swan gold mining limited (previously named monarch gold ... · swan gold mining limited (previously...

SWAN GOLD MINING LIMITED

(previously named Monarch Gold Mining Company Limited) ABN 69 100 038 266

FINANCIAL REPORT

FOR THE YEAR ENDED 30 JUNE 2008

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SWAN GOLD MINING LIMITED ABN 69 100 038 266

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CORPORATE DIRECTORY

CONTENTS

Directors’ report .................................................. 2

Auditor’s independence declaration .................. 22

Income statement ............................................... 23

Balance sheet ..................................................... 24

Statement of changes in equity .......................... 25

Cash flow statement .......................................... 27

Notes to the financial statements ....................... 28

Directors’ declaration ........................................ 80

Independent auditor’s report .............................. 81

BOARD OF DIRECTORS Martin Depisch Damian Delaney Gerhard Kornfeld Michael Fotios Peter Farris Thomas Styblo

Non-Executive Chairman Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director

COMPANY SECRETARY Ildiko Wowesny REGISTERED OFFICE First Floor 143 Hay Street SUBIACO WA 6008 Telephone: (61-8) 6389 7500 Facsimile: (61-8) 6389 7510 [email protected] Web-site: www.swangoldmining.com.au SHARE REGISTRY Computershare Investor Services Pty Ltd Level 2, 45 St. George’s Terrace Perth WA 6000 Telephone: (61-8) 9323 2000 Facsimile: (61-8) 9323 2033 E-mail: [email protected] Web-site: www.computershare.com.au AUDITORS Ernst & Young SOLICITORS Steinepreis Paganin BANKERS National Australia Bank Limited STOCK EXCHANGE LISTING Shares in Swan Gold Mining Limited are listed on the Australian Stock Exchange under the trading code SWA.

This financial report covers both the separate financial statements of Swan Gold Mining Limited (as an individual entity and the consolidated financial statements for the consolidated entity, consisting of Swan Gold Mining Limited and its subsidiaries. The annual financial report is presented in Australian dollars. Swan Gold Mining Limited is a company limited by shares, incorporated and domiciled in Australia.

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AND CONTROLLED ENTITIES

DIRECTORS' REPORT

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The directors of Swan Gold Mining Limited (previously named Monarch Gold Mining Company Limited) (“Swan Gold”, “Swan”, “the Company” or “parent entity”) present their report on the results and state of affairs of the parent entity and the consolidated entity as at and for the financial year ended 30 June 2008. DIRECTORS

The names of the directors of Swan Gold in office during the course of the financial year and up to the date of this report are as follows: Martin Depisch (appointed 25 July 2012) Damian Paul Delaney (appointed 25 July 2012) Gerhard Kornfeld (appointed 25 July 2012) Michael Fotios (appointed 14 September 2012) Peter Farris (appointed 14 September 2012) Thomas Styblo (appointed 14 September 2012) Keith John Vuleta (resigned 25 July 2012) Allan Richard Brown (appointed 26 February 2010, resigned 25 July 2012) Ian Leslie Price (appointed 26 February 2010, resigned 25 July 2012) Bruce Dennis Maluish (appointed 26 February 2010, resigned 17 June 2010) John Leslie Baxter (appointed 26 February 2010, resigned 17 June 2010) Michael Laurence Kiernan (resigned 28 June 2010) Marty Adams (appointed 23 July 2010, resigned 11 September 2010) Ian David Huitson (resigned 30 January 2009) John Maxwell Davis (resigned 1 August 2008) Phillip Peter Botsis (resigned 14 July 2008) David James Humann (resigned 11 July 2008) Matthew Damian Gill (appointed 12 November 2007, resigned 10 March 2008) Allan James Quadrio (resigned 25 January 2008) John McKee (resigned 16 November 2007) Michael Anthony Etheridge (resigned 30 July 2007) David Michael Macoboy (resigned 1 July 2007) Unless otherwise indicated, all directors held their position as a director throughout the entire financial year and up to the date of this report. PRINCIPAL ACTIVITIES

The principal activity of Swan Gold and the consolidated entity (which includes the controlled entities of Swan Gold) during the financial year was gold production, mineral exploration and evaluation. There was no significant change in the nature of this activity during the year. RESULTS OF OPERATIONS

The net loss of the consolidated entity after impairments and income tax was $87,277,000 (2007: loss $34,236,000). OPERATING AND FINANCIAL REVIEW

During the financial year the consolidated entity continued its gold production and mineral exploration and evaluation activities on its portfolio of gold mining tenements located within Western Australia until the directors appointed a Voluntary Administrator on 10 July 2008 – refer to page 4 for details of significant events after balance sheet date. The basic and diluted loss per share for the consolidated entity for the year was 53.48 cents per share (2007: loss of 38.77 cents per share). Since the Company’s incorporation in 2002 and since its listing in October 2002, the Company’s financial performance and result has been, and will continue to be, attributable to its ongoing exploration, evaluation and development activities on its tenement holdings. During the year a total of $33,604,000 in equity funds (net of costs) was raised through share placements, a share purchase plan offer to shareholders and a share entitlement offer (2007: $48,043,000). At the date of this report the Company has 743,487,661 ordinary shares on issue and 115,000,000 unlisted options outstanding over 115,000,000 ordinary shares.

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DIRECTORS' REPORT

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DIVIDENDS

No amounts were paid by way of dividend since the end of the previous financial year. The directors do not recommend the payment of a dividend. LIKELY DEVELOPMENTS

During the course of the next financial year (the year ended 30 June 2009), the consolidated entity remained under administration and all operations were placed under care and maintenance. During the course of the financial year ended 30 June 2010, the consolidated entity remained in administration up to 26 February 2010, at which time the company was recapitalised under the Recapitalisation Deed with Stirling Resources Ltd (“Stirling”). From that date the administrator retired and the new board of directors took control of the company. During the course of the financial year ended 30 June 2011, the consolidated entity held the Carnegie and Mt Ida gold projects in care and maintenance with funds provided mainly by Stirling Resources Ltd. On 18 August 2011, Swan Gold (“Swan” or “the Vendor”) executed a conditional agreement with global commodity company DCM DECOmetal GmbH (“DCM” or “the Purchaser”) to acquire Swan’s subsidiaries that own the Carnegie and Mt Ida gold projects. The main conditions of the agreement which is subject to shareholder and regulatory approval, as necessary, will see:

DCM acquire the debt and associated rights of the Mt Ida Trust for $1,000,000; DCM pay a total amount of $10,000,000 to the Group Trust with $1,000,000 payable upon signing of the

agreement and $9,000,000 payable within 6 months; Under separate arrangement DCM acquire the debt and associated rights of the Territory Trust of $6,700,000; All debts due by Swan to the Mt Ida Trust, Group Trust, Territory Trust and Stirling Resources Ltd be

extinguished at settlement; Amount to be paid to Swan of $5,000,000 at settlement; All shareholdings held by Stirling, Territory Resources Limited and DCM in Swan be cancelled at settlement; DCM fund the ongoing operations of Swan until the transaction is completed; and Settlement due on or before 31 March 2012. Whilst this date has passed, the Share Sale Agreement remains in

force and DCM have confirmed in writing that it will continue basic operational funding of Swan in accordance with the agreement.

The agreement is not binding until the following conditions are met: (a) the Financial Investment Review Board (FIRB) Condition has been satisfied; (b) the Vendor procuring all necessary third party consents to the Transaction (if any) and providing the Purchaser

with a copy of such consents; (c) the Vendor obtaining all necessary shareholder approvals required by the Corporations Act and the Listing Rules

in relation to the Transaction; (d) the Vendor obtaining the approval (by way of a deed or otherwise) of MGMC as trustee for the Mt Ida Trust to the

Purchaser in accordance with the Mt Ida Assignment Deed; (e) completion of the assignment of the Mt Ida Debt and Mt Ida Securities from MGMC as trustee for the Mt Ida

Trust to the Purchaser in accordance with the Mt Ida Assignment Deed; (f) an agreement is executed between the Purchaser and Territory Resources Limited, in its capacity as beneficiary

under the Territory Trust pursuant to which the Territory Resources Limited will assign to the Purchaser and the Purchaser will take an assignment of all Territory Resources Limited’s rights and interests as beneficiary under the Territory Trust;

(g) an agreement is executed between Stirling and the Vendor pursuant to which Stirling agrees to cancel the Stirling Debt, for no consideration, upon Settlement occurring; and

(h) each of Territory, Stirling and the Purchaser (and each of their Related Bodies Corporate) agreeing to cancel all of their shares held in Swan, subject to Settlement occurring.

On 3 May 2012, the Company announced to the ASX, that following extensive negotiations, a binding Terms Sheet, and subsequently a Restructure Deed, had been entered into by the Company, DCM DECOmetal GmbH (DCM) and Investmet Limited and/or its nominees (“Investmet”), with the execution of a formal agreement, being the Restructure Deed, on 16 May 2012 (“the Investmet transaction”).

Investmet has advised it intends to recapitalize Swan and provide sufficient funding to complete a review into recommencement of operations at the Carnegie and Mt Ida gold projects, including amongst other items thorough geological and economic reviews of resources, project data, exploration activities as required, and mine planning.

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DIRECTORS' REPORT

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LIKELY DEVELOPMENTS (continued)

Investmet will also work with the current board of Swan towards finalizing the application for re-listing of the shares of SWA (SWA shares) on the ASX (subject to ASX approval) as soon as possible after completion. The main terms and conditions of the Restructure Deed are as follows:

Swan will conduct a share placement to sophisticated investors to raise working capital of a minimum of $7,500,000 by the issue of new ordinary shares at $0.02 effective on completion of the transaction (Completion). The issue will be fully underwritten by Investmet on terms reasonably satisfactory to Investmet and the Company;

DCM will transfer 39,849,657 Swan shares to Investmet in consideration for a cash payment by Investmet to the Trustee of the Territory Trust of $6,700,000 in satisfaction of all claims by the Territory Trust;

The Group Trustee will transfer 134,483,578 Swan shares to Investmet as consideration for the payment by Investmet to the Group Trust of $10,000,000; the payment will also extinguish all claims by the Group Trust under the recapitalization deed;

Investmet will pay $144,240 to the Trustee of the Group Trust on behalf of Swan to repay the loan made by the Trustee to Swan. Swan agrees to repay Investmet on interest free terms $144,240 within two business days of a written demand by Investmet.

Investmet will advance $1,230,000 to DCM in consideration of DCM discharging the existing charge over the Mt Ida assets. A fresh security to be granted by Swan as required to Investmet;

DCM to fund ongoing operations of Swan until Completion; and

The Conditions of the Restructure Deed are to be satisfied or waived on or before 31 October 2012, with the exception of shareholder and regulatory approvals, and Loan Syndicate Arrangements which are to be finalised by 31 December 2012. Beyond these dates an alternative restructure or extension period are to be negotiated in good faith, but should no agreement be made within 5 Business Days then either party may terminate the Deed without incurring any liability.

The Conditions for Completion to occur includes amongst other items:

Agreement on documentation relating to Investmet’s funding arrangements;

The share sale agreement between Swan and DCM dated 18 August 2011 (as varied) being terminated on Completion with no further liability for either party;

The Recapitalisation Deed between Swan, Stirling Resources Ltd and others dated 21 June 2009 (as amended) being terminated on Completion with no further liability for Swan;

Any plaint proceedings relating to the tenements of Swan and its subsidiaries are to be discontinued or withdrawn on terms satisfactory to Investmet by 31 October 2012. Investmet may immediately terminate if it considers that the plaint condition will, or may, not be satisfied by 31 October 2012; and

All necessary shareholder, third party or regulatory approvals. This transaction is also conditional on the completion of inter-related transactions between Investmet, DCM and each of Stirling Resources Limited and Redbank Copper Limited, the terms of which have been finalised but not released. Investmet and DCM intend to establish syndicated loan arrangements with Swan, to include the new security charges to regulate secured debt over Swan incorporating a two year moratorium on principal repayments and at the end of the two year moratorium Swan may elect to repay the debt or require conversion at a price to be agreed between the parties. Investmet will also work with the current board of Swan towards finalizing the application for re-listing of the shares of Swan on the Australian Stock Exchange (ASX) (subject to ASX approval) as soon as possible after completion. In the opinion of the directors there is no additional information available as at the date of this report on any likely developments which may materially affect the operations of the consolidated entity and the expected results of those operations in subsequent years.

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DIRECTORS' REPORT

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OPTIONS GRANTED OVER UNISSUED SHARES

At the date of this report, 115,000,000 ordinary fully paid shares which are subject to options were unissued. The terms of these options are as follows: Number Options granted over fully paid shares exercisable:

- exercisable at $0.05 each on or before 26 February 2013 115,000,000 115,000,000 Details of options issued and exercised during the financial year are contained in Note 17 and Note 18 to the financial report. No person entitled to exercise the options has any right by virtue of the option to participate in any share issue of any other corporation. SIGNIFICANT CHANGES

Significant changes in the state of affairs of the consolidated entity during the financial year were as follows: (a) A total of $33,604,000 in equity funds (net of costs) was raised during the year through share placements, a share

purchase plan offer to shareholders and a rights share entitlement offer; (b) In November 2007, the Company agreed to acquire the Mt Magnet Gold Project for the total sum of $65 million. A $5

million deposit (50% refundable) was paid. Subsequent to year end, no further acquisition costs were paid and the acquisition did not proceed. The 50% refundable portion of the deposit was repaid.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

On 27 June 2008, Territory Resources Ltd appointed Ferrier Hodgson as Receivers and Managers, pursuant to a registered charge in respect of Swan Gold Mining Limited over Minjar Gold Pty Ltd (“Minjar”) assets. Concerns regarding the validity of this appointment, due to the nature of the security, were raised. Subsequently on 10 July 2008, the Board of Directors appointed Mr Bryan Hughes and Mr Christopher Munday as Joint and Several Administrators of Swan and its eleven subsidiaries (the “Group”). At the time of appointment, Davyhurst and Minjar were under care and maintenance programs, while production remained ongoing at Mt Ida. Deeds of Company Arrangement, whereby Mr Bryan Hughes and Mr Christopher Munday were appointed as Deed Administrators, were executed by the each member of the Group on 5 September 2008. The Minjar Gold Pty Ltd Share Sale Agreement was formally completed on 25 March 2009, thereby effecting the formal retirement of Mr Bryan Hughes as Deed Administrator and transferring trading control to the new Board of Directors. As a result of the Share Sale completion, the Minjar Gold Creditors Trust was established to receive and distribute the proceeds of the Share Sale Agreement. A meeting of the creditors of the Group was held on 30 June 2009 to vote on the recapitalisation proposal. On this date, the Recapitalisation Deed was executed between the Group, the Deed Administrator, Stirling Resources Limited and Stirling Gold Pty Ltd, subject to various conditions precedent, including shareholder approval. A meeting of the shareholders of the Company was held on 10 September 2009 to vote on the issue of shares and charges and change of Company name contemplated in the Recapitalisation Deed. Shareholders approved all resolutions. On 26 February 2010, the Recapitalisation Deed was formally completed, thereby effecting the retirement of Mr Bryan Hughes as Deed Administrator and transferring control of the Group to the new Board of Directors Effective on this date Monarch Group Mining Company Ltd was re-named “Swan Gold Mining Limited” and Davyhurst Gold Pty Ltd was re-named “Carnegie Gold Pty Ltd.”

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DIRECTORS' REPORT

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SIGNIFICANT EVENTS AFTER THE BALANCE DATE (continued)

At this time, the Receivers and Managers representing Territory retired and Territory’s charge was accordingly released. Also at this time, charges were granted in favour of the Trusts governing the Group assets in order to secure the instalments due, pursuant to the Recapitalisation Deed. On 18 August 2011, Swan Gold (“Swan” or “the Vendor”) executed a conditional agreement with global commodity company DCM DECOmetal GmbH (“DCM” or “the Purchaser”) to acquire Swan’s subsidiaries that own the Carnegie and Mt Ida gold projects (“the DCM transaction”). The main conditions of the agreement which is subject to shareholder and regulatory approval, as necessary, will see:

DCM acquire the debt and associated rights of the Mt Ida Trust for $1,000,000;

DCM pay a total amount of $10,000,000 to the Group Trust with $1,000,000 payable upon signing of the agreement and $9,000,000 payable within 6 months;

Under separate arrangement DCM acquire the debt and associated rights of the Territory Trust of $6,700,000;

All debts due by Swan to the Mt Ida Trust, Group Trust, Territory Trust and Stirling Resources Ltd be extinguished by DCM at settlement;

Amounts to be paid to Swan of $5,000,000 at settlement;

All shareholdings held by Stirling, Territory Resources Limited and DCM in Swan be cancelled at settlement;

DCM fund the ongoing operations of Swan until the transaction is completed; and

Settlement due on or before 31 March 2012. Whilst this date has passed, the Share Sale Agreement remains in force and DCM have confirmed in writing that it will continue basic operational funding of Swan in accordance with the agreement.

The agreement does not become binding until the following conditions precedent are met:

(a) the Financial Investment Review Board (FIRB) Condition has been satisfied; (b) the Vendor procuring all necessary third party consents to the Transaction (if any) and providing the Purchaser



Purchaser in accordance with the Mt Ida Assignment Deed; (e) completion of the assignment of the Mt Ida Debt and Mt Ida Securities from MGMC as trustee for the Mt Ida

Trust to the Purchaser in accordance with the Mt Ida Assignment Deed; (f) an agreement is executed between the Purchaser and Territory Resources Limited, in its capacity as beneficiary




On 3 May 2012, the Company announced to the ASX, that following extensive negotiations, a binding Terms Sheet, and subsequently a Restructure Deed, had been entered into by the Company, DCM DECOmetal GmbH (DCM) and Investmet Limited and/or its nominees (“Investmet”), with the execution of a formal agreement, being the Restructure Deed, on 16 May 2012 (“the Investmet transaction”). Investmet has advised it intends to recapitalize Swan and provide sufficient funding to complete a review into recommencement of operations at the Carnegie and Mt Ida gold projects, including amongst other items thorough geological and economic reviews of resources, project data, exploration activities as required, and mine planning.

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DIRECTORS' REPORT

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SIGNIFICANT EVENTS AFTER THE BALANCE DATE (continued)

Investmet will also work with the current board of Swan towards finalizing the application for re-listing of the shares of Swan (Swan shares) on the Australian Stock Exchange (ASX) (subject to ASX approval) as soon as possible after completion. The main terms and conditions of the Restructure Deed are as follows:


DCM will transfer 39,849,657 Swan shares to Investment in consideration for a cash payment by Investmet to the Trustee of the Territory Trust of $6,700,000 in satisfaction of all claims by the Territory Trust;



Investmet will advance $1,230,000 to DCM in consideration of DCM discharging the existing charge over the Mt Ida assets. A fresh security is to be granted by Swan as required to Investmet;








All necessary shareholder, third party or regulatory approvals; This transaction is also conditional on the completion of inter-related transactions between Investmet, DCM and each of Stirling Resources Limited and Redbank Copper Limited, the terms of which have been finalised but not released. Investmet and DCM intend to establish syndicated loan arrangements with Swan, to include the new security charges to regulate secured debt over Swan incorporating a two year moratorium on principal repayments and at the end of the two year moratorium Swan may elect to repay the debt or require conversion at a price to be agreed between the parties. Subsequent to period end a number of the Group’s tenements were subject to plaint proceedings due to the Group not meeting its minimum expenditure requirements on the tenements. The majority of the plaints have now been settled by the Company. The ability of the Group to maintain tenure to its tenements is dependent upon it continuing to meet the minimum expenditures on the tenements or obtaining exemptions for tenements in which the minimum expenditures have not been met.

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DIRECTORS' REPORT

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INFORMATION ON DIRECTORS Director Qualifications, experience and special responsibilities Martin Depisch Masters Degree in Economic and Social Sciences (Mag.rer.soc.oec) Non-Executive Chairman

A director since July 2012, Mr Depisch is an Austrian national who completed his Master in Business Administration with emphasis on Finance at Karl-Franzens University in Graz Austria. Mr Depisch has over 15 years experience in financing and project management in the mining sector. Other current directorships: Redbank Copper Limited (from November 2011) and Stirling Resources Limited (from November 2011). Mr Depisch has not held directorships in any other listed companies in the last three years.

Damian Delaney CA Non-Executive Director

A director since July 2012, Mr Delaney is a chartered accountant with many years’ experience working with international listed companies. He has been involved in numerous capital raisings for the junior resource sector and brings significant experience in capital markets for the SME sector. Other current directorships: Genesis Minerals Limited (from March 2012), Redbank Copper Limited (from July 2012) and Stirling Resources Limited (from July 2012). Former directorships in the last three years: Nimrodel Resources Ltd.

Gerhard Kornfeld PhD in Economic and Social Sciences (Dr.rer.soc.oec) Non-Executive Director

A director since July 2012, Dr Kornfeld is an Austrian national who completed his PhD at the University of Economics in Vienna. He has been involved in various executive positions throughout Europe. Other current directorships: Australian Zircon NL, Stirling Resources Limited (from September 2012) and Redbank Copper Limited (from September 2012). Mr Kornfeld has not held directorships in any other listed companies in the last three years.

Michael Fotios BSc (Hons) MAusIMM Non-Executive Director

A director since September 2012, Mr Fotios is a Geologist specialising in Economic Geology with 27 years extensive experience in exploration throughout Australia for gold, base metals, tantalum, tin and nickel and taking projects from exploration to feasibility. He previously held positions with Homestake Australia Limited and Sons of Gwalia Limited. He was Managing Director and a Director with Tantalum Australia NL (now ABM Resources Ltd) from September 1999 to October 2005. His last position was as Managing Director of Galaxy Resources Limited. Michael Fotios is founder and current Executive Chairman of Investmet and regarded as having control of Investmet for the purposes of the Corporations Act. Other current directorships: Northern Star Resources Limited (from September 2009), Pegasus Metals Limited (from December 2009), Horseshoe Metals Limited (from May 2012), General Mining Corporation Limited (from June 2012), Redbank Copper Limited (from September 2012) and Stirling Resources Limited (from September 2012). Former directorships in the last three years: Galaxy Resources Limited.

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DIRECTORS' REPORT

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Peter Farris Diploma Business Perth Tech, Diploma Business RMIT, MAICD Non-Executive Director

A director since September 2012, Mr Farris is a well respected and highly credentialed businessman in the Perth real estate industry and corporate advisory services. He has managed and developed major real estate companies with turnovers in excess of $200 million and has extensive experience in company management. Other current directorships: Northern Star Resources Limited (April 2009), Redbank Copper Limited (from September 2012) and Stirling Resources Limited (from September 2012). Mr Farris has not held directorships in any other listed companies in the last three years.

Thomas Styblo L.L.M. Mag.rer.soc.oec Non-Executive Director

Mr Styblo is Director of Finance with DCM DECOmetal GmbH. He is an Executive Master of Laws (L.L.M.) and holds a Masters Degree in Economics and Social Science (Mag.rer.soc.oec). Other current directorships: Australian Zircon NL (from February 2012), Redbank Copper Limited (from April 2012) and Stirling Resources Limited (from April 2012). Mr Styblo has not held directorships in any other listed companies in the last three years.

Allan Brown B Sc (Hons) Met NSW, FAusIMM Non-Executive Chairman

A director since February 2010, Chairman since June 2010. Resigned July 2012. Mr Brown is a metallurgist with more than 40 years’ industry experience, specialising in the design, testing, commissioning and operation of base metal processing projects. He has worked as an industry consultant on metal processing projects in Australia and overseas for a range of local and global organisations including AngloGold, Newcrest and CBH Resources. Prior to his consulting career, he worked as Project and Mine Manager for a number of gold and base metal developers including Wiluna Gold, Sally Malay Nickel and Murchison Zinc. Other current directorships: Mutiny Gold Limited. Former directorships in the last three years: Redbank Copper Limited.

Keith Vuleta B.Bus. (Acc & Com Law), C.A., MAICD Non-Executive Director

Mr Vuleta was appointed as Finance Director in May 2007. Resigned July 2012. A Chartered Accountant for more than 20 years, having trained with Ernst & Young. He has held positions as Finance Director, Chief Financial Officer and Company Secretary for public companies in the mining, engineering and financial services industries. Other current directorships: Matilda Zircon Limited. Former directorships in the last three years: Redbank Copper Limited.

Ian Price B. Eng., FAusIMM Non-Executive Director

A director since February 2010. Resigned 25 July 2012. Mr Price is a mining engineer with more than 30 years’ experience in mine operations, public company management and consulting. He has been involved in all aspects of mining from exploration, feasibility studies, permitting, project development and construction through to operations, corporate management and project financing. He also has experience in base metals, gold and coal mining and processing and has a strong background in underground mining working throughout Australasia and Asia. Other current directorships: Anchor Resources Limited. Former directorships in the last three years: Redbank Copper Limited.

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DIRECTORS' REPORT

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Bruce Maluish B.AppSc. (Surv), Dip Met. Mining Managing Director Mr Maluish was appointed Managing Director in February 2010 and resigned in June 2010. Mr

Maluish has more than 30 years’ experience in the management and development of mining operations. He has previously been the Operations and General Manager with various public companies in Australia including formative years of the very successful companies, Hill 50 Ltd and Abelle Ltd. Previously held management roles at Mount Fisher Gold Mines, Darlot Gold Mine, Mount Burgess Gold Mining, Mount Monger Gold and Sundowner Minerals. Other current directorships: Ventnor Resources Limited. Former directorships in the last three years: Matilda Zircon Limited, Matilda Minerals Limited.

John Baxter B Sc, M Sc, MAIG, MSEG, MGSA Non-Executive Director

A director since February 2010, resigning in June 2010. Mr Baxter has more than 40 years’ experience in mineral industry including 15 years with the Geological Survey of Western Australia and 20 years as a consulting geologist specializing in structural and depositional controls on ore deposits, including tectonic evolution of stratigraphically hosted mineralization and the implications for resource estimation. Other current directorships: Nil Former directorships in the last three years: Matilda Zircon Limited.

Michael Kiernan B.Bus., FAICD Executive Chairman A director since March 2002 and Chairman since November 2005, Mr Kiernan resigned in June

2010. Mr Kiernan has more than 35 years’ experience in transport, mining, contracting and resources industries, including the development and operation of mining projects in iron ore, manganese, chromite, nickel, copper, coal, gold and mineral sands. He has a track record in management and leadership of resources based projects having held executive positions with Australia’s major mining and transport contractors. He was founding Managing Director of the diversified minerals producer Consolidated Minerals Limited. Other current directorships: Nil Former directorships in the last 3 years: Territory Resources Limited (February 2007 to June 2008), India Resources Limited (August 2006 to June 2008), Mineral Resources Limited (July 2006 to May 2008), Precious Metals Australia Limited (August 2006 to February 2008), Matilda Minerals Limited (December 2006 to June 2008), Peel Exploration Limited (March 2007 to February 2008), Uran Limited (May 2006 to June 2007), Croesus Mining NL (November 2005 to July 2007), Uran Limited (May 2006 to June 2007), Australian Zircon NL (May 2006 to April 2007 and February 2009 to March 2010), Redbank Mines Limited (December 2008 to June 2010), Matilda Zircon Limited (July 2009 to June 2010) and Stirling Resources Limited (October 2008 to June 2010).

Marty Adams B.Eng (Mining) Non-Executive Director

Mr. Adams has 30 years’ experience in the Australian mining industry. He has held a range of operational and senior management positions in open pit and underground operations.

Other current directorships: Australian Zircon NL. Former directorships in the last 3 years: Redbank Copper Limited (July to September 2010), Stirling Resources Limited (July to November 2010) and Matilda Zircon Limited (July to November 2010).

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DIRECTORS' REPORT

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Allan Quadrio B.App.Sc (Met), FAusIMM Executive Director Managing Director from July 2006 to November 2007. Resigned on 25 January 2008. Mr Quadrio

is a qualified metallurgist. He has extensive experience in the mining industry. Other current directorships: nil. Former directorships in the last three years: Territory Resources Limited (2007 to 2009), Consolidated Minerals Limited (2001 to 2007), Mithril Resources Limited (2004 to 2007) and Croesus Mining NL (Subject to Deed of Company Arrangement) (2006 to 2007).

John Davis Assoc. Applied Geology, MAusIMM, MAIG Executive Director A director from August 2005 and Technical Director since July 2006. Resigned on 1 August 2008.

Mr Davis is a qualified geologist with over 30 years industry experience.

Mr Davis has not held directorships in any other listed companies in the last three years.

Ian Huitson B.Eng (Mining), FAusIMM Executive Director Mr Huitson was appointed as Operations Director in May 2007 and resigned 20 January 2009. Mr

Huitson has 23 years’ experience in the gold, nickel, manganese and chromite mining industries.

Mr Huitson has not held directorships in any other listed companies in the last three years.

David Humann FCA, FCPA, FAICD A director since February 2007. Resigned on 11 July 2008. Mr Humann is a Fellow of the Institute

of Chartered Accountants and a Fellow of the Institute of Certified Practising Accountants.

Mr Humann holds non-executive directorships with Matrix Metals Limited (since March 2000), Mincor Resources Limited (since September 1999) India Resources Limited (since July 2010) and Advanced Braking Technologies Limited (since August 2006).

Former directorships in the last three years: Macmahon Holdings Ltd (2000 to 2006), Territory Resources Ltd (2008) and Tethyan Copper Co Limited (2003 to 2006).

Philip Botsis FAICD, F.Fin. Non-Executive Director

A director since February 2003. Resigned on 14 July 2008. Mr Botsis has over 29 years; experience in finance and investment. Former directorships in the last three years: Mount Magnet South NL (2006 to 2008).

John McKee CTA, CA(S.A.), MBA, PhD Non-Executive Director

A director since May 2006 who resigned on 16 November 2007. Dr McKee is a Chartered Accountant and has a Doctorate of Philosophy majoring in International Finance and a Masters of Business Administration. Dr McKee has held senior executive positions within major resources companies and within the public sector for over 25 years. Former directorships in the last three years: Siberia Mining Corporation Limited (2004 to 2006)

David Macoboy B.Ec, B.Comm, CPA Mr Macoboy resigned on 30 June 2007. He was a director since March 2002. Mr Macoboy is a

certified practising accountant with degrees in both economics and commerce. Michael Etheridge Dr Etheridge was appointed on 20 December 2006 and resigned on 30 July 2007. Dr Etheridge has

over 30 years experience as an industry consultant, academic and research scientist.

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DIRECTORS' REPORT

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Interests in the shares and options of Swan Gold Details of directors’ interests in the securities of Swan Gold as at the date of this report are as follows: Director Fully paid shares Unlisted options D Delaney - - M Depisch - - G Kornfeld - - M Fotios - - P Farris - - T Styblo - -

COMPANY SECRETARIES

Ildiko Wowesny B.Bus. Company Secretary since 26 February 2010. Ms Wowesny is a qualified Accountant with experience in company secretarial roles together with corporate management, accounting and financial areas. She has served as Company Secretary for ASX listed resource companies for some considerable time together with 5 years at Deloitte Touche Tohmatsu and also a period in the United Kingdom with resource groups. Keith J Vuleta B.Bus (Acc & Com Law), CA, MAICD Mr Vuleta was appointed Company Secretary on 27 October 2006 and resigned on 25 January 2008. He was subsequently reappointed on 26 June 2008 and resigned on 26 February 2010. Mr Vuleta has been a Chartered Accountant for more than 20 years, having trained with Ernst & Young. He has held positions as Finance Director, Chief Financial Officer and Company Secretary for public companies in the mining, engineering and financial services industries. MEETINGS OF DIRECTORS

The number of meetings of Directors (including meetings of committees of directors) of Swan Gold held during the year ended 30 June 2008 and the number of meetings attended by each director is as follows:

Board Remuneration No. held whilst in

office No.

attended No. held whilst

in office No.

attended M Kiernan 12 12 1 1 K Vuleta 12 12 - - J Davis 12 12 - - I Huitson 12 12 - - P Botsis 12 10 1 - D Humann 12 10 - - M Gill 3 3 - - A Quadrio 5 4 - - J McKee 4 3 1 1 M Etheridge 1 - - -

Committee Membership Members acting on the committees of the board during the year: Audit Committee Remuneration Committee David Humann (Chairman) Philip Botsis (Chairman)

John McKee (resigned 16 November 2007) Michael Kiernan Philip Botsis John McKee (resigned 16 November 2007)

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REMUNERATION REPORT (audited)

This Remuneration Report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the company and the group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the parent and the group receiving the highest remuneration.

Principles used to determine the nature and amount of remuneration

Details of key management personnel during the year Executive Directors

A Quadrio Managing Director (resigned 25 January 2008) J Davis Technical Director I Huitson Operations Director K Vuleta Finance Director M Gill Managing Director (appointed 12 November 2007, resigned 10 March 2008)

Non-executive directors

M Kiernan P Botsis J McKee (resigned 16 November 2007) D Humann M Etheridge (resigned 30 July 2007) D Macoboy (resigned 1 July 2007) Executives P McCole Company Secretary (appointed 25 January 2008, resigned 26 June 2008) F J Campagna Company Secretary (resigned 25 January 2008) Directors and executives remuneration

Overall remuneration policies are determined by the Board of Directors and are adapted to reflect competitive market and business conditions. Within this framework, the remuneration committee considers remuneration policies and practices generally, and determines specific remuneration packages and other terms of employment for executive directors and senior management. Executives may be provided with longer-term incentives through participation in option schemes, which serve to align the interests of the executives with those of shareholders. Executive remuneration and other terms of employment are reviewed annually by the remuneration committee having regard to performance, relevant comparative information and expert advice. Swan Gold’s remuneration policy for executive directors and senior management is designed to promote superior performance and long term commitment to Swan Gold. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing Swan Gold’s operations. Executive directors receive a base remuneration which is market related, together with an element of performance based remuneration. During the year the Company commenced gold production but also ceased production prior to 30 June 2008. Therefore it is regarded that the Company has not earned amounts that would be appropriate to be measured as financial performance. The Company considers it inappropriate at this stage for performance considerations within its remuneration policies and at such time as the company’s performance is able to be consistently measured the board will review these policies. Swan Gold’s remuneration policies are designed to align executive’s remuneration with shareholders’ interests and to retain appropriately qualified executive talent for the benefit of Swan Gold. The main principles of the policy are: - reward reflects the competitive market in which Swan Gold operates; - individual reward should be linked to performance criteria; and - executives should be rewarded for both financial and non-financial performance. Notwithstanding the above remuneration policies, there were no proportions of any elements of remuneration that related to performance.

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REMUNERATION REPORT (audited) (continued)

The structure of remuneration packages for executive directors and other senior executives comprises: - a fixed sum base salary payable monthly in cash; - short term incentives, where considered appropriate, through eligibility to participate in performance bonus plans; - long term incentives through executive directors being eligible to participate in share option schemes and share

purchase plan with the prior approval of shareholders. Senior executives may also participate in employee share option schemes, with any option issues generally being made in accordance with thresholds set in plans approved by shareholders; and

- other benefits, including participation in superannuation schemes. The proportion of fixed and variable remuneration is established for each executive by the remuneration committee. The objective of any short term incentives is to link achievement of Swan Gold’s operational targets with the remuneration received by executives charged with meeting those targets. The objective of long term incentives is to reward executives in a manner which aligns this element of their remuneration with the creation of shareholder wealth. Swan Gold’s activities comprise the exploration and evaluation of mineral tenements aimed at identifying economic mineral deposits capable of development. Swan Gold’s financial performance reflects the nature of these ongoing activities. Non-executive directors’ remuneration In accordance with current corporate governance practices, the structure for the remuneration of non-executive directors and senior executives is separate and distinct. Shareholders approve the maximum aggregate remuneration for non-executive directors, with the current approved limit being $500,000. The Board determines the actual payments to directors. The Board approves any consultancy arrangements for non-executive directors who provide services outside of and in addition to their duties as non-executive directors. Non-executive directors are entitled to statutory superannuation benefits. At this stage of Swan Gold’s development, non-executive directors may be entitled to participate in equity based remuneration schemes. Shareholders must approve the framework for any equity based compensation schemes and if a recommendation is made for a director to participate in an equity scheme, that participation must be specifically approved by the shareholders. All directors are entitled to have their indemnity insurance paid by Swan Gold. The Company does not have a policy preventing executives and directors from managing their risk exposure from ownership of employee share options.

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Details of remuneration

The following table discloses details of the nature and amount of each element of the emoluments of each director of Swan Gold and each of the officers receiving the highest emoluments for the year ended 30 June 2008.

30 June 2008

Primary (short-term) Post-

employment

Equity (share-based

payments)

Options Salary and Non- as % directors Consulting monetary Super- of Name fees fees benefits annuation Options Total Total

$ $ $ $ $ $ % Key management personnel Executive directors K J Vuleta 224,297 - 24,127 24,424 208,292 481,140 43.3 I D Huitson 344,037 - 27,463 28,380 206,141 606,021 34.0 J M Davis 344,036 - 54,846 28,380 72,470 499,732 14.5 A J Quadrio (i) 142,017 - 30,299 60,252 - 232,568 M Gill (ii) 146,708 - 23,648 12,290 - 182,646 Non-executive directors M L Kiernan 68,807 - - 6,192 77,419 152,418 50.8 P P Botsis 50,000 - - 4,500 - 54,500 D J Humann 56,880 - - 2,666 232,900 292,446 79.6 J McKee (iii) 38,366 - - - - 38,366 M A Etheridge (iv) 16,667 - - 2,798 - 19,465 D M Macoboy (v) - - - - - - Other executives - P McCole (vi) - - - - - - F J Campagna (vii) - 57,980 - - 57,980

Total 1,431,815 57,980 160,383 169,882 797,222 2,617,282 (i) Mr Quadrio resigned on 25 January 2008. (ii) Mr Gill was appointed as Managing Director on 12 November 2007 and resigned on 10 March 2008. (iii) Mr McKee resigned on 16 November 2007. (iv) Dr Etheridge resigned on 30 July 2007. (v) Mr Macoboy resigned on 1 July 2007. (vi) Mr McCole resigned on 26 June 2008. (vii) Mr Campagna resigned on 25 January 2008.

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DIRECTORS' REPORT

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There were no proportions of any elements of Key Management Personnel remuneration that related to performance. While the options are not specifically linked to performance criteria, the options are issued with an exercise price of an ordinary Swan Gold share at the time of issue, ensuring that executives only receive a benefit where shareholder wealth has increased.

30 June 2007

Primary (short-term) Post-

employment

Equity (share-based

payments)

Options Salary and Non- as % directors Consulting monetary Super- of Name fees fees benefits annuation Options Total Total

$ $ $ $ $ $ % Key management personnel Executive directors A Quadrio (i) 262,980 - 18,052 102,148 209,352 592,532 35.3 J Davis 279,052 - 10,141 25,115 377,371 691,679 54.6 I Huitson (ii) 131,322 - 11,819 27,596 170,737 16.2 K Vuleta (iii) 163,491 - - 14,714 102,658 280,863 36.6 Non-executive directors M Kiernan - - - - 303,185 303,185 100.0 P Botsis 27,500 - - 2,475 - 29,975 J McKee 35,425 - - - - 35,425 D Macoboy 13,625 - - 1,125 50,000 64,750 77.2 J Forrest (iv) - - - - - - M Etheridge (v) 14,423 - - 1,298 - 15,721 D Humann - - - 5,438 - 5,438 Other executives F Campagna - 129,899 - - - 129,899

Total 927,818 129,899 28,193 164,132 1,070,162 2,320,204 (i) Mr Quadrio was appointed on 20 July 2006. (ii) Mr Huitson commenced employment on 5 February 2007 and was appointed on 16 May 2007. (iii) Mr Vuleta commenced employment on 16 October 2006 and was appointed on 16 May 2007. (iv) Mr Forrest resigned on 30 October 2006. (v) Dr Etheridge was appointed on 20 December 2006.

There were no proportions of any elements of Key Management Personnel remuneration that was related to performance. While the options are not specifically linked to performance criteria, the options are issued with an exercise price of an ordinary Swan Gold share at the time of issue, ensuring that executives only receive a benefit where shareholder wealth has increased.

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DIRECTORS' REPORT

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Compensation options: granted and vested during the year (consolidated) Granted Terms and conditions for each grant Vested

30 June 2008 Number Grant date

Fair value per option at

grant date

Exercise price per option

Expiry date

First exercise

date

Last exercise

date Number % $ $

Directors D Humann 2,500,000 22.11.07 0.09 0.40 23.02.12 22.11.07 23.02.12 2,500,000 100 Compensation options: granted and vested during the year (consolidated) Granted Terms and conditions for each grant Vested

30 June 2007 Number Grant date

Fair value per option at

grant date

Exercise price per option

Expiry date

First exercise

date

Last exercise

date Number % $ $

Directors A Quadrio 1,500,000 16.11.06 0.11 0.40 31.12.10 30.06.07 31.12.10 1,500,000 100 1,500,000 16.11.06 0.11 0.40 31.12.10 30.06.08 31.12.10 - - 2,000,000 16.11.06 0.11 0.40 31.12.10 30.06.09 31.12.10 - - I Huitson 1,250,000 23.02.07 0.03 0.40 23.02.11 23.02.08 23.02.11 - - 1,250,000 23.02.07 0.09 0.40 23.02.11 23.02.09 23.02.11 - - K Vuleta 1,250,000 25.10.06 0.10 0.40 30.09.10 30.09.07 30.09.10 - - 1,250,000 25.10.06 0.10 0.40 30.09.10 30.09.08 30.09.10 - - M Kiernan 2,000,000 05.07.06 0.10 0.40 31.12.10 30.06.06 31.12.10 2,000,000 100 2,000,000 05.07.06 0.10 0.40 31.12.10 30.06.07 31.12.10 2,000,000 100 2,000,000 05.07.06 0.10 0.40 31.12.10 30.06.08 31.12.10 - - 2,000,000 05.07.06 0.10 0.40 31.12.10 30.06.09 31.12.10 - - 2,000,000 05.07.06 0.10 0.40 31.12.10 30.06.10 31.12.10 - - J Davis 1,000,000 05.07.06 0.10 0.40 31.12.10 30.06.07 31.12.10 1,000,000 100 1,000,000 05.07.06 0.10 0.40 31.12.10 30.06.08 31.12.10 - - 1,000,000 05.07.06 0.10 0.40 31.12.10 30.06.09 31.12.10 - - D Macoboy 500,000 05.07.06 0.10 0.40 31.12.10 05.07.06 31.12.10 500,000 100 500,000 05.07.06 0.10 0.40 31.12.10 30.06.07 31.12.10 500,000 100 500,000 05.07.06 0.10 0.40 31.12.10 30.06.08 31.12.10 - - 500,000 05.07.06 0.10 0.40 31.12.10 30.06.09 31.12.10 - - Options granted as part of remuneration

30 June 2008 Value of options granted

during the year

Value of options exercised during

the year

Value of options lapsed during

the year

Total % remuneration for the year consisting of

options $ $ $ $ Directors

D Humann 232,900 - - 232,900 79.6%

30 June 2007 Value of options granted

during the year

Value of options exercised during

the year

Value of options lapsed during

the year

Total % remuneration for the year consisting

of options $ $ $ $ Directors

J M Davis - - - - 55% M L Kiernan 1,000,000 - - 1,000,000 100% D M Macoboy 200,000 - - 200,000 77% A J Quadrio 445,556 - - 445,556 36% I D Huitson 93,750 - - 93,750 16% K J Vuleta 205,275 - - 205,275 36%

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DIRECTORS' REPORT

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No shares were issued during the year as a result of the exercise of options granted as part of remuneration. There were no alterations to the terms and conditions of options granted as remuneration since their grant date. There were no forfeitures during the period. Information on any benefits received by directors of Swan Gold by reason of a contract made by the consolidated entity with a director or a director-related entity is contained in Note 24 of the financial report. Service agreements The terms of employment for executive directors and specified executives were formalised in service agreements. Major provisions of the agreements relating to duration and termination are set out below. J Davis – Technical Director Term of agreement: three years from 22 August 2005. Remuneration: base salary plus statutory superannuation contributions, to be reviewed annually. Equity compensation: issue of 2,100,000 options vesting in equal instalments over a period of three years. Termination provisions: twelve months’ notice by either party or payment upon termination by the Company (other than for breach of employment conditions or for gross misconduct) equal to the annual salary. I Huitson – Operations Director Term of agreement: unspecified. Remuneration: base salary plus statutory superannuation contributions, to be reviewed annually. Equity Compensation: issue of 2,500,000 options vesting in equal instalments over a period of two years. The Company also advanced a limited recourse loan of $250,000 to enable the purchase of 1,000,000 shares by Mr Huitson pursuant to the Share Purchase Plan. The loan advance is repayable within five years with interest accruing at 8.5% per annum. Termination provisions: payment upon termination by the Company (other than for serious misconduct) three months of annual salary for inadequate performance or long term incapacity and twelve months of annual salary for redundancy or in lieu of notice. K Vuleta – Finance Director Term of agreement: unspecified. Remuneration: base salary plus statutory superannuation contributions, to be reviewed annually. Equity Compensation: issue of 2,500,000 options vesting in equal instalments over a period of two years. The Company also advanced a limited recourse loan of $250,000 to enable the purchase of 1,000,000 shares by Mr Vuleta pursuant to the Share Purchase Plan. The loan advance is repayable within five years with interest accruing at 8.5% per annum. Termination provisions: payment upon termination by the Company (other than for serious misconduct) three months of annual salary for inadequate performance or long term incapacity and twelve months of annual salary for redundancy or in lieu of notice. A Quadrio – Managing Director (resigned 25 January 2008) Term of agreement: unspecified. Remuneration: base salary plus statutory superannuation contributions, to be reviewed annually. Termination provisions: payment upon termination by the Company (other than for serious misconduct) 3 months of annual salary for inadequate performance or long term incapacity and 12 months of annual salary for redundancy or in lieu of notice. M Gill – Managing Director (appointed 12 November 2007, resigned 10 March 2008) Term of agreement: unspecified. Remuneration: base salary plus statutory superannuation contributions, to be reviewed annually. A short term incentive bonus of up to 100% of annual salary was provided subject to meeting unspecified key short term performance measures. Due to Mr Gill’s resignation, no bonus was paid and the entire amount was forfeited. Equity compensation: 2.5 million options issued in three tranches vesting at 6 months, 18 months and 30 months with an exercise price of $0.30 and a term of four years. The Company also committed to issue 500,000 fully paid shares each year for three years subject to meeting unspecified key long term performance measures. Termination provisions: payment upon termination by the Company (other than for serious misconduct) 3 months of annual salary for inadequate performance or long term incapacity and 12 months of annual salary for redundancy or in lieu of notice.

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DIRECTORS' REPORT

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Share-based compensation Directors, employees and consultants may be eligible to participate in equity based compensation schemes. An employee share option scheme was approved by shareholders at a general meeting held on 5 July 2006. A Share Purchase Plan was approved by shareholders at a general meeting held on 14 August 2007. The primary purposes of the schemes are to increase motivation, promote retention, and align interests with those of Swan Gold and its shareholders and to reward contribution to the growth of Swan Gold. Company performance The table below shows the performance of the consolidated entity as measured by its earnings per share. Swan Gold shares have been suspended from trading since Voluntary Administrators were appointed on 10 July 2008. In the past five years the consolidated entity has incurred losses and no dividends have been paid. Any improvement to earnings is viewed as a long term position that is not yet fully determinable.

30 June 2008 30 June 2007 30 June 2006 30 June 2005 30 June 2004 Cents Cents Cents Cents Cents Earnings/(loss) per share (53.48) (38.77) (54.60) (12.36) (7.29)

End of Remuneration Report (audited)

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DIRECTORS' REPORT

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ENVIRONMENTAL REGULATIONS

The consolidated entity is subject to significant environmental regulation in respect to its mineral exploration activities. These obligations are regulated under relevant government authorities within Australia. The consolidated entity is a party to exploration and mine development licences. Generally, these licences specify the environmental regulations applicable to exploration and mining operations in the respective jurisdictions. The consolidated entity aims to ensure that it complies with the identified regulatory requirements in each jurisdiction in which it operates. Compliance with environmental obligations is monitored by the Board of Directors. No environmental breaches have been notified to the consolidated entity by any government agency during the year ended 30 June 2008. NON-AUDIT SERVICES

During the financial year shareholders approved the change of auditors from Ernst & Young to PricewaterhouseCoopers. The administrator was appointed 10 July 2008, and with the Company’s recapitalisation effected on 26 February 2010 the Company appointed Ernst & Young as its statutory auditor. Swan Gold’s external auditors have provided other services in addition to its statutory audit function. Non-audit services provided by Ernst & Young during their period as external auditors comprise $78,790 for taxation consulting advice and other advisory services. Non-audit services provided by PricewaterhouseCoopers during their period as external auditors comprise $75,000 for provision of corporate advisory services. Further details of remuneration of the auditors are set out in Note 21. The board has considered the non-audit services provided during the year and is satisfied that the provision of those services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and did not compromise the auditor independence requirements of the Corporations Act 2001, for the following reasons: - all non-audit services were subject to the corporate governance guidelines adopted by Swan Gold; - non-audit services have been reviewed by the audit committee to ensure that they do not impact the impartiality or

objectivity of the auditor; and - the non-audit services provided do not undermine the general principles relating to auditor independence as set out in

Professional Statement F1, Professional Independence, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity, acting as an advocate for Swan Gold or jointly sharing economic risks and rewards.

AUDITOR INDEPENDENCE

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included immediately following the Directors’ Report and forms part of this Directors’ Report. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into indemnity agreements with each of the directors and officers of the Company. Under the agreements, the Company will indemnify those officers against certain claims or for any expenses or costs which may arise as a result of work performed in their respective capacities as officers of the Company or any related entities. The Company has taken out an insurance policy insuring Directors and Officers of the Company against any liability arising from a claim bought by a third party against the Company or its Directors or Officers, and against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in their capacity as a Director or Officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. During the year, the Company paid premiums in respect of the above insurance policy. The contract prohibits the disclosure of the nature of the liabilities and/or the amount of the premium.

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DIRECTORS' REPORT

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ROUNDING

The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to Swan Gold under the ASIC Class Order 98/0100. Swan Gold is an entity to which the Class Order applies. Signed in accordance with a resolution of the directors.

Damian Delaney Director Perth, Western Australia 25 September 2012

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GB:MM:SWANGOLD:005

Liability limited by a scheme approved under Professional Standards Legislation

Auditor’s Independence Declaration to the Directors of Swan Gold Mining Limited In relation to our audit of the financial report of Swan Gold Mining Limited for the financial year ended 30 June 2008, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

G A Buckingham Partner Perth 25 September 2012

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SWAN GOLD MINING LIMITED AND CONTROLLED ENTITIES

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INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

CONSOLIDATED PARENT

NOTE 2008 2007* 2008 2007* $’000 $’000 $’000 $’000 Revenue 5(a) 26,329 161 150 124 Other income 5(b) 2,512 314 58 217 Employee and directors – remuneration expense 5(c) (11,873) (2,257) (2,060) (1,919)Employee and directors – share based payments expense

5(c) (659) (1,668) (659) (1,668)

Raw materials and consumables used 5(d) (38,706) - (953) -Depreciation and amortisation 5(e) (1,916) (415) (328) (316)Site establishment costs (5,906) (1,720) (334) -Corporate and administration expenses 5(f) (4,189) (1,074) (1,236) (943)Regulatory expenses (1,314) (1,443) (1,418) (1,438)Loss on sale of property, plant & equipment - (998) - (998)Other expenses (6,742) (1,955) (1,232) (1,404)Finance costs 5(g) (1,993) (202) (1,756) (161)Allowance for doubtful debts (705) - (535) -Exploration and evaluation expenditure 12 (27,060) (8,915) - (1,194)Impairment of deferred exploration expenditure 12 (7,232) (14,064) - -Impairment of receivables 9 (3,684) - - -Impairment of loans to controlled entities 9 - - (70,702) (17,801)Impairment of shares in controlled entities 10 - - (3,125) -Impairment of property, plant and equipment 11 (4,139) - (608) - Loss before income tax expense (87,277) (34,236) (84,738) (27,501) Income tax expense 6 - - (10,775) -

Loss after income tax (87,277) (34,236) (95,513) (27,501)Minority interests - - - -

Net loss attributable to members of Swan Gold (87,277) (34,236) (95,513) (27,501)

Basic and diluted loss per share (cents per share) 31 53.48 38.77 - * Certain amounts shown here do not do not correspond to the 2007 financial statements and reflect adjustments detailed in note 2(a).

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BALANCE SHEET AS AT 30 JUNE 2008

CONSOLIDATED PARENT NOTE 2008 2007* 2008 2007* $’000 $’000 $’000 $’000 CURRENT ASSETS Cash and cash equivalents 30 - 21,750 - 21,455Trade and other receivables 7 5,735 53 684 52Inventory 8 967 33 - -Prepayments 12 157 12 105

TOTAL CURRENT ASSETS 6,714 21,993 696 21,612 NON-CURRENT ASSETS Deferred tax asset 6 - - - 10,775Receivables 9 6,215 3,045 3,258 4,234Available for sale financial assets 63 62 63 62Other financial assets 10 - - 24,127 27,252Property, plant and equipment 11 13,915 12,745 925 1,938Deferred exploration expenditure 12 27,135 30,302 - -

TOTAL NON-CURRENT ASSETS 47,328 46,154 28,373 44,261 TOTAL ASSETS 54,042 68,147 29,069 65,873 CURRENT LIABILITIES Trade and other payables 13 21,360 13,567 2,946 7,178Interest bearing loans and borrowings 14 29,054 489 28,290 347Provisions 15 438 355 438 162

TOTAL CURRENT LIABILITIES 50,852 14,411 31,674 7,687 NON-CURRENT LIABILITIES Provisions 15 4,148 3,348 - -Interest bearing loans and borrowings 16 2,066 1,302 419 864

TOTAL NON-CURRENT LIABILITIES 6,214 4,650 419 864 TOTAL LIABILITIES 57,066 19,061 32,093 8,551 NET ASSETS / (LIABILITIES) (3,024) 49,086 (3,024) 57,322

EQUITY Contributed equity 17 137,474 103,800 137,474 103,800Accumulated losses (145,363) (58,086) (145,321) (49,808)Reserves 18 4,823 3,330 4,823 3,330

TOTAL PARENT ENTITY INTEREST (3,066) 49,044 (3,024) 57,322 Minority interests 19 42 42 - -

TOTAL EQUITY / (DEFICIT) (3,024) 49,086 (3,024) 57,322

* Certain amounts shown here do not do not correspond to the 2007 financial statements and reflect adjustments detailed in note 2(a).

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008

Attributable to equity holders of the parent entity

Contributed equity

Accumulated losses Reserves

Total Minority interests

Total equity

Consolidated $’000 $’000 $’000 $’000 $’000 $’000 At 1 July 2006* 55,757 (23,850) 1,662 33,569 42 33,611 Total income and expense for the period recognised directly in equity - - - - - - Loss for the year after income tax - (34,236) - (34,236) - (34,236) Total income and expense for the year - (34,236) - (34,236) - (34,236) Transactions with equity holders in their capacity as equity holders:

Issue of share capital 46,508 - - 46,508 - 46,508 Share issue expenses (1,765) - - (1,765) - (1,765) Exercise of options 3,300 - - 3,300 - 3,300 Share-based payments - - 1,668 1,668 - 1,668 At 30 June 2007* 103,800 (58,086) 3,330 49,044 42 49,086 Total income and expense for the period recognised directly in equity - - - - - - Loss for the year after income tax - (87,277) - (87,277) - (87,277)

Total income and expense for the year - (87,277) - (87,277) - (87,277) Transactions with equity holders in their capacity as equity holders:

Issue of share capital 35,257 - - 35,257 - 35,257 Share issue expenses (1,653) - - (1,653) - (1,653) Exercise of options 70 - - 70 - 70 Share-based payments - - 1,493 1,493 - 1,493 At 30 June 2008 137,474 (145,363) 4,823 (3,066) 42 (3,024)

* Refer to note 2(a) for adjustments made.

Prior Period Adjustments * Balance at 1 July 2006 (22,070) 35,349 35,391 Change in accounting policy (1,780) (1,780) (1,780) At 1 July 2006 (23,850) 33,569 33,611

Balance at 30 June 2007 (50,199) 56,931 56,973 Change in accounting policy (7,887) (7,887) (7,887) At 30 June 2007 (58,086) 49,044 49,086

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008 (continued)

Contributed equity

Accumulated losses Reserves

Total Parent $’000 $’000 $’000 $’000 At 1 July 2006* 55,757 (22,307) 1,662 35,112 Total income and expense for the period recognised directly in equity - - - - Loss for the year after income tax - (27,501) - (27,501) Total income and expense for the year - (27,501) - (27,501) Transactions with equity holders in their capacity as equity holders:

Issue of share capital 46,508 - - 46,508 Share issue expenses (1,765) - - (1,765) Exercise of options 3,300 - - 3,300 Share-based payments - - 1,668 1,668 At 30 June 2007* 103,800 (49,808) 3,330 57,322 Total income and expense for the period recognised directly in equity - - - - Loss for the year after income tax - (95,513) - (95,513)

Total income and expense for the year - (95,513) - (95,513)

Transactions with equity holders in their capacity as equity holders:

Issue of share capital 35,257 - - 35,257 Share issue expenses (1,653) - - (1,653) Exercise of options 70 - - 70 Share-based payments - - 1,493 1,493 At 30 June 2008 137,474 (145,321) 4,823 (3,024)

* Refer to note 2(a) for adjustments made.

Prior Period Adjustments * Balance at 1 July 2006 (22,070) 35,349 Change in accounting policy (237) (237) At 1 July 2006 (22,307) 35,112

Balance at 30 June 2007 (48,614) 58,516 Change in accounting policy (1,194) (1,194) At 30 June 2007 (49,808) 57,322

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CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

CONSOLIDATED PARENT NOTE 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Cash flows from operating activities

Receipts from customers 26,357 - - - Payments to suppliers and employees (56,120) (5,314) (9,782) (5,680) Interest received 938 161 150 124 Interest paid (413) (202) (176) (161) Net cash outflow from operating activities

30 (29,238) (5,355) (9,808) (5,717)

Cash flows from investing activities

Payments for mineral exploration expenditure (29,681) (4,890) - (1,194) Proceeds from disposal of property, plant and equipment 7,700 - - - Payments for purchase of property, plant and equipment (14,918) (7,925) (261) (386) Payment for the Minjar project - (3,638) - - Acquisition of the Mt Ida Excluded Area - (1,600) - - Proceeds from sale of other financial assets - 1,502 - 1,502 Payment for other assets (10,075) (4,557) (75) (2,815) Payments for security deposits (3,611) - (3,021) - Net cash outflow from investing activities

(50,585)

(21,108)

(3,357)

(2,893)

Cash flows from financing activities

Proceeds from issues of shares 32,151 49,288 32,151 49,288 Share issue costs (1,653) (1,765) (1,653) (1,765) Loans to controlled entities - - (66,660) (17,987) Loan proceeds from other parties 33,961 2,015 33,961 2,003 Repayment of loans to other parties (6,000) (2,000) (6,000) (2,000) Payment of finance lease liabilities (386) (129) (89) (129) Net cash inflow / (outflow) from financing activities

58,073

47,409

(8,290)

29,410

Net increase / (decrease) in cash and cash equivalents (21,750) 20,946 (21,455) 20,800 Cash and cash equivalents at the beginning of the financial year 21,750 804 21,455 655 Cash and cash equivalents at the end of the financial year 30 - 21,750 - 21,455

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NOTES TO THE FINANCIAL STATEMENTS


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1. CORPORATE INFORMATION The financial report of Swan Gold Mining Limited for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the Directors on the date of signing of the Directors’ Report. Swan Gold Mining Limited is a company limited by shares that is incorporated and domiciled in Australia. 2. STATEMENT 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, Australian Accounting Standards and Interpretations. The financial report has been prepared on a historical cost basis, except for available for sale investments, which have been measured at fair value. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated. CHANGE IN ACCOUNTING POLICY The policy for accounting for exploration and evaluation expenditure has changed from the policy applied in previous accounting periods. In previous reporting periods, the costs incurred in connection with exploration and evaluation of areas with current rights of tenure were capitalised to the balance sheet. The criteria for carrying forward the costs were:

That the rights of tenure of the area of interest are current and the costs are expected to be recouped through the successful development and exploitation of the area of interest, or by its sale, or

Exploration and evaluation activities in the area of interest had not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in relation to the area are continuing.

Costs carried forward in respect of an area of interest that was abandoned were written off in the year in which the decision to abandon was made. The policy has since changed, and the new policy has been applied retrospectively (with comparative information being restated accordingly). Under the new policy, exploration and evaluation expenditure is expensed to the income statement as and when it is incurred. Exploration and evaluation costs are only capitalised to the balance sheet if they result from an acquisition. The previous accounting policy of the Group is common for exploration companies as a result of this expenditure representing their main assets. Management judges that the new accounting policy provides reliable and relevant information because it results in a more transparent treatment of exploration and evaluation costs. The impact of this change in accounting policy is reflected below: The carry forward exploration and evaluation expenditure in the consolidated balance sheet as at 30 June 2007 has been decreased by $10.7m to reflect the application of the new accounting policy (30 June 2006: $1.8m reduction). The carry forward exploration and evaluation expenditure in the parent balance sheet as at 30 June 2007 has been decreased by $1.194m to reflect the application of the new accounting policy (30 June 2006: $0.237m reduction). The effect of these reductions in exploration and evaluation expenditures has been reflected in the opening equity positions of each respective period. For comparative purposes in the consolidated income statement, $8.915m has been recognised as exploration and evaluation expenditure in the year ended 30 June 2007. In the parent income statement, $1.194m has been recognised as exploration and evaluation expenditure in the year ended 30 June 2012. Basic and diluted earnings per share have also been restated. The amount of the impact on basic and diluted earnings per share for the net result for the period ended 30 June 2007 of this change of accounting policy is a decrease in earnings per share of 10.1 cents. Under the new accounting policy, $27.060m has been recognised as exploration and evaluation expenditure in the consolidated income statement.

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Statement of compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. (c) Adoption of New and Revised Standards In the year ended 30 June 2008, the Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2007. Details of the impact of the adoption of these new accounting standards are set out in the individual accounting policy notes set out below. The Group has also adopted the following Standards as listed below which only impacted on the Group’s financial statements with respect to disclosure:

AASB 7 ‘Financial Instruments: Disclosures’ AASB 2007-4: Amendments to Australian Accounting Standards arising from EDISI and other amendments AASB 2008-4: Amendments to Australian Accounting Standards – Key Management Personnel Disclosures by

Disclosing Entities Accounting Standards and Interpretations issued but not yet effective The following standards and interpretations have been issued by the AASB but are not yet effective for the period ending 30 June 2008: Reference Title Summary Application

date of standard

Application date for Group

AASB Int. 17 and AASB 2008-13

Distributions of Non-cash Assets to Owners and consequential amendments to Australian Accounting Standards AASB 5 and AASB 110

The Interpretation outlines how an entity should measure distributions of assets, other than cash, as a dividend to its owners acting in their capacity as owners. This applies to transactions commonly referred to as spin-offs, split offs or demergers and in-specie distributions.

1 July 2009 1 July 2009

AASB 8 and AASB 2007-3

Operating Segments and consequential amendments to other Australian Accounting Standards

New Standard replacing AASB 114 Segment Reporting, which adopts a management reporting approach to segment reporting.

1 January 2009 1 July 2009

AASB 123 (Revised) and AASB 2007-6

Borrowing Costs and consequential amendments to other Australian Accounting Standards

The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised.


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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Reference Title Summary Application

date of standard


AASB 101 (Revised), AASB 2007-8 and AASB 2007-10

Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards

Introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements.


AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations

The amendments clarify the definition of “vesting conditions”, introducing the term “non-vesting conditions” for conditions other than vesting conditions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied.


AASB 3 (Revised)

Business Combinations The revised Standard introduces a number of changes to the accounting for business combinations, the most significant of which includes the requirement to have to expense transaction costs and a choice (for each business combination entered into) to measure a non-controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. This choice will effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. The changes apply prospectively.

1 July 2009 1 July 2009

AASB 127 (Revised)

Consolidated and Separate Financial Statements

There are a number of changes arising from the revision to AASB 127 relating to changes in ownership interest in a subsidiary without loss of control, allocation of losses of a subsidiary and accounting for the loss of control of a subsidiary. Specifically in relation to a change in the ownership interest of a subsidiary (that does not result in loss of control) – such a transaction will be accounted for as an equity transaction.

1 July 2009 1 July 2009

AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127

Amending Standard issued as a consequence of revisions to AASB 3 and AASB 127. Refer above.

1 July 2009 1 July 2009

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date of standard


AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project

The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; Part II deals with either terminology or editorial amendments that the IASB believes will have minimal impact. This was the first omnibus of amendments issued by the IASB arising from the Annual Improvements Project and it is expected that going forward, such improvements will be issued annually to remove inconsistencies and clarify wording in the standards. The AASB issued these amendments in two separate amending standards; one dealing with the accounting changes effective from 1 January 2009 and the other dealing with amendments to AASB 5, which will be applicable from 1 July 2009 [refer below AASB 2008-6].


AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

This was the second omnibus of amendments issued by the IASB arising from the Annual Improvements Project. Refer to AASB 2008-5 above for more details.

1 July 2009 1 July 2009

AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

The main amendments of relevance to Australian entities are those made to AASB 127 deleting the “cost method” and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity's separate financial statements (i.e., parent company accounts). The distinction between pre- and post-acquisition profits is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment. AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value.


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date of standard


AASB 2009-2 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments [AASB 4, AASB 7, AASB 1023 & AASB 1038]

The main amendment to AASB 7 requires fair value measurements to be disclosed by the source of inputs, using the following three-level hierarchy: ► quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); ► inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and ► inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). These amendments arise from the issuance of Improving Disclosures about Financial Instruments (Amendments to IFRS 7) by the IASB in March 2009.The amendments to AASB 4, AASB 1023 and AASB 1038 comprise editorial changes resulting from the amendments to AASB 7.

Annual reporting periods beginning on or after 1 January 2009 that end on or after 30 April 2009.

1 July 2009

AASB 2009-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 2 and AASB 138 and AASB Interpretations 9 & 16]

The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting. The main amendment of relevance to Australian entities is that made to IFRIC 16 which allows qualifying hedge instruments to be held by any entity or entities within the group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements in AASB 139 that relate to a net investment hedge are satisfied. More hedging relationships will be eligible for hedge accounting as a result of the amendment. These amendments arise from the issuance of the IASB’s Improvements to IFRSs. The amendments pertaining to IFRS 5, 8, IAS 1,7, 17, 36 and 39 have been issued in Australia as AASB 2009-5 (refer below).

1 July 2009 1 July 2009

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date of standard


AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139]

The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting. The main amendment of relevance to Australian entities is that made to AASB 117 by removing the specific guidance on classifying land as a lease so that only the general guidance remains. Assessing land leases based on the general criteria may result in more land leases being classified as finance leases and if so, the type of asset which is to be recorded (intangible v property, plant and equipment) needs to be determined. These amendments arise from the issuance of the IASB’s Improvements to IFRSs. The AASB has issued the amendments to IFRS 2, IAS 38, IFRIC 9 as AASB 2009-4 (refer above).


AASB 2009-Y

Amendments to Australian Accounting Standards [AASB 5, 7, 107, 112, 136 & 139 and Interpretation 17]

These comprise editorial amendments and are expected to have no major impact on the requirements of the amended pronouncements.

1 July 2009 1 July 2009

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date of standard


AASB 9 Financial Instruments AASB 9 includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Recognition and Measurement). These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes from AASB 139 are described below. (a) Financial assets are classified based on (1) the objective of the entity’s business model for managing the financial assets; (2) the characteristics of the contractual cash flows. This replaces the numerous categories of financial assets in AASB 139, each of which had its own classification criteria. (b) AASB 9 allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument. (c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.


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date of standard


AASB 2009-11

Amendments to Australian Accounting Standards arising from AASB 9[AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12]

The revised Standard introduces a number of changes to the accounting for financial assets, the most significant of which includes: ► two categories for financial assets being amortised cost or fair value ► removal of the requirement to separate embedded derivatives in financial assets ► strict requirements to determine which financial assets can be classified as amortised cost or fair value. Financial assets can only be classified as amortised cost if (a) the contractual cash flows from the instrument represent principal and interest and (b) the entity’s purpose for holding the instrument is to collect the contractual cash flows ► an option for investments in equity instruments which are not held for trading to recognise fair value changes through other comprehensive income with no impairment testing and no recycling through profit or loss on derecognition ► reclassifications between amortised cost and fair value no longer permitted unless the entity’s business model for holding the asset changes ► changes to the accounting and additional disclosures for equity instruments classified as fair value through other comprehensive income


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date of standard


AASB 124 (Revised)

Related Party Disclosures (December 2009)

The revised AASB 124 simplifies the definition of a related party, clarifying its intended meaning and eliminating inconsistencies from the definition, including: (a) the definition now identifies a subsidiary and an associate with the same investor as related parties of each other; (b) entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer related parties of each other; and (c) the definition now identifies that, whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other. A partial exemption is also provided from the disclosure requirements for government-related entities. Entities that are related by virtue of being controlled by the same government can provide reduced related party disclosures.


AASB 2009-12

Amendments to Australian Accounting Standards

This amendment makes numerous editorial changes to a range of Australian Accounting Standards and Interpretations.


[AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052]

In particular, it amends AASB 8 Operating Segments to require an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. It also makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. F

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date of standard


AASB 1054 Australian Additional Disclosures

This standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project of the AASB and FRSB. This standard relocates all Australian specific disclosures from other standards to one place and revises disclosures in the following areas: (a) Compliance with Australian Accounting Standards (b) The statutory basis or reporting framework for financial statements (c) Whether the financial statements are general purpose or special purpose (d) Audit fees (e) Imputation credits

1 July 2011 1 July 2011

AASB 2010-3

Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 3, AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 & AASB 139]

Limits the scope of the measurement choices of non-controlling interest at proportionate share of net assets in the event of liquidation. Other components of NCI are measured at fair value. Requires an entity (in a business combination) to account for the replacement of the acquiree’s share-based payment transactions (whether obliged or voluntarily), i.e., split between consideration and post combination expenses. Clarifies that contingent consideration from a business combination that occurred before the effective date of AASB 3 Revised is not restated. Eliminates the requirement to restate financial statements for a reporting period when significant influence or joint control is lost and the reporting entity accounts for the remaining investment under AASB 139. This includes the effect on accumulated foreign exchange differences on such investments.

1 July 2010 1 July 2010

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date of standard


AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]

Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent of risks associated with financial instruments.Clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. Provides guidance to illustrate how to apply disclosure principles in AASB 134 for significant events and transactions.Clarify that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be taken into account.


AASB 2010-5 Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042]

This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB. These amendments have no major impact on the requirements of the amended pronouncements.


AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7]

The amendments increase the disclosure requirements for transactions involving transfers of financial assets. Disclosures require enhancements to the existing disclosures in IFRS 7 where an asset is transferred but is not derecognised and introduce new disclosures for assets that are derecognised but the entity continues to have a continuing exposure to the asset after the sale.

1 July 2011 1 July 2011

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date of standard


AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023, & 1038 and interpretations 2, 5, 10, 12, 19 & 127]

The requirements for classifying and measuring financial liabilities were added to AASB 9. The existing requirements for the classification of financial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for financial liabilities the change in fair value is accounted for as follows: ► The change attributable to changes in credit risk are presented in other comprehensive income (OCI) ► The remaining change is presented in profit or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.


AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence project [AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, AASB 132, AASB 134, Interpretation 2, Interpretation 112, Interpretation 113]

This Standard amendments many Australian Accounting Standards, removing the disclosures which have been relocated to AASB 1054.

1 July 2011 1 July 2011

AABS 10 Consolidated Financial Statements

AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and Interpretation 112 Consolidation – Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. This is likely to lead to more entities being consolidated into the group.


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date of standard


AASB 11 Joint Arrangements AASB 11 replaces AASB 131 Interests in Joint Ventures and Interpretation 113 Jointly- controlled Entities – Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition AASB 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method. This may result in a change in the accounting for the joint arrangements held by the group.


AASB 12 Disclosure of Interests in Other Entities

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


AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangement Standards

Consequential amendments to AASB 127 Separate Financial Statements and AASB 128 Investments in Associates as a result of the adoption of AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements and AASB 12 Disclosure of Interests in Other Entities.


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date of standard


Interpretation 19

Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments

This interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability are “consideration paid” in accordance with paragraph 41 of IAS 39. As a result, the financial liability is derecognised and the equity instruments issued are treated as consideration paid to extinguish that financial liability. The interpretation states that equity instruments issued in a debt for equity swap should be measured at the fair value of the equity instruments issued, if this can be determined reliably. If the fair value of the equity instruments issued is not reliably determinable, the equity instruments should be measured by reference to the fair value of the financial liability extinguished as of the date of extinguishment.

1 July 2010 1 July 2010

IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for determining the fair value of assets and liabilities. IFRS 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under IFRS when fair value is required or permitted by IFRS. Application of this definition may result in different fair values being determined for the relevant assets. IFRS 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.


The Group has not yet assessed whether there will be any significant impact on 30 June 2008 results in light of the standards and interpretations issued but not yet effective. F

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Going concern As at 30 June 2008, the Group’s current liabilities exceeded its current assets by $44.1 million, and it was in a net liability position of $3.0 million. The consolidated entity and Company recorded a loss of $87,277,000 (2007: $34,236,000) and $95,513,000 (2007: $27,501,000), respectively for the year ended 30 June 2008 and a voluntary administrator was appointed on 10 July 2008. In the financial years following, up to 30 June 2010, the consolidated entity and Company was still under administration. Commitments were met from the administrators dealing in the sale of assets, available funds and satisfaction of debtors and inventories. During the course of the next financial year (the year ended 30 June 2009), the consolidated entity remained under administration and all operations were placed under care and maintenance. During the course of the financial year ended 30 June 2010, the consolidated entity remained in administration up to 26 February 2010, at which time the company was recapitalised under the Recapitalisation Deed with Stirling Resources Ltd (“Stirling”). From that date the administrator retired and the new board of directors took control of the company. During the course of the financial year ended 30 June 2011, the consolidated entity held the Carnegie and Mt Ida gold projects in care and maintenance with funds provided mainly by Stirling Resources Ltd. On 18 August 2011, Swan Gold (“Swan” or “the Vendor”) executed a conditional agreement with global commodity company DCM DECOmetal GmbH (“DCM” or “the Purchaser”) to acquire Swan’s subsidiaries that own the Carnegie and Mt Ida gold projects. The main conditions of the agreement which is subject to shareholder and regulatory approval, as necessary, will see:

DCM acquire the debt and associated rights of the Mt Ida Trust for $1,000,000; DCM pay a total amount of $10,000,000 to the Group Trust with $1,000,000 payable upon signing of the

agreement and $9,000,000 payable within 6 months; Under separate arrangement DCM acquire the debt and associated rights of the Territory Trust of $6,700,000; All debts due by Swan to the Mt Ida Trust, Group Trust, Territory Trust and Stirling Resources Ltd be

extinguished at settlement; Amount to be paid to Swan of $5,000,000 at settlement; All shareholdings held by Stirling, Territory Resources Limited and DCM in Swan be cancelled at settlement; DCM fund the ongoing operations of Swan until the transaction is completed; and Settlement due on or before 31 March 2012. Whilst this date has passed, the Share Sale Agreement remains in

force and DCM have confirmed in writing that it will continue basic operational funding of Swan in accordance with the agreement.

The agreement is not binding until the following conditions are met: (i) the Financial Investment Review Board (FIRB) Condition has been satisfied; (j) the Vendor procuring all necessary third party consents to the Transaction (if any) and providing the Purchaser

with a copy of such consents; (k) the Vendor obtaining all necessary shareholder approvals required by the Corporations Act and the Listing Rules

in relation to the Transaction; (l) the Vendor obtaining the approval (by way of a deed or otherwise) of MGMC as trustee for the Mt Ida Trust to the

Purchaser in accordance with the Mt Ida Assignment Deed; (m) completion of the assignment of the Mt Ida Debt and Mt Ida Securities from MGMC as trustee for the Mt Ida

Trust to the Purchaser in accordance with the Mt Ida Assignment Deed; (n) an agreement is executed between the Purchaser and Territory Resources Limited, in its capacity as beneficiary


(o) an agreement is executed between Stirling and the Vendor pursuant to which Stirling agrees to cancel the Stirling Debt, for no consideration, upon Settlement occurring; and

(p) each of Territory, Stirling and the Purchaser (and each of their Related Bodies Corporate) agreeing to cancel all of their shares held in Swan, subject to Settlement occurring.

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) On 3 May 2012, the Company announced to the ASX, that following extensive negotiations, a binding Terms Sheet, and subsequently a Restructure Deed, had been entered into by the Company, DCM DECOmetal GmbH (DCM) and Investmet Limited and/or its nominees (“Investmet”), with the execution of a formal agreement, being the Restructure Deed, on 16 May 2012 (“the Investmet transaction”). Investmet has advised it intends to recapitalize Swan and provide sufficient funding to complete a review into recommencement of operations at the Carnegie and Mt Ida gold projects, including amongst other items thorough geological and economic reviews of resources, project data, exploration activities as required, and mine planning. Investmet will also work with the current board of Swan towards finalizing the application for re-listing of the shares of SWA (SWA shares) on the ASX (subject to ASX approval) as soon as possible after completion. The main terms and conditions of the Restructure Deed are as follows:


DCM will transfer 39,849,657 Swan shares to Investmet in consideration for a cash payment by Investmet to the Trustee of the Territory Trust of $6,700,000 in satisfaction of all claims by the Territory Trust;











All necessary shareholder, third party or regulatory approvals. This transaction is also conditional on the completion of inter-related transactions between Investmet, DCM and each of Stirling Resources Limited and Redbank Copper Limited, the terms of which have been finalised but not released. Investmet and DCM intend to establish syndicated loan arrangements with Swan, to include the new security charges to regulate secured debt over Swan incorporating a two year moratorium on principal repayments and at the end of the two year moratorium Swan may elect to repay the debt or require conversion at a price to be agreed between the parties.

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) The ability of the Group to continue to operate as a going concern and meet its debts as and when they fall due is primarily dependent upon the Directors meeting the terms and conditions under either the Investmet transaction or alternatively the DCM transaction. Failure to do so may result in the Group being unable to meet its debts as and when they fall due and realise its assets and liabilities in the ordinary course of business. The financial report has been prepared on the basis that the Company and the consolidated entity will continue to meet their commitments and can therefore continue normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. The directors believe, based on the progress of transactions as described above, that at the date of signing the financial report there are reasonable grounds to believe that having regard to the matters set out above, the company and the consolidated entity will be able to raise sufficient funds to meet its obligations in the normal course of business as the conditions are met and the sale completed. Should the company and the consolidated entity not achieve the matters set out above, there is significant uncertainty whether the company and the consolidated entity will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements. The financial report does not include any 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 consolidated entity not be able to continue as going concerns. (e) Principles of consolidation The consolidated financial report incorporates the assets and liabilities of all entities controlled by Swan Gold Mining Limited (“parent entity”) as at year end and the results of all controlled entities for the year then ended. Swan Gold Mining Limited and its controlled entities together are referred to in this financial report as the “consolidated entity” or “group”. The effects of all transactions between entities in the consolidated entity are eliminated in full. Acquisitions are accounted for using the purchase method of accounting. Where control of an entity is obtained during a financial year, its results are included only from the date upon which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the period during which control existed.

(f) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefit will flow to the consolidated entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. Interest Revenue is recognised as the interest accrues using the effective interest rate method (which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). Gold and silver sales Amounts are recognised as sales revenue when there has been a transfer of risk to a customer, and: • the gold is in a form suitable for delivery and no further processing is required by, or on behalf of, the consolidated

entity; • the quantity, quality and selling price of the gold or silver can be determined with reasonable accuracy; and • the gold or silver has been dispatched to the metals refinery and is no longer under the physical control of the

consolidated entity, or the metals refinery has formally acknowledged legal ownership of the product, including all inherent risks. F

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (g) Property, plant and equipment All assets acquired, including property, plant and equipment are initially recorded at their cost of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition. Property, plant and equipment located on a mine site is included at cost less provision for depreciation and any impairment in value. All such assets are depreciated over the estimated remaining economic life of the mine, using a unit of production basis. All other property, plant and equipment is included at cost less provision for depreciation and any impairment in value and depreciated on a straight-line basis commencing from the time the asset is held ready for use. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. (h) Other financial assets Financial assets in the scope of AASB 139 “Financial Instruments – Recognition and Measurement” are classified as either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments or available for sale investments as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The consolidated entity determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates the designation at each financial year end. All regular purchases and sales of financial assets are recognised on the trade date (the date that the consolidated entity commits to purchase the asset). Regular purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place. Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets, principally equity securities, that are designated as available-for-sale or are not classified as held to maturity investments nor loans and receivables. After initial recognition available-for sale financial assets are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss. The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis; and option pricing models, making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum. Loans, receivables and security deposits Loans, receivables and security deposits are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired as well as through the amortisation process. (i) Shares in controlled entities Investments in controlled entities are measured at cost. The Group assesses whether it is necessary to recognise any impairment loss in the investment in subsidiaries following any significant changes in the underlying assets or operations of the relevant subsidiary.

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (j) Deferred exploration and evaluation expenditure Once the legal right to explore has been acquired, exploration and evaluation costs are expensed to the Income Statement as incurred unless the Directors conclude that a future economic benefit is more likely than not to be realised. Costs incurred during this phase are expensed in the Income Statement as ‘exploration and evaluation expenditure’. In evaluating if expenditures meet the criteria to be capitalised, several different sources of information are utilised. The information that is used to determine the probability of future economic benefits depends on the extent of exploration and evaluation that has been performed. Impairment The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount.

The recoverable amount of capitalised exploration and evaluation expenditure is the higher 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. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value. An impairment exists when the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Any impairment losses are recognised in profit or loss. (k) Impairment of non-financial assets At each reporting date, the consolidated entity assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the consolidated entity 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. 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. (l) Joint Venture Assets The Group has an interest in a joint venture that has jointly controlled assets. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. The Group recognises its interest in the jointly controlled assets by recognising its interest in the assets and the liabilities of the joint venture. The Group also recognises the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the jointly controlled assets.

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (m) Income tax Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 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 assets and unused tax losses can be utilised. A deferred income tax asset is not recognised where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax to be utilised. (n) Goodwill 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 at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

(o) Trade and other receivables Trade receivables, which generally have 30 to 90 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less an allowance for impairment. An allowance for doubtful debts is made when there is objective evidence that the consolidated entity will not be able to collect the debts. Bad debts are written off when identified. Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the consolidated entity’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the consolidated entity’s cash generating units that are expected to benefit from the synergies of the combination. Impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. When the carrying amount of the cash generating unit is less than the carrying amount of goodwill, an impairment loss is recognised. Impairment losses recognised for goodwill are not subsequently reversed. (p) Trade and other payables Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year that are unpaid and arise when the consolidated entity becomes obliged to make future payments in respect of the purchase of these goods and services. (q) Interest bearing loans and borrowings All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. 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. Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as through the amortisation process

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (r) Contributed equity Ordinary share capital is recognised at the fair value of the consideration received. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. (s) Goods and services tax Revenues, expenses and assets are recognised net of goods and services tax (GST), except where the amount of GST incurred is not recoverable. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable or payable is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable or payable are classified as operating cash flows. (t) Employee benefits Provision for employee benefits represents the amount which the consolidated entity has a present obligation to pay resulting from employees’ service provided up to the balance date. Liabilities arising in respect of employee benefits expected to be settled within twelve months of the balance date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the balance date. (u) Share based payments The consolidated entity may provide benefits to employees (including directors) in the form of share-based payments, 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 they are granted. The value is determined using a binomial model. 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 the extent to which the vesting period has expired and the number of awards that, in the opinion of the directors, will ultimately vest. 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 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. (v) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis. Finance leases Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the consolidated entity are capitalised at the present value of the minimum lease payments and disclosed as plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term.

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2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (w) Rehabilitation costs Full provision for rehabilitation costs is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the balance date. Increases due to additional environmental disturbances are capitalised and amortised over the remaining lives of the operations. These increases are accounted for on a net present value basis. Rehabilitation provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. (x) Inventories Ore and Gold stocks are valued at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure relating to mining activities, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances.

(y) Borrowing costs Borrowing costs are expensed as incurred except where they relate to the financing of projects under construction where they are capitalised up to the date of commissioning or sale. (z) Earnings per share Basic earnings per share is determined by dividing net operating results after income tax attributable to members of the parent entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to potential ordinary shares. (aa) Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand and which are used in the cash management function on a day to day basis, net of outstanding bank overdrafts.

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3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The consolidated entity’s principal financial instruments are cash and short term deposits and loans. The main purpose of these financial instruments is to provide working capital and raise finance for the consolidated entity’s operations. The consolidated entity has various other financial assets and liabilities such as receivables and trade payables, which arise directly from its operations. The main risks arising from the consolidated entity’s financial instruments are interest rate risk and credit risk. The Board reviews and agrees policies for managing each of these risks. (i) Credit risk exposure Credit risk relates to the risk that a counter party will default on its contractual obligations resulting in financial loss to the consolidated entity. The exposure of the consolidated entity to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of the assets as indicated in the balance sheet. (ii) Interest rate risk exposure The Group’s exposure to the risk of changes in market interest rates is minimal and relates primarily to finance leases with fixed rates of interest.

(iii) Commodity price exposure The Group is exposed to Australia dollar gold price risk. This arises through sales of the Group’s main commodity, gold. The Group has not hedged gold production.

4. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY

(i) Significant accounting judgements In the process of applying the consolidated entity’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Capitalisation of exploration expenditure The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement in determining whether it is likely that future economic benefits are likely either from future exploitation or sale or where activities have not reached a stage which permits a reasonable assessment of the existence of reserves. The determination of Joint Ore Reserves Committee (JORC) resource is in itself an estimation process that requires varying degrees of uncertainty depending on sub-classification and these estimates directly impact the point of deferral of exploration and evaluation expenditure. The deferral policy requires management to make certain estimates and assumptions about future events or circumstances, in particular whether an economically viable extraction operation can be established. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is written off in the Income Statement in the period when the new information becomes available. (ii) Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Impairment Assets, including property, plant and equipment, receivables and goodwill, are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of “value in use” (being the net present value of expected future cash flows of the relevant cash generating unit) and “fair value less costs to sell”. Impairment of deferred exploration expenditure The future recoverability of deferred exploration expenditure is dependent on a number of factors, including whether the Group decided to exploit the related tenement itself or, if not, whether it successfully recovers the related exploration asset through sale. To the extent that deferred exploration expenditure is determined not to be recoverable in the future, this will reduce profits and net assets in the period in which this determination is made.

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4. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

Provision for decommissioning and restoration costs Decommissioning and restoration costs are a normal consequence of mining and the majority of this expenditure is incurred as the end of a mine’s life. In determining an appropriate level of provision, consideration is given to the expected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of the mine) and the estimated future level of inflation. The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates. Changes to any of the estimates could result in significant changes to the level of provisioning required, which would in turn impact future financial results. Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the binomial model using the assumptions detailed in the financial statements.

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CONSOLIDATED PARENT ENTITY 2008 2007 2008 2007 $’000 $’000 $’000 $’000 5. REVENUE AND EXPENSES (a) Revenue

- sales 25,390 - - - - interest 939 161 150 124

26,329 161 150 124

(b) Other income

- profit on sale of property, plant and equipment 1,565 - 5 -- sundry income 947 314 53 217

2,512 314 58 217

(c) Employee and directors’ benefits expenses

- wages and salaries 11,873 2,257 2,060 1,919 - share-based payments expense 659 1,668 659 1,668

12,532 3,925 2,719 3,587

(d) Raw materials and consumables used

- raw materials and consumables used 27,718 - 928 -- rehabilitation expense 904 - - -- contractors and subcontractors 10,084 - 25 -

- - 38,706 - 953 -

(e) Depreciation and amortisation

- depreciation, plant and equipment 1,916 415 328 316 1,916 415 328 316

(f) Corporate and administration expenses

- audit and accounting fees 226 - 131 -- consulting fees 336 441 249 456 - legal fees 239 - 198 -- travel and accommodation expenses 2,397 402 410 279 - occupational 257 - - -- insurance 734 231 248 208

4,189 1,074 1,236 943

(g) Finance costs

- finance lease interest 153 - 58 -- interest expense 1,840 186 1,698 145- interest on unsecured loan - 16 - 16

1,993 202 1,756 161

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CONSOLIDATED PARENT ENTITY 2008 2007 2008 2007 $’000 $’000 $’000 $’000 6. INCOME TAX

The major components of income tax are: Income statement Current income tax Current income tax charge / (benefit) (16,412) (8,331) (2,731) (2,069) Current income tax benefit not recognised 16,412 8,331 2,731 2,069 Deferred income tax Relating to origination and reversal of temporary differences (11,603) (1,674) 10,775 (317) Deferred income tax benefit not recognised 11,603 1,674 - 317

- - 10,775 -

A reconciliation between tax expense and the product of accounting loss before income tax multiplied by the applicable income tax rate is as follows:

Accounting loss before income tax (87,277) (34,236) (84,738) (27,501)

At the statutory income tax rate of 30% (2007: 30%) (26,183) (10,271) (25,421) (8,250) Expenditure not allowable for income tax purposes: Asset revaluations - - 25,507 5,340 Non-deductible expenses 261 501 261 501 Capital loss on disposal of share investment - 299 - 299

Tax losses not brought to account 25,922 9,471 10,428 2,110

Income tax expense reported in the income statement - - 10,775 -

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BALANCE SHEET 2008 2007

$’000 $’000 Income

Statement Equity

6. INCOME TAX (continued) Deferred income tax Deferred income tax relates to the following: CONSOLIDATED Deferred tax liabilities

Exploration tenements and rehabilitation (2,265) (8,086) 5,821

(2,265) (8,086)

Deferred tax assets Accrued expenses - 23 (23) Capitalised costs - 59 (59) Employee entitlements 131 49 83 Rehabilitation reserve 1,244 - 1,244 Asset revaluations 2,849 - 2,849 Revenue tax losses 35,899 20,725 15,174 Tax losses and other deferred tax assets not recognised (37,858) (12,770) (25,089)

Gross deferred income tax assets 2,265 8,086

Deferred tax (income)/expense - -

PARENT Deferred tax liabilities

Exploration tenements and rehabilitation - (429) 429

- (429)

Deferred tax assets Accrued expenses - 23 (23) Capitalised costs - 59 (59) Employee entitlements 132 49 83 Asset revaluations 346 - (346) Revenue tax losses 35,899 20,943 14,956 Tax losses and other deferred tax assets not recognised (36,377) (9,870) (26,507)

Gross deferred income tax assets - 11,204

Deferred tax (income)/expense (10,775) - The consolidated entity has unrecognised tax losses (tax effected) arising in Australia of $37,489,000 (2007: $12,400,000), subject to passing the continuity of ownership test, or failing that, the same business test.

Tax consolidation For the purposes of income taxation, Swan Gold Mining Limited and its 100% owned subsidiaries have formed a tax consolidated group. Swan Gold Mining Limited is the head entity of the tax consolidated group. 6. INCOME TAX (continued)

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(i) Members of the tax consolidated group and the tax sharing agreement

Swan Gold Mining Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July 2002. Swan Gold Mining Limited is the head entity of the tax consolidated group. Members of The Group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.

(ii) Tax effect accounting by members of the tax consolidated group.

Measurement method adopted under AASB Interpretation 1052 Tax Consolidation Accounting The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied The Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed further below.

CONSOLIDATED PARENT ENTITY 2008 2007 2008 2007 $’000 $’000 $’000 $’000

7. TRADE AND OTHER RECEIVABLES CURRENT

Unsecured loans – other parties 6,377 53 1,219 52Provision for non-recovery (642) - (535) -

5,735 53 684 52

Reconciliation of provision for non-recovery

Opening balance - - - -Movement in provision (642) - (535) -

(642) - (535) -

At 30 June, the ageing analysis of trade and other receivables is as follows:

Total 0-180 Days + 181 Days

PDNI * + 181 Days

CI **

2008 Consolidated 6,377 5,074 661 642 $’000 Parent 1,219 558 661 535 2007 Consolidated 53 53 - - $’000 Parent 52 52 - - * Past due not impaired (PDNI) ** Considered impaired (CI) Receivables past due but not considered impaired are: Consolidated $661,000 (2007: nil); Parent $661,000 (2007: nil). Payment terms on these amounts have not been re-negotiated. Each operating unit has been in direct contact with the relevant debtor and is satisfied that payment will be received in full. No collateral is being held in relation to PDNI or CI assets.

CONSOLIDATED PARENT ENTITY

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2008 2007 2008 2007 $’000 $’000 $’000 $’000

8. INVENTORY

Gold on hand – at cost 967 33 - - 967 33 - -


9. RECEIVABLES NON-CURRENT

Sundry receivables – joint venture partner (i) 3,684 441 - -Security deposits (ii) 6,215 2,604 3,258 237Unsecured loans – controlled entities (iii) - - 88,503 21,798Provision for non-recovery (3,684) - (88,503) (17,801)

6,215 3,045 3,258 4,234

Reconciliation of provision for non-recovery

Opening balance - - (17,801) -Movement in provision (3,684) - (70,702) (17,801)

(3,684) - (88,503) (17,801)

(i) Sundry receivables comprise of debts due from a joint venture partner - Refer Note 27. (ii) Security deposits are held in a 60 day term deposit that is rolled over at each maturity date. The deposit is not available for use until the consolidated entity has been released from any rehabilitation obligations in regard to tenements to which the security deposit relates. (iii) Unsecured loans to controlled entities are interest free and are repayable on demand although repayment is not expected within the next 12 months.


10. OTHER FINANCIAL ASSETS Shares in controlled entities – at cost (Note 26) - - 44,265 44,265Allowance for impairment - - (20,138) (17,013)

- - 24,127 27,252

The amount of the impairment has been measured as the difference between the net assets of the controlled entities and the investment in the controlled entities. The net assets of the controlled entities are estimated to be equal to its fair value. F

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11. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment

At cost 18,611 12,333 1,760 1,615Less accumulated depreciation (2,299) (786) (676) (294)Less impairment expense (4,139) - (608) -

12,173 11,547 476 1,321 Plant and equipment – under finance lease

At cost 2,062 1,242 618 661Less accumulated depreciation (320) (44) (169) (44)

1,742 1,198 449 617

Total property, plant and equipment 13,915 12,745 925 1,938

Reconciliation Property, plant and equipment Carrying amount at beginning of period 11,547 3,104 1,321 413Additions 13,771 8,823 261 1,189Disposals (7,408) - (295) -Depreciation expense (1,598) (380) (203) (281)Impairment expense (i) (4,139) - (608) - 12,173 11,547 476 1,321 Property, plant and equipment – under finance lease Carrying amount at beginning of period 1,198 68 617 68Additions 1,147 1,165 - 584Disposals (285) - (43) -Depreciation expense (318) (35) (125) (35) 1,742 1,198 449 617 Finance leases are secured over the related leased assets. (i) Impairment of Property, plant and equipment.

The Directors have assessed the recoverable amount of the mining plant and equipment, based on industry information and research, it was estimated for certain items of plant and equipment. The recoverable amount estimation was based on value in use and was determined at the cash-generating unit level. As a result of the change in economic circumstances and the subsequent appointment of an administrator on 10 July 2008, an impairment loss of $4,139,000 in total was recognised to reduce the carrying amount of plant and equipment to recoverable amount.

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12. DEFERRED EXPLORATION EXPENDITURE Opening balance 30,302 33,966 - -Impairment of deferred exploration expenditure (i) (7,232) (14,064) - -Exploration expenditure acquired by way of asset acquisitions (Note 29) 4,065

10,400

- -

27,135 30,302 - -

i. An impairment loss of $7,232,000 by the consolidated entity on deferred exploration expenditure was recognised in the 2008

financial year as a result of the change in economic circumstances and the subsequent appointment of a Voluntary Administrator on 10 July 2008. The impairment of deferred exploration expenditure related to the determination of the fair value of the tenements projects with reference to the recoverable value or sale value of the projects. The impairment loss has been recognised in the income statement in the line item “impairment of deferred exploration expenditure”.

ii. The policy for accounting for exploration and evaluation expenditure has changed from the policy applied in previous accounting periods (see Note 2(a),(j)). Costs incurred are expensed unless the directors conclude that a future economic benefit is more likely than not to be realised. Exploration expenditure incurred during the year of $27.060m (2007: $8.915m) was recognised in the Income Statement.

CONSOLIDATED PARENT ENTITY 2008 2007 2008 2007 $’000 $’000 $’000 $’00013. TRADE AND OTHER PAYABLES

CURRENT Trade payables and accruals 21,360 5,467 2,946 1,378Payable for acquisition of the Minjar gold project - 5,800 - 5,800Payable for acquisition of tenements - 2,300 - -

21,360 13,567 2,946 7,178

Trade creditors and accruals are non-interest bearing and generally settled on 30 day terms. As a result of the appointment of a Voluntary Administrator on 10 July 2008 all creditors were suspended and formed part of the subsequent creditor trusts under the Recapitalisation Deed settled on 26 February 2010.


14. INTEREST BEARING LOANS AND BORROWINGS CURRENT Finance lease (i) 1,093 489 329 347Unsecured loans (ii) 27,961 - 27,961 - 29,054 489 28,290 347

(i) Finance leases are secured over the assets leased. (ii) Unsecured loans are the principal amount outstanding on loans from related parties as detailed in Note 24. The terms and

conditions of the three creditors are as follows: a. Territory Resources Limited - $21,500,000 unsecured with commercial interest charged. b. India Resources Limited - $3,500,000 unsecured with commercial interest charged. c. Territory Resources Limited - $2,961,000 unsecured with no interest charged.

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15. PROVISIONS CURRENT Employee benefits 438 355 438 162

NON-CURRENT Rehabilitation Opening balance 3,348 3,348 - -Rehabilitation amount provided in current year 800 - - -Closing balance 4,148 3,348 - -

The Group makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis on the development of mines or installation of those facilities. The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites. These provisions have been created based on Swan Gold’s internal estimates. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for necessary decommissioning works required which will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable rates. This, in turn, will depend upon future gold prices, which are inherently uncertain.

CONSOLIDATED PARENT ENTITY 2008 2007 2008 2007 $’000 $’000 $’000 $’00016. INTEREST BEARING LOANS AND

BORROWINGS

NON-CURRENT Finance leases 2,066 1,302 419 864

Finance leases are secured over the assets leased.

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17. CONTRIBUTED EQUITY (a) Share capital

198,988,649 (2007: 412,614,475) ordinary fully paid shares 137,474 103,800 137,474 103,800

(b) Movements in ordinary share capital Shares $’000

Balance 1 July 2006 205,456,955 55,757Share placements Issue of shares 190,648,895 46,508Exercise of options 16,508,625 3,300Share issue costs - (1,765)Balance 30 June 2007 412,614,475 103,800 Issue of shares 48,745,832 12,604Shares issued on acquisition of assets 15,000,000 3,675Exercise of options 550,000 701 for 3 share consolidation (318,382,810) -Issue of shares 39,950,760 18,978Shares issued on acquisition of assets 510,392 -Share issue costs - (1,653) Balance 30 June 2008 198,988,649 137,474

Ordinary shares entitle the holder to participate in dividends in proportion to the number of and amounts paid on the shares held. On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote. Effective 1 July 1998, the corporation’s legislation in place abolished the concepts of authorised capital and par value shares. Accordingly the parent entity does not have authorised capital or par value in respect of its issued shares. Capital Management When managing capital, management’s objective is to safeguard the entity’s ability to continue as a going concern as well as to maintain optimum returns to shareholders and benefits to other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Management had appointed Voluntary Administrators in July 2008 and subsequently negotiated the recapitalisation in February 2010 in order to sustain these objectives. To ensure these objectives continue to be met, management have entered into the agreement for the sale of the Carnegie and Mt Ida gold projects in August 2011. Also, management have entered into a binding Term Sheet and subsequently a Restructure Deed with DCM DECOmetal GmbH and Investment Limited to recapitalize the Company. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Management has no current plans to reduce the capital structure through a share buy-back. The Group is not subject to any externally imposed capital restrictions.

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CONSOLIDATED AND PARENT ENTITY

2008 2007 $’000 $’000

18. RESERVES Option premium and share-based payments reserve 4,823 3,330

Movements in share options

Weighted average exercise price

Options $ ‘000

$

Balance 1 July 2006 0.28 36,958,625 1,662

Exercise of options 0.20 (16,508,625) -Share based payments 0.20 4,500,000 604Share based payments 0.40 13,750,000 1,064

Balance 30 June 2007 0.35 38,700,000 3,330

Cancellation 0.40 (1,000,000) -Exercise of options 0.20 (550,000) -Share based payments 0.40 5,000,000 390Issue of options to a director 0.40 2,500,000 2331 for 3 share consolidation (29,766,663) -Issue of options June 2008 0.30 6,800,000 -Expired 1.20 (1,666,667) -Equity compensation expense - 370Share based payments 0.25 666,668 500

Balance 30 June 2008 1.11 20,683,338 4,823

As at year end the following options over ordinary fully paid shares were outstanding:

Options

- exercisable at $0.90 each on or before 31 December 2008 500,000 - exercisable at $0.60 each on or before 1 May 2009 933,334 - exercisable at $1.20 each on or before 6 August 2010 1,666,667 - exercisable at $0.60 each on or before 30 September 2010 1,700,000 - exercisable at $1.20 each on or before 30 September 2010 916,667 - exercisable at $1.20 each on or before 31 December 2010 5,166,667 - exercisable at $1.20 each on or before 23 February 2011 1,500,001 - exercisable at $1.20 each on or before 23 February 2012 833,334 - exercisable at $0.30 each on or before 30 June 2012 6,800,000 - exercisable at $0.25 each on or before 17 August 2010 666,668

20,683,338

The weighted average remaining contractual life for the share options outstanding as at 30 June 2008 is 2.7 years (2007: 3.1 years). The weighted average fair value of options granted during the year was $0.066 (2007: $0.089). The value attached to the options above relates only to the options that had vested as at balance date. The fair value of equity-settled share options granted is estimated as at the date of grant or service provided using a binomial model taking into account the terms and conditions upon which the options were granted.

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18. RESERVES (continued) The following table lists the inputs to the model used for the years ended 30 June 2007 and 30 June 2008:

2008 2008 2008 Valuation date 16.11.07 06.08.07 17.08.07 Dividend yield (%) 0 0 0 Expected volatility (%) 60 68 68 Risk-free interest rate (%) 6.20 6.53 5.13 Expected life of options (years) 5.0 3.0 3.0 Option exercise price ($) 0.40 0.40 0.25 Weighted average share price at grant date 0.25 0.25 0.299 2007 Valuation date 23.02.07 08.01.07 16.11.06 25.10.06 25.10.06 Dividend yield (%) 0 0 0 0 0 Expected volatility (%) 63 55 65 68 68 Risk-free interest rate (%) 6.00 6.18 5.78 5.97 5.97 Expected life of options (years) 4.0 2.3 4.1 3.9 1.8 Option exercise price ($) 0.40 0.20 0.40 0.40 0.20 Weighted average share price at grant date 0.26 0.24 0.26 0.23 0.23 The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value. Nature and purpose of reserve The option premium and share-based payment reserve represents the premium paid to the parent entity by option holders, to the value of equity benefits provided to directors, employees as part of their remuneration and the value of services provided or amount accepted by the Group paid for by the issue of equity.


19. MINORITY INTERESTS Interest in:

Share capital 42 42 - -

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20. KEY MANAGEMENT PERSONNEL

(a) Compensation of key management personnel Remuneration by category CONSOLIDATED PARENT ENTITY 2008 2007 2008 2007 $ $ $ $ Key management personnel Short-term 1,650,178 1,085,910 1,650,178 1,085,910 Post-employment 169,882 164,132 169,882 164,132 Share-based payments 797,222 1,070,162 797,222 1,070,162

2,617,282 2,320,204 2,617,282 2,320,204

(b) Option holdings of key management personnel (consolidated)

30 June 2008 Balance at 1 July 2007

Granted as

remuneration

Options exercised

Net change

other Balance at

30 June 2008

Balance vested and exercisable at 30 June 2008

Directors

M Kiernan 10,000,000 - - (6,666,666) 3,333,334 2,000,000 A Quadrio 5,000,000 - - (5,000,000) - - J Davis 5,100,000 - - (3,400,000) 1,700,000 1,133,333 I Huitson 2,500,000 333,334 - (1,666,666) 1,166,668 750,000 K Vuleta 2,500,000 333,334 - (1,666,666) 1,166,668 750,000 P Botsis - - - - - - D Humann - 2,500,000 - (1,666,666) 833,334 833,334 J McKee - - - - - - D Macoboy 2,500,000 - - (2,500,000) - - M Etheridge - - - - - - M Gill - - - - - -

Option holdings for the following directors is to their respective date of resignation - Mr Quadrio (resigned 25 January 2008), Mr Gill (appointed 12 November 2007 and resigned 10 March 2008), Mr McKee (resigned 16 November 2007), Dr Etheridge (resigned 30 July 2007), Mr Macoboy (resigned 1 July 2007).

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20. KEY MANAGEMENT PERSONNEL (continued) Other changes during the year include share consolidation, on-market purchases, subscriptions under a share purchase plan, effect upon resignation, forfeiture and shares issued pursuant to the Share Entitlement Offer. During the year ended 30 June 2008 there were no individuals (other than the directors) who were responsible for the strategic direction and management of the consolidated entity, hence no executives are named above in respect of this period.


Granted as

remuneration

Options exercised

Net change

other Balance at

30 June 2007

Balance vested and exercisable at 30 June 2007

Directors

M Kiernan 11,115,001 - (1,115,001) - 10,000,000 4,000,000 A Quadrio - 5,000,000 - - 5,000,000 1,500,000 J Davis 2,100,000 3,000,000 - - 5,100,000 1,700,000 I Huitson - 2,500,000 - - 2,500,000 - K Vuleta - 2,500,000 - - 2,500,000 - P Botsis 495,625 - (495,625) - - - D Humann - - - - - - J McKee - - - - - - D Macoboy 1,368,750 2,000,000 (868,750) - 2,500,000 1,000,000 A Forrest - - - - - - M Etheridge - - - - - -

Option holdings for the following directors are from their respective dates of appointment – Mr Quadrio (20 July 2006), Mr Huitson (16 May 2007), Mr Vuleta (16 May 2007), Mr Humann (23 February 2007), Dr Etheridge (20 December 2006). Option holdings for the following director is to their respective date of resignation - Mr Forrest (resigned 30 October 2006), (c) Shareholdings of key management personnel (consolidated)

Shares in Swan Gold Mining Limited (number) 30 June 2008 Balance at

1 July 2007 On the

exercise of options

Net change other Balance at

30 June 2008 Directors M Kiernan 40,624,999 - (25,647,150) 14,977,849 A Quadrio 125,000 - (125,000) - J Davis 250,000 - (156,492) 93,508 I Huitson 75,000 - 283,334 358,334 K Vuleta - - 333,334 333,334 P Botsis 4,815,781 - (2,865,199) 1,950,582 D Humann - - - - J McKee - - - - D Macoboy 2,523,124 - (2,523,124) - M Etheridge 312,500 - (312,500) - M Gill - - - - F

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20. KEY MANAGEMENT PERSONNEL (continued) Shareholdings for the following directors are to their respective dates of resignation Mr Macoboy (1 July 2007), Dr Etheridge (30 July 2007), Mr McKee (16 November 2007), Mr Gill (10 March 2008) and Mr Quadrio (25 January 2008). Other changes during the year include share consolidation, on-market purchases, subscriptions under a share purchase plan, effect upon resignation, forfeiture and shares issued pursuant to the Share Entitlement Offer.


Received during the year on the

exercise of options

Other changes during the year

Balance at

30 June 2007 Directors M Kiernan 17,217,002 1,115,001 22,292,996 40,624,999 A Quadrio - - 125,000 125,000 J Davis 53,500 - 196,500 250,000 I Huitson - - 75,000 75,000 K Vuleta - - - - P Botsis 3,357,000 495,625 963,156 4,815,781 D Humann - - - - J McKee - - - - D Macoboy 1,149,750 868,750 504,624 2,523,124 A Forrest 21,743,058 - - 21,743,058 M Etheridge - - 312,500 312,500

Other changes during the year include on-market purchases, subscriptions under a share purchase plan, effect upon resignation, forfeiture and shares issued pursuant to the Share Entitlement Offer. Except for equity issued as part of remuneration, all equity transactions with key management personnel have been entered into under terms and conditions no more favourable than those the consolidated entity would have adopted if dealing at arm’s length. Loans to key management personnel Mr M Gill was loaned an amount of $500,000 pursuant to an employment agreement. This loan was advanced interest free and was to be forgiven at the rate of $100,000 for each year of service. At 30 June 2008 the balance outstanding was $500,000. Pursuant to the Share Purchase Plan approved by shareholders on 14 August 2007, Mr Huitson and Mr Vuleta were advanced amounts of $250,000 each to acquire shares in the Company. Each loan is a limited recourse loan and is secured by a share mortgage over the shares acquired. Due to the limited recourse nature of the loan, for accounting purposes the issued shares are treated like options and the value of these options have been included as a Share Based Payment in the Remuneration Report. During the year these loan amounts were fully impaired. At 30 June 2008 the balance outstanding was $250,000 each, but fully provided for by the Group. There were no other loans to key management personnel during the financial year. Other transactions with directors Transactions during the year between the consolidated entity and directors or their director-related entities are set out in Note 24.

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CONSOLIDATED PARENT ENTITY 2008 2007 2008 2007

$ $ $ $ 21. REMUNERATION OF AUDITORS

Amounts paid or due and payable to the auditors for: Auditing or reviewing the financial report 210,970 77,375 210,970 77,375Taxation advisory services 71,615 116,635 71,615 116,635Other services 82,175 12,519 82,175 12,519

364,760 206,529 364,760 206,529

CONSOLIDATED PARENT ENTITY

2008 2007 2008 2007 $’000 $’000 $’000 $’000

22. EXPENDITURE COMMITMENTS (a) Operating leases (non-cancellable)

Minimum lease payments - not later than one year 227 19 227 12- later than one year but not later than five years 151 55 151 32

378 74 378 44

Operating leases relate to office space and car parks. (b) Finance leases

The consolidated entity has entered into finance leases for various items of plant and machinery. These leases have terms of renewal but no purchase terms or escalation clauses. Renewals are at the option of the entity that hold the lease. Future minimum lease payments under finance leases, together with the present value of the net minimum lease payments, are as follows:


Consolidated entity Within one year 1,352 631 382 447 After one year but not more than five years 2,269 1,451 444 963

Total minimum lease payments 3,621 2,082 826 1,410 Less: Future finance charges

(462) (291) (78) (199)

Present value of minimum lease payments 3,159 1,791 748 1,211

(c) Capital expenditure commitments Under the terms of mineral tenement licences held by the consolidated entity, minimum annual expenditure obligations of $5,400,000 (2007: $5,250,000) may be required to be expended during the forthcoming financial year in order for the tenements to maintain a status of good standing. This expenditure may be incurred by the consolidated entity or its joint venture partners and may be subject to variation from time to time in accordance with Department of Industry and Resources regulations.

23. SEGMENT INFORMATION

The consolidated entity operates predominantly in one business and geographical segment, being mineral exploration in Australia, and all of the assets of the consolidated entity are deployed for these purposes.

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24. RELATED PARTIES

(a) Transactions with related parties During the year the Company received $9,500,000 (2007: $2,000,000) from India Resources Limited, a company in which Mr M Kiernan, Mr D Humann and Mr A Quadrio are or were directors. This amount was provided unsecured with commercial interest charged. An amount of $6,000,000 (2007: $2,000,000) was repaid during the year and $3,500,000 of the principal and $507,488 of accrued interest is outstanding at the date of this report. During the year, the Company received a total of $56,333 (2007: $78,000) from India Resources Limited, for the rental of office facilities on normal commercial terms and a total of $192,029 (2007: $nil) for the provision of administrative services on normal commercial terms. During the previous financial period, the Company met certain expenses of India Resources Limited amounting to $648,290. These amounts were provided unsecured and interest free and were repaid to the Company in January 2007. During the previous financial period, Swan Gold Mining Limited appointed India Resources Limited as its Special Purpose Vehicle company in India for the purpose of fulfilling its obligations arising from the contract with Hindustan Copper Limited that the Company entered on behalf of India Resources Limited and to benefit from the performance by way of a deed of appointment. Swan Gold received 375,000 shares in India Resources Limited for these services. In December 2006 the Company entered into a memorandum of understanding with HCL on behalf of India Resources Limited. Pursuant to a deed of appointment the Company appointed India Resources Limited as its Special Purpose Vehicle company. The memorandum seeks interest in cooperation and collaboration of copper resources in India. During the financial year, the Company paid a total of $31,509 (2007: $76,624) to Ledge Finance Ltd, of which Mr P Botsis is a director and shareholder, for the provision of finance services on normal commercial terms. During the financial year, the Company paid a total of $442,755 (2007: $334,928) to Athena Capital Pty Ltd, of which Mr James Kiernan is a substantial shareholder, for the provision of capital management services on normal commercial terms. (b) Transactions with other parties

During the year the Company received $24,200,000 (2007: nil) from Territory Resources Limited, a company in which Mr M Kiernan, Mr D Humann and Mr A Quadrio are or were directors. This amount was provided unsecured with commercial interest charged. An amount of $2,700,000 (2007: nil) was repaid during the year and $21,500,000 of the principal and $678,402 of accrued interest is outstanding at the date of this report. During the year an amount of $2,961,000 (2007: nil) was paid on behalf of the Company by Territory Resources Limited, a company in which Mr M Kiernan, Mr D Humann and Mr A Quadrio are or were directors. This amount was for replacement security bonds and was provided unsecured and was outstanding at the date of this report. During the year, Swan Gold Mining Limited disposed of a property to Territory Resources Limited in Ventnor Avenue, West Perth for $7,700,000. Prior to this disposal an independent valuation of this property was obtained in support of the consideration paid. During the year Swan Gold Mining Limited issued shares to Territory Resources Limited on the following transactions; 5,750,000 shares on 22 February 2008 at a price of $0.50 per share, and 7,833,336 shares on 28 April 2008 at an issue price of $0.45 per share. Both transactions were part of general capital raisings to other shareholders and investors. of the parent entity. Intra-entity loan balances have been eliminated in the financial report of the consolidated entity.

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24. RELATED PARTIES (continued)

(c) Transactions with related parties in the wholly owned group During the financial period, unsecured loan advances were made between the parent entity and its controlled entities. All such loans were interest free. Loan balances between the parent entity and its controlled entities are disclosed in the financial report of the parent entity. Intra-entity loan balances have been eliminated in the financial report of the consolidated entity.

Other transactions with directors and specified executives are set out in Note 20.

25. FINANCIAL INSTRUMENTS (a) Financial Risk Management Policies and Objectives

The Group’s activities expose it to a variety of financial risks: market risk (including commodity risk), credit risk, liquidity risk, and interest rate risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on financial performance without limiting the Group’s potential upside.

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 gold price risk and assessments of market forecasts for gold prices. Liquidity risk is measured through the development of rolling future cash flow forecasts at various gold prices.

Risk management is carried out by executive management with guidance from the Audit Committee under policies approved by the Board. The Board also provides regular guidance for overall risk management, including guidance on specific areas, such as mitigating commodity price, interest rate and credit risks where applicable.

Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified below, including the setting of limits for any hedging coverage of gold, credit allowances, and future cash flow forecast projections.

(b) Net Fair Values The carrying amounts of financial assets and financial liabilities recorded in the financial statements represent their respective amortised cost net of impairment. Their fair value is not able to be readily determined due to the company being in administration subsequent to the balance date.

(c) Credit Risk

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The Group’s maximum exposure to credit risk at reporting date in relation to each class of financial asset is the carrying amount of those assets as indicated in the balance sheet.

In relation to managing potential credit risk exposures, the Group has in place policies that aim to ensure that cash transactions are limited to high credit quality financial institutions and that the amount of credit exposure to any one financial institution is limited as far as is considered commercially appropriate.

(d) Interest Rate Risk Interest rate risk represents the risk that the value of a financial instrument will fluctuate as a result of changes in market interest rates. The exposure of the consolidated entity to interest rate risk and the effective weighted average interest rate for classes of financial assets and liabilities is set out below.

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25. FINANCIAL INSTRUMENTS (continued)

30 June 2008

Consolidated $’000 Parent $’000

Financial assets Financial assets Floating rate Floating rate Security deposits 6,215 Security deposits 3,258 Fixed rate Fixed rate Sundry receivables - Sundry receivables - 6,215 3,258 Financial liabilities Financial liabilities Fixed rate Fixed rate Finance lease liability 3,159 Finance lease liability 748 Floating rate Floating rate Unsecured loans 27,961 Unsecured loans 27,961

31,120 28,709

30 June 2007

Consolidated $’000 Parent $’000

Financial assets Financial assets Floating rate Floating rate Cash 21,750 Cash 21,455 Sundry receivables 441 Sundry receivables - Security deposits 2,604 Security deposits 237 24,795 21,692 Financial liabilities Financial liabilities Fixed rate Fixed rate Finance lease liability 1,791 Finance lease liability 1,211 1,791 1,211

The Group’s policy is to manage its exposure to interest rate risk by holding cash on short term, fixed rate deposits and variable rate deposits with reputable high credit quality financial institutions.

The Group constantly analyses its interest rate exposure. Consideration is given to potential renewals of existing positions, alternative financing and the mix of fixed and variable interest rates.

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(a) FINANCIAL INSTRUMENTS (continued)

(e) Commodity Price Risk

The Group is exposed to movements in the gold price.

Management, in conjunction with guidance from the Board, regularly reviews the need for gold derivatives. Management will continue to monitor movements in the gold price and may enter into derivative instruments if necessary.

(f) Sensitivity Analysis The following tables summaries the sensitivity of the Group’s financial assets and liabilities to interest rate risk. Had the relevant variables, as illustrated in the tables, moved, with all other variables held constant, post tax profit and equity would have been affected as shown. The analysis has been performed on the same basis for 2008 and 2007.

CONSOLIDATED PARENT

30 June 2008 Interest rate risk Interest rate risk Interest rate risk Interest rate risk

-1% (i) +1% (i) -1% (i) +1% (i)

Profit Equity Profit Equity Profit Equity Profit Equity

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Security deposits (62) - 62 - (33) - 33 -

Financial liabilities

Unsecured loans 280 - (280) - 280 - (280) -

Total increase/(decrease) 218 - (218) - 247 - (247) -

CONSOLIDATED PARENT

30 June 2007 Interest rate risk Interest rate risk Interest rate risk Interest rate risk

-1% (i) +1% (i) -1% (i) +1% (i)

Profit Equity Profit Equity Profit Equity Profit Equity

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Cash (218) - 218 - (215) - 215 -

Sundry receivables (4) - 4 - - - - -

Security deposits (26) - 26 - (2) - 2 -

Total increase/(decrease) (248) - 248 - (217) - 217 -

(i) The rate of 1% applied in the above analysis for 2007 and 2008 is based on management’s expected movement for the interest rate over the next financial year.

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FINANCIAL INSTRUMENTS (continued)

(g) Liquidity Risk The consolidated entity’s objective is to maintain a balance between continuity of funding and flexibility through the use of loans and equity raisings. Management and the Board monitor the Group’s liquidity reserve on the basis of expected cash flow. The information that is prepared by senior management and reviewed by the Board includes:

i. Annual cash flow budgets; ii. Three year cash flow forecasts; and

iii. Monthly rolling cash flow forecasts.

30 June 2008 Maturing Total

Consolidated

< 1 year

1 to 5 years

$’000 $’000 $’000 Financial liabilities Fixed rate Trade payables 21,360 - 21,360 Finance lease liability 1,093 2,066 3,159 Unsecured loans 27,961 - 27,961

Total 50,414 2,066 52,480

Weighted average effective interest rate 6.8% 10.2%


Parent

< 1 year

1 to 5 years

$’000 $’000 $’000 Financial liabilities Fixed rate Trade payables 2,946 - 2,946 Finance lease liability 329 419 748 Unsecured loans 27,961 - 27,961

Total 31,236 419 31,655


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25. FINANCIAL INSTRUMENTS (continued)


Consolidated

< 1 year

1 to 5 years

$’000 $’000 $’000 Financial liabilities Fixed rate Trade payables 5,467 - 5,467 Finance lease liability 489 1,302 1,791 Total 5,956 1,302 7,258



Parent

< 1 year

1 to 5 years

$’000 $’000 $’000 Financial liabilities Fixed rate Trade payables 1,378 - 1,378 Finance lease liability 347 864 1,211 Total 1,725 864 2,589


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26. INVESTMENTS IN CONTROLLED ENTITIES

Name of entity

Country of incorporation

Class of shares

Equity holding 2008 2007

% %

Monarch Nickel Pty Ltd Australia Ordinary 100 100 Monarch Gold Pty Ltd Australia Ordinary 80 80 Davyhurst Gold Pty Ltd Australia Ordinary 100 100 Minjar Gold Pty Ltd Australia Ordinary 100 100 Siberia Mining Corporation Pty Ltd (1) Australia Ordinary 100 100 Mt Ida Gold Pty Ltd Australia Ordinary 100 100 Mount Magnet Gold Pty Ltd (2) Australia Ordinary 100 - Controlled entities of Siberia Mining Corporation Pty Ltd Ida Gold Operations Pty Ltd Australia Ordinary 100 100 Pilbara Metals Pty Ltd Australia Ordinary 100 100 Siberia Gold Operations Pty Ltd Australia Ordinary 100 100

(1) Converted to a proprietary limited company and changed its name on 20 July 2006. (2) Company placed into voluntary liquidation on 19 December 2008.

27. INTERESTS IN JOINT VENTURES The consolidated entity entered into a joint venture arrangement with Kingsday Holdings Pty Ltd for the operation of the Mt Ida Excluded Area joint venture. Under the agreement Swan Gold retains a 70% interest in the asset. The consolidated entity contributes 100% of the funding of the joint venture with the other participant’s share repayable from the gold production of the asset. Swan Gold will be paid interest on the funds used and in relation to the other participant’s share of costs at a rate of 30% per annum during periods where mining operations are accruing on the Mt Ida Excluded Area. The face value of the amount repayable as at 30 June 2008 is $3.684 million with an applicable notional interest rate of 30%, subject to an interest free period of 20 months when Swan Gold had yet to recommence mining operations. This balance was fully impaired during the year as the recovery of this balance is dependent on gold production and remains uncertain. The joint venture has no contingent liabilities or capital commitments.

28. CONTINGENT LIABILITIES There were no contingent liabilities identified as at 30 June 2008.

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29. ASSET ACQUISITION

Acquisition of Minjar Gold Pty Ltd In July 2006, the consolidated entity completed the acquisition of the Minjar gold project. The project is located in Western Australia and consists of a gold treatment plant, associated mine infrastructure and a portfolio of mining tenements. The total cost of the asset acquisition was $10,000,000 to be paid in cash. The fair value of the identifiable assets of the Minjar gold project as at the date of the acquisition are: CONSOLIDATED Recognised

on acquisition

$’000 Plant and equipment 3,600 Deferred exploration expenditure 6,400 10,000

Cost of the acquisition: Deposit paid in April 2006 500 Paid during the year 3,638 Security bonds 862 Payable at 30 June 2007 5,000 10,000

Acquisition of Mt. Ida Excluded Area In February 2007, the consolidated entity completed the acquisition of the Mt Ida Excluded Area gold project by a joint venture. The project is located in Western Australia and consists of the Meteor, Whinnen, Baldock and Timoni ore bodies and associated mine and camp infrastructure. The total cost of the asset acquisition was $4,000,000 to be paid in cash. The fair value of the identifiable assets of the Mt Ida Excluded Area gold project as at the date of the acquisition are: CONSOLIDATED Recognised

on acquisition

$’000 Deferred exploration expenditure 4,000 4,000

Cost of the acquisition: Deposit paid in February 2007 100 Paid during the year 1,600 Payable at 30 June 2007 2,300 4,000

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29. ASSET ACQUISITION (continued)

Acquisition of Riverina ProjectIn February 2008, the consolidated entity completed the acquisition of the Riverina gold project. The project is located in Western Australia and consists of the Riverina ore body and associated granted mining leases, prospecting licenses and exploration licenses and contains Indicated and Inferred gold resources totalling 1.64 million tonnes @ 3.8g/t Au for 200,000 ounces. The total cost of the asset acquisition was $4,009,000 to be paid by the issue of 15,000,000 fully paid ordinary shares and 5,000,000 options.

The fair value of the identifiable assets of the Riverina gold project as at the date of the acquisition are: CONSOLIDATED Recognised

on acquisition

$’000 Deferred exploration expenditure 4,065 4,065

Cost of the acquisition: Share based payment – fully paid shares 3,675 Share based payment – options 390 4,065

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30. CASH FLOW STATEMENT

a) Reconciliation of cash Cash balances comprise:

Cash at bank - 21,750 - 21,455For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

b) Reconciliation of net cash outflow from operating

activities to loss after income tax

Loss after income tax (87,277) (34,236) (95,513) (27,501) Deferred exploration expenditure written-off 27,060 8,915 - 1,194Share-based payments 659 1,668 659 1,668Depreciation and amortisation 1,916 415 328 316Allowance for non-recovery of loans and investments - - 73,827 17,801Allowance for doubtful debts 705 - 535 -Other income - (314) - (217)Gain on disposal of plant and equipment (1,565) - (5) -Impairment of fixed assets 4,139 - 608 Impairment of exploration expenditure 7,232 14,064 - -Impairment of receivables 3,684 - - -Loss on sale of property, plant and equipment - 998 - 998 Changes in operating assets and liabilities (Increase)/decrease in receivables (1,071) 104 (1,166) 105Increase/(decrease) in payables 15,187 2,808 (225) (197)(Increase)/decrease of prepayments 145 (56) 93 (1)Increase of provisions 883 311 276 117(Increase)/decrease of inventory (935) (32) - -(Increase)/decrease in deferred tax asset - - 10,775 -

Net cash outflow from operating activities (29,238) (5,355) (9,808) (5,717)

Non-cash financing and investing activities During the financial year the consolidated entity acquired plant and equipment with an aggregate fair value of $1,147,000 (2007: $1,165,000), by means of finance leases.

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CONSOLIDATED 2008 2007

$’000 $’000 31. EARNINGS PER SHARE

Loss used in the calculation of basic earnings per share (87,277) (34,236) Number Number Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share 163,200,855 88,306,817Effect of dilution:

Share options Nil 418,657Weighted average number of ordinary shares on issue adjusted for the effect of dilution 163,200,855 88,306,817

The weighted average number of ordinary shares takes into account the weighted average effect of the share consolidation during the year. Options granted to employees including Key Management Personnel are considered to be potential ordinary shares and have been considered in the determination of diluted earnings per share, to the extent they are dilutive. There are no options excluded from the calculation of diluted earnings per share that could potentially dilute basic earnings per share because they are anti-dilutive for either of the periods presented. Total anti-dilutive options as at 30 June 2008 was 20,683,338 (2007: 12,900,000). There is no impact of dilutive shares as the consolidated entity made a loss for the year, hence any dilution would reduce the loss per share. Diluted earnings per share is therefore the same as basic loss per share.

The following movements in ordinary shares and options occurred subsequent to balance date:

On 26 February 2010, pursuant to the Recapitalisation Deed - a. 300,000,000 fully paid ordinary shares were allotted and issued to Stirling Gold Pty Ltd, b. 100,000,000 options were allotted and issued to Stirling Gold Pty Ltd, c. 208,832,344 fully paid ordinary shares were allotted and issued to MGMC Pty Ltd, d. 35,000,000 fully paid ordinary shares were allotted and issued to Crawley Investments Pty Ltd.

At various dates subsequent to 30 June 2008 and up to the signing of this report a total of 20,683,338 options also lapsed or expired.

There were no other movements in ordinary shares and options which occurred subsequent to balance date.

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32. SUBSEQUENT EVENTS

On 27 June 2008, Territory Resources Ltd appointed Ferrier Hodgson as Receivers and Managers, pursuant to a registered charge in respect of Swan Gold Mining Limited over Minjar Gold Pty Ltd (“Minjar”) assets.

Concerns regarding the validity of this appointment, due to the nature of the security, were raised.

Subsequently, on 10 July 2008, the Board of Directors appointed Mr Bryan Hughes and Mr Christopher Munday as Joint and Several Administrators of Swan and its eleven subsidiaries (the “Group”).

At the time of appointment, Davyhurst and Minjar were under care and maintenance programs, while production remained ongoing at Mt Ida.

Deeds of Company Arrangement, whereby Mr Bryan Hughes and Mr Christopher Munday were appointed as Deed Administrators, were executed by the each member of the Group on 5 September 2008.

The Minjar Gold Pty Ltd Share Sale Agreement was formally completed on 25 March 2009, thereby effecting the formal retirement of Mr Bryan Hughes as Deed Administrator and transferring trading control to the new Board of Directors. As a result of the Share Sale completion, the Minjar Gold Creditors Trust was established to receive and distribute the proceeds of the Share Sale Agreement.

A meeting of the creditors of the Group was held on 30 June 2009 to vote on the recapitalisation proposal. On this date, the Recapitalisation Deed was executed between the Group, the Deed Administrator, Stirling Resources Limited and Stirling Gold Pty Ltd, subject to various conditions precedent, including shareholder approval.

A meeting of the shareholders of the Company was held on 10 September 2009 to vote on the issue of shares and charges and change of Company name contemplated in the Recapitalisation Deed. Shareholders approved all resolutions.

On 26 February 2010, the Recapitalisation Deed was formally completed, thereby effecting the retirement of Mr Bryan Hughes as Deed Administrator and transferring control of the Group to the new Board of Directors.

Effective on this date Monarch Group Mining Company Ltd was re-named “Swan Gold Mining Limited” and Davyhurst Gold Pty Ltd was re-named “Carnegie Gold Pty Ltd”.

At this time, the Receivers and Managers representing Territory Resources Limited retired and Territory Resources Limited’s charge was accordingly released.

Also at this time, charges were granted in favour of the Trusts governing the Group assets in order to secure the instalments due, pursuant to the Recapitalisation Deed.

On 18 August 2011, Swan Gold Mining Limited (“Swan” or “the Vendor”) executed a conditional agreement with global commodity company and Stirling Resources Ltd major shareholder, DCM DECOmetal GmbH (“DCM” or “the Purchaser”) to acquire Swan Gold’s subsidiaries that own the Carnegie and Mt Ida gold projects (“the DCM Transaction”).

Under the agreement DCM acquires the debt and associated rights of the Mt Ida Trust for $1,000,000. DCM is to pay a total of $10,000,000 to the Group Trust, with $1,000,000 paid upon signing the agreement and $9,000,000 payable within six months. Under separate arrangement DCM acquired the debt and associated rights of the Territory Trust of $6,700,000. All debts due by Swan to the Mt Ida Trust, Group Trust, Territory Trust and Stirling Resources Ltd will be extinguished by DCM at settlement.

Swan Gold will receive an amount of $5,000,000 at settlement and all shareholdings that Stirling Resources Ltd, Territory Resources Ltd and DCM hold in Swan Gold will be cancelled. Settlement is due on or before 31 March 2012, and DCM is funding the ongoing operations of the consolidated entity until the transaction is completed.

The agreement does not become binding until the following conditions precedent are met:

(a) the (Financial Investment Review Board (FIRB) Condition has been satisfied; (b) the Vendor procuring all necessary third party consents to the Transaction (if any) and providing the Purchaser



Purchaser in accordance with the Mt Ida Assignment Deed;

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32. SUBSEQUENT EVENTS (continued) (e) completion of the assignment of the Mt Ida Debt and Mt Ida Securities from MGMC as trustee for the Mt Ida Trust

to the Purchaser in accordance with the Mt Ida Assignment Deed; (f) an agreement is executed between the Purchaser and Territory Resources Limited, in its capacity as beneficiary




On 3 May 2012, the Company announced to the ASX, that following extensive negotiations, a binding Terms Sheet and subsequently a Restructure Deed was entered into by Swan, DCM DECOmetal GmbH (DCM) and Investmet Limited and/or its nominees (“Investmet”), with the execution of a formal agreement, being the Restructure Deed, on 16 May 2012.

Investmet has advised it intends to recapitalize Swan and provide sufficient funding to complete a review into recommencement of operations at the Carnegie and Mt Ida gold projects, including amongst other items thorough geological and economic reviews of resources, project data, exploration activities as required, and mine planning. Investmet will also work with the current board of Swan towards finalizing the application for re-listing of the shares of Swan (Swan Shares) on the Australian Stock Exchange (ASX) (subject to ASX approval) as soon as possible after completion. The main terms and conditions of the Restructure Deed are as follows:


DCM will transfer 39,849,657 SWA shares to Investment in consideration for a cash payment by Investmet to the Trustee of the Territory Trust of $6,700,000 in satisfaction of all claims by the Territory Trust;


Investmet will pay $144,420 to the Trustee of the Group Trust on behalf of Swan to repay the loan made by the Trustee to Swan. Swan agrees to pay Investmet on interest free terms $144,240 within two business days of a written demand by Investmet.



The Conditions of a Restructure Deed are to be satisfied or waived on or before 30 June 2012, or an alternative restructure or extension period are to be negotiated in good faith. Should no agreement be made within 5 Business Days then either party may terminate the Deed without incurring any liability.


Agreement on documentation relating to Invetmet’s funding arrangements;




All necessary shareholder, third party or regulatory approvals.

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32. SUBSEQUENT EVENTS (continued)

This transaction is also conditional on the completion of inter-related transactions between Investmet, DCM and each of Stirling Resources Limited and Redbank Copper Limited, the terms of which have been finalised but not released. Investmet and DCM intend to establish syndicated loan arrangements with Swan, to include the new security charges to regulate secured debt over Swan incorporating a two year moratorium on principal repayments and at the end of the two year moratorium Swan may elect to repay the debt or require conversion at a price to be agreed between the parties.

Subsequent to period end a number of the Group’s tenements were subject to plaint proceedings due to the Group not meeting its minimum expenditure requirements on the tenements. The majority of the plaints have now been settled by the Company. The ability of the Group to maintain tenure to its tenements is dependent upon it continuing to meet the minimum expenditures on the tenements or obtaining exemptions for tenements in which the minimum expenditures have not been met.

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DIRECTORS’ DECLARATION

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In accordance with a resolution of the directors of Swan Gold Mining Limited, I state that:

1. In the opinion of the directors:

a. The financial statements, notes and the additional disclosures included in the directors’ report designed as audited, of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including:

i. Giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date.

ii. Complying with Accounting Standards and Corporations Regulations 2001.

b. Subject to the matters disclosed in Note 2(d), there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2008.

On behalf of the board

Damian Delaney Director

Perth, Western Australia 25 September 2012

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Liability limited by a scheme approved under Professional Standards Legislation

GB:MM:SWANGOLD:005

Independent auditor's report to the members of Swan Gold Mining Limited

Report on the financial report

We have audited the accompanying financial report of Swan Gold Mining Limited, which comprises the balance sheet as at 30 June 2008, the income statements, the statements of changes in equity and the cash flow statements for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

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

Auditor's responsibility

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

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

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

Independence

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

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GB:MM:SWANGOLD:005

Opinion In our opinion:

a. the financial report of Swan Gold Mining Limited is in accordance with the Corporations Act 2001, including:

i giving a true and fair view of the company's and consolidated entity's financial positions as at 30 June 2008 and of their performance for the year ended on that date; and

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

b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Material Uncertainty Regarding Continuation as a Going Concern

Without qualifying our opinion, we draw attention to Note 2(d) in the financial report. As a result of the matters described in Note 2(d), there is significant uncertainty whether the company and consolidated entity will continue as going concerns, and therefore whether the company and consolidated entity will realise their assets and extinguish their liabilities in the normal course of business and at the amounts stated in the financial report. The financial report does not include any 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/or the consolidated entity not continue as a going concern.

Report on the remuneration report

We have audited the Remuneration Report included in pages 13 to 19 of the directors' report for the year ended 30 June 2008. 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 Swan Gold Mining Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

Ernst & Young

G A Buckingham Partner Perth 25 September2012

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ASX Additional Information Additional information required by the Australian Securities Exchange Listing Rules and not disclosed elsewhere in this report is set out below: SHAREHOLDINGS (as at 14 August 2012) Substantial shareholders The number of shares held by substantial shareholders and their associates are set out below:

Shareholder Number of ordinary shares

% of issue capital

MGMC PTY LTD <GROUP A/C> 178,206,960 23.97

STIRLING GOLD PTY LTD 176,981,690 23.80

DCM DECOmetal GmbH 47,349,241 6.37

SUSAN KIERNAN 40,000,000 5.38

Voting Rights Each shareholder is entitled to receive notice of and attend and vote at generals meetings of the Company. At a general meeting every shareholder present in person or by proxy, representative or attorney will have one vote on a show of hands and on a poll, one vote for each share held. Distribution of equity security holders

Category Total shareholders

1‐1,000 424

1,001‐5,000 1,505

5,001‐10,000 1,037

10,001‐100,000 1,549

100,001‐9,999,999,999 294

On market buy‐back There is not currently any on market buyback. Securities on issue

Category Number

Ordinary Shares 743,487,661

Unlisted options (26/2/13; $0.05) 115,000,000

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ASX Additional Information Continued Twenty largest shareholders

Shareholder name No of ordinary shares held

Percentage of capital held

MGMC PTY LTD <GROUP A/C> 178,206,960 23.97


DCM DECOMETAL GMBH 43,349,241 6.37

SUSAN KIERNAN 40,000,000 5.38

MGMC PTY LTD <MT IDA A/C> 30,625,384 4.12

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3 27,890,187 3.75

J P MORGAN NOMINEES AUSTRALIA LIMITED 17,690,431 2.38

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 8,605,499 1.16

AMP LIFE LIMITED 6,625,571 0.89

MULLOWAY PTY LTD <FAMILY A/C> 6,000,000 0.81

MINERAL RESOURCES LIMITED 5,000,000 0.67

J P MORGAN NOMINEES AUSTRALIA LIMITED <CASH INCOME A/C> 4,998,472 0.67

NATIONAL NOMINEES LIMITED 4,069,305 0.55

CLIFFWAY PTY LTD <JOHN HARTLEY POYNTON PERSONAL > 4,000,000 0.54

MARTIN PLACE SECURITIES NOMINEES PTY LTD 3,620,000 0.49

ABBOTSLEIGH PTY LTD 3,424,862 0.46

DR LEON EUGENE PRETORIUS 3,000,000 0.40

TAYCOL NOMINEES PTY LTD 2,600,000 0.35

EMICHROME PTY LTD 2,376,667 0.32

TUXEDO INVESTMENTS PTY LTD 2,040,000 0.27

Total 575,104,269 77.35

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Twenty largest option holders ($0.05; 26/2/2013)

Option holder name No of options held Percentage of options held


HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3 6,666,666 5.80

CELTIC CAPITAL PTY LTD <THE CELTIC CAPITAL A/C> 6,126,667 5.33

CUNNINGHAM PETERSON SHARBANEE SECURITIES PTY LTD 3,900,000 3.39

OCEANIC ASSET MANAGEMENT PTY LTD <CF AUST NATURAL RESOURCE A/C> 2,666,667 2.32

TWO FIVE TWO PTY LTD 2,586,666 2.25

MARTIN PLACE SECURITIES NOMINEES PTY LTD 2,153,336 1.87

MULLOWAY PTY LTD <FAMILY A/C> 2,000,000 1.74

RICHSHAM NOMINEES PTY LTD 1,779,999 1.55

CLIFFWAY PTY LTD <JOHN HARTLEY POYNTON PERSONAL > 1,333,333 1.16

CUNNINGHAM PETERSON SHARBANEE SECURITIES PTY LTD 1,000,000 0.87

TAYCOL NOMINEES PTY LTD 866,667 0.75

ALBATROSS PASS PTY LTD 840,000 0.73

MEERKAT PTE LIMITED 666,667 0.58

PLAN B TRUSTEES LIMITED <LIFETIME SUPER FUND A/C> 666,667 0.58

GURRAVEMBI INVESTMENTS PTY LTD <SUPER FUND A/C> 666,666 0.58

LSAF HOLDINGS PTY LTD <OWEN FAMILY A/C> 633,333 0.55

SEAVIEW ENTERPRISES PTY LTD 533,333 0.46

MR JOSEPH JAN MADEJ + MRS SUSAN ANNE MADEJ <MADEJ SUPER FUND A/C> 466,667 0.41

MS SARAH CANTERBURY 450,000 0.39

Total 96,437,237 83.86

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swan gold mining limited (previously named monarch gold ... · swan gold mining limited (previously...

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