ABN: 30 003 207 467 For personal use only - asx.com.au · ABN: 30 003 207 467 ANNUAL REPORT 2012 For personal use only. ... PNGFP is currently the key economic and operational entity

Pacif ic Nuigini L imited and its Control led Ent it ies 1WWW.NIUGINI.COM.AU

ANNUAL REPORT 2012ABN: 30 003 207 467

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Pacif ic Nuigini L imited and its Control led Ent it ies Pacif ic Nuigini L imited and its Control led Ent it ies 1

CHAIRMAN’S LETTER TO SHAREHOLDERS 2

MANAGING DIRECTORS REPORT 3

REVIEW OF OPERATIONS 4 DIRECTORS’ REPORT 14

AUDITOR’S INDEPENDENCE DECLARATION 23

FINANCIAL STATEMENTS

ConsolidatedStatementofcomprehensiveincome 24 ConsolidatedStatementoffinancialposition 25 ConsolidatedStatementofchangesinequity 26 ConsolidatedStatementofcashflows 27 NotestoandformingpartoftheFinancialStatements 28

DIRECTORS’ DECLARATION 53

INDEPENDENT AUDIT REPORT TO THE MEMBERS 54

CORPORATE GOVERNANCE STATEMENT 56

SHAREHOLDER INFORMATION 60

MINERAL TENEMENTS 62

CORPORATE DIRECTORY

DirectorsMrPeterCOOK(Non-ExecutiveChairman)MrPaulCMRLEC(ManagingDirector)MrSamAKOITAI(NonExecutiveDirector)MrDavidOSIKORE(ExecutiveDirector)

Company Secretary and CFOMrDennisLOVELL

Registered OfficeSuite14,46DouglasStreetMiltonQLD4064Telephone:+61(0)733673996Facsimile:+61(0)733682998

Principal Place of BusinessSuite14,46DouglasStreetMiltonQLD4064Telephone:+61(0)733673996Facsimile:+61(0)733682998

BankersWestpacBankingCorporation109StGeorgesTerracePerthWA6000

Country of IncorporationAustralia

AuditorsBDOAuditPtyLtdLevel18,300QueenStreetBrisbaneQLD4000Telephone:+61(0)732375999Facsimile:+61(0)732219227

Share RegistryComputershareInvestorServicesPtyLtd117VictoriaStreetWestEndQLD4101GPOBox2975MelbourneVic3001Telephone:(withinAustralia)1300850505Telephone:(outsideAustralia)+61(0)394154000Facsimile:+61(0)394732500

Home ExchangeAustralianSecuritiesExchangeLimitedLevel5RiversideCentre123EagleStreetBrisbaneQLD4000

Websitewww.niugini.com.au

ASX Code: PNR

TABLE OF CONTENTSF

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DearShareholders,

ItismypleasuretopresentyoutheannualreportforPacificNiuginiLimitedforthe2012year.IthasbeenoneofmixedfortunesfortheCompany.

Wehavewitnessedsuccessinourregionalexplorationprograms,particularlyatGarainawherewehavedefinedasignificantgoldandcopperanomaly.

OurgoldingravelsprojectsatBulolohaveshownmixedsuccessfromourbulksamplingprograms.Wehavehadtosortoutcompeting landusemattersand resolved theseby formingaJVandacquiringanewprojectat thesametime. SamplingatWiduboshhasreturnedgradeslowerthanexpectedwithafarmoreerraticgolddistribution.Despitethisgradesarewellinexcessofouranticipatedoperatingcostsandweareforgingaheadwithstatutoryprocessestoenablemining.

AtBulolowehaveonlytestedasmallportionofthegravelsinthepreviouslyun-dredgedflatsinthesouthwestoftheproject.Hereun-expectedbarrenoverburdenandlowgradeswereencountered.Whilstthismostobviousoffirstchoiceminingareasappearsnottomakethegrade,thereremainssignificantmorepotentialinpreviouslyun-dredgeddeepergravels.Wehaveproceededwithourplantconstructionatthereadyandremaindeterminedtomakeacommercialgofromthisproject.

Elsewhereourgrass-rootsteamshavebeenwalkingupcreeksandclamberingovermountainsassessingtheprospectivityofourothertitles,withsomeearlystagesuccess.

Wehavecontinuedtooperateinafrugalmannerwithlowoverheadsandlowcostvalueformoneyexploration.

Weretainahealthycashbalanceandremaindebtfree.Unfortunately,oursharepricehasfalleninlinewiththewidermarketdeclineinrecenttimes.

I thankour shareholders for their continuedsupportandpatience.As farasgeologygoes,PNG iselephantcountryandourMelanesianteamhasasecondtononechanceofmakingthatnextbigdiscovery.

PeterCookChairman

CHAIRMAN’S LETTER TO SHAREHOLDERSF

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Thepastyearhasgenerallybeensuccessfulforthecompanyontheprojectdevelopmentfront.However,therehavealsobeennumerouschallengestofaceinordertoachieveourgoals.

CommencementofworkatBulolotookfarlongerthatwecouldhaveanticipatedduetoaccessissuespreventingthecommencementofbulksamplingformostofthefirsthalfoftheyear.Throughnegotiationandpersistence,thecompanyfinalisedajointventureagreementwithPNGForestProducts,openingaccesstoprospectiveareasofEL1616,andgaining50%ownershipoftheirgoldinterestsinML457-Widubosh.

InitialbulksamplingprogramshavebeencompletedatBuloloandWidubosh.InitialresultsindicatemoreconsistentandhighergradesattheWiduboshproject,andassuchthatisnowthefocusofinitialprojectdevelopmentactivities.

Theproductionplantpurchasedin2010hasundergoneasignificantmake-over,andmajorcomponentmanufactureandupgradehas been completed. The plant can be finalised on short notice once all development issues have been addressed. On siteconstructiontimeisexpectedtobeintheorderofamonth.

EnvironmentalapprovalsforWiduboshhavebeenlodged,andaminingcompensationagreementwithlandownershasalreadybeenputinplacebyPNGForestProducts.TheJointVentureistargetingproductioninthefirsthalfof2013.

Exploration,inourgreenfieldtenementshasalsocontinuedtobesuccessful.TheKusiProspectinEL1614-Garainahascontinuedtoreturnexcitinggeochemicalandgeophysicalsurveyresults,andthepotential fordelineationofaneconomicorebody inthetenementishigh.Soilsampling,costeansampling,ground-mag,heli-magandradiometricsurveyshaveallbeenundertakeninvaryingdegreesduring theyear. Threediamondholesweredrilled tounderstandthesub-surfacegeologyandeachreturnedencouraginggoldresults.

ExplorationatthenearbySimtarget(alsoinEL1614–Garaina)hasnowcommenced,withpositiveinitialresults,andreconnaissanceworksattheKasumatargetisplanned.Theaimistodelineateseveraldrilltargetsatthesiteaheadofremobilisingcontractorsanddrillingcrewslaterintheyear.

OurGusaptenement(EL1615)intheMadangProvinceprovidesoursecondgreenfieldsexplorationfocus.Severaloutcroppingcopper-goldprospectshavebeenidentifiedduringthepasttwoyears,andextensivemagneticandradiometricsurveyshavebeencompletedtoassistwiththeexplorationeffort.OurcurrentfocusintheareaistheMunambeProspect,whichisataveryearlystage,butshowingpositivesignsforasignificantdiscovery.

Theboardandmanagementareacutelyawareoftheverydifficultcapitalmarkets,particularlywithrespecttoearlystageexplorationventures.Wehaveworked tostrikeabalancebetweenprogressionofourprojects,andconservationofcash reserves.Whileprogressingtheneartermgravelprojectsasquicklyaspossible,wehavefocussedexplorationeffortsinotherareasondefiningthebestpossibledrilltargetsusinglowcostfieldreconnaissancetechniquesforthefirsthalfof2012.Thishasenabledustoremaininasoundfinancialpositionwithacashbalanceof$10.7millionandnodebtattheendofthereportingperiod.

PaulCmrlecManagingDirector

MANAGING DIRECTORS REPORTF

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CORPORATE

Share IssuesDuringthepastfinancialyearthefollowingshareissueswerecompletedtoraiseacashtotalof$3,347,600:

(i) Theexerciseof9,085,001,$0.30,30Sept2011optionstoraise$2,725,500.(ii) Theexerciseof1,500,000,$0.20,26Nov2012optionstoraise$300,000.(iii) Theexerciseof1,500,000,$0.20,30Jun2014optionstoraise$300,000.(iv) Theexerciseof130,000,$0.17,23Feb2013employeeoptionstoraise$22,100.

US$ deposit conversion

InSeptember2011theUS$cashdepositcarriedintheaccountsat30June2011atAU$11,064,637wasconvertedintoAustralianDollarstorealiseanamountofAU$11,917,690resultinginarealisedforeignexchangegainofAU$853,053.

OPERATIONS

Papua New Guinea (PNG)Pacific Niugini Minerals (PNG) Ltd

TheCompany’swhollyownedPNGsubsidiaryPacificNiuginiMinerals(PNG)Ltd(“PNM”)holds9explorationtitlescovering3,750squarekilometresinPapuaNewGuinea.

PNM’s projects and exploration tenementsarelocatedinthreeprovincesofPapuaNewGuinea,coveringsixseparateprojectareas.Exploration titles EL1589 (Zenag), EL1614(Garaina), EL2013 (Garawaria), EL1616(Bulolo) and EL 1828 (Pindu) are located inMorobe Province. Exploration title EL1613(Hagen) is located in Western HighlandsProvince, and EL1615 (Gusap), EL 1869(Mutzing)andEL1827(Dumpu)arelocatedintheMadangProvince.

Tenements EL1827, EL1828, EL 1869,and EL 2013 were newly acquired by thecompanyinMarch2012,andservetofurtherstrengthenourhighlyprospectiveportfolioofexplorationassetsinPapuaNewGuinea.

During the 2011/2012 year, the Companyhasactivelyexplored intheBulolo,Garaina,Gusap, and Hagen project areas with

encouragingresultsincludingthedefinitionofabroadzoneofhighlyanomalousgold-silvermineralisationattheKusiProspect,anddiscoveryofnumerousnewoccurrencesofcopperandgoldmineralisationinseveralprospectsattheGusapProject.

ThemajorfocusandareaofadvancementfortheyearwasintheBuloloGravelProject.AfterexhaustivenegotiationswithlandholderPNGForestProducts(PNGFP),PacificNiuginisuccessfullynegotiatedajointventurewhichnotonlyfacilitatedaccesstotheprospectiveareasofEL1616,butalsoprovideda50%interestinML457(Widubosh),atenementheldbyPNGFPapproximately10kmnorthofEL1616.

PNMcontinuestoprogressactivitiesinPNGwithaclearfocusonthecommencementofproductionfromtheBuloloProjectanddiscoveryofcopperandgolddepositsintheGarainaandGusapProjects.Newlygrantedtenementswillbethesubjectsofinitialreconnaissanceexplorationintheensuingmonths,withprioritiestobesetfollowingtheinitialprogramsofwork.

Thecompanyhasalsobeenactiveintheevaluationofnewprojectsandwillcontinuetoproactivelypursueacquisitionopportunitiesforproducing(ornearproduction)assets,whichcancomplimentthefocusoftransitiontoproducerstatus.

REVIEW OF OPERATIONSF

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Bulolo Gold Project – Morobe Province

FamousasthebirthplaceofPlacerDome(nowBarrick),oneoftheworld’sforemostgoldminersandthemostsuccessfulinPNG,therecordedproductionfromgraveldredgingisdocumentedfromhistoricrecordsatapproximately200MillionCubicmetresatarecoveredgradeof0.32g/m3gold,fortheproductionofover2.15millionounces.

EL1616 covers the vast bulk of historic gold productionfromwithintheMorobeProvince.ThisgoldproductionhascomefromgolddredgingoftheBuloloGravelFlatsbetween1934 and 1965, although significantly interrupted duringWorldWarII.EL1616containsthebestofthehistoricallyproductiveBulologravelflats.

Pacific Niugini attempted to access the gravel zones ofEL1616since the inceptionof thecompany in2009,butwasrepeatedlyfrustratedinitsattemptsduetoobjectionsand legal action taken by the current land holder, PNGForestProducts(PNGFP),whoutilisesomeoftheareaforgrazingcattle.

In October 2011, Pacific Niugini and PNGFP reachedagreement to merge their respective gold interests, andprogress the project under a joint venture arrangement.PNGFPiscurrentlythekeyeconomicandoperationalentityinBulolowithsubstantialagriculture,timberprocessing,andretailoperationsintheareawithapproximately1200peopleemployed.PNGFPalsobringsubstantialaccesstoservicesto the mining projects through supply of hydro-electricityfromthenearbyBaiunePowerStation(ownedbyPNGFP),expertiseandabilityinconstructionandoperationofminecamps and facilities, and extensive industrial workshopfacilitiesandpersonnelinoperationatBulolo.

Under the terms of the Joint venture, PNGFP haveparticipatinginterestsof30%overareassouthoftheBulolotownarea(primarilycoveredbypastorallicensesownedbyPNGFP),anda25%participatinginterestinotherareasofEL1616.

PacificNiuginihasa50%interestinML457(Widubosh),whichhasbeenheldbyPNGFPforanumberofyears.

PacificNiuginiistheoperatoroftheprojectsandcompletedasubstantialamountofworkinbothprojectareasduringthelasthalfoftheyear.

DespiteattemptstoexpeditethefinalisationoftheJointVentureagreements,finaliseddocumentationwasnotcompleteduntilApril2012,demonstratingthefrustrationwhichcanbemetinadministrativeprocessesinPNG.Whileagreementstooklongerthanexpectedtofinalise,PNGFPbecameausefulandcooperativepartner,andsubstantialtestingworkscommencedatWiduboshinJanuary2012,withbothpartiescontributingtotheirshareofcostssincethattime.

ML457– Widubosh (50%)

Widoboshliesapproximately10kmnorthofEL1616,coveringsome177hectares.Whilehistoricalrecordsarepoor,therehavebeenseveralpastperiodsofminingatWidobosh,withevidenceofsignificantpreviousgoldproduction.Areasclosetothetenementcontinuetobeworkedbysmall-scaleminers.

Themajorityofthegravelsexistinraisedterraces,andassuchtheareawasnotdredgedduringtheextensiveminingcampaignsintheareabetween1934and1965.Intermittentsmallscaleminingusingbothhydraulicingandmechanicalmininghasbeenundertakenintheareasincethe1950’s.Areasaroundthetenementcontinuetobeworkedbysmall-scaleminers.


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Pacific Niugini completed a majortesting program during the firstquarterof2012,withapproximately1,600tonnesofmaterialexcavatedfrom26testpits.Approximately13tonnesofconcentratematerialwasgeneratedanddispatchedtoBurnieResearch Laboratory for analysisandmetallurgicaltesting.

Laboratory testwork confirmedthe presence of gold throughoutthe gravel profile, with sizing from+1mmto-100μm.Recoveryofgoldusinggravity jigswasshowntobeexcellent,withnegligiblegoldvaluesreportedintailingssamples.

OverallthecombinedgoldresultsforML457indicatehighlyvariablegrades,asisexpectedinalluvialdeposits.Assaydataandsubsequentgradeestimatepercubicmetreofgravelsvaryfrom0.037g/m3to1.05g/m3,withpitsfromsubstantialareasoftheleaseindicatinggradesof0.1g/m3orbetter,andanoverallarithmenticaveragegradeof0.133g/m3.

Inadditiontobulksampling,atotalof5churn-drillholeswerecompletedwiththeaimofidentifyingcontinuityofgoldthroughouttheprofile,andtoestablishthedepthofbasement.Allholesconfirmedthecontinuityofgoldthroughtheprofile.

Hole ID Northing Easting RL (M) Drilled Depth(Meters)

Drilled to Basement (Y/N)

WD001 457112 9215474 613 25.5 Y

WD002 456697 92155665 613 30.1 N

WD003 456622 9215565 635 29.2 N

WD004 456999 9215124 626 22.6 Y

WD005 457194 9215198 609 12.5 Y

Visualinspectionofdrillsamplesfollowingaconcentrationprocessusingsluicingandpanningshowedgoldinvaryingamountsthroughoutthegravelprofiles.Thedrillresultsarenotconsideredtobeacceptableforaccurategradedeterminationandhavenotbeenassayed.PacificNiuginiwillcorrelatedrillingdatawithresultsfromtestpittingtoassistintheselectionofpriorityminingareasforthecommencementofproduction.

DuetodifficultiesindealingwithalluvialdepositsundertheJORCcode,PacificNiuginihasnotattemptedtogenerateresourceorreserveestimates,anddoesnotintendtodoso.Resultsreceivedfromtestinggivethecompanyadequateconfidencetoadvancetheprojectfurther,andactivitiesintheensuingyearareexpectedtoinclude:

• Completionofallrequiredregulatoryapprovalsfortheproject.EnvironmentalapprovaldocumentationandfeeshavealreadybeenlodgedwiththeDepartmentofEnvironmentandConservation.ApprovalsprocessesinPNGcanbeslow,andPacificNiuginiregardtheapprovalprocessasthemajortimeunknownpriortodevelopmentoftheproject.

• Undertakinga short infill test-pittingprogram.Themajor focusof the testpittingwill be tocomplete severalpits toatleast15mdepthtoconfirmthecontinuityofgoldgradesinthegravelprofile.TheJVpartnersareassessingtheprogramrequirementsatthetimeofthisreport.

• Finalisationofoperationalplansand infrastructurerequirements.PacificNiuginihasconsideredanumberofoptions foroperationoftheproject,withbulkhandlingofmaterialsusingconveyorscurrentlythepreferredoption,indicatingthelowestoperatingcost.

• Transitiontoproduction.Subjecttoresultsfromworkinthepointsabovebeingpositive,PacificNiuginiintendstofinalisethere-configurationofthealreadyowned750m3/hrproductionplantandmobilisetoWiduboshtocommenceproduction.Adecision tocommenceproduction requiresavote in theaffirmative frombothJVpartners,andbothpartnersare tocontributetocostsinaccordancewiththeirequityshareoftheproject.


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EL1616 – Bulolo (75% north of the Bulolo town ship and 70% south of the Bulolo township)

ThefirsttestingofEL1616commencedinSeptember2011,priortoagreementwithPNGFP.Thetestingundertakeninthelastquarterof2011wasrestrictedtopreviouslyminedareasoutsideofthePNGFPcontrolledpastoralleases,andservedtoconfirmthepresenceofgoldthroughoutthegravelprofile,aswellasconfirmingthattheBulolorivercontinuestorechargethesystemwithnewalluvialgold.Importantly,theperiodallowedforcommissioningofthe10t/hrtestplantmanufacturedbyPacificNiugini,andfortrainingoflocaltestingandsamplingcrews.Drillingwasundertakeninthesameperiodtodepthsexceeding50metres,confirmingthecontinuityofgoldoccurrencethroughoutthegravelprofile.Seismicsurveys inthepreviousyear indicatedgraveldepthsofgreaterthan100m,howeverdrillingcouldnotadvancebeyond55mduetodrillrigconstraints.

Systematictestingofbothpreviouslydredgedgravels,andvirginsourcescommencedinMarch2012,immediatelyaftercompletionoftheinitialWiduboshprogram.Atotalof40testpitswerecompletedovertheSouthWestportionofthegravelswitheachtestpitprovidinga30m3bulksample.

Anunexpectedlayerofbarrentransportedcoverwasfoundtoexistoverthepreviouslyundredgedgravels,whilegoldwasseentooccurfromsurfaceinthepreviouslydredgedareas.

Thebulksamplingresultsarefromthesouthwesternsectionofthegravels.Atyear-end,assayresultsfromthemajorityofthetestpitsremainedoutstanding,howeverthetestingprogramwascompletedin theSouthWesternportionof theareaof the testprogram.Thesamplingofhistoricallydredgedareasshowsthatsignificantgoldstillexistedintheirtailings(upto0.06g/m3).

Historicaldredgingonlywenttoapproximately30mdepthanddatacollected from drilling and seismic surveys suggests that a large

volumeofgravelexistsbelowthepreviouslydredgedareas,andmayprovideanopportunityiftheremovalofdredgetailingscanbeeffectedeconomically.Whilstdisappointedinthesamplingresultsfromthisarea–whichpresentedanearsurfaceimmediatetarget, thebulkof thegravels remain inplaceandtobe further tested.Basedonthe initial results fromBulolo,PacificNiuginiintendstoproceedwithadvancingtheWiduboshprojectasapriority,andwillrevisitprocessingofpreviouslydredgedgravelsandaccessingvirginareasbelowonceWiduboshisinproduction.

Production Plant

PacificNiuginimadetheopportunisticpurchaseofaproductionscalegravityprocessingplantwhenitbecameavailablelatein2010.Theplantwasofascalesuitedto initialproductionoperationsattheBuloloproject,butwaspoorly laidoutandlackedseveralitemsofcriticalinfrastructure.

PacificNiuginihasproceededwiththedetaileddesignandconstructionofadditionalitems,andreconfigurationoftheplantlayoutduringthepastyear.WorkshavebeenundertakennearBrisbaneinAustralia,andtheplantisnowdesignedinsuchawaythatmodulescanbetransported instandardshippingcontainers,withonsiteconstructionrequirements likely tobe less thanonemonthoncelandedincountry.

Theinitialplantonlyutilisesapproximatelyhalfoftheprocessingequipmentpurchasedin2010,andhasbeenconfiguredtotreatgravelatthecapacityof750m3/hour.Theproductionrateisexpectedtotranslatetoanannualcapacityof4milliontonnesofgravelperannum,withthefinalgoldproductionprofiledirectlydependentongoldgrade.Atthetimethatthefirstproductionmodulehasbeenshowntooperatesuccessfully,itisPacificNiugini’sintentiontoproduceasecondmodulefromtheremainingalreadyownedplant.


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Garaina Project - EL1614 and EL2013 – Morobe Province (100%)

TheGarainatenement (EL1614) is located110kmsoutheastofLaeand80kmsoutheastofWauTownintheMorobeProvince.

The tenementareacovers thesuturezonebetween theOwenStanley Metamorphic thrust to the west and the PapuanUltramafictotheeast.TheOwenStanleymetamorphiccomplexunderliesmostof theEL.Alluvialgoldcontinues tobeworkedbylocalvillagerswithcrudeequipmentatGerepo,Kamusi,Bapiand Garaina. Until the Kusi gold-silver discovery in 2011 byPacificNiugini,nopotentialsourceofthealluvialgoldhadbeendiscoveredinthepast.

Nickel, gold and copper occurrences have been previouslyreportedfromtheregion.PacificNiuginiconsidersthetenementhaspotentialfordiscoveryofeconomicgold,copperandnickellateritedeposits.

Kusi Prospect

PacificNiuginidiscoveredsignificantoutcroppingsurfacemineralisationattheKusiProspectinJanuary2011,andhascontinuedtoadvanceitsunderstandingofthesourceof,andcontrolstomineralisationsincethattime.Importantly,theKusidepositiswelllocatedintermsoffutureintensiveexploration,andmininglogistics.AroadalreadyexistsbetweenWauTownandKasangari,whichareonly3kilometresfromKusi.Whiletheroadisnotcurrentlyinservice,workstobringtheroadbacktoatrafficableconditionarerelativelyminor,andcanbeundertakenpriortocommencementofanymajordrillingprogramsplannedinthefuture.Further,largeareasofflatlandexistintheGarainaValley,approximately12kilometreseastofKusi.Thereiscurrentlyanoperatingairstripintheareabeingusedfortransportofpersonnel,andconsumableswherepossible.Thislargeexpanseofflatlandwillprovidetheidealplatformformineinfrastructureintheeventthatthedepositisdeveloped.

Workcompletedduringtheyearincludedextensivegridbasedgeo-chemicalsampling,manualcosteansampling,closespacedheli-magneticandradiometricsurveys,andreconnaissancedrilling.

Atotalof54manualtrenches(KSTC001–KSTC054)havebeenexcavatedacrosstheprospectsincediscovery.Samplingwasconductedmostlyat1mintervals,butalsowithconsiderationofgeology.Bestresults,whichhavebeenpreviouslyreportedbythecompanyinclude:

• [email protected]/tAu,39.17g/tAg• [email protected]/tAu,4.34g/tAg• [email protected]/tAu,2.54g/tAg• [email protected]/tAu,8.92g/tAg• [email protected]/tAu,4.8g/tAg• [email protected]/tAu,4.77g/tAg,0.37%Cu• [email protected]/tAu,&0.30%Cu• [email protected]/tAu,&0.42%Cu

Threeangleddiamonddrill holes totalling853.20metersweredrilled to test thesubsurfacestratigraphyand thecontinuityofoutcroppinggold,copperandbasemetalmineralisationinthesecondhalfof2011.HolesKSDD001andKSDDH002weredrilledtotestdepthextensionofbestgoldinterceptsintrenchKST026whichreported53.0m@1.97g/tAu.HoleKSDDH003wasdrilledatsouthernparttheprospectwhichhadhighmagneticresponseingroundbasedsurveys,andhascoincidentalhighgradegold,copperandbasemetalsintrenchKSTC045,[email protected]/tAu,0.37%Cuand0.93%Zn.

Workcompletedsincethedrillingcampaign,whichhasincludedheli-magneticandradiometricsurveys,extensivemapping,andfurthergridbasedsoilsampling,suggeststhatholeswerecompletedonasub-optimalpositionandorientation,andadditionaldrillingprogramsarebeingprepared.


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Drill holeDrill Collar Coordinates (m) Sample

NumberFrom (m)

To(m) Significant Intercepts (cut-off grade 0.5 g/t Au)North East

KSDD001 9134794 494157 5412-54195412–54145461-5490548254725505

12.215.266.087.077.0110.0

23.018.396.088.078.0111.0

Ø[email protected]/tAu&8.84g/[email protected]/tAu&18.15g/tAgØ[email protected]/tAu&0.51g/tAgincl.Ø[email protected]/tAu&0.4g/tAgØ[email protected]/tAu,2g/tAg&0.12%CuØ[email protected]/tAu&0.1g/tAg

KSDD002 9134794 494157 5669–56925670–56725715-5719

11.613.161.7

4016.867.7

Ø[email protected]/tAu&3.51g/[email protected]/tAu&14.53g/tAgØ[email protected]/tAu

KSDD003 9134422 494009 5877-58815880

5145

5.18.0

73.0

10.19.0

74.0

Ø[email protected]/tAu,0.45%Cu&0.96%Zn,[email protected]/tAu,0.91%Cu&0.31%Zn

[email protected]/tAu.

Resultsfromthecompletedholesaresummarisedinthetableabove:

Magnetic and radiometric signatures obtained through helicopterbasedsurveysprovideexcellentcorrelationwithfieldobservationsto date, and add great confidence to the overall prospectivity oftheproject,bothattheKusiProspect,andinotherareasofsimilarmagnetic anomalism including Sim and Kasuma. The magneticresponseshowsbothhighmagneticandlow(magneticdestruction)susceptibility with enriched potassium, thorium and uranium.PotassiumisespeciallyelevatedtowardsthesouthofKusi,whichcorrespondswithpotassicalterationencounteredindrillholesandcreekoutcropmapping.

OfmajorgeophysicalinterestisthefactthattheKusimagnetichighhasa largenonmagnetic core.Consultantgeophysicist,ExploreGeoPtyLtd reported that thenon-magnetic coremay represent

destructionofmagnetics,ratherthanbeinganon-magneticbody.Ifshowntobethecase,excellentpotentialfordiscoveryofalarge,highqualitydepositexists.

PacificNiuginiiscompletingafullgeochemicalsamplingprogramattheKusiProspect,aheadofintendedadditionalgeophysicalsurveysanddrillingprograms.

Sim Prospect

Simisagold,silver,lead,zinctargetsupportedbyacoincidentmagneticanomaly,andlocatedseveralkilometresnorthofKusi.

PacificNiuginiconductedafirstpassregionalsurfacesamplingcampaigninlate2010,whentworocksamplesreturnedelevatedgold(13.9g/tAuand9.29g/tAu)withelevatedbasemetals.Simisunderlainpredominantlybymetamorphicbasementrocksofcarbonaceousphyllite,metapsammite,schistandminorlimestone.Therockunitshavebeenextensivelydeformedandvariablyintrudedbyintrusivesofgranodioriticandporphyriticorigin.

Aridgeandspursurfacesamplingprogramoverthemagneticanomalyandsurroundingareaswascompletedsubsequenttotheendofthereportingperiod.Resultsfromthesamplingprogramarepending,howeverinitialsamplesarehighlyencouragingwithmultiplesamplesdisplayingmineralisedintrusiveandbasementrockfabricswithvariedalterationprofiles.

Kasuma Prospect

KasumaisamagnetictargetlocatedtothewestofKusi.Theprospectwassubjectoftheheli-magneticandradiometricsurveycompletedin2011,anddisplayssignaturessimilartotheSimprospect.

The Kasuma site is yet to be accessed for initial geological investigation and surface sampling, however the Pacific Niuginiexplorationteamarepreparingforaninitialprogram.Initialworkwillincludecreekmappingandridgeandspursamplingprogramswithcommencementofworkplannedforthelastquarterof2012.


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EL2013

EL2013adjoinsEL1614 (Garaina) tosouthwest.TheEL2013 tenementarea liesstrategicallyon thesamenortheast trendinginterpretedtransferstructureswhichhosttheKusi,SimandKasumatargetsandisconsideredhighlyprospectiveforepithermalandporphyrystylegoldand/orcopperdeposits.PacificNiuginiconsidersthattenementhassimilargeologyandprospectivityasforEL1614.

The exploration tenement was granted in March 2012, and no fieldwork has been undertaken to date. Depending on initialobservations,theplannedKasumareconnaissanceexplorationprogrammaybeextendedintoEL2013asthemagneticanomalyattheprospectstraddlestheboundaryofthetwotenements.

Gusap Project – EL1615, EL1869, and EL 1827 – Madang Province (100%)

TheGusapProjectislocatedintheMadangProvincecovering2250squarekilometresofprospectivegroundovertheFinisterreRanges. The tenement is underlain by athrusted sequence of indurated argillites,volcanic and limestone later intruded byintrusive of dioritic, granodiorite, microdiorite,gabbro,doleriteandtonalitedifferentiates.Thesequence is overlain unconformably to thenorthbyPliocenelimestone.Anumberofmajorregional, deeply sheeted structures, trendingnorthwest, and dipping east; dominate thestructuralframeworkoftheFinisterreRanges.

The tenementarea is considered tobehighlyprospectiveforthediscoveryoflargeporphyrycopper gold, epithermal gold, and skarndeposits. Pacific Niugini completed extensiveexplorationworkwithinEL1615duringtheyear,whilebothEL1869,andEL1827weregrantedinMarch2012.

A major wide spaced heli-magnetic andradiometric survey, covering approximately

45%oftheGusapProjectareawasundertakeninthelastquarterof2012,followingsubstantialdelayscausedbyavailabilityofthesurveyhelicopterandcrew.Theheli-surveyidentifiedanumberofstructuralfeatureswithinthetenement,andalsohighlightedmagneticanomalyprospectsforfurtherfollow-up.TheresultsorthesurveyledtoaclosespacedinfillprogramovertheMunambeProspectinEL1869andEL1615,whereextensivegroundmappingandsamplingiscurrentlyunderway.

ThefocusoffieldworkduringtheyearwastheYanganondeposit,wherecreekoutcroprocksamplesinMarch2011returnedupto4.80%copper,1.99g/tgold,0.87%Zinc,13.9g/tsilver,104g/tmolybdenum,16g/tantimonyand165g/ttin.UpongrantingofEL1869,PacificNiuginifocussedsignificantattentionontheMunambeProspect,whichisconsideredtobehighlyprospectiveforthediscoveryofacopper-goldporphyrysystem.

TheongoingexplorationactivitiesatYanganonandMunambeprospects,combinedwith thepreviousdiscoveryofhighgradecopper inoutcropatTuringopoandGabanacontinuetosupport the interpretedoccurrenceofasubstantialmineralisingbodywithinthetenementarea.Explorationforaworld-classporphyrycopper–goldsystemwithintheGusapProjectcontinuestobeaviewedashighlyprospectivebyPacificNiugini,andtheprojectwillcontinuetoprovideanexplorationfocus,alongwiththeGarainaProject.

Yanganon Copper Gold Prospect

CopperandgoldmineralisationatsurfaceishostedwithinshallowdippingandreactivatedthrustfaultsoftheFinnisterrestructuralcomplex.Therearenumeroushydrothermallyalteredintrusives(gabbro,diorite,clinopyroxinite,dolerite,microdioriteanddunnite)embeddedwithinthesestructures.Theintrusivesmayberesponsiblefor introductionofcopperandbasemetalmineralisation.ReplacementstylecopperskarnmineralisationisevidentandoutcropsatYanganonSouthEast,andYanganonCentralprospects.


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Thecombinedprospectareasspanapproximately12kilometresalongstrike.Besttrenchassayresultsduringtheyearincluded:

YWTC01 [email protected]%Cu




YWTC06A [email protected]%Cu



AnumberoftrenchandsoilsamplesremainoutstandingfortheYanganonProspects,andtheforwardworkprogramintheareawillbeformulatedonceallinformationisreceivedandcollated.

Munambe Copper and Gold Prospect

TheMunambeprospectdiscoveryin2010identifiedsamplescontainingupto9%Cu,0.34g/tAu,and38g/tAg,fromintenselysericite-clay-pyritealteredandquartz+carbonate+pyrite+chalcopyritemineralisedintrusiveclastshostedwithinanapparentlywidespreadargillicalterationzone.

TheCompanyundertookandcompletedadetailedhelicoptermagneticandradiometricsurveyovertheprospectarea,infillingthewidespacedsurveyundertakeninthelastquarterof2011.

Thefieldworkprogram forMunambe isongoing,with theobjectiveofexpandingon theoriginaloutcroppingcopperandgoldmineralisationdiscoveredin2010andbringingMunambetoahighconfidencedrilltargetassoonaspossible.

Todatemineralisationhasbeenmapped ina largestructure100mwideandapproximately1000m in length.Mineralisation isexpressedasintenselyhydrothermallyaltered(sericite–pyrite–clay)intrusivespresentasclastsandinfaultbrecciamatrix.ThemajorfaulthasbeennamedtheMunambefaultZone(MFZ).ThereareanumberofparallelstructurestoMFZtrending340degrees,anddippingsteeplytonortheast.Theseparallelstructuresaremineralisedandarelocatedbetween80and400mfromthemainMunambeFault.

Work programs at Munambe are at a very early stage, however initial sampling has confirmed the prospectivity of the area,confirmingthepresenceofcopper,gold,andbasemetals.Initialsamplingreturnedthefollowingassays.Selective Rock chip sampling

• SN20791:3.8%Cu,0.11%Pb&8.23%Zn(Float)• SN20789:0.81%Cu&0.85%Zn(Float)• SN20790:0.81%Cu&25ppmMo(Outcrop)• SN20785:0.18%Cu(Outcrop)• SN20779:0.17g/tAu,0.11%Zn(Outcrop)

Trench sampling

TrenchMNTC01 [email protected]/tAu, [email protected]%Cu,26ppmMo

TrenchMNTC02 [email protected]%Cu

PacificNiuginihasrecentlyachievedaccessintoanarea,whichdisplaysadomeshapedfeature,withacorrespondingzoneofhighmagneticsusceptibility.Initialfieldworkintheareahasidentifiedzonesofsulphidemineralisationinoutcrop,andvariablyalteredintrusiverocks.Thiszoneisthecurrentfocusofexplorationintheareawithalargenumberofsamplesrecentlysubmittedforassay.

TheGusapProjectremainsahighprioritytargetforPacificNiugini,andtheexplorationteamwillcontinuetopursuereconnaissanceprogramsintothevariousprospectareaswithaviewtodelineatingandundertakinghighconfidencedrillingprograms.


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EL1828, Pindu - Morobe Province (100%)

EL1828(547.8Km2)islocatedimmediatelynorthofLae,intheMorobeProvinceofPapuaNewGuinea.Thetenementcovers548squarekilometresoftheFinisterre–SarawagaRanges.ThisisaGreenfieldstenementwithverylimitedmoderndayexplorationworkovertheareasofthetenement.

Basement rocks consist mostly of Miocene Finisterrevolcanics and sediments. The basement rock packageswere later intrudedbyultrabasic rockswithperidotiteandserpentinised peridotite composition. It is believed thatthese intrusive may have introduced copper, silver, goldand nickel mineralisation. Elevated copper values werepreviouslyreportedatLengbati,LalangandatlowerMongiRiverbytheBureauofMineralResources(BMR)ofAustraliaandbythePapuaNewGuineaGeologicalSurvey.

Besthistoricalgradesreportedfromthetenementareawere23.7%copper,37g/t silver,chromite1800g/tchromite,

and369g/tnickel.ThetenementwasgrantedtoPacificNiuginiinMarch2012,andtodatenofieldworkhasbeenundertakenbyPacificNiugini.Theareaisconsideredtobehighlyprospectiveforporphyrycopper-goldtargets,andPacificNiuginiintendstoundertakeinitialreconnaissanceexplorationprogramswithinthetenementareaintheensuingyear.

EL 1613 – Mt Hagen (100%) – Western Highlands Province

TheMtHagenEL1613islocatednearPapuaNewGuinea’sthirdlargestcity,MtHagenCity,intheWesternHighlandsProvince.

Anexcellent roadnetworkexistswith infrastructuresandothers services easily accessible from Mt Hagen. TheEL covers prospective areas of the northwest-southeaststriking mineralised Bismarck Fault Zone corridor whichhosts numerous copper gold and other base-metaloccurrences including the copper molybdenum Yanderadeposit([email protected]%copper)thatisbeingprogressedtoPrefeasibilityStatus.

The tenement has two identified copper-gold prospects,KotnaandPaglum,withnumerousotherprospectiveareasavailableforreconnaissanceexploration.

Kotna Prospect

Volcanicunitsconsistingof tuff,volcanicbreccias,volcanolithicsedimentsandcalcareoussedimentsunderlieKotna.Both thevolcanicandsedimentaryunitsarelaterintrudedbymultiplephasedporphyriticdiorites.CopperandgoldoccurrencesareknowntobespatiallyrelatedtothedioriteintrusionsintheBismarckFaultZone.FieldmappingatKotnadiscoveredextensivehydrothermalalterationandcopper–gold–molybdenummineralisation.

Twocoreholes(KNDD001&2)werecompletedinthepreviousyear.Theobjectiveofthedrillingwastotestsubsurfacecontinuityofcopperandbasemetalmineralisationincosteans,whichisseentobehostedinsediments,volcanicunitsandindaciticporphyriticintrusives. Drilling intersected weak porphyry style mineralisation showing moderate to locally intense pervasive hydrothermalalteration,hostedbyvariablyalteredvolcanictuff.Drillingconfirmedsurfacegeologicalobservationsofporphyrystylemineralisation.Whilethetargetporphyrymineralisationwasnotintersectedbytheseholes,importantmineralisationandalterationpatternswerelogged.

Strong epidote and increasing sulphide mineralisation were intersected in the deeper parts of KNDD002. Intense propyliticalterationwithminorzonesofadvancedargilicalterationwasseeninthemajorityofholeKNDD001.Widely,spacednarrowveinletswithquartz+pyrite+chalcopyrite+/-basemetalwereintersectedinbothholes.PNRbelievesthattheresultsdemonstratethattheporphyrysourceisreasonablyclose,eitherbelowortothesideoftheinitialtargetarea.


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Following the drilling campaign, Pacific Niugini undertook an intensive ridge and spur sampling program, and ground basedmagneticsurveys.Theridgeandspurgeochemicalprogramidentifiedabroadzoneofanomalous,andcoincidentcopper,gold,molybdenum,leadandzinctothewestoftheoriginaldrillinglocation.Thegroundmagneticsurveyconfirmedtheexistenceofamagneticanomaly (bothhighand low(destructive)zonesrecorded)coincidentwiththegeochemicalanomaly.PacificNiuginicontinuestoviewtheKotnaProspectasbeingprospectiveforthediscoveryofablindcopper-goldporphyrydeposit,andwillconsiderfurtherworkprogramsasexplorationatGarainaandGusapareprogressed.

Paglum Prospect

ThePaglumprospect isunderlainmostlyby rocksof volcanicandsedimentaryorigin,whichhavebeen intrudedbyMiocenegranodioriteandbyPliocenediorites.Anumberofstructuresareevidenttrendingnorthwesttosoutheast,appeartensional toBismarckFaultZoneamajortectonicstructurewithinthearea.Gold,copperandbasemetalmineralisationarecloselyassociatedwithnortheast–southweststructures.

Mineralisationoccursaswidelyspacedquartz–sulphideveinsandatthecontactbetween intrusiveandcountryrock.Previousgeochemical sampling programs have outlined coincident zones of copper, gold and molybdenum mineralization within theprospect.

NoadditionalfieldworkwascarriedoutatPaglumduringtheyearduetocompetingexplorationpriorities.Paglumcontinuestobeprospectiveforthediscoveryofcopper-goldporphyrydeposits,andthecompanywillconsiderfurtherworkprogramsdependentonexplorationresultsattheGarainaandGusapprojects.

EL 1589 – Zenag

The Zenag Prospect (EL1589) is located 65kilometressouthwestofLaeCityand12kilometressoutheast of Wafi/Golpu epithermal gold andporphyrycopper-golddeposit.ThekeytargetistheBiamenamagneticanomalyconsideredtorepresentan intrusive magnetic body, which straddles thewesterntenementboundary.

Zenag Tenement

Works completed in EL1589 by PNM and othershave revealed widespread elevated gold in creeksand trenching shedding from this area. Historicalmappingandsamplingbytheneighbourtothewesthasreportedbestsurfacetrenchingresultsof15m@24g/tAuand1.44%Cufromwhatisconsideredtobelong to thesame intrusivesystemstraddling theboundaryofthetenement.

GiventhelargeamountofprospectsunderconsiderationbyPacificNiugini,workonthetenementhasbeenlimited.PacificNiuginiwillcontinuewithlimitedsamplingprogramsovertheprospectinthecomingyear,withtheGarainaandGusapprojectsexpectedtocontinueastheprioritytargetsforthecompany.

REVIEW OF OPERATIONS

TheinformationinthisreportthatrelatestotheExplorationResultsforPacificNiuginiMineralsLtdisbaseduponinformationcompiledbyMrDavidMOsikore(BScGeology)),M.AusIMM..MrOsikoreisafulltimeemployeeofPacificNiuginiLimitedMineandhassufficientexperiencewhichisrelevanttothestyleofmineralisationandtypeofdepositunderconsiderationandtotheactivitythatheisundertakingtodulyqualifyasaCompetentPersonasdefinedinthe2004EditionofAustralasianCodeforReportingofExplorationResults,MineralResourcesandOreReserves.MrOsikoreconsentstotheinclusioninthereportofthemattersbasedupontheirinformationintheformandcontexttowhichitappears.PacificNiuginihasnotcalculatedresourcesfortheBuloloProjectincompliancewiththeJORCcode,anddoesnotintendtoduetodifficultiesindealingwithalluvialdeposits.Anyproductiondecisionwillbemadeonthebasisofbulksamplingresults,andinconsiderationofhistoricalproductionfromthearea

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Yourdirectorspresenttheirreportonthecompanyanditscontrolledentityforthefinancialyearended30June2012.

DIRECTORS

Thenamesofthedirectorsinofficeandatanytimeduringorsincetheendoftheyearareasfollows.Directorshavebeeninofficesincethestartofthefinancialyeartothedateofthisreportunlessotherwisestated.

NAMES, QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES

Mr Peter CookBScAppliedGeol,MSc(MinEcon),MAusIMM

MrCook is aGeologist andMineral Economist and is the currentNon-ExecutiveChairmanand formerManagingDirector ofMetalsXLtd.InthepastdecadehehasbeentheManagingDirectorofHill50Ltd,HarmonyGoldAustraliaPtyLtd,AbelleLtdandBluestoneTinLtd.

Heiscurrentlyanon-executivedirectorofWestgoldResourcesLtd,AzianaLtdandMetalsXLtd.

MrCookisthenon-executiveChairmanofPacificNiuginiLimited.

Mr David OsikoreBSc,MAusIMM

MrOsikoreBScisaGeologistandhasextensiveexplorationexperienceworkingforgroupssuchasBougainvilleCopperLimited,PlacerDome,Ingold(asubsidiaryofINCO)andRenisonGoldfields.InrecenttimeshehasbeenaSeniorGeologistwithAuroraGoldLimited,theExplorationManagerforAbelleLtdresponsiblefortheirWafiandHiddenValleyProjectsandhewasappointedthePNGExplorationManagerforHarmonyGoldaftertheirtake-overofAbelleLtd.DavidhasconsiderableexperienceindealingwithalllevelsofPNGbusiness,government,landownercommunitiesandgovernmentagencies.

MrOsikorehasnotheldanyotherpubliccompanydirectorshipsinthepastthreeyears.

MrOsikoreistheManagingDirectorofthewhollyownedPNGsubsidiary,PacificNiuginiMinerals(PNG)LimitedandisanexecutivedirectorofPacificNiuginiLimited.

Mr Paul Cmrlec BEng(Mining),Honours

MrCmrlecholdsaBachelorofMiningEngineeringdegreefromtheUniversityofSouthAustralia.Hehasextensiveexperienceinfeasibilitystudiesandprojectdevelopmentandhasheldanumberofoperationalandplanningroles,includingthepositionofUndergroundManageratseveralWesternAustraliangoldmines.HewaspreviouslytheGroupUndergroundMiningEngineerforHarmonyGoldAustralia,andtheGroupMiningEngineerforMetalsXLimited.

Inadditiontooperationalminingroles,MrCmrlec’srecentexperienceincludesthegeneralmanagementofmajorfeasibilitystudiesfortheWafiCopper-GolddepositinPapuaNewGuinea,andtheWingellinaNickel-CobaltdepositintheCentralMusgravesregionofWesternAustralia.

MrCmrlecistheManagingDirectorofPacificNiuginiLimited.

Hewasalsoanon-executivedirectorofWestgoldResourcesLimiteduntilhisresignationon1June2011.

Mr Sam Akoitai

MrAkoitaiwasamemberofthenationalparliamentofPNGfrom1997untilmid2007,servingfirstlyasMinisterforBougainvilleAffairsfrom1997until2000andsubsequentlyasMinisterforMiningfrom2002until2007.MrAkoitaiwasresponsibleforestablishmentofPNG’sMineralResourcesAuthority,thestatutoryauthoritywhichnowregulatestheminingindustryinthatcountry,andhasheldnumerousroleswithinthePNGresourcesindustry.

MrAkoitai isalsoanon-executivedirectorofMarengoMining (PNG)LimitedthePNGoperatingsubsidiaryofMarengoMiningLimited(ASX&POMSoXCode:MGO).MrAkoitaiisanon-executivedirectorofPacificNiuginiLimited.

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COMPANY SECRETARY AND CFO

Mr Dennis Lovell CA

MrLovellisaCharteredAccountantwithmorethan40yearsexperienceincorporatefinancialmanagementinarangeofindustriesincluding mineral exploration, mining, manufacturing and wholesale and retail operations in Australia and overseas. He hasconsultedtoanumberofASXlistingandcapitalraisingprojectsandhasactedascompanysecretaryandfinancialdirectortoanumberofpubliclistedcompanies.

PRINCIPAL ACTIVITIES

Theprincipalactivitiesoftheconsolidatedentityduringthefinancialyearconsistedof:• ExplorationformineralsinPapuaNewGuinea.

OPERATING RESULTS

Theconsolidatedlossforthefinancialyearafterprovidingforincometaxamountedto$2,326,986(2011:profitof$1,742,194).

DIVIDENDS PAID OR RECOMMENDED

Thedirectorsrecommendthatnodividendbepaidfortheyearended30June2012,norhaveanyamountsbeenpaidordeclaredbywayofdividendsincetheendofthepreviousfinancialyear.

REVIEW OF OPERATIONS

Afullreviewoftheoperationsoftheconsolidatedentityduringtheyearended30June2012isincludedinthisreport.

FINANCIAL POSITION

Theconsolidatedentityhadcashresourcesof$10.7millionat30June2012andhasnoborrowings.Thenetassetsoftheeconomicentityhaveincreasedby$1.3millionduringthefinancialyear(from$24.1millionat30June2011to$25.4millionat30June2012)mainlyfromsharecapitalissues.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

IntheopinionoftheDirectors,therewerenosignificantchangesinthestateofaffairsoftheconsolidatedentitythatoccurredduringthefinancialyearotherthanasdisclosedinthisreportortheconsolidatedfinancialstatements.

AFTER BALANCE DATE EVENTS

Thereisnoothermatterorcircumstancethathasarisensincetheendofthefinancialyeartothedateofthisreport,whichhassignificantlyaffected,ormaysignificantlyaffecttheoperationsoftheconsolidatedentity,theresultsofthoseoperationsorthestateofaffairsoftheconsolidatedentityinsubsequentfinancialyears.

FUTURE DEVELOPMENTS AND EXPECTED RESULTS

Businessstrategiesandprospectsforfuturefinancialyearshavebeenincludedinthereviewofoperations.

ENVIRONMENTAL ISSUES

Theconsolidatedentity’soperationsaresubject tosignificantenvironmental regulationsunder the lawsofPapuaNewGuinea.TheseissuesaredealtwithbytheManagingDirectorofPacificNiuginiMinerals(PNG)Ltd,theoperatingentityinPNG,andtheconsolidatedentityisnotawareofanymatterthatrequiresdisclosurewithrespecttoanysignificantenvironmentalregulationinrespectofitsactivities.

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REMUNERATION REPORT (AUDITED)

ThisreportdetailsthenatureandamountofremunerationforeachdirectorandotherkeymanagementpersonnelofPacificNiuginiLimited.

(A) Principles used to determine the nature and amount of remuneration

Remuneration PolicyTheremunerationpolicyoftheCompanyhasbeendesignedtoaligndirectorandotherkeymanagementpersonnelobjectiveswithshareholderandbusinessobjectivesbyprovidingafixedremunerationcomponentandofferingspecificlong-termincentivesviatheissueofoptionsandperformancerights.TheBoardoftheCompanybelievestheremunerationpolicytobeappropriateandeffectiveinitsabilitytoattractandretainthebestexecutivesanddirectorstorunandmanagetheeconomicentity,aswellascreategoalcongruencebetweendirectors,executivesandshareholders.

During the year ended30June2012, theeconomicentitydidnothavea separately establishednominationor remunerationcommittee.Consideringthesizeoftheeconomicentity,thenumberofdirectorsandtheeconomicentity’sstageofitsdevelopment,theBoardareoftheviewthatthesefunctionscanbeefficientlyperformedwithfullBoardparticipation.

Theremunerationpolicy,settingthetermsandconditionsfortheexecutivedirectorsandotherseniorexecutives,wasdevelopedandapprovedbytheboard.TheBoardbelievesthatithasimplementedsuitablepracticesandproceduresthatareappropriateforanorganisationofthissizeandmaturity.

Remuneration StructureInaccordancewithbestpracticecorporategovernance, thestructureofnon-executiveDirectorandexecutiveremuneration isseparateanddistinct.

Non-Executive Director Remuneration ObjectiveTheBoardseekstosetaggregateremunerationatalevelwhichprovidestheCompanywiththeabilitytoattractandretainDirectorsofthehighestcalibre,whilstincurringacostwhichisacceptabletoshareholders.

StructureTheboardpolicyistoremuneratenon-executivedirectorsatmarketratesforcomparablecompaniesfortime,commitmentandresponsibilities.Theboarddeterminespaymentstothenon-executivedirectorsandreviewstheirremunerationannually,basedonmarketpractice,dutiesandaccountability.Independentexternaladviceissoughtwhenrequired.Noadvicewasobtainedduringthereportingperiod.Themaximumaggregateamountoffeesthatcanbepaidtonon-executivedirectorsissubjecttoapprovalbyshareholdersattheAnnualGeneralMeetingandcurrentlystandsat$250,000pa.Feesfornon-executivedirectorsarenotlinkedtotheperformanceoftheeconomicentity.TheDirectorsarenotrequiredtoholdanysharesintheCompanyundertheConstitutionoftheCompany,howevertoaligndirectors’interestswithshareholderinterests,thedirectorsareencouragedtoholdsharesintheCompany.

Managing Director and Executive Remuneration StructureBasedonthecurrentstageintheCompany’sdevelopment,itssize,structureandstrategies,theBoardconsidersthatthekeyperformanceindicatorinassessingtheperformanceofExecutivesandtheircontributiontowardsincreasingshareholdervalueissharepriceperformanceoverthereviewperiod.Atpresent,remunerationisnotimpactedsolelybytheCompany’ssharepriceperformancebutalsootherfactorssuchasexplorationprogressandresults.

IndividualandCompanyoperatingtargetsassociatedwithtraditionalfinancialandnon-financialmeasuresaredifficulttosetgiventhesmallnumberofexecutivesandtheneedtobeflexibleandmulti-tasked,astheCompanyrespondstoacontinuallychangingbusinessenvironment.Consequently,aformalprocessofdefiningKeyPerformanceIndicators(KPI’s)andsettingtargetsagainsttheKPI’shasnotbeenadoptedatthepresenttime.

Remunerationconsistsofthefollowingkeyelements:Fixedremuneration;andVariableremunerationLongtermincentives(LTI).

TheproportionoffixedremunerationandvariableremunerationisestablishedforeachexecutivebytheBoard.

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Fixed RemunerationTheleveloffixedremunerationissetsoastoprovideabaselevelofremunerationwhichisbothappropriatetothepositionandiscompetitiveinthemarket.FixedremunerationisreviewedannuallybytheBoardhavingregardtotheCompanyandindividualperformance,relevantcomparableremunerationintheminingexplorationindustryandexternaladvice.Noexternaladvicewasobtainedduringthereportingperiod.Executivesreceivetheirfixedremunerationincash.

ExecutivedirectorscanbeemployedbytheCompanyonaconsultancybasis,onboardapproval,withremunerationandtermsstipulatedinindividualconsultancyagreements.

Variable Remuneration – Long Term Incentive (LTI)TheobjectiveoftheLTIplanistorewardExecutivesinamannerwhichalignstheelementofremunerationwiththecreationofshareholderwealth.AssuchLTI’saremadetoExecutiveswhoareabletoinfluencethegenerationofshareholderwealthandthushaveanimpactontheCompany’sperformance.

ThelevelofLTIgrantedis,inturn,dependentontheseniorityoftheExecutiveandtheresponsibilitiestheExecutiveassumesintheCompanyandisgrantedatthediscretionoftheBoard.

LTIgrantstoExecutivesaredeliveredintheformofshareoptionsandperformancerights.TheseoptionsandrightsareissuedontermsdeterminedbytheBoardatthetimeofissue.TheyareissuedtoaligntheExecutivesinterestswiththatoftheshareholders.TheCompanydoeshaveaformalemployeeLongTermIncentivePlan.Duringthecurrentandpreviousfinancialyearsthegrouphasgeneratedlossesfromitsexplorationandevaluationactivities.Giventhenatureof thegroup’sactivitiesandtheconsequentialoperatingresults,nodividendshavebeenpaid.Therehavebeennoreturnsofcapitalinthecurrentorpreviousfinancialperiods.Thedetailsofmarketsharepricemovementsareasfollows:

Share Price

Yearend30June2012 $0.235





(B) Remuneration of Directors and other Key Management Personnel

Detailsoftheremunerationofdirectorsandthekeymanagementpersonnel(asdefinedinAASB124RelatedPartyDisclosures)aresetoutinthefollowingtables.

ThekeymanagementpersonneloftheCompanyandtheGroupincludethedirectorsandthefollowingexecutiveofficerswhohaveordidhaveauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheentity:

• DennisLovell-CompanySecretaryandChiefFinancialOfficer

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Remuneration of Directors and other Key Management Personnel (cont)

Short TermPost

EmploymentShare-Based

Payments

2012

Cash Salary & Fees

Cash Bonus

Non-Cash

Benefits

Consultancy Agreement

Superannuation Contribution

Options/Performance

Rights

Total % Performance

Related

Directors $ $ $ $ $ $ $

PeterCook 60,000 - - 8,800 5,400 - 74,200 -

DavidOsikore 190,476 - - - 16,000 - 206,476 -

PaulCmrlec - - - 319,400 - 171,334* 490,734 35%

SamAkoitai 44,676 - - - - - 44,676 -

Total 295,152 - - 328,200 21,400 171,334 816,086 -

Other Key Management Personnel

DennisLovell - - - 132,223 - - 132,223 -

Total - - - 132,223 - - 132,223 -*Thisamountrepresentstheportionofthevaluationoftheperformancerightsexpensedduringthe2012financialyear.NorightswereissuedtoPCmrlecduringthecurrentfinancialyear,nocashbenefitwasreceivedandtherightshavenotvested.

Short TermPost

EmploymentShare-Based

Payments

2011

Cash Salary & Fees

Cash Bonus

Non-Cash

Benefits

Consultancy Agreement

Superannuation Contribution

Options/Performance

Rights

Total % Performance

Related

Directors $ $ $ $ $ $ $

PeterCook 60,000 - - 30,800 - - 90,800 -

DavidOsikore 166,667 - - - 14,000 - 180,667 -

AndrewWaller-resigned1/4/11 30,000 - - - - - 30,000 -

PaulCmrlec 30,000 - - 65,420 - 306,234 401,654 76%

SamAkoitai–appointed23/5/11 4,200 - - - - - 4,200 -

Total 290,867 - - 96,220 14,000 306,234 707,321 -

Other Key Management Personnel

DennisLovell - - - 126,062 - - 126,062 -

Total - - - 126,062 - - 126,062 -

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(C) Compensation options/rights – Granted and vested during the year

During the 2012 financial year there were no options or performance rights granted as equity compensation benefits to keymanagementpersonnel.

2011 financial year:Duringthe2010/11financialyearunlistedoptionsandperformancerights(Rights)weregrantedasequitycompensationbenefitsasdisclosedbelow.Theoptionsandrightswereissuedfreeofcharge.Detailsofthetermsoftheoptionsandrightsaregivenin(E)below.Theoptionsandperformancerightsvestasindicatedbelowandwereissuedtoencouragekeymanagementpersonneltogeneratefutureshareholderwealth.TheoptionsandperformancerightsissuedtoPCmrlecwereissuedintermsoftheemployeeLongTermIncentivePlanandwereapprovedbyshareholdersatameetingheldon23June2011.

Terms and Conditions of Each Grant

2011 Granted Number

Grant Date Value per Option/right at Grant Date

$

Exercise Price

$

Vesting Date Expiry Date

Directors

PCmrlec-Options 2,000,000 23.06.2011 0.152 0.38 23.06.2011 23.06.2014

PCmrlec-Rights 500,000 23.06.2011 0.34 Nil (a) 23.06.2014




TOTAL 4,000,000

(a)Detailsofvestingconditionsaregivenin(E)below-norightsvestedorwereforfeitedduringthefinancialyear.

(D) Values of Options and Performance Rights Granted as Part of Remuneration

During the 2012 financial year there were no options or performance rights granted as equity compensation benefits to keymanagementpersonnel.

2011

Value of options/rights granted during the year

Value of options/rights exercised during the year

Value of options/rights lapsed during

the year

Directors

PCmrlec-optionsandrightstotal 814,000 - -Therewerenoalterationstotermsandconditionsofoptionsorrightsgrantedasremunerationsincetheirgrantdate.

(a) Thevalueofoptionsandperformancerightsgrantedinthe2011yearwasdeterminedbyanindependentvaluerusingtheBlack-Scholespricingmodelthattakesintoaccountthesharepriceatgrantdate,exerciseprice,expectedvolatility,option/rightslife,expecteddividends,therisk-freerate,andthefactthattheoptions/rightsarenottradeable.Thetotalvalueoftheoptions/rightsgrantedisincludedinthetableabove.Thisdiffersfromtheexpenserecognisedasthecalculationoftheexpensealsotakesintoaccounttheprobabilityofsatisfyingthevestingcriteria.Theexpenseisrecognisedoverthevestingperiod.Ifallperformanceconditionsaremetanamountof$336,432willbeexpensedinfuturereportingperiods

(b) Noremunerationoptionsorrightslapsedduringtheyearended30June2012.Duringtheyear1,500,000shareswereissuedtoDOsikoreontheexerciseofremunerationoptionswithanexercisepriceof20c.$300,000wasreceived.Thevalueoftheoptionsatgrantdateandexercisedatewas8.1cand24crespectively.

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(E) Employment Contracts of Directors and Senior Executives

Mr Paul Cmrlec, Managing Director and CEO

MrCmrlecwasappointedasManagingDirectoron4thApril2011.

Witheffectfrom1April2011athreeyearcontractwasenteredintobetweenBerrimilServicesPtyLtd(acompanyassociatedwithMrCmrlec)andPacificNiuginiLtd(PNR).

UnderthecontractBerrimilprovidestheservicesofMrCmrlecasManagingDirectorofPNRforadailyconsultingfeecappedtoamaximumdailyamountof$1,600perday.Thefeeisallinclusive,withnoadditionalon-coststobechargedbyBerrimil.

MrCmrlec’sremunerationpackageincludesthefollowingincentives:-(a)TwomillionoptionstoacquirefullypaidordinarysharesinPNRatanexercisepriceof$0.38expiring23June2014.(b)TwomillionperformancerightstobeallottedfullypaidordinarysharesinPNRwiththefollowingtermsandperformancehurdles:

• 500,000shareswhenPNRrecordsitsfirstcommerciallyviablegoldproduction.• 500,000shareswhenPNRsurpasses50,000ozofgoldproductionorequivalentproductioninthecaseofanothermetal

orcommodityinvalue.• 500,000shareswhenPNRsurpasses100,000ozofgoldproductionorequivalentproductioninthecaseofanothermetal

orcommodityinvalue.• 500,000sharesifandwhenthemarketcapitalisationofPNRsurpassesAU$200millionforaminimumcontinuousperiod

of20tradingdays.TheoptionsandperformancerightswereissuedunderthetermsofthePacificNiuginiLtd’sLongTermIncentivePlanandwereapprovedbyshareholdersatameetingheldon23June2011.Theperformancerightswereissuedon23June2011andexpirethreeyearsfromthedateofissue.Toexercisetheperformancerights,itisarequirementthatMrCmrlecremainsaconsultantofthecompanyuntilthevestingconditionsaremet.

Mr David Osikore, Managing Director PNG and Executive Director

MrDOsikorehasafouryearservicecontractwithPacificNiuginiMinerals(PNG)Ltdwhichcommenced1July2009.ThecurrentremunerationistheequivalentofAU$175,000perannumwhichequatedtoPNGKina400,000atthedateofthelastreviewandispaidinPNG,plussuperannuation.Terminationis3monthsnoticeundernormalcircumstancesand12monthsinthecaseofterminationwithoutnoticeorfundamentalchange.

Mr Peter Cook, Non-Executive Chairman

MrCookhasnoformalagreementbetweenhimselfandtheCompany.Heispaidanon-executivedirectors’feeof$60,000perannumplussuperannuationandaconsultingfeeforanyadditionaltimespentonCompanybusinessoverandabovethenormalhourscoveredbythefixeddirectors’fee.

Mr Sam Akoitai, Non-Executive Director

MrAkoitaihasnoformalagreementbetweenhimselfandtheCompany.Heispaidanon-executivedirectors’feeof$40,000perannumandaconsultingfeeforanyadditionaltimespentonCompanybusinessoverandabovethenormalhourscoveredbythefixeddirectors’fee.

Mr Dennis Lovell, CFO and Company Secretary

MrLovellhasnoformalagreementbetweenhimselfandtheCompany.HisremunerationisbywayoffeespaidtoLovell&CoPtyLtd(acompanyassociatedwithDLovell)forservicesprovidedtotheCompanyinvoicedonanhourlybasis.

THIS IS THE END OF THE AUDITED REMUNERATION REPORT

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Directors’ Interests in Shares and Options of the Company

2012 Ordinary Options Over Ordinary Shares Performance Rights

Shares $0.20 $0.17 $0.20 $0.38

30/06/14 23/02/13 26/11/12 23/06/14 23/06/14

PeterCook 15,065,656 5,000,000 - - - -

DavidOsikore 6,000,000 1,500,000 - - - -

SamAkoitai - - - - - -

PaulCmrlec 408,500 200,000 1,000,000 - 2,000,000 2,000,000

MEETINGS OF DIRECTORS

Duringthefinancialyeardetailsofmeetingsofdirectorsheldandattendancesbyeachdirector(whileadirectoroftheCompany)duringtheyearwereasfollows:

Board Meetings

Director Attended Held

PCook 3 3

DOsikore 3 3

PCmrlec 3 3

SAkoitai 2 3

INDEMNIFYING OFFICERS OR AUDITOR

DuringthefinancialyeartheCompanyhaspaidpremiumstoinsuretheDirectorsandofficersagainstcertainliabilitiesarisingoutoftheirconductwhileactingasanofficeroftheCompany.Thecompanyhaspaidpremiumstoinsureeachofthedirectorsandofficersagainstliabilitiesforcostsandexpensesincurredbythemindefendinganylegalproceedingsarisingoutoftheirconductwhileactinginthecapacityofdirectororofficerofthecompany,otherthanconductinvolvingawilfulbreachofdutyinrelationtothecompany.Underthetermsandconditionsoftheinsurancecontractthepremiumpaidcannotbedisclosed.

OPTIONSAtthedateofthisreport,theunissuedordinarysharesoftheCompanyunderoptionorperformancerightsareasfollows:

Date of options/rights granted

Expiry Date Exercise Price Number of unlisted Options

Number of unlisted Performance Rights

01/09/2009 30/06/2014 $0.20 16,450,100

23/02/2010 23/02/2013 $0.17 150,000

09/03/2010 23/02/2013 $0.17 1,000,000

06/09/2010 31/03/2013 $0.28 2,000,000

21/12/2010 21/12/2013 $0.47 1,000,000

23/06/2011 23/06/2014 $0.38 2,000,000

23/06/2011 23/06/2014 Nil 2,000,000

30/11/2011 30/11/2012 Nil 300,000

30/11/2011 30/11/2013 Nil 200,000

30/11/2011 30/11/2014 $0.48 800,000

23,400,100 2,500,000

Therearenoparticipatingrightsorentitlementsinherentintheoptionsandholderswillnotbeentitledtoparticipateinnewissuesofcapitalorbonusissuesofferedormadetoshareholdersduringthecurrencyoftheoptions.However,theCompanywillsendanoticetoeachoptionholderatleast20businessdaysbeforetherecorddate,andthiswillgiveoptionholderstheopportunitytoexercisetheiroptionspriortothedatefordeterminingentitlementstoparticipateinanysuchissue.

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OPTIONS (cont)Thefollowingordinarysharesofthecompanywereissuedduringorsincetheendofthefinancialyearasaresultoftheexerciseofoptionsgranted:

Date of options granted Options expiry date Issue price of shares No. of shares issued

1/09/2009 30/09/2011 $0.30 9,085,001

1/09/2009 30/06/2014 $0.20 1,500,000

26/11/2009 26/11/2012 $0.20 1,500,000

23/02/2010 23/02/2013 $0.17 130,000

12,215,001Noamountswereunpaid.

PROCEEDINGS ON BEHALF OF COMPANY

Nopersonhasappliedforleaveofcourttobringproceedingsonbehalfofthecompanyorinterveneinanyproceedingstowhichthecompanyispartyforthepurposeoftakingresponsibilityonbehalfofthecompanyforalloranypartoftheseproceedings.

TheCompanywasnotapartytoanysuchproceedingsduringtheyear.

CORPORATE GOVERNANCE

Inrecognisingtheneedforthehigheststandardsofcorporatebehaviourandaccountability,thedirectorsoftheCompanysupportandhaveadheredtotheprinciplesofCorporateGovernance.TheCompany’scorporategovernancestatementiscontainedintheCorporateGovernancesectionoftheReport.

NON-AUDIT SERVICES

Theboardofdirectorsissatisfiedthattheprovisionofnon-auditservicesduringtheyeariscompatiblewiththegeneralstandardofindependenceforauditorsimposedbytheCorporationsAct2001.Thedirectorsaresatisfiedthattheservicesdisclosedbelowdidnotcompromisetheexternalauditor’sindependenceforthefollowingreasons:

• allnon-auditservicesarereviewedandapprovedbytheboardpriortocommencementtoensuretheydonotadverselyaffecttheintegrityandobjectivityoftheauditor;and

• thenatureoftheservicesprovideddonotcompromisethegeneralprinciplesrelatingtoauditorindependenceassetoutintheAPES110CodeofEthicsforProfessionalAccountants.

Thefollowingfeesfornon-auditserviceswerepaid/payabletorelatedentitiesoftheexternalauditorsBDOAuditPtyLtdandSintonSpenceCharteredAccountants(PNG)duringtheyearended30June2012:

BDOAuditPtyLtd $10,750 SintonSpenceCharteredAccountantsPNG $6,885

Theauditor’sindependencedeclarationfortheyearended30June2012isonthefollowingpageandthedeclarationformspartofthisdirectors’report.

SignedinaccordancewitharesolutionoftheBoardofDirectors.

Paul CmrlecManaging DirectorDated24September2012

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DECLARATION OF INDEPENDENCE BY A J WHYTE TO THE DIRECTORS OF PACIFIC NIUGINI LIMITED

AsleadauditorofPacificNiuginiLimitedfortheyearended30June2012,Ideclarethat,tothebestofmyknowledgeandbelief,therehavebeennocontraventionsof:

• theauditorindependencerequirementsoftheCorporationsAct2001inrelationtotheaudit;and• anyapplicablecodeofprofessionalconductinrelationtotheaudit.

ThisdeclarationisinrespectofPacificNiuginiLimitedandtheentitiesitcontrolledduringtheperiod.

AJWhyteDirector

BDOAuditPtyLtd

Brisbane:24September2012

Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au

Level 18, 300 Queen St Brisbane QLD 4000, GPO Box 457 Brisbane QLD 4001 Australia

BDO Audit (QLD) Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (QLD) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK

company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

57

Independence

In conducting our audit, we have complied with the independence requirements of the

Corporations Act 2001. We confirm that the independence declaration required by the Corporations

Act 2001, which has been given to the directors of Pacific Niugini Limited, would be in the same

terms if given to the directors as at the time of this auditor’s report.

Opinion

In our opinion:

(a) the financial report of Pacific Niugini Limited is in accordance with the Corporations Act 2001,

including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June

2011 and of its performance for the year ended on that date; and

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

and

(b) the financial report also complies with International Financial Reporting Standards as disclosed

in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 1 to of the directors’ report for

the year ended 30 June 2011. 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 Pacific Niugini Limited for the year ended 30 June 2011

complies with section 300A of the Corporations Act 2001.

BDO Audit (QLD) Pty Ltd

A J Whyte

Director

Brisbane: 26 September 2011

228

AUDITOR’S INDEPENDENCE DECLARATION

BDOAuditPtyLtdABN33134022870isamemberofanationalassociationofindependententitieswhichareallmembersofBDO(Australia)LtdABN77050110275,anAustraliancompanylimitedbyguarantee.BDOAuditPtyLtdandBDO(Australia)LtdaremembersofBDOInternationalLtd,aUKcompanylimitedbyguarantee,andformpartoftheinternationalBDOnetworkofindependentmemberfirms.LiabilitylimitedbyaschemeapprovedunderProfessional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012

Note Group

2012

$

2011

$

Continuing Operations

Revenue 4(a) 778,703 373,296

Otherincome 4(b) 853,053 988,061

Depreciation (230,377) (85,253)

DirectorandEmployeebenefitsexpense (993,620) (1,047,639)

Otherexpenses 5 (2,734,745) (6,910,069)

Profit (Loss) from continuing operations before income tax (2,326,986) (6,681,604)

Incometaxexpense 6 - -Profit/(Loss) from continuing operations for the year after income tax (2,326,986) (6,681,604)

Profit/(Loss) from discontinued operations before income tax 23 - 9,310,368

Income tax expense 6(a) - (886,569)

Profit/(Loss) from discontinued operations after income tax - 8,423,798

Profit/(Loss) for the year (2,326,986) 1,742,194

Other comprehensive income

Exchangedifferencesonthetranslationofforeignoperations 81,466 (18,924)

Other comprehensive income for the year net of tax 81,466 (18,924)

Total comprehensive income for the year (2,245,520) 1,723,270

Earnings per Share from continuing operations

Basicprofit/(loss)pershare(centspershare) 9 (0.94) (2.90)

Dilutedprofit/(loss)pershare(centspershare) 9 (0.94) (2.90)

Earnings per share from Discontinued Operations

Basicprofit/(loss)pershare(centspershare) 9 - 3.66

Dilutedprofit/(loss)pershare(centspershare) 9 - 3.66

Earnings per Share for profit/(loss) for the year

Basicprofit/(loss)pershare(centspershare) 9 (0.94) 0.76

Dilutedprofit/(loss)pershare(centspershare) 9 (0.94) 0.76

Theaccompanyingnotesformpartofthesefinancialstatements.

FINANCIAL STATEMENTSF

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CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2012

Note Group

2012 $

2011 $

ASSETS

CURRENT ASSETS

Cashandcashequivalents 10 10,717,727 17,185,823

Tradeandotherreceivables 11 520,908 1,038,869

Financialassetsatfairvaluethroughprofitorloss 12 110,091 458,369

TOTAL CURRENT ASSETS 11,348,726 18,683,061

NON-CURRENT ASSETS

Property,plantandequipment 14 3,870,896 1,159,510

Explorationandevaluationassets 15 12,357,921 6,098,966

TOTAL NON-CURRENT ASSETS 16,228,817 7,258,476

TOTAL ASSETS 27,577,543 25,941,537

CURRENT LIABILITIES

Tradeandotherpayables 16 802,243 585,880

Provisions 17 89,412 51,095

TOTAL CURRENT LIABILITIES 891,655 636,975

NON-CURRENT LIABILITIES

Deferredtaxliability 18 1,240,810 1,240,810

TOTAL NON-CURRENT LIABILITIES 1,240,810 1,240,810

TOTAL LIABILITIES 2,132,465 1,877,785

NET ASSETS 25,445,078 24,063,752

EQUITY

Issuedcapital 19 132,430,888 129,083,287

Reserves 20 3,474,395 3,113,684

Accumulatedlosses (110,460,205) (108,133,219)

TOTAL EQUITY 25,445,078 24,063,752



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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2012

Issued Capital

Accumulated Losses

Option Reserve

Foreign Currency

Translation Reserve

Share Based Payment Reserve

Total

$ $ $ $ $ $

Balance at 1 July 2010 121,979,494 (109,875,413) 1,562,495 27,990 782,897 14,477,463

Profit(Loss)fortheyear - 1,742,194 - - - 1,742,194

Exchangedifferencesontranslationofforeignoperations -

- - (18,924) - (18,924)

Total comprehensive income for the year - 1,742,194 - (18,924) - 1,723,270

Transactions with owners in their capacity as owners:

Sharesissuedduringtheyear 7,616,423 - - - - 7,616,423

Optionsissuedasconsiderationforcapitalraising (241,130) - 241,130 - -

-

Othershareissuecosts (271,500) - - - - (271,500)

Sharebasedpayments - - - - 518,096 518,096

Balance at 30 June 2011 129,083,287 (108,133,219) 1,803,625 9,066 1,300,993 24,063,752

Balance at 1 July 2011 129,083,287 (108,133,219) 1,803,625 9,066 1,300,993 24,063,752

Profit(Loss)fortheyear - (2,326,986) - - - (2,326,986)

Exchangedifferencesontranslationofforeignoperations - - - 81,466 - 81,466

Total comprehensive income for the year

- (2,326,986) - 81,466 - (2,245,520)

Transactions with owners in their capacity as owners:

Sharesissuedduringtheyear 3,347,601 - - - - 3,347,601

Sharebasedpayments - - - - 279,245 279,245

Balance at 30 June 2012 132,430,888 (110,460,205) 1,803,625 90,532 1,580,238 25,445,078

Theaccompanyingnotesformpartofthesefinancialstatements


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CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2012

Note Group

2012 $

2011 $

CASH FLOWS FROM OPERATING ACTIVITIES

Receiptsinthecourseofoperations 110,455 48,867

Paymentstosuppliersandemployees (2,151,620) (1,476,890)

Interestreceived 590,500 294,533

Incometaxpaid - (886,569)

Netcashprovidedby/(usedin)operatingactivities 24 (1,450,665) (2,020,059)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchaseofproperty,plantandequipment (2,724,401) (938,887)

Paymentsforexplorationandevaluationassets (6,493,682) (3,018,316)

Proceedsfromsaleofheldforsaleassets 23 - 13,243,674

Baddebtrecovery - 400,000

Bonmercioptionfees - 335,785

Loanstootherparties - 177,000

Netcash(usedin)/providedbyinvestingactivities (9,218,083) 10,199,256

CASH FLOWS FROM FINANCING ACTIVITIES

Proceedsfromissueofshares 19 3,347,599 7,616,423

Costofshareissue - (271,500)

Netcashprovidedbyfinancingactivities 3,347,599 7,344,923

Net(decrease)/increaseincashandcashequivalentsheld (7,321,149) 15,524,120

Effectofexchangeratechangesoncashandcashequivalents 853,053 (1,261,987)

Cashandcashequivalentsatbeginningoffinancialyear 17,185,823 2,923,690

Cashandcashequivalentsatendoffinancialyear 10 10,717,727 17,185,823



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Note 1: Reporting Entity

PacificNiuginiLimited(the“Company”)isacompanydomiciledinAustralia.TheconsolidatedfinancialstatementsoftheCompanyasatandfortheyearended30June2012comprisetheCompanyanditssubsidiaries(togetherreferredtoas“theGroup”).SeparatefinancialstatementsforPacificNiuginiLimitedasanindividualentityarenolongerpresentedasaresultofachangeintheCorporationsAct2001.FinancialinformationforPacificNiuginiLtdasanindividualentityisincludedinnote27.

Note 2: Basis of Preparation(a) Statement of compliance

The financial statements are general purpose financial statements which have been prepared in accordance with AustralianAccounting Standards (AASB’s) (including Australian Interpretations) adopted by the Australian Accounting Standards Board(AASB)andtheCorporationsAct2001.AustralianAccountingStandardsincludeAustralianequivalentstoInternationalFinancialReportingStandards(AIFRS).CompliancewithAIFRSensuresthefinancialreportalsocomplieswithIFRSsandinterpretationsadoptedbytheInternationalAccountingStandardsBoard.Thegroupisafor-profitentityforfinancialreportingpurposesunderAustralianAccountingStandards.

ThefinancialstatementswereapprovedbytheBoardofDirectorson24September2012.

(b) Basis of measurement

Theconsolidatedfinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptforheld-for-tradingfinancialassetsatfairvaluethroughprofitorlosswhicharemeasuredatfairvalue.

(c) Functional and presentation currency

These consolidated financial statements are presented in Australian dollars which is the Company’s functional currency. ThefunctionalcurrencyoftheGroup’sPapuaNewGuineasubsidiaryisthePNGKina.

(d) Use of estimates and judgements

Thepreparationoffinancialstatementsrequiresmanagement tomake judgements,estimatesandassumptionsthataffect theapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedintheperiodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.

Inparticular,informationaboutsignificantareasofestimationuncertaintyandcriticaljudgementsinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountsrecognisedinthefinancialstatementsaredescribedinthefollowingnotes:

Note15–recoverableamountofexplorationassetsNote25–sharebasedpayments

Note 3: Significant Accounting Policies

Thefinancial reportcomprisesfinancialstatements for theconsolidatedentityconsistingof theCompanyand itssubsidiaries.Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoalltheyearspresentedintheseconsolidatedfinancialstatements,unlessotherwisestatedandhavebeenappliedconsistentlyacrosstheGroup,exceptassetoutbelow:

(a) Principles of Consolidation

(i) Subsidiaries

TheconsolidatedfinancialstatementsincorporatetheassetsandliabilitiesofallsubsidiariesoftheCompanyasat30June2012andtheresultsofallsubsidiariesfortheyearthenended.TheCompanyanditssubsidiariestogetherarereferredtointhisfinancialreportasthegrouportheconsolidatedentity.

Subsidiariesareentitiescontrolledby theCompany.Controlexistswhen theCompanyhas thepower,directlyor indirectly, togovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Inassessingcontrol,potentialvoting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012

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includedintheconsolidatedfinancialstatementsfromthedatethatcontrolcommencesuntilthedatethatcontrolceases.Theyarede-consolidatedfromthedatethatcontrolceases.

(ii) Transactions eliminated on consolidation

Intra-groupbalances,andanyunrealisedincomeandexpensesarisingfromintra-grouptransactions,areeliminatedinpreparingtheconsolidatedfinancialstatements.Accountingpoliciesofsubsidiariesareconsistentwiththeparent.

(iii) Investment in Associate

AssociatesarethoseentitiesinwhichtheGrouphassignificantinfluence,butnotcontrol,overthefinancialandoperatingpolicies.Associatesareaccountedforusingtheequitymethod(equityaccountinginvestees).TheconsolidatedfinancialstatementsincludetheGroup’sshareoftheresultsofequityaccountedinvestees,afteradjustmentstoaligntheaccountingpolicieswiththoseoftheGroup,fromthedatethatsignificantinfluencecommencesuntilthedatethatsignificantinfluenceceases.WhentheGroup’sshareoflossesexceedsitsinterestinanequityaccountedinvestee,thecarryingamountofthatinvestment(includinganylongterminvestments)isreducedtonilandtherecognitionoffurtherlossesisdiscontinuedexcepttotheextentthattheGrouphasanobligationorhasmadepaymentsonbehalfoftheinvestee.

(b) Business combinationsTheacquisitionmethodofaccountingisusedtoaccountforallbusinesscombinations.Considerationismeasuredatthefairvalueoftheassetstransferred,liabilitiesincurredandequityinterestsissuedbythegrouponacquisitiondate.Considerationalsoincludestheacquisitiondatefairvaluesofanycontingentconsiderationarrangements,anypre-existingequityinterestsintheacquireeandshare-basedpaymentawardsoftheacquireethatarerequiredtobereplacedinabusinesscombination.Theacquisitiondateisthedateonwhichthegroupobtainscontroloftheacquiree.Whereequityinstrumentsareissuedaspartoftheconsideration,thevalueoftheequityinstrumentsistheirpublishedmarketpriceattheacquisitiondateunless,inrarecircumstancesitcanbedemonstratedthatthepublishedpriceatacquisitiondateisnotfairvalueandthatotherevidenceandvaluationmethodsprovideamorereliablemeasureoffairvalue.

Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedinbusinesscombinationsare,withlimitedexceptions,initiallymeasuredattheirfairvaluesatacquisitiondate.Goodwillrepresentstheexcessoftheconsiderationtransferredandtheamountofthenon-controllinginterestintheacquireeoverfairvalueoftheidentifiablenetassetsacquired.Iftheconsiderationandnon-controllinginterestoftheacquireeislessthanthefairvalueofthenetidentifiableassetsacquired,thedifferenceisrecognisedinprofitorlossasabargainpurchaseprice,butonlyafterareassessmentoftheidentificationandmeasurementofthenetassetsacquired.

Foreachbusinesscombination,thegroupmeasuresnon-controllinginterestsateitherfairvalueoratthenon-controllinginterest’sproportionateshareoftheacquiree’sidentifiablenetassets.

Acquisition-relatedcostsareexpensedwhenincurred.

Wherethegroupobtainscontrolofasubsidiarythatwaspreviouslyaccountedforasanequityaccountedinvestmentinassociateorjointlycontrolledentity,thegroupremeasuresitspreviouslyheldequityinterestintheacquireeatitsacquisitiondatefairvalueandtheresultinggainorlossisrecognisedinprofitorloss.Wherethegroupobtainscontrolofasubsidiarythatwaspreviouslyaccounted for as an available-for-sale investment, any balance on the available-for-sale reserve related to that investment isrecognisedinprofitorlossasifthegrouphaddisposeddirectlyofthepreviouslyheldinterest.

Wheresettlementofanypartofthecashconsiderationisdeferred,theamountspayableinfuturearediscountedtopresentvalueatthedateofexchangeusingtheentity’sincrementalborrowingrateasthediscountrate.

Contingentconsideration isclassifiedasequityor financial liabilities.Amountsclassifiedasfinancial liabilitiesaresubsequentlyremeasuredtofairvalueattheendofeachreportingperiod,withchangesinfairvaluerecognisedinprofitorloss.

Assetsandliabilitiesfrombusinesscombinationsinvolvingentitiesorbusinessesundercommoncontrolareaccountedforatthecarryingamountsrecognisedinthegroup’scontrollingshareholder’sconsolidatedfinancialstatements.


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(c) Financial Assets

Recognition

Thegrouprecognisesreceivablesonthedatethattheyareoriginated.Allotherfinancialassetsarerecognisedinitiallyonthetradedateatwhichthegroupbecomesapartytothecontractualprovisionsoftheinstrument.

Thegroupderecognisesafinancialassetwhenthecontractualcashflowsfromtheassetexpires,orittransferstherightstoreceivethecontractualcashflowssuchthatsubstantiallyalltherisksandrewardsofownershipofthefinancialassetaretransferred.

Thegrouphasthefollowingfinancialassets:

Financial assets at fair value through profit or loss

Financialassetsatfairvaluethroughprofitorlossarethosethatareintendedtobesoldinthenearterm.

Financialassetsatfairvaluethroughprofitorlossaremeasuredinitiallyatfairvalue.Theyaremeasuredsubsequentlyatfairvaluewithmovementsinfairvaluebeingrecognisedinprofitorloss.

Loans and receivables

Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquoted inanactivemarketandaresubsequentlymeasuredatamortisedcost.Gainsorlossesarerecognisedinprofitorlossthroughtheamortisationprocessandwhenthefinancialassetisderecognised.

(d) Foreign Currency Transactions and Balances

(i) Functional and presentation currencyItemsincludedinthefinancialstatementsofeachofthegroup’sentitiesaremeasuredusingthecurrencyoftheprimaryeconomicenvironment in which the entity operates (“the functional currency”). The consolidated financial statements are presented inAustraliandollars,whichisPacificNiuginiLtd’sfunctionalandpresentationcurrency.

(ii) Transactions and balancesTransactionsinforeigncurrencieshavebeenconvertedatratesofexchangerulingonthedateofthosetransactions.Atbalancedate,amountsreceivableandpayableinforeigncurrenciesaretranslatedatratesofexchangecurrentatthatdate.Realisedandunrealisedgainsandlossesarebroughttoaccountindeterminingtheprofitorlossforthefinancialyear.

(iii) Group companiesTheresultsandfinancialpositionofallthegroupentities(noneofwhichhasthecurrencyofahyperinflationaryeconomy)thathaveafunctionalcurrencydifferentfromthepresentationcurrencyaretranslatedintothepresentationcurrencyasfollows:• Assetsandliabilitiesforeachstatementoffinancialpositionpresentedaretranslatedattheclosingrateatthedateofthat

statementoffinancialposition

• Incomeandexpensesforeachstatementofcomprehensiveincomepresentedaretranslatedataverageexchangerates(unlessthisisnotareasonableapproximationofthecumulativeeffectoftheratesprevailingonthetransactiondates,inwhichcaseincomeandexpensesaretranslatedatthedatesofthetransactions),and

• Allresultingexchangedifferencesarerecognisedinothercomprehensiveincome.

Onconsolidation,exchangedifferencesarisingfromthetranslationofanynetinvestmentinforeignentities,andofborrowingsandotherfinancialinstrumentsdesignatedashedgesofsuchinvestments,arerecognisedinothercomprehensiveincome.Whenaforeignoperationissoldoranyborrowingsformingpartofthenetinvestmentarerepaid,aproportionateshareofsuchexchangedifferencesisreclassifiedtoprofitorloss,aspartofthegainorlossonsalewhereapplicable.

Goodwillandfairvalueadjustmentsarisingontheacquisitionofaforeignentityaretreatedasassetsandliabilitiesoftheforeignentitiesandtranslatedattheclosingrate.

(e) Revenue Recognition

Revenue from thesaleofgoodsanddisposalofotherassets is recognisedwhen theGrouphas transferred to thebuyer thesignificantrisksandrewardsofownership.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.

Interestincomeisrecognisedonatimeproportionbasisusingtheeffectiveinterestmethod.


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(f) Income Tax

Incometaxexpensecomprisescurrentanddeferredtax.Currenttaxfortheperiodistheexpectedtaxpayableonthecurrentperiod’staxableincomebasedonthenationalincometaxrateforeachjurisdiction.Deferredtaxisrecognisedusingtheliabilitymethod,providingfortemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposesandunusedtaxlosses.

Deferredtaxisrecognisedfortemporarydifferencesatthetaxratesexpectedtoapplywhentheassetsarerecoveredorliabilitiesaresettled,basedonthosetaxrates,whichareenactedorsubstantivelyenactedforeachjurisdiction.Therelevanttaxratesareappliedtothecumulativeamountsofdeductibleandtaxabletemporarydifferencestomeasuredeferredtax.Anexceptionismadeforcertaintemporarydifferencesarisingfromtheinitialrecognitionofanassetoraliability.Nodeferredtaxisrecognisedinrelationtothesetemporarydifferencesiftheyaroseinatransaction,otherthanabusinesscombination,thatatthetimeofthetransactiondidnotaffecteitheraccountingprofitortaxableprofitorloss.

Deferredtaxassetsarerecognisedfordeductibletemporarydifferencesandunusedtax lossesonly if it isprobablethatfuturetaxableamountswillbeavailabletoutilisethosetemporarydifferencesandlosses.

Deferredtaxassetsarereviewedateachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.

Deferredtaxisnotrecognisedfortemporarydifferencesbetweenthecarryingamountandtaxbasesofinvestmentsincontrolledentitieswheretheparententityisabletocontrolthetimingofthereversalofthetemporarydifferencesanditisprobablethatthedifferenceswillnotreverseintheforeseeablefuture.

Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsetcurrenttaxassetsandliabilitiesandwhenthedeferredtaxbalancesrelatetothesametaxationauthority.Currenttaxassetsandliabilitiesareoffsetwheretheentityhasa legallyenforceablerighttooffsetandintendseithertosettleonanetbasis,ortorealisetheassetandsettlethe liabilitysimultaneously.

Currentanddeferredtaxbalancesattributabletoamountsrecognisedinothercomprehensiveincomeanddirectlyinequityarealsorecognisedinothercomprehensiveincomeanddirectlyinequityrespectively.

(g) Impairment of Assets

Assetsare reviewed for impairmentwhenevereventsorchanges incircumstances indicate that thecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamount is thehigherofanasset’s fairvalue lesscosts tosellandvalue inuse.For thepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashinflowswhicharelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets(cash-generatingunits).Assets,otherthangoodwill,thatsufferedaimpairmentarereviewedforpossiblereversaloftheimpairmentateachreportingdate.

(h) Cash and Cash Equivalents

For statementof cash flowpurposes, cashandcashequivalents includescashonhand,deposits heldat callwith financialinstitutions,othershort-term,highlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorlessthatarereadilyconvertibletoknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue,andbankoverdrafts.

(i) Fair Value Estimation

Thefairvalueoffinancialassetsandfinancialliabilitiesmustbeestimatedforrecognitionandmeasurementorfordisclosurepurposes.Fairvalueshavebeendeterminedformeasurementand/ordisclosurepurposesbasedonthefollowingmethods.

Financial instruments traded in active marketsThefairvalueoffinancialinstrumentstradedinactivemarkets(suchaspubliclytradedderivatives,andtradingandavailable-for-salesecurities)isbasedonquotedmarketpricesatthestatementoffinancialpositiondate.ThequotedmarketpriceusedforfinancialassetsheldbytheGroupisthecurrentbidprice;theappropriatequotedmarketpriceforfinancialliabilitiesisthecurrentaskprice.


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Financial instruments not traded in active marketsThefairvalueoffinancialinstrumentsthatarenottradedinanactivemarketisdeterminedusingvaluationtechniques.TheGroupusesavarietyofmethodsandmakesassumptionsthatarebasedonmarketconditionsexistingateachbalancedate.Quotedmarketpricesordealerquotesforsimilarinstrumentsareusedforlong-termdebtinstrumentsheld.Othertechniques,suchasestimateddiscountedcashflows,areusedtodeterminefairvaluefortheremainingfinancialinstruments.

Share-based payment transactionsThefairvalueofemployeeshareoptionsismeasuredusinganoptionspricingmodel.Measurementinputsincludesharepriceonameasurementdate,exercisepriceoftheinstrument,expectedvolatility(basedonweightedaveragehistoricvolatilityadjustedforchangesexpectedduetopubliclyavailableinformation),weightedaverageexpectedlifeoftheinstruments(basedonhistoricalexperienceandgeneraloptionholderbehaviour),expecteddividends,andtherisk-freeinterestrate(basedongovernmentbonds).Serviceandnon-marketperformanceconditionsattachedtothetransactionsarenottakenintoaccountindeterminingfairvalue.

(j) Property, Plant and Equipment

Recognition and measurementEachclassofproperty,plantandequipmentisstatedathistoricalcostless,whereapplicable,anyaccumulateddepreciationandimpairmentlosses.Historicalcostincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.

Thecostofself-constructedassetsincludesthecostofmaterialsanddirectlabour,anyothercostsdirectlyattributabletobringingassettoaworkingconditionforitsintendeduse,andthecostsofdismantlingandremovingtheitemsandrestoringthesiteonwhichtheyarelocated.Purchasedsoftwarethatisintegraltothefunctionalityoftherelatedequipmentiscapitalisedaspartoftheequipment.

Whenpartsofanitemofproperty,plantandequipmenthavedifferentusefullives,theyareaccountedforasseparateitems(majorcomponents)ofproperty,plantandequipment.

Subsequent costsSubsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenancearechargedtothestatementofcomprehensiveincomeduringthefinancialperiodinwhichtheyareincurred.

DepreciationDepreciationiscalculatedusingthestraightlinemethodtoallocatetheassetscost,netoftheirresidualvalues,overtheirestimatedusefullives,asfollows:

Plantandequipment: 3-10yearsMotorvehicles: 5yearsLeaseholdimprovements: 3-5years

Theassets’residualvaluesandusefullivesarereviewed,andadjustedifappropriate,ateachstatementoffinancialpositiondate.

Gainsandlossesondisposalsaredeterminedbycomparingproceedswithcarryingamount.Theseareincludedinthestatementofcomprehensiveincome.

(k) Mineral Exploration and Evaluation Expenditure

Explorationandevaluationexpenditure incurred isaccumulated inrespectofeach identifiableareaof interest.Thesecostsareonlycarriedforwardtotheextentthattheyareexpectedtoberecoupedthroughthesuccessfuldevelopmentorsaleofthearea,orwhereactivitiesintheareahavenotyetreachedastagethatpermitsreasonableassessmentoftheexistenceorotherwiseofeconomicallyrecoverablereserves.

Accumulatedcostsinrelationtoanabandonedareaarewrittenoffinfullagainstprofitintheyearinwhichthedecisiontoabandontheareaismade.

(l) Issued Capital

Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromtheproceeds.


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(m) Earnings Per Share

(i) Basic earnings per share

Basicearningspershareiscalculatedbydividingtheprofitorlossattributabletoequityholdersofthecompany,excludinganycostsofservicingequityotherthanordinaryshares,bytheweightedaveragenumberofordinarysharesoutstandingduringthefinancialyear,adjustedforbonuselementsinordinarysharesissuedduringthefinancialyear.

(ii) Diluted earnings per share

Dilutedearningspershareadjuststhefiguresusedinthedeterminationofbasicearningspersharetotakeintoaccounttheafterincometaxeffectofinterestandotherfinancingcostsassociatedwithdilutivepotentialordinarysharesandtheweightedaveragenumberofsharesassumedtohavebeenissuedfornoconsiderationinrelationtodilutivepotentialordinaryshares.

(n) Goods and Services Tax (“GST”)

Revenues, expensesandassetsare recognisednetof theamountofGST, exceptwhere theamountofGST incurred is notrecoverablefromtheAustralianTaxOffice(“ATO”).InthesecircumstancestheGSTisrecognisedaspartofthecostofacquisitionoftheassetoraspartofanitemoftheexpense.ReceivablesandpayablesinthestatementoffinancialpositionareshowninclusiveofGST.ThenetamountofGSTrecoverablefrom,orpayabletotheATOisincludedasacurrentassetorliabilityinthestatementoffinancialposition.

Cashflowsarepresentedinthestatementofcashflowsonagrossbasis,exceptfortheGSTcomponentofinvestingandfinancingactivities,whicharedisclosedasoperatingcashflows.

(o) Non-current assets held for sale and discontinued operations

Non-currentassets(ordisposalgroups)thatareexpectedtoberecoveredprimarilythroughsaleratherthanthroughcontinuinguseareclassifiedasheldforsale.Immediatelybeforeclassificationasheldforsale,theassets(orcomponentsofadisposalgroup)areremeasuredinaccordancewiththeGroup’saccountingpolicies.Thereaftergenerallytheassets(ordisposalgroup)aremeasuredattheloweroftheircarryingamountandfairvaluelesscosttosell.Anyimpairmentlossonadisposalgroupfirstisallocatedtogoodwill,andthentoremainingassetsand liabilitiesonproratabasis,exceptthatno loss isallocatedto inventories,financialassets,deferredtaxassets,employeebenefitsassets,investmentpropertyandbiologicalassets,whichcontinuetobemeasuredinaccordancewiththeGroup’saccountingpolicies.Impairmentlossesoninitialclassificationasheldforsaleandsubsequentgainsorlossesonre-measurementarerecognisedinprofitorloss.Non-currentassets(ordisposalgroups)arepresentedseparatelyfromotherassetsorliabilitiesinthestatementoffinancialposition.

Adiscontinuedoperationisacomponentoftheentitythathasbeendisposedoforisclassifiedasheldforsaleandthatrepresentsaseparatemajorlineofbusinessorgeographicalareaofoperations,ispartofasingleco-ordinatedplantodisposeofsuchalineofbusinessorareaofoperations,orisasubsidiaryacquiredexclusivelywithaviewtoresale.Theresultsofdiscontinuedoperationsarepresentedseparatelyinthestatementofcomprehensiveincome.

(p) Employee benefits

(i) Defined contribution superannuation fundsObligationsforcontributionstodefinedcontributionsuperannuationfundsarerecognisedasanexpenseinprofitorlosswhentheyaredue.

(ii) Short-term benefitsLiabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting fromemployees’servicesprovidedtoreportingdateandarecalculatedatundiscountedamountsbasedonremunerationwageandsalaryratesthattheGroupexpectstopaywhentheliabilitiesaresettled,includingrelatedon-costs,suchasworkerscompensationinsuranceandpayrolltax.

(iii) Share-based payment transactionsThegrantdatefairvalueofoptionsgrantedtoemployeesisrecognisedasanemployeeexpense,withacorrespondingincreaseinequity,overtheperiodinwhichtheemployeesbecomeunconditionallyentitledtotheoptions.Theamountrecognisedisadjustedtoreflecttheactualnumberofshareoptionsthatvest,exceptforthosethatfailtovestduetomarketconditionsnotbeingmet.


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(q) New Accounting Standards and Interpretations

TheGrouphasadoptedthefollowingnewandamendedAustralianAccountingStandardsandAASBInterpretationsasof1July2011.Thesehavenothadamaterialimpactonthefinancialreport.:

Reference Title Application date of standard

Application date for the Company

AASB124(R) RelatedPartyDisclosures(December2009) 1January2011 1July2011

AASB2009-12 Amendments toAustralianAccountingStandards [AASB5,8,108,110,112,119,133,137,139,1023&1031andInterpretations2,4,16,1039&1052]

1January2011 1July2011

AASB2009-14 AmendmentstoAustralianInterpretation–PrepaymentsofaMinimumFundingRequirement


AASB1054 AustralianAdditionalDisclosures 1July2011 1July2011

AASB2010-4 Further Amendments to Australian Accounting Standards arisingfrom the Annual Improvements Project [AASB 1, 7, 101, 134 andInterpretation13]


AASB2010-5 AmendmentstoAustralianAccountingStandards[AASB1,3,4,5,101,107,112,118,119,121,132,133,134,137,139,140,1023&1038andInterpretations112,115,127,132&1042]


AASB2010-6 Amendments to Australian Accounting Standards – Disclosures onTransfersofFinancialAssets[AASB1&AASB7]

1July2011 1July2011

AASB2011-1 Amendments to Australian Accounting Standards arising from theTrans-TasmanConvergenceproject [AASB1,AASB5,AASB101,AASB107,AASB108,AASB121,AASB128,AASB132,AASB134,Interpretation2,Interpretation112,Interpretation113]

1July2011 1July2011

AustralianAccountingStandardsandInterpretationsthathavebeenrecentlyissuedoramendedbutarenotyeteffectivehavenotbeenadoptedbytheGroupfortheannualreportingperiodending30June2012.

TheCompanyanticipatesthatalloftherelevantpronouncementswillbeadoptedintheCompany’saccountingpoliciesforthefirstperiodbeginningaftertheeffectivedateofthepronouncement.Informationofnewstandards,amendmentsandinterpretationsthatareexpectedtoberelevanttotheGroup’sfinancialstatementsisprovidedbelow:

Reference Title Application date of standard

Application date for the Company

AASB9 FinancialInstruments 1January2013 1July2013

AASB10 ConsolidatedFinancialStatements 1January2013 1July2013

AASB11 JointArrangements 1January2013 1July2013

AASB12 DisclosureofInterestsinOtherEntities 1January2013 1July2013

AASB13 FairValueMeasurements 1January2013 1July2013

AASB2011-9 Amendments to Australian Accounting Standards Presentation ofItemsofOtherComprehensiveIncome(AASB101Amendments)

1July2012 1July2012

AASB2011-4 Amendments to Australian Accounting Standards to RemoveIndividual Key Management Personnel Disclosure Requirements(AASB124Amendments)

1July2013 1July2013

Interpretation20

StrippingCostsintheProductionPhaseofaSurfaceMine 1January2013 1July2013


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Note 4: Revenue and Income Note Group

2012$

2011$

(a) Revenue from continuing operations

Interest 651,267 345,209

Otherrevenue 127,436 28,087

778,703 373,296

(b) Other income from continuing operations

Baddebtrecoveries - 400,000

Profitondisposal-mineraltenement - 588,061

Foreignexchangegain 853,053 -

853,053 988,061

Other income from discontinued operations

Optionfeeincome - 335,785

Gainonsaleofinvestment 23 - 8,974,583

- 9,310,368

Note 5: Other Expenses

Lossbeforeincometaxincludesthefollowingspecificexpenses:

Other Expenses (net of expenses from discontinued operations)

Rentalexpenseonoperatingleases 142,935 87,528

Professionalandconsultantsfees 621,677 346,600

Allowancefordoubtfuldebts 11 823,000 1,000,000

Fairvaluechangesinfinancialassetsatfairvaluethroughprofitorloss

348,278

1,322,862

Explorationandevaluationassetsimpairment - 2,314,709

Foreignexchangeloss - 1,261,987

Lossonsaleofnon-currentassets 837 -

Insurances 115,979 58,699

Travel 201,067 118,525

Legal 94,379 8,692

Otheradministrationexpenses 386,593 390,467

2,734,745 6,910,069


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Note 6: Income Tax Expense

Group

2012$

2011$

(a) IncomeTaxExpense

Currenttax (693,936) (749,213)

Deferredtax 79,613 (999,105)

Withholdingtaxpaid - 886,569

Taxlossnotrecognised 918,958 1,748,318

(Under)/overprovisionforprioryears (304,635) -

- 886,569

Incometaxexpenseattributableto:

Continuingoperations - -

Discontinuedoperations - 886,569

- 886,569

(b) Theprimafacietaxonprofit/(loss)beforeincometaxisreconciledtotheincometaxasfollows: (2,326,986) 2,628,763

Primefacietaxpayableonprofit/(loss)beforeincometaxat30%(2011:30%) (698,096) 788,629

Add:

Taxeffectof:

-sharebasedpayment 83,773 155,429

Less:

Taxeffectof:

-non-taxableforeignincome - (2,692,375)

Withholdingtaxpaid - 886,569

Taxlossnotrecognised 918,958 1,748,318

(Under)/overprovisionfromprioryears (304,635) -

Incometaxexpense - 886,569

DeferredTaxAsset

Unusedtaxlossesandothertemporarydifferencesnotbroughttoaccount:

-temporarydifferences 1,150,787 1,225,469

-taxlosses:

-Domestic/foreignoperatinglosses 5,583,047 4,664,089

-capitallosses 181,883 181,883

6,915,717 6,071,441

DeferredTaxLiability

Thebalancecomprisestemporarydifferencesattributableto:

Explorationandevaluationassets 1,240,810 1,240,810

Totaldeferredtaxliabilities 1,240,810 1,240,810

Movements

Openingbalanceat1July 1,240,810 1,240,810

Movements - -

Closingbalanceat30June 1,240,810 1,240,810


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Note 7: Key Management Personnel

Group

2012$

2011$

Short-termemployeebenefits 755,575 387,087

Post-employmentbenefits 21,400 14,000

Share-basedpayments 171,334 306,234

948,309 707,321

(i) Option and performance right holdingsThenumbersofoptionsandperformance rightsoverordinaryshares in thecompanyheldduring thefinancialyearbydirectorsandotherkeymanagementpersonnel,includingtheirpersonallyrelatedparties,aresetoutbelow.

2012 Balance at start of year or on

appointment

Granted during the year as

Compensation

Expired during the year

Exercised during the year

Balance at the end of the year

Vested and exercisable at the end of the

year

Directors

PeterCook 5,000,000 - - - 5,000,000 5,000,000

DavidOsikore 4,500,000 - - (3,000,000) 1,500,000 1,500,000

SamAkoitai - - - - - -

PaulCmrlec 5,200,000 - - - 5,200,000* 3,200,000

DennisLovell 1,700,100 - - - 1,700,100 1,700,100

16,400,100 - - (3,000,000) 13,400,100 11,400,100* Comprises 3,200,000 options and 2,000,000 performance rights-see Remuneration Report section of Directors Report fordetails.Theperformancerightshavenotvestedattheendoftheyear.

2011 Balance at start of year or on

appointment

Granted during the year as

Compensation

Expired during the year


Vested and exercisable at the end of the

year

Directors

PeterCook 5,000,000 - - 5,000,000 5,000,000

DavidOsikore 4,500,000 - - 4,500,000 4,500,000

SamAkoitaiappointed23/5/11 - - - - -

PaulCmrlec 1,200,000 4,000,000** - 5,200,000 3,200,000

AndrewWallerresigned1/4/2011 - - - - -

DennisLovell 1,700,100 - - 1,700,100 1,700,100

12,400,100 4,000,000 - 16,400,100 14,400,100** Comprises 2,000,000 options and 2,000,000 performance rights-see Remuneration Report section of Directors Report fordetails.Theperformancerightshavenotvestedattheendoftheyear.

Alloptionsarevestedandexercisableattheendoftheyear.Performancerightsaresubjecttohurdleconditions-seeRemunerationReportsectionofDirectorsReportfordetails


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Note 7: Key Management Personnel (continued)(ii) Share holdings

ThenumbersofsharesinthecompanyheldduringthefinancialyearbyeachdirectorandotherkeymanagementpersonneloftheCompany,includingtheirpersonallyrelatedparties,aresetoutbelow.Nosharesweregrantedasremuneration.1,500,000shareswereissuedontheexerciseofremunerationoptions(2011:nil).

2012 Balance at start of year

Acquired during the year

Other changes during the year


PeterCook 14,713,838 351,818(i) - 15,065,656

DavidOsikore(ii) 6,000,000 3,000,000 (3,000,000) 6,000,000

SamAkoitai - - - -

PaulCmrlec 408,500 - - 408,500

DennisLovell 3,400,200 - - 3,400,200

Total 24,522,538 3,351,818 (3,000,000) 24,874,356(i)Onmarketpurchaseduringtheyear.(ii)DuringtheyearDavidOsikoreexercised3,000,000$0.20optionsandsold3,000,000fullypaidordinaryshares.

2011 Balance at start of year

Acquired during the year

Other changes during the year


AndrewWallerresigned1/4/11 5,467,070 - (5,467,070)* -

PeterCook 14,713,838 - - 14,713,838

DavidOsikore 6,000,000 - - 6,000,000

SamAkoitaiappointed23/5/11 - - - -

PaulCmrlec 408,500 - - 408,500

DennisLovell 3,400,200 - - 3,400,200

Total 29,989,608 - (5,467,070) 24,522,538*Heldatdateofresignation

Note 8: Auditors’ Remuneration

Group

2012$

2011$

Auditservices:

AmountspaidorpayableforauditorreviewofthefinancialstatementsforthecompanyoranyentityintheGroup.

BDOAudit(WA)PtyLtd - 34,286

BDOAuditPtyLtd. 62,570 16,000

SintonSpenceCharteredAccountants(PNG) 10,714 7,359

73,284 57,645

Taxationservices:

AmountspaidorpayablefortaxationservicesperformedforthecompanyoranyentityintheGroup.

BDOCorporateTax(WA)PtyLtd - 8,131

BDO(QLD)PtyLtd 10,750 3,266

SintonSpenceCharteredAccountants(PNG) 6,885 4,645

17,635 16,042


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Note 9: Earnings per Share

Group

2012$

2011$

(a) Basic earnings per share

Fromcontinuingoperations(centspershare) (0.94) (2.90)

Fromdiscontinuedoperations(centspershare) - 3.66

Totalbasicearningspershare (0.94) 0.76

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

Basicanddiluted

Profit/(Loss)fromcontinuedoperations (2,326,986) (6,681,604)

Profit/(Loss)fromdiscontinuedoperations - 8,423,798

Profit/(Loss)fortheyear (2,326,986) 1,742,194

(c) Weightedaveragenumberofordinary sharesoutstandingduring the yearusedincalculatingbasicEPS 247,350,623 230,689,088

At30June201223,400,100(2011:45,075,101)optionsand2,500,000performancerights(2011:2,000,000)wereoutstandingwhichcouldpotentiallydilutebasicearningspershareinthefuture.Becausethereisalossfromcontinuingoperations,thesewouldhaveanantidilutiveeffectandthereforedilutedearningspershareisthesameasbasicearningspershare.

Note 10: Cash and Cash Equivalents

Group

2012$

2011$

Cashatbankandonhand 10,717,727 17,185,823

10,717,727 17,185,823

Note 11: Trade and Other Receivables

Group

CURRENT 2012$

2011$

OtherReceivables 2,343,908 2,038,869

Allowancefordoubtfuldebts (1,823,000) (1,000,000)

520,908 1,038,869Allloansthatarepastduehavebeenimpaired.

Group

2012$

2011$

Movementinallowancefordoubtfuldebts:

Balanceat1July (1,000,000) -

Decrease(Increase)inProvisionfordoubtfulreceivables (823,000) (1,000,000)

Receivableswrittenoffduringtheyear - -

Balanceat30June (1,823,000) (1,000,000)

Included in other receivables is a convertible note for $1,823,000 (2011: 1,823,000). A provision for doubtful receivables of$1,823,0000(2011:1,000,000)hasbeenrecognised inrelationtothis.TheCompanycontinuestopursuetherecoveryoftheconvertiblenote.


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Note 12: Financial Assets at fair value through profit or loss

Group

2012$

2011$

Financialassetsasat30Juneatfairvalue(current) 110,091 458,369

ThefinancialassetsatfairvalueareheldfortradingandcompriseonlyequityinvestmentsquotedonASXandhavebeenvaluedatmarketpricesrulingon30June2012(AASB7-level1).

Note 13: Controlled EntitiesControlled Entities Consolidated

Country of Incorporation Percentage Owned (%)

Parent Entity 2012 2011

PacificNiuginiLtd Australia

Subsidiaries and Associates of Pacific Niugini Ltd

PacificNiuginiMineralsPtyLtd Australia 100 100

PacificNiuginiMinerals(PNG)Ltd PNG 100 100

ChromeHoldingsSAPtyLtd Australia 100 100

PacificNiuginiMinerals(Bulolo)Ltd(i) PNG 100 -

(i)Entitywasincorporatedbythegroupduringtheyear

Note 14: Plant and Equipment Group

2012$

2011$

(a) At cost

Plantandequipment 1,128,889 262,119

Accumulateddepreciation (239,995) (72,183)

Totalplantandequipment 888,894 189,936

Motorvehicles 306,719 182,662


Totalmotorvehicles 203,608 140,276

Leaseholdimprovements 1,816 1,816


Totalleaseholdimprovements 202 807

Capitalworkinprogress-plantandequipment 2,778,192 828,491

Totalcost 4,215,616 1,275,088

Totalaccumulateddepreciation (344,720) (115,578)

Totalnetbookvalue 3,870,896 1,159,510


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Note 14: Plant and Equipment (Cont)

Group

2012$

2011$

(b) Reconciliation

Plant and equipment

Asat1July 189,936 116,185

Additions 872,721 129,782

Disposals (4,715) -

Depreciationexpense (169,048) (56,031)

Netcarryingvalue 888,894 189,936

Motor vehicles

Asat1July 140,276 128,515

Additions 124,057 40,378

Disposals - -


Netcarryingvalue 203,608 140,276

Leasehold improvements

Asat1July 807 1,412

Additions - -

Disposals - -

Depreciationexpense (605) (605)

Netcarryingvalue 202 807

Capital work in progress-plant and equipment

Asat1July 828,491 -

Additions 1,949,701 828,491

Netcarryingvalue 2,778,192 828,491

Total Reconciliation Summary

Asat1July 1,159,510 246,113

Additions 2,946,478 998,650

Disposals (4,715) -


Netcarryingvalue 3,870,896 1,159,510


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Note 15: Exploration and Evaluation Assets

Group

2012$

2011$

Capitalised exploration and evaluation assets:

Carryingamountinrespectofareasofinterestinexplorationandevaluationphase 12,357,921 6,098,966

Reconciliation Areconciliationofthecarryingamountsofexplorationandevaluationassetsissetoutbelow:

Carryingamountatbeginningofyear 6,098,966 5,218,721

Additions 6,258,955 3,366,893

Disposals(note24(b)) - (171,939)

Explorationimpairmentwriteoff - (2,314,709)

Carryingamountatendofyear 12,357,921 6,098,966

PacificNiuginiMinerals (PNG)Ltd (PNM)at30June2012 is theholderofPapuaNewGuineaExplorationLicencesEL1589,EL1613,EL1614,EL1615andEL1616.Theselicenceswereallissuedon7July2008foratwoyeartermandwererenewedforafurthertwoyeartermexpiringon6July2012.AtthedateofthesefinancialstatementsthetwoyearrenewalprocessinrespectofthesefiveEL’sforthethirdrenewaltermexpiringon6July2014wasstillinprogress.TheCompanyhasreceivedwrittenconfirmationfromtheMineralResourcesAuthorityinPNGthatthesetenementsareintherenewalprocessandthattheyareingoodstanding.Thecompanyisoftheviewthattherenewalofthesetenementswilltakeplaceinthenormalcourseofbusiness.

DuringthepastfinancialyearanadditionalfournewExplorationLicencesweregrantedforatwoyearperiodexpiringon11March2014.TheseareEL1869,EL1827,EL1828andEL2013.

Recovery of the carrying amount of the exploration and evaluation assets is dependent on the successful development andcommercialexploitation,oralternatively,saleoftherespectiveareasofinterest.

Note 16: Trade and Other PayablesUnsecured liabilities

Group

2012$

2011$

Tradepayables 678,385 496,571

Sundrypayablesandaccruedexpenses 123,858 89,309

802,243 585,880

Note 17: Provisions

Current

Employeebenefits 89,412 51,095

Note 18: Deferred tax liability

NON-CURRENT

DeferredtaxliabilityarisingonthefairvalueadjustmentofthePNGexplorationandevaluationassetsacquired 1,240,810

1,240,810


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Note 19: Issued Capital

(a) Issued and paid up capital Group

2012$

2011$

251,284,667(2011:239,069,666)fullypaidordinaryshares 132,430,888 129,083,287

(i)Thecompany’sshareshavenoparvalueandthereisnolimittotheamountofauthorisedcapital.

(b) Movement in shares on issue 2012 2011

Number of shares $ Number of shares $

Beginningoftheyear 239,069,666 129,083,287 203,184,922 121,979,494

Issuedduringtheyear

• placements(i) - - 30,450,000 6,090,000

• lesstransactioncosts(i) - - - (512,630)

• Optionsexercised(ii) - - 4,634,744 1,390,423

• Optionsexercised(ii) - - 800,000 136,000

• Optionsexercised(iii) 9,085,001 2,725,501 - -

• Optionsexercised(iii) 130,000 22,100 - -

• Optionsexercised(iii) 3,000,000 600,000 - -

Endoftheyear 251,284,667 132,430,888 239,069,666 129,083,287

i. TheCompanymadea shareplacementduring the year ended30June2011of 30,450,000sharesat an issuepriceof$0.20each.Costsof theplacementamounted to$512,630. Included in thecostof theplacement is$241,130 for2,000,000optionsissuedtoanadviserthatassistedwiththeplacement.ThefairvalueoftheseoptionsatgrantdatewasdeterminedbyanindependentvaluerusingaBlack-Scholesoptionpricingmodel.

ii. Duringthepreviousfinancialyear4,634,744$0.3030Sept2011optionsand800,000$0.1723February2013employeeoptionswereexercised.

iii. During the current financial year 9,085,001$0.3030Sept 2011options, 130,000$0.1723February 2013employeeoptions,1,500,000$0.2026Nov2012directoroptionsand1,500,000$0.2030Jun2014directoroptionswereexercised.

iv. Termsandconditions

Fullypaidordinarysharescarryonevotepershareandcarrytherighttodividends.

(c) Options and Performance Rights outstanding 2012 Number 2011 Number

Atbalancedatetherewereunissuedordinarysharesofthecompanyunderoptionandperformancerightsasfollows:

Unlisted30September2011optionsatanexercisepriceof$0.30each - 19,085,001

Unlisted26November2012employeeoptionsatanexercisepriceof$0.20each - 1,500,000

Unlisted30June2014optionsatanexercisepriceof$0.20each 16,450,100 17,950,100

Unlisted23February2013employeeoptionsatanexercisepriceof$0.17each 1,150,000 1,440,000

Unlisted31March2013optionsatanexercisepriceof$0.28each 2,000,000 2,000,000

Unlisted21December2013employeeoptionsatanexercisepriceof$0.47each 1,000,000 1,100,000

Unlisted23June2014directoroptionsatanexercisepriceof$0.38each 2,000,000 2,000,000

Unlisted23June2014directorperformancerights–nilexerciseprice 2,000,000 2,000,000

Unlisted30November2014employeeoptionsatanexercisepriceof$0.48each 800,000 -

Unlisted30November2012employeeperformancerights–nilexerciseprice 300,000 -

Unlisted30November2013employeeperformancerights–nilexerciseprice 200,000 -

25,900,100 47,075,101


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Note 20: Reserves

Group

2012$

2011$

OptionReserve 1,803,626 1,803,626

ShareBasedPaymentsReserve 1,580,238 1,300,992

Foreigncurrencytranslationreserve 90,531 9,066

3,474,395 3,113,684

(a) Foreign Currency Translation Reserve Theforeigncurrencytranslationreserverecordsexchangedifferencesarisingontranslationofforeignsubsidiaries.

(b) Option Reserve Theoptionreserverecordsitemsrecognisedasexpensesonvaluationofshareoptionsissuedtothirdparties.

(c) Share Based Payment Reserve Thesharebasedpaymentreserverecordsitemsrecognisedasexpensesonvaluationoftheoptionsissuedtodirectorsandemployees.

Note 21: Contingent Liabilities and Contingent Assets

Therearenocontingentliabilitiesorcontingentassetsatbalancedate.

Note 22: Segment Reporting

(a) Description of segments

TheGrouphasidentifieditsoperatingsegmentsbasedontheinternalreportsthatarereviewedandusedbytheCEOandtherestoftheBoardofDirectors(chiefoperatingdecisionmakers)inassessingperformanceanddeterminingtheallocationofresources.OperatingsegmentsaredeterminedonthebasisoffinancialinformationreportedtotheBoardwhichisattheconsolidatedentitylevel.Accordingly,theconsolidatedentityistreatedasoneoperatingsegment.

Therefore,management identifies theGroupashavingonlyone reportable segment.The financial results from this reportablesegmentareequivalenttothefinancialstatementsoftheconsolidatedentityasawhole

(b) Entity-wide disclosures

TheGroup’sgeographicalinformationisasfollows:

Australia$

Papua New Guinea$

Non-currentassets 2012 11,245 16,216,898

Non-currentassets 2011 14,405 7,244,071

TheGroupoperatesprimarilyinmineralexplorationlocatedinPapuaNewGuinea.TheGroup’sheadquartersofficeisinAustralia.TheGroupdoesnothaveanyproducts/servicesthatitderivesmaterialrevenuefromexceptinterest.

Note 23: Discontinued Operation

InMarch2008theGroupannouncedthat ithadentered intoanagreementwithAMCOLInternationalCorporation (“AMCOL”)topurchase theGroup’s74% interest in theRuighoekChromeProject inSouthAfrica forUS$26.4million.Settlementof thistransactionoccurredon26February2009for53%oftheGroup’sinterestintheRuighoekprojectfortheamountofUS$14million(Stage1)andthesaleandsettlementoftheremaining47%fortheamountofUS$12.4millionoccurredinSeptember2010(Stage2).Asa resultof thesettlementof the remaining47%ofRuighoek inSeptember2010, the investment inRuighoekandthe loanaccountstotheRuighoekentities,whichwereassignedtoAMCOLonsettlement,weredisclosedasheldforsalefinancialassetsat30June2010.


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Note 23: Discontinued Operation (cont)

At30June2011theGroupreportedallamountsrelatedtothesettlementoftheremaining47%oftheRuighoekproject,includingthegainondisposal,asadiscontinuedoperation.

Group

Results of discontinued operation2012

$2011

$

Optionfeeincome - 335,785

Gainonsaleofdiscontinuedoperationbeforeincometax(seebelow) - 8,974,582

Profit/(loss)fromdiscontinuedoperationsbeforeincometax - 9,310,367

Less:Incometaxexpense - (886,569)

Profit/(loss)fromdiscontinuedoperationsafterincometax - 8,423,798

Details of the sale to AMCOL of the remaining 47% of the Ruighoek mine

Saleproceeds - 13,243,674

Less:Carryingvalueofheldforsaleassets - (4,269,092)

Gainonsaleofdiscontinuedoperationbeforeincometax(note4) - 8,974,582

Note 24: Cash Flow Information

Group

2012$

2011$

(a) Reconciliation of Cash Flow from Operations withProfit/(Loss) after Income Tax

Profit/(Loss)afterincometax (2,326,986) 1,742,194

Depreciation 230,377 85,253

Sharebasedpayments 279,245 518,096

GainonsaleofRuighoekChromeproject - (8,974,583)

Bonmercioptionfees - (335,785)

Explorationimpairment - 2,314,709

(Gain)ondisposalofmineraltenement - (588,061)

Baddebtprovision 823,000 1,000,000

Baddebtrecovery - (400,000)

Unrealisedexchangegain 80,793 1,243,063

Realisedexchangegain (853,053) -

Fairvaluechangeinfinancialassets 348,278 1,322,862

Changesinoperatingassetsandliabilities,netoftheeffectsofpurchaseanddisposalsubsidiaries

Increase/(decrease)inpayables 48,370 316,584

Increase/(decrease)inprovisions 38,317 32,109

(Increase)/decreaseinotheroperatingassets (19,725) (355,871)

(Increase)/decreaseinreceivables (99,281) 59,371

Netcashprovidedby/(usedin)operatingactivities (1,450,665) (2,020,059)

(b) Non-cash investing activitiesTherewerenonon-cashinvestingactivitiesduringthefinancialyear.Duringthe2011financialyearthecompanysoldcertainmineraltenementswithabookvalueof$171,939inconsiderationforASXlistedsharestothevalueof$760,000.


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Note 25: Share-based Payments

Group

2012$

2011$

Share-based payment expenses recognised during the financial year

Equitysettledoptions/rightsissuedtodirectors - 333,862

Equitysettledoptions/rightsissuedtoemployees 279,245 184,234

279,245 518,096

Theweightedaverageremainingcontractuallifeofshareoptionsoutstandingattheendofthefinancialyearwas1.68years(2011:2.38years)Theweightedaverageexercisepriceofshareoptionsoutstandingattheendofthefinancialyearwas$0.243(2011:$0.227)

DetailsofShare-basedpaymentsmadeduringthe2012financialyear:(a) On30thNovember2011900,000shareoptionswereissuedtoanumberofemployeesintermsoftheCompanyemployee

shareoptionplanwithanexercisepriceof$0.48each,anexpirydateof30November2014andvestingtwelvemonthsafterissuedate.

(b) On30thNovember2011500,000performancerightswereissuedtotwoconsultants.Theexercisepricewasnilandtheexpirydatewas30Nov2012inrespectof300,000rightsand30Nov2013inrespectof200,000rights.Therightswereissuedsubjecttoanumberofperformancehurdleswhicharesetoutinthetablebelow.

DetailsofShare-basedpaymentsmadeduringthe2011financialyear:(a) On21stDecember20101,100,000shareoptionswereissuedtoanumberofemployeesandaconsultantintermsofthe

Companyemployeeshareoptionplanwithanexercisepriceof$0.47eachandanexpirydateof21December2013.

(b) On23rdJune2011shareholdersapprovedtheissueof2,000,000shareoptionstoadirectorMrPaulCmrlec.Theoptionsweregrantedandvestedonthatdate.Theexercisepricewas$0.38eachandtheexpirydate23rdJune2014.

(c) On23rdJune2011shareholdersapprovedtheissueof2,000,000performancerightstoadirectorMrPaulCmrlec.Therightsweregrantedonthatdate.Theexercisepricewasnilandtheexpirydate23rdJune2014.Therightswereissuedsubjecttoanumberofperformancehurdleswhicharesetoutinthetablebelow.

FairValueofOptionsandRightsGrantedTheweightedaveragefairvalueofoptionsandrightsgrantedduringtheyearwas29.5cents(2011:22.2cents).Thefairvalueatgrantdatewasdeterminedbyanindependentvaluerusinganoptionpricingmodelthattakesintoaccountthesharepriceatgrantdate,exerciseprice,expectedvolatility,optionorrightlife,expecteddividends,theriskfreerate,andthefactthattheoptionsandrightsarenottradeable.Thepricingmodelandinputsusedfortheoptionsandrightsgrantedduringtheyearended30June2012aresetoutinthetablebelow:

Details2012 Financial year

Employee Options Consultant Performance Rights

Consultant Performance Rights

Numberofoptions/rights 900,000 300,000 200,000

Pricingmodelusedtocalculatefairvalue

Black-ScholesandBinomialmodel

Black-Scholesmodel Black-Scholesmodel

Consideration nil nil nil

Option/PerformanceRightlife 3years 1year 2years

Exerciseprice $0.48 nil nil

Grantdate 30-11-2011 30-11-2011 30-11-2011

Vestingdate 30-11-2012 Seenote(ii)below Seenote(ii)below

Expirydate 30-11-2014 30-11-2012 30-11-2013

Sharepriceatgrantdate $0.36 $0.36 $0.36

Fairvalueofoptions/rightsgranted 12.6cents $0.36 $0.36

Expectedvolatility% 61.48% 61.48% 61.48%

Expecteddividendyield% nil nil nil

Riskfreerate% 3.15% 3.12% 3.12%


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Note 25: Share-based Payments (cont)

(i) VolatilityhasbeendeterminedbasedonPacificNiugini’ssharepriceoverthe12monthsimmediatelyprecedingtheoptionsissue.Duetothecompany’shistoricalsharepricemovements,andtherelativepercentageofeachmovementagainsttheshareprice,itisexpectedthatthisvolatilitywillnotchangesignificantlyoverthelifeoftheoptionsandthereforethevolatilityassetoutabovehasbeenusedastheexpectedfuturesharepricevolatilityoverthelifeoftheoptions.

(ii)

No. Rights Performance hurdle type Vesting date

Vesting probability*

150,000 Firstcommerciallyviablegoldproductionfromfirstcommercialscalegoldproductionplant

30-11-2012 nil

150,000 Productionrateof3,500,000m3/annumoverthreemonthperiod 30-11-2012 nil

100,000 Commerciallyviablegoldproductionfromsecondcommercialscalegoldproductionplant

30-11-2013 nil

100,000 First50,000ozgoldproduction 30-11-2013 15%

*Thisistheprobabilityappliedtodeterminethenumberofperformancerightstobeincludedinthemeasurementoftheirissueovertheexpectedvestingperiod.

Details2011 Financial year

Employee Options Director Options Director Performance Rights

Numberofoptions/rights 1,100,000 2,000,000 2,000,000

Consideration nil nil nil

Option/PerformanceRightlife 3years 3years 3years

Exerciseprice $0.47 $0.38 nil

Grantdate 21-12-2010 23-06-2011 23-06-2011

Vestingdate 21-12-2010 23-06-2011 Seenote(ii)below

Expirydate 21-12-2013 23-06-2014 23-06-2014

Sharepriceatgrantdate $0.35 $0.34 $0.34

Fairvalueofoptions/rightsgranted 13.6cents 15.2cents 34.0cents

Expectedvolatility% 65.31% 67.35% 67.35%

Expecteddividendyield% nil nil nil

Riskfreerate% 5.25% 4.67% 4.67%

(i) VolatilityhasbeendeterminedbasedonPacificNiugini’ssharepriceoverthe12monthsimmediatelyprecedingtheoptionsissue.Duetothecompany’shistoricalsharepricemovements,andtherelativepercentageofeachmovementagainsttheshareprice,itisexpectedthatthisvolatilitywillnotchangesignificantlyoverthelifeoftheoptionsandthereforethevolatilityassetoutabovehasbeenusedastheexpectedfuturesharepricevolatilityoverthelifeoftheoptions.

(ii)

Performance rights hurdles

No. Rights Performance hurdle type Probability*

500,000 Commerciallyviablegoldproduction 75%

500,000 50,000ozgoldproduction 15%

500,000 100,000ozgoldproduction nil

500,000 Marketcapitalisation$200Million nil

*Thisistheprobabilityappliedtodeterminethenumberofperformancerightstobeincludedinthemeasurementoftheirissueovertheexpectedvestingperiod.


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Note 25: Share-based Payments (cont)Summary of share-based payment options/rights issued

Thefollowingtableillustratesthenumberandweightedaverageexerciseprices(WAEP)ofshare-basedpaymentoptionsandrightsissuedduringthefinancialyear.

2012Number

2012WAEP

2011Number

2011WAEP

Outstandingatthebeginningoftheyear 8,040,000 0.23 3,740,000 0.18

Expiredduringtheyear - - - -

Grantedduringtheyear 1,400,000 0.30 5,100,000 0.25

Forfeitedduringtheyear (360,000) 0.29 - -

Exercisedduringtheyear (1,630,000) 0.20 (800,000) 0.17

Outstandingattheendoftheyear 7,450,000 0.24 8,040,000 0.23

Note 26: Subsequent Events

Thereisnoothermatterorcircumstancethathasarisensincetheendofthefinancialyeartothedateofthisreport,whichhassignificantlyaffected,ormaysignificantlyaffecttheoperationsoftheconsolidatedentity,theresultsofthoseoperationsorthestateofaffairsoftheconsolidatedentityinsubsequentfinancialyears

Note 27: Parent Entity Information

Thefollowinginformationrelatestotheparententity,PacificNiuginiLtd,at30June2012.TheinformationpresentedherehasbeenpreparedusingconsistentaccountingpoliciesaspresentedinNote1.

2012$

2011$

CurrentAssets 11,451,942 18,482,539

Non-currentassets 23,447,147 12,710,527

Totalassets 34,899,089 31,193,066

Currentliabilities 404,358 168,980

Non-currentliabilities 11,150,705 11,150,705

Totalliabilities 11,555,063 11,319,685

NetAssets 23,344,026 19,873,381

Issuedcapital 132,430,887 129,083,287

Accumulatedlosses (112,470,723) (112,314,524)

Optionreserve 1,803,625 1,803,625

Share-basedpaymentsreserve 1,580,237 1,300,993

Totalequity 23,344,026 19,873,381

Profit(Loss)fortheyear (156,200) (3,258,699)

Othercomprehensiveincomefortheyear - -

Totalcomprehensiveincomefortheyear (156,200) (3,258,699)

Thecompanyhadnocommitments,guaranteesorcontingentliabilitiesasat30June2012and2011.


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Note 28: Financial Risk ManagementOverviewThis note presents information about the Group’s exposure to credit, liquidity and market risks, their objectives, policies andprocessesformeasuringandmanagingrisk,andthemanagementofcapital.

TheGroupdoesnotuseanyformofderivativesasitisnotatalevelofexposurethatrequirestheuseofderivativestohedgeitsexposure.Exposurelimitsarereviewedbymanagementonacontinuousbasis.Thegroupdoesnotenterintoortradefinancialinstruments,includingderivativefinancialinstruments,forspeculativepurposes.

TheBoardofDirectorshasoverallresponsibilityfortheestablishmentandoversightoftheriskmanagementframework.Managementmonitorsandmanagesthefinancialrisksrelatingtotheoperationsofthegroupthroughregularreviewsoftherisks.

Credit riskCreditriskistheriskoffinanciallosstotheGroupifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andarisesprincipallyfromtheGroup’sreceivablesandcashheldatfinancialinstitutions.

Exposuretocreditrisk

ThecarryingamountoftheGroup’sfinancialassetsrepresentsthemaximumcreditexposure.TheGroup’smaximumexposuretocreditriskatthereportingdatewas:

Note Group

Carrying Amount

2012$

2011$

Cashandcashequivalents 10 10,717,727 17,185,823

Tradeandotherreceivables 11 520,908 1,038,869

Cash and cash equivalentsTheGrouplimitsitsexposuretocreditriskbyonlyinvestinginliquidsecuritiesandonlywithcounterpartiesthathaveanacceptablecreditrating.AllcashisheldwithWestpacandANZbanks.

Trade and other receivablesAstheGroupoperatesprimarilyinexplorationactivities,itdoesnothavetradereceivablesandthereforeisnotexposedtocreditriskinrelationtotradereceivables.

Liquidity riskLiquidityriskistheriskthattheGroupwillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheGroup’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillalwayshavesufficientliquiditytomeetitsliabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheGroup’sreputation.

TheGroupmanages liquidity riskbymaintainingadequatecashreserves fromfundsraised in themarketandbycontinuouslymonitoringforecastandactualcashflows.TheGroupdoesnothaveanyexternalborrowings.Thefollowingarethecontractualmaturitiesoffinancialliabilities:

Group 30 June 2012

Carrying amount$

Contractual cash flows

$

6 mths or less$

6-12 mths 1-2 years 2-5 years

Tradeandotherpayables–Note16

(802,242) (802,242) (802,242) - - -

Group

30 June 2011

Carrying amount

$

Contractual cash flows

$

6 mths or less$

6-12 mths 1-2 years 2-5 years

Tradeandotherpayables–Note16

(585,880) (585,880) (585,880) - - -


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Note 28: Financial Risk Management (cont)

Market RiskMarketriskistheriskthatchangesinmarketprices,suchasforeignexchangerates,interestratesandequitypriceswillaffecttheGroup’snetincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimisingthereturn.

Currency riskTheGroupisexposedtocurrencyriskonpurchasesandpayablesthataredenominatedinacurrencyotherthantherespectivefunctionalcurrenciesofGroupentities.ThecurrencyinwhichtransactionsprimarilyaredenominatedisthePapuaNewGuineaKina.

TheGrouphasnotenteredintoanyderivativefinancialinstrumentstohedgesuchtransactionsotherthan:

Thecompanyenteredintoa12monthforwardcovercontracttobuyPNGKinaattherateofAU$250,000permonthforthe12monthperiodJanuarytoDecember2012atabasespotraterangingfromPNGKina2.057to2.036.Theoutstandingcommitmentat30June2012inrespectofthiscontractis$1,500,000.

Basedon theGroup’soperations inPapuaNewGuinea (PNG)during the financial year, had theAustralianDollarweakened/strengthenedby10%againstthePNGKinawithallothervariablesheldconstant,theGroup’sothercomprehensiveincomeandequitywouldhavebeen$134,800higher/lower.

Interest rate riskTheGroupisexposedtointerestraterisk(primarilyonitscashandcashequivalents),whichistheriskthatafinancialinstrument’svalueorfuturecashflowswillfluctuateasaresultofchangesinthemarketinterestratesoninterest-bearingfinancialinstruments.TheGroupdoesnotusederivativestomitigatetheseexposures.TheGroupadoptsapolicyofensuringthatasfaraspossibleitmaintainsexcesscashandcashequivalentsinshorttermdepositswithreputablefinancialinstitutionsatinterestratesmaturingover90-180dayrollingperiodsorless.

ProfileAtthereportingdatetheinterestrateprofileoftheGroup’sinterest-bearingfinancialinstrumentswas:

Weighted Average

Interest Rate

Carrying Amount

$

Weighted Average

Interest Rate

Carrying Amount

$

Consolidated 2012 2011

Cashandcashequivalents 4.0-5.5% 10,717,727 4.0-5.7% 17,185,823

Tradeandotherreceivables - - 10% 1,038,864

10,717,727 18,224,687

SensitivityanalysisTheBoardhasestimatedthatgivenmarketconditionsachangeof100basispointsininterestratesisappropriatetoassesstheGroup’ssensitivitytovariablerate instruments.Achangeof100basispoints in interestratesatthereportingdatewouldhaveincreased(decreased)equityandprofitor lossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables, inparticularforeigncurrencyrates,remainconstant.Theanalysisisperformedonthesamebasisfor2011.

Group

Profit/Equity

100bp increase 100bp decrease

30 June 2012 $ $

Variablerateinstruments 107,177 (107,177)

30 June 2011

Variablerateinstruments 171,858 (171,858)


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Note 28: Financial Risk Management (cont)Equity Price RiskEquitypriceriskistheriskthatthevalueofaninstrumentwillfluctuateasaresultofchangesinmarketprices(otherthanthosearisingfrominterestrateriskorcurrencyrisk),whethercausedbyfactorsspecifictoanindividualinvestment,itsissuerorallfactorsaffectingallinstrumentstradedinthemarket.

TheGroupisexposedtoequitypriceriskarisingfromitsfinancialassetsatfairvaluethroughprofitorloss.Withrespecttotheequitypriceriskarisingfromthesefinancialassets,themaximumexposureisequaltothecarryingamountofthefinancialassetsatfairvaluethroughprofitorlosswhichatbalancedateis$110,091(2011-$458,369).

Based on the equity investments held at the end of the financial year, had the Australian Securities Exchange strengthened/weakenedby10%withallothervariablesheldconstant,theGroup’spre-taxprofitandequitywouldhavebeen$11,000higher/lower(2011:$45,837)

Commodity Price RiskTheGroupoperatesprimarilyintheexplorationandevaluationphaseandaccordinglytheGroup’sfinancialassetsandliabilitiesaresubjecttonocommoditypricerisk.

Fair valuesThecarryingamountsoffinancialassetsandliabilitiesapproximatefairvalue.Thebasisfordeterminingfairvaluesisdisclosedinnote12.

Capital ManagementTheGroup’sobjectiveswhenmanagingcapital are to safeguard theGroup’sability tocontinueasagoingconcern, soas tomaintainastrongcapitalbasesufficienttomaintainfutureexplorationanddevelopmentofitsprojects.Inordertomaintainoradjustthecapitalstructure,theGroupmayreturncapitaltoshareholders,issuenewsharesorsellassetstoreducedebt.TheGroup’sfocushasbeentoraisesufficientfundsthroughequitytofundexplorationandevaluationactivities.TheGroupmonitorscapitalonthebasisofthegearingratio,howevertherearenoexternalborrowingsasatbalancedateorat30June2011.

TherewerenochangesintheGroup’sapproachtocapitalmanagementduringtheyear.Riskmanagementpoliciesandproceduresareestablishedwithregularmonitoringandreporting.NeithertheCompanynoranyofitssubsidiariesaresubjecttoexternallyimposedcapitalrequirements.Capitalcomprisesequityasdisclosedinthestatementoffinancialposition.

Note 29: Capital and other commitments

(a) Operating lease commitments

Group

2012$

2011$

Futureoperatingleaserentalsofofficespacenotprovidedforinthefinancialstatementsandpayable:

-notlaterthanoneyear 21,100 44,514

-laterthanoneyearbutnotlaterthanfiveyears - 14,838

21,100 59,352

(b) Exploration commitments

Group

2012$

2011$

Inordertomaintaincurrentrightsoftenuretoexplorationpermits,theconsolidatedentityhascertainobligationstoexpendminimumamountsofmoney.Thefollowingexplorationexpenditurerequirementshavenotbeenprovidedforinthefinancialreportandarepayable:

notlaterthanoneyear 331,000 517,391

laterthanoneyearbutnotlaterthanfiveyears 331,000 -

662,000 517,391


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Note 30: Related Party Transactions

Ultimate parent

PacificNiuginiLimitedistheultimateparententity.

Identification of Related parties

OwnershipinterestsinwhollyownedentitiesaresetoutinNote13.


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Inthedirectors’opinion:

(a) thefinancialstatementscomprisingthestatementofcomprehensiveincome,statementoffinancialposition,statementofcashflows,statementofchangesinequityandaccompanyingnotesareinaccordancewiththeCorporations Act 2001 and :

(i) complywithAccountingStandardsandtheCorporations Regulations 2001and:

(ii) giveatrueandfairviewofthefinancialpositionasat30June2012andoftheperformancefortheyearendedonthatdateoftheconsolidatedentity.

(b) the consolidated entity has included in the notes to the financial statements an explicit and unreserved statement ofcompliancewithInternationalFinancialReportingStandards.

(c) therearereasonablegroundstobelievethatthecompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable;and

(d) theremunerationdisclosuressetout intheDirectors’Report(aspartoftheauditedRemunerationReport)fortheyearended30June2012complywithsection300AoftheCorporations Act 2001.

Thedirectorshavebeengiventhedeclarationsbythechiefexecutiveofficerandchieffinancialofficerrequiredbysection295Aofthe Corporations Act 2001.

ThisdeclarationismadeinaccordancewitharesolutionoftheBoardofDirectors.

_________________MrPCmrlecManagingDirector

Datedthis24September2012

DIRECTORS’ DECLARATIONF

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INDEPENDENT AUDITOR’S REPORT

TothemembersofPacificNiuginiLimited

Report on the Financial ReportWehaveaudited theaccompanyingfinancial reportofPacificNiuginiLimited,whichcomprises theconsolidatedstatementoffinancial position as at 30 June 2012, the consolidated statement of comprehensive income, the consolidated statement ofchangesinequityandtheconsolidatedstatementofcashflowsfortheyearthenended,notescomprisingasummaryofsignificantaccountingpoliciesandotherexplanatory information,and thedirectors’declarationof theconsolidatedentitycomprising thecompanyandtheentitiesitcontrolledattheyear’sendorfromtimetotimeduringthefinancialyear.

Directors’ Responsibility for the Financial ReportThedirectorsofthecompanyareresponsibleforthepreparationofthefinancialreportthatgivesatrueandfairviewinaccordancewithAustralianAccountingStandardsandtheCorporations Act 2001andforsuchinternalcontrolasthedirectorsdetermineisnecessarytoenablethepreparationofthefinancialreportthatgivesatrueandfairviewandisfreefrommaterialmisstatement,whetherduetofraudorerror.InNote2,thedirectorsalsostate,inaccordancewithAccountingStandardAASB101Presentation of Financial Statements,thatthefinancialstatementscomplywithInternational Financial Reporting Standards.

Auditor’s Responsibility Our responsibility is toexpressanopinionon thefinancial reportbasedonouraudit.Weconductedouraudit inaccordancewithAustralianAuditingStandards.Thosestandardsrequirethatwecomplywithrelevantethicalrequirementsrelatingtoauditengagements andplan andperform the audit to obtain reasonable assurance aboutwhether the financial report is free frommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialreport.Theproceduresselecteddependontheauditor’s judgement, includingtheassessmentoftherisksofmaterialmisstatementofthefinancialreport,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttothecompany’spreparationofthefinancialreportthatgivesatrueandfairviewinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessofthecompany’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebythedirectors,aswellasevaluatingtheoverallpresentationofthefinancialreport.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.





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Opinion

In our opinion:


including:




and


in Note 1.







Opinion




A J Whyte

Director


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IndependenceInconductingouraudit,wehavecompliedwiththeindependencerequirementsoftheCorporations Act 2001.WeconfirmthattheindependencedeclarationrequiredbytheCorporations Act 2001,whichhasbeengiventothedirectorsofPacificNiuginiLimited,wouldbeinthesametermsifgiventothedirectorsasatthetimeofthisauditor’sreport.

Opinion

Inouropinion:

(a) thefinancialreportofPacificNiuginiLimitedisinaccordancewiththeCorporations Act 2001,including:

(i) givingatrueandfairviewoftheconsolidatedentity’sfinancialpositionasat30June2012andofitsperformancefortheyearendedonthatdate;and

(ii) complyingwithAustralianAccountingStandardsandtheCorporations Regulations 2001;and

(b) thefinancialreportalsocomplieswithInternational Financial Reporting StandardsasdisclosedinNote2.

Report on Other Legal and Regulatory Requirements

WehaveauditedtheRemunerationReportincludedinpages16to20ofthedirectors’reportfortheyearended30June2012.ThedirectorsofthecompanyareresponsibleforthepreparationandpresentationoftheRemunerationReportinaccordancewithsection300AoftheCorporations Act 2001.OurresponsibilityistoexpressanopinionontheRemunerationReport,basedonourauditconductedinaccordancewithAustralianAccountingStandards.

Opinion

Inouropinion,theRemunerationReportofPacificNiuginiLimitedfortheyearended30June2012complieswithsection300AoftheCorporations Act 2001.

BDO Audit Pty Ltd

A J WhyteDirector






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Opinion

In our opinion:


including:




and


in Note 1.







Opinion




A J Whyte

Director


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AllASXlistedentitiesarerequiredtodiscloseagainsttherecommendationsanddisclosureobligationscontainedintherevisedASXCorporateGovernanceCouncilCorporateGovernancePrinciplesandRecommendationsintheannualreportandininitialpublicofferdocuments.TheCompanyhasadoptedsystemsofcontrolandaccountabilityasthebasisfortheadministrationofcorporategovernance.TheBoardiscommittedtoadministeringthepoliciesandprocedureswithopennessandintegrity,pursuingthetruespiritofcorporategovernancecommensuratewiththeCompany’sneeds.Totheextenttheyareapplicable,theCompanyhasadoptedthesecondeditionoftheCorporateGovernancePrinciplesandRecommendations(“Recommendations”)aspublishedbytheASXCorporateGovernanceCouncil.CopiesoftheCompany’scorporategovernancepoliciesaresetoutinthe“CorporateGovernancePolicies”availableontheCompany’swebsiteatwww.niugini.com.au.AstheCompany’sactivitiesdevelop insize,natureandscope,thesizeoftheBoardandtheimplementationofadditionalcorporategovernancepoliciesandstructureswillbegivenfurtherconsideration.InviewofthesizeoftheCompanyandthenatureof itsactivities,theBoardconsidersthatthecurrentboardisacosteffectiveandpracticalmethodofdirectingandmanagingtheCompany.TheCompanyreportsthefollowingdeparturesfromtheASXPrinciplesandRecommendations:

RECOMMENDATION PRINCIPAL 2: STRUCTURE THE BOARD TO ADD VALUE

Recommendation 2.1:Amajorityoftheboardshouldbeindependentdirectors.

Explanation for Departure:TheBoardcomprisesfourdirectors,oneofwhichisindependent.TheremainingdirectorsarenotindependentbecausetwoareemployedinanexecutivecapacityandtheChairman,whilstanon-executive,holdsasubstantialinterest in the Company. The Board considers that the merits of appointing additional directors in order to achieve majorityindependentstatusareoutweighedbytheBoard’swishtomaintainarelativelysmallboardwithrelevantexperience,whichtheBoardbelievesisadequatehavingregardtotheoperationsoftheCompany.

Recommendation 2.2: The Chairman should be an independent director.

Notification of Departure: TheChairisnotIndependent.

TheChairman,MrCookdoesnotmeettherequirementforIndependence(assetoutintherecommendations)duetohissubstantialshareholdingintheCompany.

MrCook’sexperienceandknowledgeoftheindustryinwhichtheCompanyoperatesmakehiscontributiontotheBoardsuchthatitisappropriateforhimtoremainasChairmanoftheBoard.

Giventhesizeoftheindustryinwhichitoperates,thecurrentBoardstructureisconsideredtobestservetheCompanyinmeetingitsobjectives,givenitssmallcapitalization,limitedresourcesandexistingoperations.ThecompositionoftheBoardwillbereviewedonanannualbasistoensurethattheboardhastheappropriatemixofexpertiseandexperience.

Recommendation 2.4:TheCompanyshouldestablishanominationcommitteeconsistingofamajorityofindependentdirectors.

Notification of Departure:Thereisnoseparatenominationcommittee.Dueto thesizeandnatureof theCompany, the fullBoardconsiders themattersand issues thatwould fall to thenominationcommittee.TheCompanyhasadoptedaNominationChartersettingouttheBoardprocessestoraiseissuesthatwouldotherwisebeconsideredbythenominationcommittee.TheBoardconsidersthatatthisstage,noefficienciesorotherbenefitswouldbegainedbyestablishingaseparatenominationcommittee.

TheBoardintendstoreconsidertherequirementforandbenefitsofaseparatenominationcommitteeastheCompany’soperationsgrowandevolve.

RECOMMENDATION PRINCIPAL 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING

Recommendation 3.3: Discloseineachannualreportthemeasurableobjectivesforachievinggenderdiversitysetbytheboardinaccordancewiththediversitypolicyandprogresstowardsachievingthem.

Recommendation 3.4: Discloseineachannualreporttheproportionofwomenemployeesinthewholeorganisation,womeninseniorexecutivepositionsandwomenontheboard.

Notification of Departure:DisclosuresarenotmadewithregardtoRecommendations3.3and3.4above.

DuetothesizeandnatureoftheCompany’sbusinessandgiventhatthemajorityofoperationsandemploymenttakesplaceinPNG,theBoardconsidersthatatthisstagenobenefitswouldbegainedbymakingsuchdisclosures.

TheBoard intendstoreconsidertherequirementforandbenefitsofthesedisclosuresastheCompany’soperationsgrowandevolve.

CORPORATE GOVERNANCE STATEMENTF

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RECOMMENDATION PRINCIPAL 4: SAFEGUARD INTEGRITY AND FINANCIAL REPORTING

Recommendation 4.1: TheCompanyshouldestablishanauditcommittee.

Recommendation 4.2: Theauditcommitteeshouldbestructuredsothatitconsistsofnon-executivedirectorswhoareamajorityofindependentdirectors.

Notification of Departure:Thereisnoseparateauditcommittee.

DuetothesizeandnatureoftheCompany,theBoardhasnotestablishedanauditcommitteeratherthefullBoardformstheauditcommittee.TheCompanyhasadoptedanAuditChartersettingouttheBoardprocessesthatwouldotherwisebeconsideredbytheauditcommittee.TheBoardconsidersthatitissufficientfortheBoardtoassumetheresponsibilitiesthatareordinarilyassignedtoanauditcommittee.

TheBoardintendstoreconsidertherequirementforandbenefitsofaseparateauditcommitteeastheCompany’soperationsgrowandevolve.

RECOMMENDATION PRINCIPAL 8: REMUNERATE FAILRLY AND RESPONSIBLY

Recommendation 8.1: TheCompanyshouldestablisharemunerationcommittee.

Recommendation 8.2: Theremunerationcommitteeshouldbestructuredsothatitconsistsofnon-executivedirectorswhoareamajorityofindependentdirectors.

Notification of Departure: Thereisnoseparateremunerationcommittee.

DuetothesizeandnatureoftheCompany,aseparateremunerationcommitteeisnotconsideredtoaddanyefficiencytotheprocess of determining the levels of remuneration for the Directors and key executives. The Board considers that it is moreappropriatethatitsetasidetimeatBoardmeetingstoaddressmattersthatwouldnormallyfalltotheremunerationcommittee.TheCompanyhasadoptedaRemunerationChartersettingouttheBoardprocessesthatwouldotherwisebeconsideredbytheremunerationcommittee.

In addition allmattersof remunerationwill continue tobedetermined in accordancewith theCorporationsAct requirements,especiallyinrelationtorelatedpartytransactions.Thatis,noDirectorwillparticipateindeliberationsregardingtheirownremunerationorrelatedissues.

Recommendation 8.3: The structure of non-executive directors’ remuneration from that of executive director and seniormanagementremunerationshouldbeclearlydistinguished.

Notification of Departure: Guidelines for non-executive director remuneration state that non-executive directors should notnormally participate in schemes designed for the remuneration of executives and non-executive directors should not receiveoptionsorbonuspayments.TheCompany’snon-executivedirectorsareeligibletoparticipateintheCompany’slongtermincentiveplan.TheBoardconsidersthatthisisanecessarymotivationtoattractthehighestcalibrecandidatestotheBoardatthisstageintheCompany’soperations.TheCompanycurrentlyhastwonon-executivedirectors.

The table below summarises the Company’s compliance with the ASX Corporate Governance Council’s Principles and Recommendations:

Principle # ASX Corporate Governance Council Recommendations Reference Comply

Principle 1 Lay solid foundations for management and oversight

1.1 EstablishthefunctionsreservedtotheBoardandthosedelegatedtoseniorexecutivesanddisclosethosefunctions.

BoardCharter Yes

1.2 Disclosetheprocessforevaluatingtheperformanceofseniorexecutives. BoardCharter,BoardPerformanceEvaluation

Policy,RemunerationReport

Yes

1.3 ProvidetheinformationindicatedintheGuidetoreportingonprinciple1. BoardCharterRemunerationReport

Yes


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Principle 2 Structure the Board to add value

2.1 AmajorityoftheBoardshouldbeindependentdirectors. BoardCharter No

2.2 Thechairshouldbeanindependentdirector. BoardCharter No

2.3 Therolesofchairandchiefexecutiveofficershouldnotbeexercisedbythesameindividual.

BoardCharter Yes

2.4 TheBoardshouldestablishanominationcommittee. Nominationcharter No

2.5 Disclose the process for evaluating the performance of the Board, itscommitteesandindividualdirectors.

BoardPerformanceEvaluationPolicy

Yes

2.6 ProvidetheinformationindicatedintheGuidetoreportingonprinciple2. Yes

Principle 3 Promote ethical and responsible decision-making

3.1 Establishacodeofconductanddisclosethecodeorasummaryasto: Directorsandexecutiveofficerscodeof

conductEmployeecodeof

conduct

Yes

• the practices necessary to maintain confidence in the company’sintegrity;

• the practices necessary to take into account the company’s legalobligationsandthereasonableexpectationsofitsstakeholders;and

• the responsibility and accountability of individuals for reporting andinvestigatingreportsofunethicalpractices.

3.2 Establishapolicyconcerningdiversityanddisclosethepolicyorasummaryof that policy. The policy should include requirements for the board toestablishmeasurableobjectivesforachievinggenderdiversityfortheboardtoaccessannuallyboththeobjectivesandprogressinachievingthem.

DiversityPolicy Yes

3.3 Disclose in each annual report the measurable objectives for achievinggenderdiversitysetbytheboardinaccordancewiththediversitypolicyandprogresstowardsachievingthem.

DiversityPolicy No

3.4 Disclose ineachannualreporttheproportionofwomenemployees inthewholeorganisation,womeninseniorexecutivepositionsandwomenontheboard.

DiversityPolicy No

3.5 ProvidetheinformationindicatedintheGuidetoreportingonprinciple3. Codesofconduct Yes

Principle 4 Safeguard integrity in financial reporting

4.1 TheBoardshouldestablishanauditcommittee. Auditcharter Yes

4.2 Theauditcommitteeshouldbestructuredsothatit: No

• consistsonlyofnon-executivedirectors;

• consistsofamajorityofindependentdirectors;

• ischairedbyanindependentchair,whoisnotchairoftheBoard;and

• hasatleastthreemembers.

4.3 Theauditcommitteeshouldhaveaformalcharter Auditcharter Yes

4.4 ProvidetheinformationindicatedintheGuidetoreportingonprinciple4. Auditcharter Yes


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Principle 5 Make timely and balanced disclosure

5.1 EstablishwrittenpoliciesdesignedtoensurecompliancewithASXListingRuledisclosurerequirementsandtoensureaccountabilityatseniorexecutivelevelforthatcomplianceanddisclosethosepoliciesorasummaryofthosepolicies.

ASXDisclosurepolicyShareholder

communicationpolicy

Yes

5.2 ProvidetheinformationindicatedintheGuidetoreportingonprinciple5. ASXDisclosurepolicyShareholder

communicationpolicy

Yes

Principle 6 Respect the rights of shareholders

6.1 Designacommunicationspolicyforpromotingeffectivecommunicationwithshareholdersandencouragingtheirparticipationatgeneralmeetingsanddisclosethepolicyorasummaryofthatpolicy.

ASXDisclosurepolicyShareholder

communicationpolicy

Yes

6.2 ProvidetheinformationindicatedintheGuidetoreportingonprinciple6. ASXDisclosurepolicyShareholder

communicationpolicy

Yes

Principle 7 Recognise and manage risk

7.1 Establishpoliciesfortheoversightandmanagementofmaterialbusinessrisksanddiscloseasummaryofthosepolicies.

Riskmanagementpolicy

Auditcharter

Yes

7.2 TheBoardshouldrequiremanagementtodesignandimplementtheriskmanagementandinternalcontrolsystemtomanagethecompany’smaterialbusinessrisksandreporttoitonwhetherthoserisksarebeingmanagedeffectively.TheBoardshoulddisclosethatmanagementhasreportedtoitastotheeffectivenessofthecompany’smanagementofitsmaterialbusinessrisks.


Auditcharter

Yes

7.3 TheBoardshoulddisclosewhetherithadreceivedassurancefromthechiefexecutiveofficerandthechieffinancialofficerthatthedeclarationprovidedinaccordancewithsection295AoftheCorporationsActisfoundedonasoundsystemofriskmanagementandinternalcontrolandthatthesystemisoperatingeffectivelyinallmaterialrespectsinrelationtofinancialreportingrisks.


Auditcharter

Yes

7.4 ProvidetheinformationindicatedintheGuidetoreportingonprinciple7. Riskmanagementpolicy

Auditcharter

Yes

Principle 8 Remunerate fairly and responsibly

8.1 TheBoardshouldestablisharemunerationcommittee. Remunerationcharter No

8.2 Theremunerationcommitteeshouldbestructuredsothatit:

• consistsofamajorityofindependentdirectors• ischairedbyanindependentchair• hasatleastthreemembers

8.3 Clearly distinguish the structure on non-executive directors’ remunerationfromthatofexecutivedirectorsandseniorexecutives.

RemunerationcharterRemunerationReport

Yes

8.4 ProvidetheinformationindicatedintheGuidetoreportingonprinciple8. Remunerationcharter Yes


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Additional information requiredby theAustralianStockExchangeLimitedListingRulesnotdisclosedelsewhere in thisAnnualReportissetoutbelow.

1. ShareholdingsTheissuedcapitaloftheCompanyasat30September2012is251,284,667.ordinaryfullypaidsharesand25,900,100unlistedoptionsandperformancerights.

Ordinary Shares Ranges No. of Holders No. of Shares

1-1,000 174 48,209

1,001-5,000 162 537,935

5,001–10,000 131 1,073,631

10,001-100,000 506 19,937,189

100,001andover 170 229,687,703

1,143 251,284,667

Numberholdinglessthanamarketableparcel(2,778shares) 240 183,891

2. Top 20 Ordinary Fully Paid Shareholders as at 30 September 2012

Units % of Issued Capital

1 NATIONALNOMINEESLIMITED 42,802,783 17.03

2 HSBCCUSTODYNOMINEES(AUSTRALIA)LIMITED 30,951,891 12.32

3 AJAVAHOLDINGSPTYLTD 15,065,636 6.00

4 CITICORPNOMINEESPTYLTD 10,145,623 4.04

5 LIBERTYMANAGEMENTPTYLTD<LIBERTYSUPERFUND> 9,920,000 3.95

6 MRDAVIDMIRINGTOROOSIKORE 6,000,000 2.39

7 SKIPTANPTYLTD<P&MMEURSFAMILYA/C> 5,311,906 2.11

8 JAMARIPTYLTD<STAFFSUPERFUNDA/C> 5,069,000 2.02

9 RELLAVPTYLTD<THECOSGROVESUPERFUNDA/C> 4,942,591 1.97

10 ALLSTATESSECRETARIATEPTYLTD 4,500,000 1.79

11 MRTERRENCEJOSEPHCAPLICE 3,503,727 1.39

12 MRDENNISJLOVELL+JCLOVELL<LOVELL&COSUPERFUND> 3,400,200 1.35

13 SKIPTANPTYLTD<ANZMARGINLENDINGA/C> 3,333,333 1.33

14 FITELNOMINEESLIMITED 3,000,000 1.19

15 PONTEGOINVESTMENTSSOLEESTABLISHMENT<PONTEGOINVA/C> 3,000,000 1.19

16 MRLAWRENCEWILLIAMHAWKE<HAWKEFAMILYSUPERFUNDA/C> 2,875,000 1.14

17 DLNPTYLTD 2,577,192 1.03

18 BROKENRIDGEPTYLTD 2,200,000 0.88

19 SAINTHOTELS&RESORTSPTYLTD<SHAFSTONPROPERTYA/C> 2,200,000 0.88

20 WOORABINDAENTERPRISESPTYLTD<MJS1974A/C> 2,000,000 0.80

162,798,882 64.79

3. Substantial Shareholders as at 24 September 2012

No.ofSharesHeld %Held

3.1 AjavaHoldingsPtyLtd 15,065,636 6.00%

3.2 BlackRockInvestmentManagement(Australia)Limitedandassociated 18,400,000 7.32%

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4. Unlisted Options and Performance Rights

Asat30September2012therewere25,900,100unlistedoptionsandperformancerightsoutstanding.Theoptionandperformancerightsholdersdonothaveanyvotingrights.

Thenumberofholdersofoptionsandperformancerightsonissueareasfollows:

UNLISTED OPTIONS Total No. No. Holders

Holder with 20% or greater of the total number issued

Name % held No.

$0.20Expire30June2014 16,450,100 12AjavaHoldingsPtyLtd 30 5,000,000

LibertyManagementPtyLtd<ATFLibertySuperFund> 30 4,960,000

$0.17Expire23Feb2013 1,150,000 2 BerrimilServicesPtyLtd 87 1,000,000

$0.28Expire31Mar2013 2,000,000 1 GoldRubyInvestmentsLtd 100 2,000,000

$0.47Expire21Dec2013 1,000,000 5 YarranvaleProcessConsultingPtyLtd 75 750,000

$0.38Expire23Jun2014 2,000,000 1 BerrimilServicesPtyLtd 100 2,000,000

$0.48Expire30Nov2014 800,000 9

UNLISTED PERFORMANCE RIGHTS

Expire23Jun2014 2,000,000 1 BerrimilServicesPtyLtd 100 2,000,000

Expire30Nov2012 300,000 2 YarranvaleProcessConsultingPtyLtd 67 200,000

Expire30Nov2013 200,000 1 YarranvaleProcessConsultingPtyLtd 100 200,0000

TOTAL 25,900,100 34

5. Voting Rights

OrdinaryFullyPaidShareholders

AtageneralmeetingoftheCompanyshareholdersareentitled:

• Onashowofhands,eachpersonwhoisamemberorsoleproxyhasonevote.• Onapoll,eachshareholderisentitledtoonevoteforeachfullypaidshare.

Options

Optionholdershavenovotingrightsuntilthesecuritiesareconvertedintofullypaidordinaryshares.

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Asat30September2012

Project Name Location in PNG Tenement No. Date of Grant Pacific Niugini Interest

Zenag MorobeProvince EL1589 07-07-2008 100%

MtHagen WesternHighlands EL1613 07-07-2008 100%

Garaina MorobeProvince EL1614 07-07-2008 100%

Gusap MadangProvince EL1615 07-07-2008 100%

Bulolo MorobeProvince EL1616 07-07-2008 100%

Mutzing MadangProvince EL1869 12-03-2012 100%

Dumpu MadangProvince EL1827 12-03-2012 100%

Pindu MorobeProvince EL1828 12-03-2012 100%

Garawaria MorobeProvince EL2013 12-03-2012 100%

PacificNiuginiMinerals (PNG)Ltd (PNM)at30June2012 is theholderofPapuaNewGuineaExplorationLicencesEL1589,EL1613,EL1614,EL1615andEL1616.Theselicenceswereallissuedon7July2008foratwoyeartermandwererenewedforafurthertwoyeartermexpiringon6July2012.AtthedateofthesefinancialstatementsthetwoyearrenewalprocessinrespectofthesefiveEL’sforthethirdrenewaltermexpiringon6July2014wasstillinprogress.TheCompanyhasreceivedwrittenconfirmationfromtheMineralResourcesAuthorityinPNGthatthesetenementsareintherenewalprocessandthattheyareingoodstanding.Thecompanyisoftheviewthattherenewalofthesetenementswilltakeplaceinthenormalcourseofbusiness.

DuringthepastfinancialyearanadditionalfournewExplorationLicencesweregrantedforatwoyearperiodexpiringon11March2014.TheseareEL1869,EL1827,EL1828andEL2013.

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Pacif ic Nuigini L imited and its Control led Ent it ies4WWW.NIUGINI.COM.AU

ANNUAL REPORT 2012ABN: 30 003 207 467

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ABN: 30 003 207 467 For personal use only - asx.com.au · ABN: 30 003 207 467 ANNUAL REPORT 2012 For personal use only. ... PNGFP is currently the key economic and operational entity