Killara Resources Limited and Controlled Entities - ASX · Killara Resources Limited and Controlled...

Killara Resources Limited

and Controlled Entities (ABN 68 132 204 561)

Half-year Report

31 December 2014

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Half-year Report 31 December 2014

CORPORATE DIRECTORY

CHAIRMAN Matthew Driscoll

EXECUTIVE DIRECTORS Reza Zulkarnaen Wim Zulkarnaen

NON-EXECUTIVE DIRECTOR Robert Kipp

COMPANY SECRETARY Leah Watson

PRINCIPAL PLACE OF BUSINESS & REGISTERED OFFICE

Australia

Level 3 North building

333 Collins Street

MELBOURNE VIC 3000

Telephone: +61 3 9629 3898

Facsimile: +61 3 9629 4898

Indonesia

12th Floor, Ratu Plaza Office Tower

Jl. Jend Surdiman 9

JAKARTA 10270

AUDITORS

Grant Thornton

Australia

SHARE REGISTRAR

Boardroom Pty Limited

GPO Box 3993

SYDNEY NSW 2001

Telephone: (within Australia) 1300 737 760

(outside Australia) +61 2 9290 9600

Facsimile: +61 2 9290 9655

STOCK EXCHANGE LISTING

Australian Securities Exchange

(Home Exchange: Melbourne, Victoria)

Code: KRA

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CONTENTS PAGE

Directors’ report 2

Auditor’s independence declaration 9

Consolidated statement of profit or loss and other comprehensive income 10

Consolidated statement of financial position 11

Consolidated statement of changes in equity 12

Consolidated statement of cash flows 13

Notes to the condensed interim consolidated financial statements 14

Directors’ declaration 20

Independent auditor’s review report 21

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DIRECTORS’ REPORT

The Directors of Killara Resources Limited (“Killara”) present their report together with the financial statements of the Consolidated Entity, being Killara Resources Limited (“the Company”) and its Controlled Entities (“the Group”) for the half-year ended 31 December 2014.

Directors

The names of the Company’s directors in office during or since the end of the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Matthew Driscoll Executive Chairman

Robert Kipp Non-Executive Director (changed from Executive Director 19 June 2014)

Reza Zulkarnaen Executive Director

Wim Zulkarnaen Executive Director

Review of operations and financial results

Killara specialises in exploration for precious metals, energy and base metal resources, with an emphasis on sustainable mining practices and community engagement.

Our mission is to be globally recognised as a leader in the delivery of sought after minerals and energy solutions whilst employing profitable and sustainable mining practices with the collaboration of local communities and government.

The loss of the Company after providing for income tax amounted to $3,882,748 for the half‐year (2013: $507,398 net loss after tax); this is mainly due to the impairment of PT Borneo Emas Hitam (“BEH”) assets during the period amounting to $3,813,807.

Contributed equity increased by $75,000 less capital raising costs from $12,898,680 to $12,972,066 as a result of a private placement during the period. Details of contributed equity are disclosed in note 10 to the financial statements. The proceeds from the capital-raising have been used to meet short-term expenditure needs.

In the half year accounts Killara reports a deficiency of assets of $2.3 million dollars. This is due to the provisioning of impairment against both the value of Killara’s coal assets and its receivable assets in relation to its Indonesian operations. The provisioning is a conservative view and is consistent with accounting standards and the advice of Killara’s Auditors. Where a detailed valuation is provided in the future, the provision for impairment will be adjusted accordingly. It is the intention of Killara directors to undertake a detailed valuation as soon as possible.

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DIRECTORS’ REPORT (continued)

Review of operations and financial results (continued)

Killara’s Indonesian Project - PT Borneo Emas Hitam (KRA 80% interest)

In May 2013 Killara acquired an 80% interest in PT Borneo Emas Hitam. Its location is shown below.

Figure 1: Map of Indonesia and project location

Killara completed the acquisition of an 80% interest in PT Borneo Emas Hitam, a producing Indonesian coal mine. Killara paid US$2.2 million for the interest and also acquired an option over a 60% interest in PT Pagun Taka, a prospective coal deposit in Central Kalimantan, Indonesia, which the Board has decided not to pursue.

Key commercial terms of the agreement were:

Killara to pay US$2.2 million for 80% of BEH;

• Killara will hold 49% of the share capital directly and 31% via a Share Pledge Agreement with

PT Rukis Capital Investment (“PT Rukis”);

• Operational control moves immediately to Killara;

• Killara nominated personnel to join the BEH board, with Killara gaining majority

representation;

• Killara will pay an additional US$3.00 per tonne above a minable reserve threshold of

733,333 tonnes ensuring that the cost of acquisition remains at US$3.00 per tonne; and

• Minable reserve estimates are subject to an independent technical assessment.

Location & permitting

BEH received formal approval for the production permit, i.e. IUP (Izin Usaha Pertambangan) No. 540/005/IUP-OP/MB-PBAT/1/2011 which is listed as ‘clean and clear’ by Indonesia’s department of Energy and Mineral Resources and covers a 1,002ha area in the Tenggarong district, Kutai Kartanegara regency, East Kalimantan province, Indonesia. The mining license had an automatic right for renewal, the renewal application was lodged within the stipulated time frame and manner prescribed and an extension duly issued. The extension period provides for a further term of four years under new permit No. 540/042/IUP-OP/MB-PBAT/XII/2013 that will expire in December 2017.

This successful application and granting of the IUP with the Bupati of Kutai Kartanegara secures a further four year coal production license for the BEH project.

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Killara’s Indonesian Project (continued)

Location & permitting (continued)

Tenggarong is three hours travel by car, using provincial roads from Balikpapan. The district is a large coal producer, with all concessions adjoining BEH either in operation or previously subject to mining. Forestry is classified as Areal Penggunaan Lain (Other Land Use Area) which does not require a permit from the Indonesian Ministry of Forestry for exploration or mining activities.

Figure 2 - BEH Project Location

Exploration

• Drilling contractor PT Reka Indo Internusa completed the exploration program on the Eastern

Block at Killara’s PT Borneo Emas Hitam (BEH) coal concession in East Kalimantan. The

program focuses on an additional target (East Expansion) east of the two short term production

targets (Pit 11 and Pit 4) which have been subject to land compensation. Drilling at Pit 11 and

Pit 4 is complete along with geological modelling.

• In addition to that based on this drilling campaign 4 coal seams were found on the undeveloped

area of the Eastern Block.

• Result from drilling to date are within expectations of the Killara geological team. 113 of the 114

holes drilled have intersected target seams. All intervals are apparent thickness and were

adjusted to geophysical log results.

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Exploration (continued)

Figure 3 - Borehole locations, Land Compensation and Mined Out/Dump Areas

• The BEH concession is divided into 3 (three) blocks which are the eastern block, the central

block and the western block. Killara’s priority for this concession is on the eastern block based

on outcrop and drilling data.

• The current program has focused on the eastern block of the concession, with three short term

production targets (Pit 4, 6 and 8) which have been subject to land compensation previously.

Picture 4 and 5 Core Drilling Activities

Production

• Killara Resources engaged Berkah Ciwi Lestari Kaltim (BCLK) for the production phase of

operations, inclusive of overburden removal and coal extraction. Total coal production for the

period ended 31 March 2014 was 4,557.43 tons. Production of coal stopped in early March due

to issues with the coal contractor. As at the end of the period production had not recommenced

with the board deciding to terminate the contractor agreement in accordance with the terms of

the contractor agreement. This was done in April 2014.

• Drilling plans have been completed by Killara’s independent consultant & drilling contractor PT

Reka Indo Internusa (RII) for the commencement of drilling programs in the Western area of the

concession.

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Production (continued)

Picture 6. Pit4E mining activities

Picture 7. Crushing activity at the stockpile area

• Production, which commenced in January 2014, has resulted in the extraction of 4,557.43 tons of

coal. The total tonnage produced is lower than anticipated due to factors outside the control of

Killara.

• The production delays experienced with the contractor PT Berkah Ciwi Lestari Kaltim (BCLK) has

resulted in the termination of their services.

• Killara sold its maiden barge of 3,883.941 metric tons of coal from its Borneo Emas Hitam (BEH)

concession located in East Kalimantan, Indonesia to Glencore International AG (Glencore). This

first sale represents a pivotal moment in the history of Killara as it achieves the significant turning

point, with Killara moving from coal explorer to producer.

• Killara is reviewing plans to engage directly in the production process with discussions continuing

with coal traders. If funding of the BEH project via an advance coal sales agreement is successful

BEH will resume its coal production based on the completed mine design at strip ratio of 18.71 that

indicates 230,630.20 minable tons of coal from the Eastern area of BEH concession.

• The general operating conditions for small miners have been rigorously challenging over the past

12 months, principally due to reduced operating margins from lower coal sale prices together with

general subdued share market conditions in the junior mining sector. In order to preserve cash

resources, whilst management work towards bringing BEH back into production, the Board has

embarked on a cost review of all activities.

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Production (continued)

Picture 8 and 9. Barging Activities

Project pipeline and business strategy

Killara has a very well developed network of business contacts in the Republic of Indonesia and Australia through which it has been, and continues to be, offered a range of resource projects for potential acquisition. Evaluation of these opportunities is on-going.

Over the following three years it is Killara’s objective to acquire a range of mineral resource projects ranging from greenfield opportunities which can add significant upside value, partially developed exploration projects which have had some preliminary exploration work undertaken but require more intensive exploration programs to define the resource and fully functional production projects with produce positive cash flow for Killara.

Despite the continued upward demand for thermal coal Killara is aware of the potential risks. These include but not limited to sovereign risk, commodity price risk and currency risk. Whilst these external factors may pose a threat in Killara’s ability to achieve its strategic objectives, it does have risk mitigating strategies to reduce any potential impacts. Shareholders and potential investors should always remain cognisant that such risks remain as part of the normal aspects of being a mining company.

Corporate

On 23 September 2014 Killara completed a placement of 7,500,000 fully paid ordinary shares at a price of $0.001 each raising a total of $75,000. Events subsequent to reporting date

On 28 January 2015, the Directors agreed to vary the loan agreement dated 29 August 2013 and extend the loan term to 31 May 2015. The Directors are not aware of any other matters or circumstances that 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.

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AUDITOR’S INDEPENDENCE DECLARATION

A copy of the Auditor’s Independence Declaration as required under s307C of the Corporations Act 2001 is included on page 9 of this financial report and forms part of this Directors Report.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to section 306(3) of the Corporations Act 2001.

Matthew Driscoll

Chairman

On behalf of the board of Directors.

Dated this 11th day of March 2015

COMPETENT PERSONS STATEMENT

Exploration or technical information in this release has been prepared by Mr Ansar Bayanta ST, MTM, who at the time of writing was a full time employee of Killara Resources Limited and a Member of the Australian Institute of Mining and Metallurgy. Mr Bayanta has sufficient experience which is relevant to the style of mineralisation 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 of Exploration Results, Mineral Resources and Ore Reserves” (the JORC Code). Mr Bayanta consents to the release being issued in the form and context in which it appears.

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The Rialto, Level 30

525 Collins St

Melbourne Victoria 3000

Correspondence to:

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Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

Auditor’s Independence Declaration

To The Directors of Killara Resources Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead

auditor for the review of Killara Resources Limited for the half-year ended 31 December

2014, I declare that, to the best of my knowledge and belief, there have been:

a No contraventions of the auditor independence requirements of the Corporations

Act 2001 in relation to the review; and

b No contraventions of any applicable code of professional conduct in relation to the

review.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

B. A. Mackenzie

Partner - Audit & Assurance

Melbourne, 11 March 2015

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Leah

Typewritten Text

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

Notes 31 December

2014 $

31 December

2013 $

Revenue

Interest revenue 102,965 89,256

Other income 3,273 3,000

Employee benefits expenses (60,077) (453,058)

Equity-based payments (61,806) (28,751)

Occupancy expenses (35,775) 1,150

Depreciation expense (6,451) (7,329)

Consultancy expenses (162,755) (26,469)

Legal and compliance expenses (16,808) 8,092

Exploration expenses incurred (981) (15,939)

Administration expenses 169,474 33,848

Impairment of assets 6,7,8,9 (3,813,807) -

Write-off of exploration and evaluation assets 6 - (111,198)

Loss before income tax (3,882,748) (507,398)

Income tax expense - -

Net loss for the period (3,882,748) (507,398)

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Exchange differences on translating foreign operations 4,629 (65,940)

Other comprehensive loss for the period, net of tax 4,629 (65,940)

Total comprehensive loss for the period (3,878,119) (573,338)

Loss for the period attributable to:

Owners of the Company (3,109,188) (504,602)

Non-controlling interest (773,560) (2,796)

(3,882,748) (507,398)

Total comprehensive loss attributable to:

Owners of the Company (3,104,559) (570,542)


(3,878,119) (573,338)

Basic loss per share (cents per share) (3.01) (0.41)

Diluted loss per share (cents per share) (3.01) (0.41)

The accompanying notes form part of these financial statements.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014

Notes 31 December 2014 $

30 June 2014 $

CURRENT ASSETS

Cash and cash equivalents 47,825 28,650

Trade and other receivables 149,262 139,197

Inventories – coal stockpile 7 53,731 68,060

TOTAL CURRENT ASSETS 250,818 235,907

NON-CURRENT ASSETS

Trade and other receivables 8 1,595 1,465,544

Mine properties 9 - 1,951,816

Plant and equipment 19,521 24,800

Other non-current assets 157,879 157,156

TOTAL NON-CURRENT ASSETS 178,995 3,599,316

TOTAL ASSETS 429,813 3,835,223

CURRENT LIABILITIES

Trade and other payables 1,591,225 1,457,581

Borrowings 10 1,043,222 852,205

Provisions 21,764 21,019

TOTAL CURRENT LIABILITIES 2,656,211 2,330,805

NON-CURRENT LIABILITIES

Provisions 45,904 41,899

TOTAL NON-CURRENT LIABILITIES 45,904 41,899

TOTAL LIABILITIES 2,702,115 2,372,704

NET ASSETS (2,272,302) 1,462,519

EQUITY

Issued capital 11 12,972,066 12,898,680

Reserves 1,336,510 1,626,784

Accumulated losses (15,676,118) (12,923,195)

Total equity attributable to owners of the Company (1,367,542) 1,602,269


TOTAL EQUITY (2,272,302) 1,462,519 For

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

Attributable to owners of Killara Resources Limited Non-controlling interest

Total equity

Issued capital Accumulated losses Equity based

payment reserve FX reserve

Total

$ $ $ $ $ $ $

Balance at 1 July 2013 12,655,252 (11,670,050) 2,000,946 (4,936) 2,981,212 1,078 2,982,290

Reported loss for the period - (504,602) - - (504,602) (2,796) (507,398)

Reported other comprehensive expense - - - (65,940) (65,940) - (65,940)

Equity settled transactions - - 28,751 - 28,751 - 28,751

Shares issued during the period 253,000 - - - 253,000 - 253,000

Capital raising costs (9,572) - - - (9,572) - (9,572)

Options expired or lapsed - 376,880 (376,880) - - - -

Non-controlling interests on acquisition of subsidiary

- - - - - (337) (337)

Total comprehensive loss - (504,602) - (65,940) (570,542) (2,796) (573,338)

Balance at 31 December 2013 12,898,680 (11,797,772) 1,652,817 (70,876) 2,682,849 (2,055) 2,680,794

Balance at 1 July 2014 12,898,680 (12,923,195) 1,693,779 (66,995) 1,602,269 (139,750) 1,462,519

Reported loss for the period - (3,109,188) - - (3,109,188) (773,560) (3,882,748)

Reported other comprehensive income - - - 4,629 4,629 - 4,629

Equity settled transactions - - 61,806 - 61,806 - 61,806

Shares issued during the period 75,000 - - - 75,000 - 75,000

Capital raising costs (1,614) - - - (1,614) - (1,614)

Expiry/lapse of employees options and performance shares

- 356,265 (356,265) - - - -

Foreign exchange movement on opening balances

- - (444) - (444) 8,550 8,106

Total comprehensive loss - (3,109,188) - 4,629 (3,104,559) (773,560) (3,878,119)

Balance at 31 December 2014 12,972,066 (15,676,118) 1,398,876 (62,366) (1,367,542) (904,760) (2,272,302)


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CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

31 December

2014 $

31 December

2013 $

Operating activities

Payments to suppliers and employees (165,035) (608,569)

Payments for exploration and evaluation - (458,957)

Interest received 701 6,765

Interest paid - (8,654)

Net cash used in operating activities (164,334) (1,069,415)

Investing activities

Purchase of plant and equipment - (3,803)

Net cash used in investing activities - (3,803)

Fiancing activities

Proceeds from issue of share capital 75,000 253,000

Payment for share issue costs (1,614) (9,573)

Proceeds from borrowings 109,749 504,741

Proceeds from related entity loans - 26,357

Proceeds from employee loans 936 6,235

Net cash provided by financing activities 184,071 780,760

Net change in cash and cash equivalents 19,737 (292,458)

Cash and cash equivalents at beginning of period 28,650 589,002

Exchange differences on cash and cash equivalents (562) 1,125

Cash and cash equivalents at end of the period 47,825 297,669


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

1. CORPORATE INFORMATION

The interim consolidated financial statements of Killara Resources Limited and its subsidiaries (the “Company” or the “Group”) for the six months ended 31 December 2014 were authorised for issue in accordance with a resolution of the Directors on 11 March 2015.

Killara Resources Limited is a company limited by shares, incorporated in Australia, whose shares are publicly traded on the Australian Securities Exchange (“ASX”). The Group’s principal activity is the exploration and mining of coal in Indonesia.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The condensed interim consolidated financial statements (‘the interim financial statements’) of the Group are for the six (6) months ended 31 December 2014 and are presented in Australian Dollar ($AUD), which is the functional currency of the Parent Company. These general purpose interim financial statements have been prepared in accordance with the requirements of the Corporations Act 2001 and AASB 134 Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with Australian Accounting Standards, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2014 and any public announcements made by the Group during the half-year in accordance with continuous disclosure requirements arising under the Australian Securities Exchange Listing Rules and the Corporations Act 2001.

Significant accounting policies

The interim financial statements have been prepared in accordance with the same accounting policies adopted in the Group’s last annual financial statements for the year ended 30 June 2014.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements.

3. ESTIMATES

When preparing the half-year financial statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results. The judgements, estimates and assumptions applied in the interim financial statements, including the key sources of estimation uncertainty were the same as those applied in the Group’s last annual financial statements for the year ended 30 June 2014.

4. GOING CONCERN

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

The Group incurred a loss of $3,882,748 for the half-year ended 31 December 2014 (2013: $507,398) and operating cash outflows of $164,334 (year ended 30 June 2014: $1,636,527). As at 31 December 2014, the Group had a cash balance of $47,825 (year ended 30 June 2014: $28,650) and a working capital deficit of $2,428,743 (year ended 30 June 2014: $2,123,980).

The ability of the Company and the Group to continue to pay its debts as and when they fall due is dependent upon the Company successfully realising the value of its mineral properties, and raising additional capital as required.

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4. GOING CONCERN (continued)

The Directors believe it is appropriate to prepare these accounts on a going concern basis because:

• the Directors are currently looking at all commercial options in relation to its PT Borneo Emas Hitam (East Kalimantan) coal project, whether that be a sale of the asset or the recommencement of production;

• the Directors plan to raise additional funds as and when it is required. In light of the Group’s current exploration and development projects, the Directors believe that the additional capital required can be raised in the market;

• two directors have provided a loan facility of up to $1,300,000, for which $256,778 is undrawn as at 31 December 2014; and

• the Directors have an appropriate plan to contain certain operating and exploration expenditure if appropriate funding is unavailable.

The ability of the Group to continue as a going concern is principally dependent upon the successful result of the plans detailed above. These conditions indicate a material uncertainty that may cast significant doubt about the ability of the Group to continue as a going concern.

Based on cash flow forecasts and other factors referred to above, the directors are satisfied that the going concern basis of preparation is appropriate.

Should the Group be unable to continue as a going concern it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or to the amount and classification of liabilities that might result should the Group be unable to continue as a going concern and meet its debts as and when they fall due.

5 SEGMENT REPORTING

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. The Board of Directors has determined that segment reporting does not apply for the current reporting period, and the information in this report is reported in a manner consistent with the internal reporting provided to the chief operating decision maker.

Internal reporting does not include operating segments, but the need for operating segments is monitored by the Group’s chief operating decision maker (the Board of Directors) and strategic decisions are made on the basis of consolidated operating results.

There were no Group revenues from external customers during the period (half-year ending 31 December 2013: $Nil) and its non-current assets are divided into the following geographical areas:

31 December 2014

30 June 2014

Non-current Assets

Non-current Assets

$ $

Australia (Domicile) 29,404 32,144

Indonesia 149,591 3,567,172

Total 178,995 3,599,316

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31 December

2014

$

31 December

2013

$

6. LOSS BEFORE INCOME TAX EXPENSE

The following revenue and expense items are relevant in explaining the

financial performance for the half-year:

Write-off project costs

- Ora Banda (Orinda) tenements - 111,198

- 111,198

Impairment losses

- Impairment of loans to related party 1,358,311 -

- Impairment of other debts 413,994 -

- Impairment of stockpile 20,834 -

- Impairment of mine property 2,020,668 -

3,813,807 -

31 December

2014 $

30 June 2014

$

7. INVENTORIES - STOCKPILE

Inventories – stockpile 74,565 68,060

Provision for impairment (20,834) -

53,731 68,060

In recognition of factors such as the continuing drop in world coal prices, an impairment charge has been made against the carrying value of the stockpile.

8. NON-CURRENT TRADE AND OTHER RECEIVABLES

Non-current

Loans to related parties (a) 1,358,311 1,086,208

Loans to related parties, provision for impairment (a) (1,358,311) -

- 1,086,208

Other debtors 415,589 379,336

Other debtors, provision for impairment (413,994) -

1,595 1,465,544

All of the Group’s trade and other receivables have been reviewed for indicators of impairment in relation to the Indonesian operations, and a provision for impairment has been raised accordingly.

(a) In May 2013, the Company acquired an Indonesian Company, PT Borneo Emas Hitam (“BEH”). As a result of the

acquisition, the Company recognised receivables of $1,341,966. At 31 December 2014, $1,772,305 of the non-current receivables relates to receivables in relation to BEH (30 June 2014: $1,464,088). The receivables are from entities who have a direct holding in BEH and the Company expected to recover the receivables through future profits from the BEH project. As at 31 December 2014 the Company is still in the process of obtaining confirmation from the Indonesian Government for the conversion of BEH from a domestic investment company to a foreign investment company (“Pemanaman Modal Asing” or “PMA company”).

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8. NON-CURRENT TRADE AND OTHER RECEIVABLES (Continued)

The recoverability of the receivables is dependent upon the successful commercialisation of the PT Borneo Emas Hitam Project, and due to the presence of indicators of impairment (refer Note 9), a provision for impairment has been raised in relation to these receivables during the half-year ended 31 December 2014.

31 December

2014 $

30 June 2014

$

9. MINE PROPERTIES

Mine properties – at cost 2,033,716 1,964,419

Accumulated amortisation and provision for impairment (2,033,716) (12,603)

- 1,951,816

The following tables show the movements in mine properties:

(a) Gross carrying amount

1 July 2014 to 31 December

2014

$

1 July 2013 to 30 June 2014

$

Cost at beginning of period 1,964,419 -

Transferred from Exploration and Evaluation Assets - 1,971,971

Additions - 127,352

Change in rehabilitation provision - (108,630)

Change in post mining provision - 25,155

Net exchange differences 69,297 (51,429)

At reporting date 2,033,716 1,964,419

(b) Amortisation and impairment

Balance at beginning of period (12,603) -

Amortisation expense - (12,905)

Impairment loss recognised in profit or loss (2,020,668) -

Net exchange differences (445) 302

At reporting date (2,033,716) (12,603)

At the end of the period the Directors reviewed the carrying value of the mine properties, and in recognition of factors such as the continuing drop in world coal prices, meant that the group could no longer carry the value of Indonesian mine properties at the current carrying value. Accordingly, an impairment charge has been made against the carrying value of the mine properties.

10. BORROWINGS

On 29 August 2013, the Group entered into an agreement with Directors whereby the Directors would provide a loan facility of up to $600,000. This was extended to a loan of $1,300,000 during the year ended 30 June 2014. During the half-year, amounts drawn down on this facility amount to $109,748 (half-year to 31 December 2013: $504,741), and the balance of $1,043,222 at 31 December 2014 includes interest payable of $148,745. The loan bears interest at the rate of 12% per annum and is repayable within one year. The proceeds from the loan have been used to meet short-term expenditure needs. No repayments of the loan, except for some interest payments, have been made to the date of this report.

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11. ISSUED CAPITAL AND RESERVES

During the six months ended 31 December 2014, 7,500,000 shares were issued to private investors for cash, corresponding to 5.6% of total shares issued. Each share has the same right to receive dividends and the represents one vote at the shareholders’ meeting of Killara Resources Limited.

Company

31 December 2014

Company

30 June 2014

$ $

132,484,378 (30 June 2014:124,984,378) Issued and fully paid ordinary shares 12,972,066 12,898,680

(a) Movements in ordinary shares on issue $

Number

At 1 July 2014 12,898,680 124,984,378

Shares issued 75,000 7,500,000

Capital raising costs (1,614) -

At 31 December 2014 12,972,066 132,484,378

(b) Movements in options Number

Number

At the beginning of the reporting period 22,000,000 38,000,000

Options expired during the period (6,000,000)

(16,000,000)


(c) Movements in performance share rights

At the beginning of the reporting period 9,000,000 -

Performance share rights A issued in October & November 2013 expiring 27 November 2015 -

4,000,000

Performance share rights B issued in October & November 2013 expiring 30 June 2016 -

4,000,000

Performance share rights C issued in October & November 2013 expiring 31 October 2016 -

4,000,000

Performance share rights forfeited during the period (1,500,000) (3,000,000)


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11. ISSUED CAPITAL AND RESERVES (continued)

The details of other reserves are as follows:

Equity-based payments reserve

$

Foreign currency translation reserve

$

Total

$

Balance at 1 July 2014 1,693,779 (66,995) 1,626,784

Equity-based payments 61,806 - 61,806

Options expired or lapsed (341,510) - (341,510)

Performance share rights forfieted (14,755) (14,755)

Other comprehensive income / (loss) (444) 4,629 4,185

Balance at 31 December 2014 1,398,876 (62,366) 1,336,510

Balance at 1 July 2013

2,000,946

(4,936)

1,996,010

Equity-based payments 28,751 - 28,751

Options expired or lapsed (376,880) - (376,880)

Other comprehensive income - (65,940) (65,940)

Balance at 31 December 2013 1,652,817 (70,876) 1,581,941

12. CONTINGENT LIABILITIES

In the opinion of the directors, there has been no material change in contingent liabilities since the last annual reporting date.

13. EVENTS SUBSEQUENT TO REPORTING DATE

On 28 January 2015, the Directors agreed to vary the loan agreement dated 29 August 2013 and extend the loan term to 31 May 2015.

The Directors are not aware of any other matters or circumstances that 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.

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DIRECTORS’ DECLARATION

In the opinion of the directors of Killara Resources Limited,

1. The consolidated financial statements and notes of Killara Resources Limited are in accordance with the

Corporations Act 2001, including:

a. giving a true and fair view of financial position as at 31 December 2014 and of its performance for the half-

year ended on that date; and.

b. complying with Accounting Standard AASB 134: Interim Financial Reporting, and

2. There are reasonable grounds to believe that the company will be able to pay its debts as and when they become

due and payable.

Signed in accordance with a resolution of the Board of Directors made pursuant to section 303(5) of the Corporations Act

2001.

Mr Matthew Driscoll Chairman

11 March 2015

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The Rialto, Level 30

525 Collins St


Correspondence to:

GPO Box 4736


T +61 3 8320 2222

F +61 3 8320 2200

E [email protected]

W www.grantthornton.com.au

Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the

context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm

is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and

are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its

Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

Independent Auditor’s Review Report

To the Members of Killara Resources Limited

We have reviewed the accompanying half-year financial report of Killara Resources Limited

(“Company”), which comprises the statement of financial position as at 31 December 2014,

and the statement of profit or loss and other comprehensive income, statement of changes

in equity and statement of cash flows for the half-year ended on that date, notes comprising

a statement or description of accounting policies, other explanatory information and the

directors’ declaration.

Directors’ responsibility for the half-year financial report

The directors of Killara Resources Limited are responsible for the preparation of the half-

year financial report that gives a true and fair view in accordance with Australian Accounting

Standards and the Corporations Act 2001 and for such controls as the directors determine is

necessary to enable the preparation of the half-year financial report that is free from material

misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our

review. We conducted our review in accordance with the Auditing Standard on Review

Engagements ASRE 2410 Review of a Financial Report Performed by the Independent

Auditor of the Entity, in order to state whether, on the basis of the procedures described,

we have become aware of any matter that makes us believe that the half-year financial report

is not in accordance with the Corporations Act 2001 including: giving a true and fair view of

the Killara Resources Limited financial position as at 31 December 2014 and its

performance for the half-year ended on that date; and complying with Accounting Standard

AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the

auditor of Killara Resources Limited, ASRE 2410 requires that we comply with the ethical

requirements relevant to the audit of the annual financial report.

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A review of a half-year financial report consists of making enquiries, primarily of persons

responsible for financial and accounting matters, and applying analytical and other review

procedures. A review is substantially less in scope than an audit conducted in accordance

with Australian Auditing Standards and consequently does not enable us to obtain assurance

that we would become aware of all significant matters that might be identified in an audit.

Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we complied with the independence requirements of the

Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that

makes us believe that the half-year financial report of Killara Resources Limited is not in

accordance with the Corporations Act 2001, including:

a giving a true and fair view of the Company’s financial position as at 31 December

2014 and of its performance for the half-year ended on that date; and

b complying with Accounting Standard AASB 134 Interim Financial Reporting and

Corporations Regulations 2001.

Material uncertainty regarding going concern

Without qualification to the conclusion expressed above, we draw attention to Note 4 to the

financial statements which notes net operating cash outflows of $164,334 for the half-year

ended 31 December 2014 and a closing cash balance of $47,825. This condition, along with

other matters set forth in Note 4, indicate the existence of a material uncertainty which may

cast significant doubt about the company’s ability to continue as a going concern and

therefore, the company may be unable to realise its assets and discharge its liabilities in the

normal course of business, and at the amounts stated in the financial report.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

B. A. Mackenzie

Partner - Audit & Assurance

Melbourne, 11 March 2015

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