitte.com.au

Report on the Financial Report

We have audited the accompanying financial report of Gippsland Limited, which comprises the statement of financial position as at 30 June 2014, the statement of profit or loss and other comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity, comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 22 to 64.

Directors’ Responsibility for the Financial Report

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

Auditor’s Responsibility

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

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

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

Auditor’s Independence Declaration

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

Liability limited by a scheme approved under Professional Standards Legislation.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 65

==> picture [92 x 18] intentionally omitted <==

Opinion

In our opinion:

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

• (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the year ended on that date; and

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

• (b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 2(c).

Material Uncertainty Regarding Continuation as a Going Concern

Without modifying our opinion, we draw attention to Note 2(b) in the financial report which indicates that the consolidated entity has incurred net losses of $5,849,058 (2013: $7,999,617) and experienced net cash outflows from operations of $2,387,941 (2013: $2,427,974) and net cash outflows from investing activities of $481,441 (2013: $1,167,790) for the year ended 30 June 2014. These conditions, along with other matters set out in Note 2(b), indicate the existence of a material uncertainty that may cast significant doubt about the company’s and the consolidated entity’s ability to continue as going concerns and therefore, whether they will realise their assets and extinguish their liabilities in the ordinary course of business.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 6 to 10 16 to 20 of the directors’ reportof the directors’ report for the year ended 30 June 2014. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion the Remuneration Report of Gippsland Limited for the year ended 30 June 2014, complies with section 300A of the Corporations Act 2001 .

DELOITTE TOUCHE TOHMATSU

Chris Nicoloff Partner Chartered Accountants Perth, 30 September 2014

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

66

56

ASX ADDITIONAL INFORMATION

AS AT 30 SEPTEMBER 2014

Shares

A TOTAL EQUITY Shares SECURITIES Totals on Issue 1,375,700,081

B	DISTRIBUTION OF
	EQUITY SECURITIES
	1 ‐ 1,000	41
	1,001 ‐ 5,000	40
	5,001 ‐ 10,000	31
	10,001 ‐ 100,000	460
	100,001 and over	407
		979
	No of shareholders holding	849
	an unmarketable parcel

C	TOP 20 SHAREHOLDERS	Number	%
1	Abbotsleigh Pty Ltd	586,788,200	42.65
2	JP Morgan Nominees Aust Limited	140,979,205	10.25
3	Situate Pty Ltd	61,408,626	4.46
4	HSBC Custody Nominees Aust Limited	45,124,691	3.28
5	Sunland Systems Pty Ltd	28,550,000	2.08
6	Nessim Emile Alfred	24,998,534	1.82
7	Taveroam Pty Limited	19,140,345	1.39
8	Citicorp Nominees Pty Limited	18,543,364	1.35
9	Situate Pty Limited	17,777,517	1.29
10	King Town Holdings Pty Ltd	16,000,000	1.16
11	Leejames Nominees Pty Limited	12,000,000	0.87
12	Taveroam Pty Ltd	10,260,243	0.75
13	Richard Henry Gardiner	10,150,000	0.74
14	BNP Paribas Nominees Pty Ltd	9,007,968	0.65
15	Croftbank Pty Limited	8,324,133	0.61
16	David Same	8,148,006	0.59
17	Eco International Pty Ltd	7,812,369	0.57
18	Threesixty Group Pty Ltd	7,641,000	0.56
19	EJ & LY Congdon	7,000,000	0.51
20	Invia Custodians Pty Limited	6,714,286	0.49
		1,046,368,487	76.07
D	SUBSTANTIAL SHAREHOLDERS	Number	%
	Abbotsleigh Pty Ltd	586,788,200	42.65
	Situate Pty Ltd, Taveroam Pty Ltd and RW Beale	109,000,000	7.92

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 67

ASX ADDITIONAL INFORMATION

AS AT 30 SEPTEMBER 2014

E VOTING RIGHTS

Under the Company's constitution, all ordinary shares carry one vote per share without restriction.

F EXPLORATION INTERESTS

As at 30 September 2014, the Company has an interest in the following tenements:

Country	Project	Tenement	Status	Interest
Egypt	Abu Dabbab	Exploitation Licence 1658	Granted	50%1
Egypt	Abu Dabbab	Exploitation Licence 1659	Granted	50%1
Egypt	Nuweibi	Exploitation Licence 1785	Granted	50%
Egypt	Wadi Allaqi ‐ Seiga	Exploration Licence2	Pending	‐
Egypt	Wadi Allaqi ‐ Shashoba	Exploration Licence2	Pending	‐
Egypt	Wadi Allaqi – Haimur	Exploration Licence2	Pending	‐
Egypt	Wadi Allaqi – Garayat	Exploration Licence2	Pending	‐
Egypt	Wadi Allaqi – Koleit	Exploration Licence2	Pending	‐
Egypt	Wadi Allaqi – Nile Valley A	Exploration Licence2	Pending	‐
Egypt	Wadi Allaqi – Nile Valley E	Exploration Licence2	Pending	‐
Egypt	Wadi Allaqi – Abu Swayel	Exploration Licence2	Pending	‐
Egypt	Wadi Allaqi – Um Tiur	Exploration Licence2	Pending	‐
Eritrea	Adobha	Exploration Licence	Granted	100%
Eritrea	Adobha (Gerasi South)	Exploration Licence	Granted	100%
Eritrea	Adobha (Gerasi)	Exploration Licence	Pending	‐

Notes:

1. Gippsland holds 50% of the shares in TEJSC which holds the exploration licences.

2. Tenements granted subject to an agreement with the Egyptian Government (EMRA) dated 21 June 2004 however the status of these tenements is in dispute with EMRA which the Company hopes to resolve through the grant of a large Exploration Licence area that encompasses all of the nine disputed tenements. Until the dispute is resolved, the Company believes it is prudent to list its interest as Nil.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

68

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

ASX CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS

The Company is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve, the Company has turned to the ASX Corporate Governance Principles and Recommendations issued in August 2007 (and amended in 2010). As consistency with the ASX guidelines has been a gradual process, where the Company did not have certain policies or committees recommended by the Council in place for the entire reporting period, the Company has identified when such policies or committees were introduced. The Company has endeavoured to early adoption of the revised principles and recommendations.

To illustrate where the Company has addressed each of the Council's revised recommendations, the following summary cross‐references each revised recommendation with sections of the Corporate Governance Statement.

Introduction

Gippsland Limited has adopted systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised below.

The following additional information about the Company's corporate governance practices is set out on the Company's website at www.gippslandltd.com:

• Corporate Governance Statement including disclosures and explanations;

• Summary of Code of Ethics and Conduct for Directors and Key Executives;

• Summary of Securities Trading Policy;

• Audit Committee Charter;

• Remuneration Committee Charter;

• Summary of Continuous Disclosure Policy;

• Summary of Shareholder Communications Strategy;

• Policy on Risk Oversight and Management of Material Business Risks; and

• Summary of Company Code of Ethics and Conduct.

Explanations for Departures from Best Practice Recommendations

During the financial year the Company has complied with the majority of the Eight Essential Corporate Governance Principles and the corresponding Best Practice Recommendations as published by the Council and as detailed below:

1. LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

Council Principle 1: Companies should establish and disclose the respective roles and responsibilities of board and management.

Council Recommendation 1.1:

Establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

The Company complies with this recommendation.

The board has set out the responsibilities of the Board in Section 1.1 of its Corporate Governance Statement which can be accessed on the Company website. Any functions not reserved for the Board and not expressly reserved for members by the Corporations Act 2001 and ASX Listing Rules are reserved for senior executives.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 69

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

Council Recommendation 1.2:

Disclose the process for evaluating the performance of senior executives.

The Company complies with this recommendation.

Arrangements put in place by the Board to monitor the performance of the Group's executives include:

• a review by the Board of the Group's financial and operating performance;

• comparison of executive remuneration levels to industry benchmarks; and

• annual performance appraisal meetings between the executive and the Chairman incorporating analysis of performance with each individual to ensure that the level of reward is aligned with respective responsibilities and individual contributions made to the success of the Company.

Council Recommendation 1.3:

Companies should provide the information indicated in the Guide to reporting on Principle 1

The Company complies with recommendations 1.1 and 1.2.

The Company did not comply with its policies as there was no formal review of senior executive performance in accordance with the above policy during the financial year. The Company plans to undertake a performance evaluation during this calendar year.

2. STRUCTURE THE BOARD TO ADD VALUE

Council Principle 2: Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.

Council Recommendation 2.1:

A majority of the Board should be independent directors.

The Company does not comply with this Recommendation.

Currently the Board of Gippsland Limited has one independent director, Mr J Kenny, and three non‐independent directors, Mr I Gandel, Mr M Rosenstreich and Mr J Starink. Prior to the appointment of Mr M Rosenstreich on 24 March 2014, the Board comprised one independent director and two non‐independent directors. Mr Starink is not independent by virtue of the fact that he is an executive. Mr Gandel is not independent as he holds a substantial interest in the Company's securities.

While the Board strongly endorses the position that boards need to exercise independence of judgment, it also recognises (as does ASX Corporate Governance Council Principle 2) that the need for independence is to be balanced with the need for skills, commitment and a workable board size. The Board believes it has recruited members with the skills, experience and character to discharge its duties and that any greater emphasis on independence would be at the expense of the Board's effectiveness.

Mr Kenny is a Non‐Executive Director of the Company. He is considered independent within the ASX Corporate Governance Council's guidelines.

At present the Company believes that the individuals on the Board can make, and do make, quality and independent judgments in the best interests of the Company on all relevant issues. Directors having a conflict of interest in relation to a particular item of business must absent themselves from the Board Meeting before commencement of discussion on the

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

70

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

topic.

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the expense of appointing additional independent Non‐Executive Directors.

Council Recommendation 2.2:

The chair should be an independent director.

The Company does not comply with this Recommendation.

The Company's Chairman, Mr I Gandel, is not considered by the Board to be independent as he holds a substantial interest in the Company's securities.

However the Board believes that the Chairman is able and does bring quality judgment to all relevant issues falling within the scope of the role of a Chairman.

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to necessitate the appointment of an independent Chairman.

Council Recommendation 2.3:

The roles of chair and chief executive officer should not be exercised by the same individual.

The Company does comply with this Recommendation.

Mr I Gandel is the Non‐Executive Chairman and the role of Chief Executive Officer is undertaken by Mr Rosenstreich. Prior to the appointment of Mr Rosenstreich on 24 March 2014, Mr Starink was the sole executive director. The roles of chairman and chief executive officer are not exercised by the same individual.

Council Recommendation 2.4:

The Board should establish a nomination committee .

The Company does not comply with this Recommendation.

The board does not have a nomination committee. The Board considers that the Company is not currently of a size to justify the formation of a nomination committee. The Board as a whole undertakes the process of reviewing the skill base and experience of existing Directors to enable identification of attributes required in new Directors. Where appropriate independent consultants are engaged to identify possible new candidates for the Board.

The membership of the Board, its activities and composition is subject to periodic review. The criteria for determining the identification and appointment of a suitable candidate for the Board shall include quality of the individual, background of experience and achievement, compatibility with other Board members, credibility within the Company's scope of activities, intellectual ability to contribute to Board's duties and physical ability to undertake Board's duties and responsibilities.

Directors are initially appointed by the full Board subject to election by shareholders at the next Annual General Meeting. Under the Company's Constitution the tenure of Directors is subject to reappointment by shareholders not later than the third anniversary following his last appointment. A Managing Director may be appointed for any period and on any terms the Directors think fit and, subject to the terms of any agreement entered into, the Board may revoke any appointment.

The Board acknowledges this does not comply with Recommendation 2.4 of the ASX Corporate Governance Guidelines. If the Company's activities increase in size, scope and nature, the appointment of a nomination committee will be reviewed by the Board and implemented if appropriate.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 71

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

Council Recommendation 2.5:

Disclose the process for evaluating the performance of the board, its committees and individual directors.

The Company complies with this recommendation.

The Board has adopted an annual evaluation process to measure its own performance. Also, the Board undertakes an annual review in relation to the composition and skills mix of the Directors of the Company.

Council Recommendation 2.6:

Companies should provide the information indicated in the Guide to reporting on Principle 2.

The Company complies with this recommendation and provides the following disclosures.

The skills, experience and expertise relevant to the position held by each director are disclosed in the Directors Report.

The Board has determined that individual Directors have the right in connection with their duties and responsibilities as Directors, to seek independent professional advice at the Company's expense. The engagement of an outside adviser is subject to prior approval of the Chairman and this will not be withheld unreasonably. If appropriate, any advice so received will be made available to all Board members.

Period of Office Held by each director in office at the date of the Directors Report

Mr I Gandel – appointed 24 June 2009, date of last re‐election 16 November 2012, tenure 5 years. Mr M Rosenstreich ‐ appointed 24 March 2014, tenure 5 months.

Mr J Starink – appointed 8 May 2007, date of last re‐election 27 November 2013, tenure 7 years.

Mr J Kenny – appointed 2 September 1999, date of last re‐election 27 November 2013, tenure 15 years.

The Company did not comply with its policy as there was no performance evaluation of board members or review in relation to the composition and skills mix of the Directors of the Company during the year. The Company plans to undertake a performance evaluation during this calendar year.

3. PROMOTE ETHICAL AND RESPONSIBLE DECISION‐MAKING

Council Principle 3: Companies should actively promote ethical and responsible decision‐making.

Council Recommendation 3.1:

Establish a code of conduct and disclose the code or a summary of the code as to:

• the practices necessary to maintain confidence in the Company's integrity;

• the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders;

• the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

The Company complies with this recommendation.

The Company has adopted a Code of Ethics and Conduct for Directors and Key Executives and a Company Code of Ethics and Conduct, both of which can be accessed on the website.

Council Recommendation 3.2:

Companies should establish a policy concerning diversity, and disclose the policy or a summary of that policy. The policy

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

72

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

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

The Company has adopted a Diversity Policy. A copy of the Company's Diversity policy is available on the website. The policy does not contain measurable objectives because the Company is not of a sufficient size to justify these objectives.

Council Recommendation 3.3:

Companies should disclose in each annual report the measurable objectives for achieving gender diversity.

The Company does not comply with this recommendation as it has not implemented a policy containing measurable objectives because the Company is not of a sufficient size to justify these objectives.

Council Recommendation 3.4:

Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.

The Company complies with this recommendation. The Group currently employees three women across its offices in Perth, Cairo and Asmara. None of the female employees is a senior executive or a Director.

Council Recommendation 3.5:

Provide the information indicated in the Guide to reporting on Principle 3.

The Company complies with this recommendation.

4. SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

Council Principle 4: Companies should have a structure to independently verify and safeguard the integrity of their financial reporting.

Council Recommendation 4.1:

The Board should establish an audit committee.

The Company complies with this recommendation.

The Board has an audit committee.

Council Recommendation 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;

• has at least three members.

The members of the audit committee are Mr Gandel, Mr Starink and Mr Kenny. The Chairman of the audit committee is Mr Kenny, who is not the Chairman of the Board.

Currently the audit committee has one independent director, Mr Kenny, and two non‐independent directors, Mr Starink and Mr Gandel. The Company does not comply with Recommendation 4.2.

While the Board strongly endorses the position that the audit committee should exercise independence of judgment, it also

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 73

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

recognises that there are only three directors on the Board and it was decided that audit committee members should be those most familiar with statutory financials. The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the expense of appointing additional independent Non‐Executive Directors simply to fill the audit committee.

Council Recommendation 4.3

The audit committee should have a formal charter.

The Company complies with this recommendation.

Council Recommendation 4.4:

Provide the information indicated in the Guide to reporting on Principle 4.

The Company complies with this recommendation and provides the following disclosure.

• Two meetings of the audit committee were held during the year. Mr Starink and Mr Gandel attended both meetings. Mr Kenny attended one meeting. The meeting which Mr Kenny did not attend was chaired by the Secretary, Mr Caren, in his absence.

• Deloitte Touche Tohmatsu is the incumbent auditor. External auditors are selected on the basis of professional skills, reputation, service levels and fees.

• The current policy of the external auditor is to rotate the audit engagement partner every 5 years. This is disclosed on the Company website. The audit partner was rotated after the 2012 audit.

5. MAKE TIMELY AND BALANCED DISCLOSURE

Council Principle 5: Companies should promote timely and balanced disclosure of all material matters concerning the Company.

Council Recommendation 5.1:

Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

The Company complies with this recommendation.

The Company has adopted a Continuous Disclosure Policy which is available on its website.

Council Recommendation 5.2:

Provide the information indicated in the Guide to reporting on Principle 5.

The Company complies with this recommendation.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

74

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

6. RESPECT THE RIGHTS OF SHAREHOLDERS

Council Principle 6: Companies should respect the rights of shareholders and facilitate the effective exercise of those rights.

Council Recommendation 6.1:

Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose that policy or a summary of that policy.

The Company complies with this recommendation.

The Company has adopted a Shareholder Communication Strategy which is available on its website.

Council Recommendation 6.2:

Provide the information indicated in the Guide to reporting on Principle 6.

The Company complies with this recommendation.

7. RECOGNISE AND MANAGE RISK

Council Principle 7: Companies should establish a sound system of risk oversight and management and internal control.

Council Recommendation 7.1:

Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

The Company complies with this recommendation.

The Company has a Policy on Risk Oversight and Management of Material Business Risks which is available on the website.

Council Recommendation 7.2

The board should require management to design and implement the risk management and internal 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.

The Chief Executive Officer (currently the Managing Director, Mr Rosenstreich and previously the Executive Director, Mr Starink) and the Chief Financial Officer review the risk management and internal control systems and report annually to the Board in respect of the company’s key business risks and how they are being managed. The last report was completed in September 2013.

Council Recommendation 7.3

The board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with 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 financial reporting risks.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 75

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

The Company complies with this recommendation.

The Board receives assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer in the form of a declaration, prior to approving the financial statements.

Council Recommendation 7.4:

Provide the information indicated in the Guide to reporting on Principle 7.

The Company complies with this recommendation and provides the following disclosure;

The board has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer that the declaration provided in accordance with 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 financial reporting risks.

8. REMUNERATE FAIRLY AND RESPONSIBLY

Council Principle 8: Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear.

Council Recommendation 8.1

The Board should establish a remuneration committee.

The Company complies with this recommendation.

The Board established a remuneration committee which is governed by a formal charter. The Remuneration committee charter is available on the website.

Council Recommendation 8.2

The remuneration committee should be structured so that it;

• Consists of a majority of independent directors;

• Is chaired by an independent chair

• Has at least three members

The members of the remuneration committee are Mr Gandel, Mr Starink and Mr Kenny. The Chairman of the remuneration committee is Mr Gandel who is not independent.

Currently the remuneration committee has one independent director, Mr Kenny, and two non‐independent directors, Mr Starink and Mr Gandel. The Company does not comply with Recommendation 8.2.

While the Board strongly endorses the position that the remuneration committee should exercise independence of judgment, it also recognises that there are only three directors on the Board. The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the expense of appointing additional independent Non‐ Executive Directors simply to fill the remuneration committee.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4

76

CORPORATE GOVERNANCE STATEMENT AS AT 30 SEPTEMBER 2014

Council Recommendation 8.3

Companies should clearly distinguish the structure of non‐executive directors’ remuneration from that of executive directors and senior executives.

The Company complies with this recommendation.

Information on director and executive remuneration is contained within the Directors' Report.

Council Recommendation 8.4:

Provide the information indicated in the Guide to reporting on Principle 8.

The Company complies with this recommendation and provides the following disclosures;

• No meetings of the remuneration committee were held during the year.

• The Company currently has no schemes for retirement benefits, other than superannuation for directors.

• The Company does not have any unvested entitlements under any equity‐based remuneration schemes.

GIPPSLAND LIMITED AND CONTROLLED ENTITIES ABN 31 004 766 376

4 77

OFFICE ADDRESS Suite 12, 186 Hay Street, Subiaco WA 6008, Australia POSTAL ADDRESS PO Box 8206, Subiaco East WA 6008, Australia TELEPHONE +61 8 9340 6000 | FACSIMILE +61 8 9340 6060 | EMAIL info@gippslandltd.com