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Orrex Resources Ltd

Annual Report

For the year ended 30 June 2015

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Annual Report │ 30 June 2015 Page 1

Corporate Directory 2 Letter from the Chairman 3 Directors’ Report 4 Consolidated Statement of Financial Position 13 Consolidated Statement of Profit or Loss and other Comprehensive income 14 Consolidated Statement of Changes in Equity 15 Consolidated Statement of Cash Flows 16 Notes to the Financial Statements 17 Directors’ Declaration 40 Auditor’s Independence Declaration 41 Independent Auditor’s Report 42 ASX Additional Information 44

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CORPORATE

LETTER

FROM

THE

CHAIRMAN

For the year ended 30 June 2015

Dear Shareholder,

On behalf of the Directors of Orrex Resources Ltd ("Orrex" or the "Company"), we are pleased to present to shareholders the Company's Annual Report for the year ended 30 June 2015.

The Company has continued to be exposed to the difficult market conditions for junior mineral explorers principally caused by a lower metal prices and poor investor sentiment with the industry. During the reporting period the gold price decreased from approximately US$1,300 per ounce, at the end of June 2014, to US$1,130 per ounce at the time of going to print on this report. The Board has continued its low cost exploration strategy and minimised corporate spend to preserve capital.

At the Golden Mile South (GMS) project we have continued exploration and the rationalisation of our tenement holdings following reviews of our work over the years, as well as pursuing joint venture possibilities.

Last year we identified additional targets for aircore and possible RC follow‐up drilling. The most promising of these targets is very close to the Lakewood mill and is a promising target for follow up drilling. Work is underway to bring a joint venture partner in to fund this next program.

Orrex has continued to focus on identifying and conducting desktop analyses and due diligence on prospective acquisition targets and other business opportunities.

The Company is in a good position to take advantage of any such opportunities, with approximately $2.5m of cash at 30 June 2015, minimal overheads and a tight capital structure. The Board is targeting a solid business case to apply our funds and capital structure to develop a fast growing, preferably global enterprise. Yours sincerely, Mark Stowell Chairman

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DIRECTORS’

REPORT

Your directors submit their report for the year ended 30 June 2015.

1. DIRECTORS

The names and details of the company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

Mr MARK STOWELL B. Bus, CA (Non‐executive Chairman)

Mr Stowell has over 20 years of corporate finance and business management experience in a large variety of roles. His initial senior role was as a manager in Corporate Finance at Arthur Andersen.

Mark was a founder and board member for seven years of Anvil Mining Limited, now a significant Africa based copper mining company. In 2004, he was a joint founder and director of Incremental Petroleum Ltd, an ASX listed company that was subject of an on market takeover in 2009. Mr Stowell is a Non‐executive director of Mawson West Ltd, a Toronto Stock Exchange listed copper producer operating in the Democratic Republic of Congo. Mr Stowell is also a non‐executive director of Incremental Oil and Gas Ltd and Kula Gold Limited.

Mr JEREMY BOND B.Com, B.Econ, BA (Non‐executive Director) (Commenced 17 December 2014)

Mr Bond is an investment manager of Terra Capital, an Australian based resource fund. He previously worked as a resource analyst at RAB Special Situations Fund at RAB Capital Plc based in London. The RAB Special Situations Fund had an investment bias towards natural resources. Prior to joining RAB, Mr Bond was an associate at Azure Capital, a boutique investment bank based in Perth, WA. Mr Bond is currently on the Board of Oklo Resources Limited and XTD Limited

Mr GUY LYONS BSc Ag (Hons)(Non‐executive Director) (Commenced 17 December 2014)

Mr Lyons has worked in the financial services industry since 2007, most recently for Euroz Securities as an institutional advisor. He previously was involved in the establishment of the Blackswan Equities institutional team before the merger with Euroz Securities. Mr Lyons' focus has been the small‐capitalisation industrial and resources market. Prior to joining Blackswan, he was an advisor at Macquarie Private Wealth

Mr STEVE ROBINSON BSc (Non‐executive Director) (Resigned 17 December 2014)

Steve is a Rhodes Scholar, business strategist and financial economist with over 20 years’ experience in the agribusiness, mining and energy industries.

Mr JONATHAN ASQUITH BA (Hons) CA MBA (Non‐executive Director) (Resigned 17 December 2014)

Mr Asquith is a Chartered Accountant with over 25 years corporate experience with major international accounting firms and commercial enterprises

2. COMPANY SECRETARY

Mr JONATHAN ASQUITH BA (Hons) CA MBA

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3. DIRECTORS’ MEETINGS

The number of meetings of directors held during the year and the numbers of meetings attended by each director were as follows: DIRECTORS DIRECTORS MEETINGS HELD ATTENDED M Stowell 6 6 J Bond 2 2 G Lyons 2 2 S Robinson 4 4 J Asquith 4 4 4. PRINCIPAL ACTIVITIES

The principal activity during the year of the Group was mineral exploration. There has been no significant change in the nature of this activity during the year.

5. OPERATING AND FINANCIAL REVIEW

Overview

Orrex operates as a mineral explorer in Western Australia and during the year had a gold exploration project, the Golden Mile South Project (“GMS”). The Golden Mile South Project is located in the heart of the Kalgoorlie region with potential for discovery of various styles of large gold deposits similar to those of the Eastern Goldfields.

Orrex is also reviewing further projects in Australia and overseas to add to its project portfolio. As part of these processes a subsidiary company was incorporated in USA during the year, but following the discontinuation of the related proposed project, the subsidiary was liquidated.

Orrex incurred an after tax loss for the year ended 30 June 2015 of $80,399 (30 June 2014 loss of: $363,052).

New projects

Management has continued to focus on acquiring additional projects for the Company and has conducted several desktop analyses on potential projects. The primary areas of interest are Australia and the Americas. With over $2.5m in cash at 30 June 2015, the Board considers Orrex to be well positioned in the current market.

Golden Mile South Project, Eastern Goldfields, WA

Orrex owns 95% to 100% interest in the tenements comprising the Golden Mile South Project, the Company’s flagship project.

Golden Mile South represents an opportunity for discovery of various styles of large gold deposits, with a large tenement package. The tenure is located in the heart of the Kalgoorlie region approximately 5km southeast of the Kalgoorlie Super Pit and 5km north of the New Celebration/Jubilee gold mine. The proximity of the Golden Mile South Project to Kalgoorlie makes exploration relatively inexpensive given easy access to infrastructure and facilities.

During the year a rationalisation of tenure with the least prospectivity was undertaken. Licences with a total area of 3,451 hectares were surrendered. These licences mainly comprised the Hannan’s East, Feysville and Kenty (Kingsreef) areas.

Orrex continues to cautiously advance the GMS project, however the Board is actively reviewing business opportunities in Australia and other favourable investment jurisdictions with the aim of securing a project that could deliver shareholder value in the nearer term.

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Operating Results for the year

The Group’s operating loss after income tax for the year was $80,399 (2014: $363,052). The Group’s basic loss per share for the year was 0.18 cents (2014: loss 0.99 cents). The decrease in operating loss in comparison with prior year is caused by a decrease in the scale of exploration activities undertaken and the receipt of Research and development grant monies.

Liquidity and capital resources

The statement of cash flows shows that there was an increase in cash and cash equivalents in the year ended 30 June 2015 of $1,198,186 (2014: decrease $199,459).

Asset and capital structure

The Group has no debt or borrowings other than usual trade creditors paid on normal commercial terms.

Significant changes in the State of Affairs

There were no significant changes in the state of affairs of the Group during the year other than as noted in this report.

6. SHARE ISSUES DURING THE YEAR AND TO THE DATE OF THIS REPORT

During the year the Company made a 1:1 rights issue of shares. A total of 36,684,336 shares were issued at an issue price of 3.00 cents per share.

No shares have been issued subsequent to the year end to the date of this report.

7. SHARE OPTIONS

On 26 May 2015 the company issued the following options:

At the date of this report, the unissued ordinary shares of the company under option are as follows:

All options granted were exercisable at 30 June 2015.

8. DIVIDENDS

No dividends were paid or declared and no dividends have been recommended by the Directors.

9. RISK MANAGEMENT

The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks and opportunities identified by the Board. The Group has an Audit and Risk Charter.

The Group believes it is crucial for all Board members to be part of this process and as such the Board has not established a separate risk management committee and the Board as a whole acts in that role.

Date of Expiry Exercise Price Number issued

30 November 2018 5 cents 1,000,000

Date of Expiry Exercise Price Number under option

30 November 2018 5 cents 2,500,000

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Annual Report │ 30 June 2015 Page 7 10. PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

The Company was not a party to any such proceedings during the period.

11. ENVIRONMENTAL REGULATION

The Group’s activities are subject to environmental regulations under either Commonwealth or State legislation. However, the Board believes that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the Group.

12. SIGNIFICANT EVENTS AFTER THE BALANCE DATE

There have been no significant events after the balance date.

13. FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

The Group will continue to focus on mineral exploration and business development opportunities.

14. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into a Deed of Indemnity (Deed) with each Director and the Company Secretary (officers). Under the Deed, the Company indemnifies the officers to the maximum extent permitted by law and the Constitution against legal proceedings, damage, loss, liability, cost, charge, expense, outgoing or payment (including legal expenses on a solicitor/client basis) suffered, paid or incurred by the officers in connection with the officers being an officer of the Company, the employment of the officer with the Company or a breach by the Company of its obligations under the Deed.

The Company has not provided any insurance or indemnification for the Auditor of the Company.

15. REMUNERATION REPORT (AUDITED)

The remuneration report details the nature and amount of remuneration for each Director of Orrex Resources Limited, the Company and the Group and for key management personnel of the Group.

For the purposes of this report, key management personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly.

All remuneration paid to Directors and key management personnel is valued at cost to the Group and expensed or capitalised as appropriate.

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Annual Report │ 30 June 2015 Page 8 Details of key management personnel

The key management personnel of Orrex Resources Ltd during the financial year were:

 Mark Stowell (Non‐executive Chairman)

 Guy Lyons (Non‐executive Director) (Appointed 17 December 2014)

 Jeremy Bond (Non‐executive Director) (Appointed 17 December 2014)

 Steven Robinson (Non‐executive Director) (Resigned 17 December 2014)

 Jonathan Asquith (Non‐executive Director ,(Resigned 17 December 2014), Company Secretary

Remuneration Policy

The performance of the Group depends on the quality of its key management and personnel. To prosper the Group must attract, motivate and retain highly skilled directors and executives. To this end the Group embodies the following principles in its remuneration policy:

 Provide competitive rewards to attract high calibre executives;

 Link executive rewards to shareholder value;

 Significant proportion of executive compensation ‘at risk’, dependent upon meeting pre‐determined targets; and

 Establishing demanding, appropriate performance hurdles in relation to variable executive compensation.

The Group does not have a remuneration committee. All remuneration matters are dealt with by the full Board.

Non‐executive Director Remuneration

Non‐executive Directors’ fees are determined within an aggregate fee pool limit, which is periodically recommended for approval by shareholders. The current fee aggregate limit is $300,000. This amount is separate from any specific tasks that the Directors may take on for the Group.

Senior Executive Remuneration Policy

The Group is committed to remunerating its senior executives in a manner that is market‐competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, under the Senior Executive Remuneration Policy the remuneration of senior executive may be comprised of the following:

 Fixed salary that is determined from a review of the market and reflects core performance requirements and expectations;

 A performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Group performance;

 Participation in any share/option scheme with thresholds approved by shareholders; and

 Statutory superannuation.

By remunerating senior executives through performance and long‐term incentive plans in addition to their fixed remuneration the Group aims to align the interests of senior executives with those of shareholders and increase Group performance.

The objective behind using this remuneration structure is to drive improved Group performance and thereby increase shareholder value as well as aligning the interests of executives and shareholders.

The Board may use its discretion with respect to the payment of bonuses, stock options and other incentives.

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Annual Report │ 30 June 2015 Page 9 Consequences of performance on shareholder wealth

In considering the Group’s performance and benefits to shareholder wealth, the Board has regard to the following indices in respect of the current financial year and previous four financial years.

2015 2014 2013 2012 2011

Net loss attributable to owners of the company ($80,399) ($363,052) ($569,678) ($1,023,492) ($806,180)

Dividends paid ‐ ‐ ‐ ‐ ‐

Change in share price ($0.021) ($0.013) ($0.005) ($0.12) ($0.04)

*Orrex Resources Limited was officially listed on the Australian Stock Exchange on 30 November 2010.

Directors’ and executive officers’ remuneration

Details of the nature and amount of each major element of remuneration of each director of the Group and key management personnel of the Group are:

Short‐term Post‐ employment Share based payments S300A(1)(3)(vi) Value of options as proportion of remuneration % Salary & Fees Other benefits Super‐

annuation Options Total

$ $ $ $ $ % M Stowell 2014 23,663 ‐ 2,189 4,050 29,902 13.50% 2015 20,601 ‐ 1,944 ‐ 22,545 ‐ S Robinson 2014 23,663 ‐ 2,189 4,050 29,902 13.50% 2015 10,100 ‐ 947 ‐ 11,048 ‐ J Asquith 2014 23,663 ‐ 2,189 4,050 29,902 13.50% 2015 20,601 ‐ 1,944 ‐ 22,545 ‐ J Bond 2015 10,685 ‐ 1,015 12,934 24,634 52.5% G Lyons 2015 10,685 ‐ 1,015 12,934 24,634 52.5% TOTAL 2014 70,989 ‐ 6,567 12,150 89,706 TOTAL 2015 72,672 ‐ 6,866 25,868 105,406

Mr J Asquith resigned as a Director during the year but continues as Company Secretary.

Directors’ and executive officers’ interests

The following relevant interests in shares and options of the company were held directly and beneficially by the directors as at the date of this report:

Fully paid shares Options to acquire ordinary shares M Stowell 7,550,000 500,000 J Bond 5,600,000 500,000 G Lyons 3,333,333 500,000 J Asquith 650,000 500,000 Details of performance related remuneration

At present there is no performance‐based remuneration component to executive or non‐executive remuneration, however, performance of key management personnel is reviewed annually.

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Equity instruments

All options refer to options over ordinary shares of Orrex Resources Limited, which are exercisable on a one‐for‐one basis.

Options and rights over equity instruments granted as compensation

The following options were granted as compensation to Directors during the current reporting period or the prior period.

There has been no exercise of options granted as compensation during the current period or the prior period.

Modification of terms of equity‐settled share‐based payment transactions

No terms of equity‐settled share‐based payment transactions (including options granted as compensation to key management personnel) have been altered or modified by the issuing entity during the reporting period or the prior period.

Analysis of movements in options

Movements during the reporting period of options held over ordinary shares in the Company were:

Option description Number on

issue at the

start of the year Issued during the year Vested during the year Expired during the year

Number on issue

at the end of the

year

Exp. 11.4.2015 $0.30 5,000,000 ‐ ‐ 5,000,000 ‐

Exp. 30.11.2018 $0.05 1,500,000 1,000,000 1,000,000 ‐ 2,500,000

During the year there were no shares issued on the exercise of compensation options.

Analysis of options and rights over equity instruments granted as compensation

Details of vesting profiles of the options granted as remuneration to each key management person of the Group are detailed below.

Name Number Expiry Date % vested in

year % forfeited in year Financial years in which grant vests M Stowell 500,000 30 November 2018 100% ‐ 2013/14 J Bond 500,000 30 November 2018 100% ‐ 2014/15 G Lyons 500,000 30 November 2018 100% ‐ 2014/15 J Asquith 500,000 30 November 2018 100% ‐ 2013/14

Date of issue Date of Expiry Exercise Price Number

26 May 2015 30 November 2018 5 cents 1,000,000

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During the reporting period the movement in the number of options over ordinary shares in Orrex Resources Limited held, directly, indirectly or beneficially, by each key management person, including their related parties was as follows. Balance 1 July 2014 Granted as Remuneration Expiry of Options Change in key management role Balance 30 June 2015 M Stowell 1,500,000 ‐ (1,000,000) ‐ 500,000 J Bond ‐ 500,000 ‐ ‐ 500,000 G Lyons ‐ 500,000 ‐ ‐ 500,000 J Asquith 500,000 ‐ ‐ ‐ 500,000 S Robinson (i) 500,000 ‐ ‐ (500,000) ‐

(i) S Robinson resigned as a director on 17 December 2014 and therefore no balance is disclosed at 30 June 2015.

Shareholding of key management personnel

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

Balance 1 July 2014 Granted as Remuneration On Exercise Of Options Net Change Other Balance 30 June 2015 M Stowell 4,300,400 ‐ ‐ 3,249,600 7,550,000 J Bond ‐ ‐ ‐ 5,600,000 5,600,000 G Lyons ‐ ‐ ‐ 3,333,333 3,333,333 J Asquith 400,000 ‐ ‐ 250,000 650,000 S Robinson 150,000 ‐ ‐ (150,000) ‐

(i) S Robinson resigned as a director on 17 December 2014 and therefore no balance is disclosed at 30 June 2015.

Analysis of movements in options

The movement during the reporting period, by value, of options over ordinary shares in the company held by each key management person is detailed below.

Name Value of options granted in year (i) $ Value of options exercised in year $ Value of options lapsed in year $ M Stowell ‐ ‐ ‐ J Bond 12,934 ‐ ‐ G Lyons 12,934 ‐ ‐ J Asquith ‐ ‐ ‐ S Robinson ‐ ‐ ‐

(i) The value of options granted in the year is the fair value of the options calculated at the grant date using the Black Scholes option‐pricing model. The total value of the options granted is included in the table above. End of the Remuneration Report

Committee Memberships

The Group does not have a Remuneration, Nomination or Audit Committee as these roles are undertaken by the full Board.

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Directors’ benefits

No director of the Group has received or become entitled to receive a benefit because of a contract that the director or a firm of which the director is a member or an entity in which the director has substantial financial interest made with the company or an entity that the Company controlled, or a body corporate that was related to the Company, when the contract was made or when the director received, or became entitled to receive the benefit, other than a benefit included in the aggregate amount of emoluments received or due and receivable by the directors shown in Note 18 to the Financial Statements.

16. AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration is set out on page 41 and forms part of the Directors’ report for the financial year ended 30 June 2015.

17. NON‐AUDIT SERVICES

During the year, Stantons International, the Group’s Auditor, has not performed any other services in addition to their statutory duties.

Details of amounts paid to the auditor of the Group, Stantons International, and its related practices for audit services provided during the year are set out in Note 7 to the financial report.

18. CORPORATE GOVERNANCE

The Corporate Governance Statement of the company is located at

www.orrexresources.com/IRM/content/about_corporategovernance.html

This report is signed in accordance with a resolution of the directors, made pursuant to Section 298(2) of the Corporations Act 2001.

On behalf of the directors Mark Stowell Director 30 September 2015 Perth

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CONSOLIDATED

STATEMENT

OF

FINANCIAL

POSITION

AS AT 30 JUNE 2015 Consolidated Note 2015 2014 $ $ Current Assets

Cash and cash equivalents 8 2,540,518 1,342,332

Trade and other receivables 9 13,833 8,683

Total Current Assets 2,554,351 1,351,015

Non‐Current Assets

Exploration assets 10 351,721 496,462

Total Non‐Current Assets 351,721 496,462

Total Assets 2,906,072 1,847,477

Current Liabilities

Trade and other payables 11 76,026 63,430

Total Current Liabilities 76,026 63,430

Total Liabilities 76,026 63,430 Net Assets 2,830,046 1,784,047 Equity Issued Capital 12 7,098,983 5,998,453 Reserves 12 382,667 356,799 Accumulated Losses ( 4,651,604) (4,571,205) Total Equity 2,830,046 1,784,047

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

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CONSOLIDATED

STATEMENT

OF

PROFIT

OR

LOSS

AND

OTHER

COMPREHENSIVE

INCOME

FOR THE YEAR ENDED 30 JUNE 2015 Consolidated Note 2015 2014 $ $ Revenue 5 ‐ ‐ Exploration expenses (142,416) (142,475)

Wages, salaries and related costs (79,538) (77,558)

Options expensed 22 (25,868) (12,150)

Cost of surrendered tenements (144,741) (121,362)

Other expenses (162,855) (61,529)

Operating loss (555,418) (415,074)

Financial income 64,734 52,022

Other income 5 410,285

Loss from continuing operations (80,399) (363,052)

Income tax expense 6 ‐ ‐

Loss for the year (80,399) (363,052)

Loss attributable to members of the entity (80,399) (363,052)

Other comprehensive income

Items that may be re‐classified subsequently to profit or loss ‐ ‐

Items that will not be re‐classified subsequently to profit or

loss ‐ ‐

Other comprehensive profit or loss for the year net of tax ‐ ‐

Total comprehensive loss for the year (80,399) (363,052)

Total comprehensive loss for the year attributable to

members of the entity (80,399) (363,052)

Basic and diluted loss per share attributable to ordinary

equity holders of the entity (cents) 13 (0.18) (0.99)

The above Consolidated Statement of Profit or loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

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CONSOLIDATED

STATEMENT

OF

CHANGES

IN

EQUITY

FOR THE YEAR ENDED 30 JUNE 2015 Consolidated Issued capital Accumulated losses Other reserves Total equity $ $ $ $ Balance at 1 July 2013 5,998,453 (4,208,153) 344,649 2,134,949

Loss for the year ‐ (363,052) ‐ (363,052)

Other comprehensive income ‐ ‐ ‐

Total comprehensive income for the year ‐ (363,052) ‐ (363,052)

Options issued during the year ‐ ‐ 12,150 12,150

Cost of issue of share capital ‐ ‐ ‐ ‐

Balance at 30 June 2014 5,998,453 (4,571,205) 356,799 1,784,047

Balance at 1 July 2014 5,998,453 (4,571,205) 356,799 1,784,047

Loss for the year ‐ (80,399) ‐ (80,399)

Other comprehensive income ‐ ‐ ‐ ‐

Total comprehensive income for the year ‐ (80,399) ‐ (80,399)

Options issued during the year ‐ 25,868 25,868

Issue of share capital 1,100,530 ‐ ‐ 1,100,530

Balance at 30 June 2014 7,098,983 (4,651,604) 382,667 2,830,046

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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CONSOLIDATED

STATEMENT

OF

CASH

FLOWS

FOR THE YEAR ENDED 30 JUNE 2015 Consolidated 2015 2014 Note $ $

Cash flows from operating activities

Payments to suppliers and employees (371,592) (254,190)

Interest received 58,963 54,731

R&D funds received 410,285 ‐

Net cash from/(used in) operating activities 14 97,656 (199,459)

Cash flows from financing activities

Issue of share capital 1,100,530 ‐

Net cash from financing investing activities 1,100,530 ‐

Net increase/(decrease) in cash and cash equivalents 1,198,186 (199,459)

Cash and cash equivalents at the beginning of year 1,342,332 1,541,791

Cash and cash equivalents at end of year 8 2,540,518 1,342,332

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

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NOTES

TO

THE

FINANCIAL

STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 1. CORPORATE INFORMATION

Orrex Resources Ltd (the “Company”) is a company limited by shares incorporated in Australia. The consolidated financial statements of the Company as at and for the year ended 30 June 2015 comprise the Company and its subsidiary (together referred to as the “Group” and individually as “Group entities”).

The consolidated financial statements were authorised for issue in accordance with a resolution of the directors on 30 September 2015.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant policies that have been adopted in the preparation of this financial report are:

(a) Basis of preparation

The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards including Australian Interpretations. The financial report has also been prepared on a historical cost basis and accrual accounting and, except where stated, does not take into account changing money values or current valuations of non‐current assets. The financial report is presented in Australian dollars.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

New standards and interpretations adopted in 2014/15 financial year

None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2014 affected any of the amounts recognised in the current period or any prior period although it caused minor changes to the Group’s disclosure

New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations issued by the AASB which are not yet mandatorily applicable to the Group have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early.

AASB 9 Financial Instruments and associated Amending Standards (applicable for annual reporting period

commencing 1 January 2018)

The Standard will be applicable retrospectively (subject to the comment on hedge accounting below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting.

Key changes made to this standard that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income.

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NOTES

TO

THE

FINANCIAL

STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The directors anticipate that the adoption of AASB 9 will not have a material impact on the Group’s financial instruments.

AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods commencing on or after 1

January 2017).

When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles‐based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non‐monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers.

The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the following five‐step process:

‐ identify the contract(s) with a customer;

‐ identify the performance obligations in the contract(s); ‐ determine the transaction price;

‐ allocate the transaction price to the performance obligations in the contract(s); and ‐ recognise revenue when (or as) the performance obligations are satisfied.

This Standard will require retrospective restatement, as well as enhanced disclosures regarding revenue.

The directors anticipate that the adoption of AASB 15 will not have a material impact on the Group’s revenue recognition and disclosures).

(c) Principles of Consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of the parent Orrex Resources Ltd and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 16.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

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NOTES

TO

THE

FINANCIAL

STATEMENTS

Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non controlling interests". The Group initially recognises non‐controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary's net assets on liquidation at either fair value or at the non‐ controlling interests' proportionate share of the subsidiary's net assets. Subsequent to initial recognition, non‐ controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non‐controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income.

(d) Interests in Joint Arrangements

Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about relevant activities are required.

Separate joint venture entities providing joint venturers with an interest to net assets are classified as a "joint venture" and accounted for using the equity method.

Joint venture operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure to each liability of the arrangement. The Group's interests in the assets, liabilities, revenue and expenses of joint operations are included in the respective line items of the consolidated financial statements.

Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties' interests. When the Group makes purchases from a joint operation, it does not recognise its share of the gains and losses from the joint arrangement until it resells those goods/assets to a third party.

The Group has no interests in joint arrangements as at 30 June 2015.

(e) Fair Value of Assets and Liabilities

The Group measures some of its assets and liabilities at fair value on either a recurring or non‐recurring basis, depending on the requirements of the applicable Accounting Standard.

Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced) transaction between independent, knowledgeable and willing market participants at the measurement date.

As fair value is a market‐based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data.

To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs).

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For non‐financial assets, the fair value measurement also takes into account a market participant's ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use.

The fair value of liabilities and the entity's own equity instruments (excluding those related to share‐based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements.

Valuation techniques

In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability, The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches:

 Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities.

 Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value.

 Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity.

Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable.

Fair value hierarchy

AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows:

Level 1

Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2

Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly

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Level 3

Measurements based on unobservable inputs for the asset or liability.

The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3.

The Group would change the categorisation within the fair value hierarchy only in the following circumstances: if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or

if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa.

When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred.

(f) 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 liabilities are recognised for all taxable temporary differences:

 except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

 in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 Deferred income tax assets are recognised for all deductible temporary differences, carry‐forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry‐forward of unused tax assets and unused tax losses can be utilised:

 except 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; and

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

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

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

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Investments and other financial assets

Financial assets in the scope of AASB 139 Financial Instrument: 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 assets. 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 Group determines the classification of its financial assets after initial recognition and when allowed and appropriate re‐evaluates this designation at each financial year‐end.

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way 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.

(i) Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of making a profit. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Held‐ to‐ maturity investments

Non derivative financial assets with fixed or determinable payments and fixed maturity are classified as held‐to maturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are included in this classification. Investments that are intended to be held‐to‐maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through amortisation process.

(iii) Loans and receivables

Loans and receivables including loan notes and loans to key management personnel are non‐derivative financial assets with fixed determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains or losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iv) Available‐for‐sale investments

Available‐for‐sale investments are those non‐derivative financial assets that are designated as available‐for‐sale or are not classified as any of the three preceding categories. After initial recognition available‐for‐sale investments 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 the investments that are actively traded in the organised financial markets are determined by reference to quoted market bid prices at the close of business on the balance sheet 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.

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) Interest in a jointly controlled operation

A joint venture is a contractual agreement whereby two or more parties undertake an economic activity that is subject to joint control. A jointly controlled operation involves use of assets and other resources of the venturers rather than the establishment of a separate entity. The Group recognises its interest in the jointly controlled operation by recognising the assets that it controls and the liabilities that it incurs. 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 operation.

(i) Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight‐line basis over the estimated useful life of the asset as follows:

Plant and equipment‐over 5 to 10 years.

Impairment

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash‐generating unit to which the asset belongs.

If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash‐generating units are written down to their recoverable amount. The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(j) Exploration and evaluation expenditure

Expenditure incurred during exploration and the early stages of evaluation of new areas of interest is written off as incurred.

Costs of acquisition of exploration areas of interest are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future.

(k) Development properties

Where projects have advanced to the stage that directors have made a decision to mine, they are classified as development properties. When further development expenditure is incurred in respect of a development property, such expenditure is carried forward as part of the cost of that development property only when substantial future economic benefits are established. Otherwise such expenditure is classified as part of the cost of production or written off where production has not commenced.

For personal use only

Orrex Resources Ltd

Annual Report

For the year ended 30 June 2015

CONTENTS

CORPORATE

DIRECTORY

LETTER

FROM

THE

CHAIRMAN

DIRECTORS’

REPORT

CONSOLIDATED

STATEMENT

OF

FINANCIAL

POSITION

CONSOLIDATED

STATEMENT

OF

PROFIT

OR

LOSS

AND

OTHER

COMPREHENSIVE

INCOME

CONSOLIDATED

STATEMENT

OF

CHANGES

IN

EQUITY

CONSOLIDATED

STATEMENT

OF

CASH

FLOWS

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THE

FINANCIAL

STATEMENTS

NOTES

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THE

FINANCIAL

STATEMENTS

NOTES

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THE

FINANCIAL

STATEMENTS

NOTES

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THE

FINANCIAL

STATEMENTS

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FINANCIAL

STATEMENTS

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STATEMENTS

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