MELIOR RESOURCES INC. FILING STATEMENT IN RESPECT OF … · MELIOR RESOURCES INC. SUMMARY OF FILING STATEMENT (as at May 15, 2014 except as otherwise indicated) The following is a

MELIOR RESOURCES INC.

FILING STATEMENT

IN RESPECT OF

THE CHANGE OF BUSINESS BYMELIOR RESOURCES INC.

May 15, 2014

Neither the TSX Venture Exchange Inc. nor any securities regulatoryauthority has in any way passed upon the merits of theChange of Business described in this Filing Statement.

TABLE OF CONTENTS

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GLOSSARY OF TERMS............................................................................................................................1

SUMMARY OF FILING STATEMENT....................................................................................................5

CAUTION REGARDING FORWARD LOOKING STATEMENTS........................................................8

OTHER INFORMATION .........................................................................................................................10

RISK FACTORS .......................................................................................................................................11

Acquisition and Integration Risks.................................................................................................18Trading in the Company’s Common Shares may be Volatile.......................................................19

INFORMATION CONCERNING THE COMPANY...............................................................................19

Corporate Structure.......................................................................................................................19General Development of the Business ..........................................................................................19Selected Consolidated Financial Information and Management’s Discussion and Analysis .......23Description of the Securities.........................................................................................................23Stock Option Plan .........................................................................................................................24Prior Sales .....................................................................................................................................24Stock Exchange Trading Prices ....................................................................................................24Executive Compensation ..............................................................................................................24Description of the Stock Option Plan ...........................................................................................27Pension Benefits ...........................................................................................................................29Termination and Change of Control Benefits ...............................................................................29Director Compensation .................................................................................................................30Securities Authorized for Issuance Under Equity Compensation Plans .......................................30Management Contracts .................................................................................................................31Arm’s Length Transaction. ...........................................................................................................31Legal Proceedings.........................................................................................................................31Auditor, Transfer Agent and Registrar .........................................................................................31Material Contracts.........................................................................................................................31

INFORMATION CONCERNING BELRIDGE........................................................................................31

Corporate Structure.......................................................................................................................31General Development of the Business ..........................................................................................32Significant Acquisitions and Dispositions ....................................................................................32Description of the Business ..........................................................................................................32Selected Consolidated Financial Information and Management’s Discussion and Analysis .......95Description of the Securities.........................................................................................................96Consolidated Capitalization ..........................................................................................................96Prior Sales .....................................................................................................................................96Executive Compensation ..............................................................................................................97Arm’s Length Transaction ............................................................................................................97Legal Proceedings.........................................................................................................................97Material Contracts.........................................................................................................................97

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INFORMATION CONCERNING THE RESULTING ISSUER..............................................................98

Corporate Structure.......................................................................................................................98Intercorporate Relationships .........................................................................................................98Description of the Business ..........................................................................................................98Description of Securities...............................................................................................................99Pro forma Consolidated Capitalization.........................................................................................99Fully Diluted Share Capital ..........................................................................................................99Available Funds and Principal Purposes.....................................................................................100Risk Factors ................................................................................................................................101Principal Securityholders ............................................................................................................101Directors and Officers.................................................................................................................101Anticipated Executive Compensation.........................................................................................106Indebtedness of Directors and Officers.......................................................................................109Investor Relations Arrangements................................................................................................109Options to Purchase Securities....................................................................................................109Escrowed Securities ....................................................................................................................109Auditors, Transfer Agent and Registrar......................................................................................110

GENERAL MATTERS ...........................................................................................................................110

Sponsorship.................................................................................................................................110Experts ........................................................................................................................................110Other Material Facts ...................................................................................................................111Board Approval...........................................................................................................................111

CERTIFICATE OF THE ISSUER ..........................................................................................................112

CERTIFICATE OF BELRIDGE .............................................................................................................113

SCHEDULE “A” - FINANCIAL STATEMENTS.................................................................................115

SCHEDULE “B” - MANAGEMENT DISCUSSION & ANALYSIS ...................................................116

SCHEDULE “C” - PRO-FORMA FINANCIAL STATEMENTS ........................................................117

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GLOSSARY OF TERMS

In this Filing Statement, unless otherwise defined or expressly stated herein or something in the subjectmatter or the context is clearly inconsistent therewith:

“Affiliate” means a company that is affiliated with another company as described below. A company isan “Affiliate” of another company if:

(a) one of them is the subsidiary of the other, or

(b) each of them is controlled by the same Person.

A company is “controlled” by a Person if:

(c) voting securities of the company are held, other than by way of security only, by or forthe benefit of that Person, and

(d) the voting securities, if voted, entitle the Person to elect a majority of the directors of thecompany;

A Person beneficially owns securities that are beneficially owned by:

(e) a company controlled by that Person, or

(f) an Affiliate of that Person or an Affiliate of any Company controlled by that Person;

A “subsidiary” is a company that is controlled by a Person.

“Associate” when used to indicate a relationship with a Person, means:

(a) an issuer of which the Person beneficially owns or controls, directly or indirectly, votingsecurities entitling him to more than 10% of the voting rights attached to outstandingsecurities of the issuer,

(b) any partner of the Person,

(c) any trust or estate in which the Person has a substantial beneficial interest or in respect ofwhich the Person serves as trustee or in a similar capacity, and

(d) in the case of a Person that is an individual,

(i) that Person’s spouse or child, or

(ii) any relative of the Person or of his spouse who has the same residence as thatPerson.

“Audit Committee” means the audit committee of the Board;

“BCA” means the Business Corporations Act (British Columbia), as amended from time to time;

“Belridge” means Belridge Enterprises Pty Ltd, a company formed under the laws of Australia;

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“Belridge Shareholders” means Belmont Park – Monto Pty Ltd, Panorama Ridge – Monto Pty Ltd andSashimi Investments Pty Ltd, in each case in their capacity as trustees;

“Board” means the board of directors of the Company;

“CEO” means the Chief Executive Officer of the Company;

“CFO” means the Chief Financial Officer of the Company;

“Change of Business” means a transaction or series of transactions which will redirect an issuer’sresources and which changes the nature of its business, for example, through the acquisition of an interestin another business which represents a material amount of the issuer’s market value, assets or operations,or which becomes the principal enterprise of the issuer;

“Closing Date” means the date on which the closing of the Proposed Acquisition occurs;

“Common Shares” means the common shares in the capital of the Company and will also be thecommon shares in the capital of the Resulting Issuer;

“company” unless specifically indicated otherwise, means a corporation, incorporated association ororganization, body corporate, partnership, trust, association or other entity other than an individual;

“Company” means Melior Resources Inc., a company formed under the laws of British Columbia;

“Control Person” means any Person that holds or is one of a combination of Persons that holds asufficient number of any of the securities of an issuer so as to affect materially the control of that issuer,or that holds more than 20% of the outstanding voting securities of an issuer except where there isevidence showing that the holder of those securities does not materially affect the control of the issuer;

“Corporate Governance Committee” means the corporate governance committee of the Board;

“Exchange” means TSX Venture Exchange Inc.;

“Filing Statement” means this filing statement;

“Final Exchange Bulletin” means the bulletin issued by the Exchange following completion of theProposed Acquisition and the submission of all required documentation and that evidences the finalExchange acceptance of the Proposed Acquisition;

“Indicated Mineral Resource” means that part of a Mineral Resource for which quantity, grade orquality, densities, shape and physical characteristics, can be estimated with a level of confidencesufficient to allow the appropriate application of technical and economic parameters, to support mineplanning and evaluation of the economic viability of the deposit. The estimate is based on detailed andreliable exploration and testing information gathered through appropriate techniques from locations suchas outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological andgrade continuity to be reasonably assumed;

“Inferred Mineral Resource” means that part of a Mineral Resource for which quantity and grade orquality can be estimated on the basis of geological evidence and limited sampling and reasonablyassumed, but not verified, geological and grade continuity. The estimate is based on limited information

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and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits,workings and drill holes;

“Insider” when used in relation to the Company, means:

(a) a director or senior officer of the Company;

(b) a director or senior officer of a company that is an Insider or subsidiary of the Company;

(c) a Person that beneficially owns or controls, directly or indirectly, voting shares carryingmore than 10% of the voting rights attached to all outstanding voting shares of theCompany; or

(d) the Company itself if it holds any of its own securities;

“Goondicum Project” means the ilmenite extraction operations currently owned by Belridge, includingthe mine site, processing plant and supporting infrastructure located 30km due east of Monto, CentralQueensland, Australia, as more particularly described in the Technical Report;

“H&S Consultants” means H&S Consultants Pty. Ltd;

“Measured Mineral Resource” means that part of a Mineral Resource for which quantity, grade orquality, densities, shape and physical characteristics are so well established that they can be estimatedwith confidence sufficient to allow the appropriate application of technical and economic parameters tosupport production planning and evaluation of the economic viability of the deposit. The estimate isbased on detailed and reliable exploration, sampling and testing information gathered through appropriatetechniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closelyenough to confirm both geological and grade continuity;

“Mineral Reserve” means the economically mineable part of a Measured or Indicated Mineral Reservedemonstrated by at least a pre-feasibility study. This study must include adequate information on mining,processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting,that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowancesfor losses that may occur when the material is mined;

“Mineral Resource” means a concentration or occurrence of diamonds, natural solid inorganic material,or natural solid fossilized organic material, including base and precious metals, coal, and industrialminerals in or on the earth’s crust in such form and quantity and of such grade or quality that it hasreasonable prospects for economic extraction. The location, quantity, grade, geological characteristicsand continuity of a Mineral Resource are known, estimated or interpreted from specific geologicalevidence and knowledge;

“Melior Australia” means Melior Australia Pty Ltd, a company formed under the laws of Australia;

“NEO” has the meaning ascribed to such term on page 25 of this Filing Statement;

“NI 43-101” means National Instrument 43-101 “Standards of Disclosure for Mineral Projects”;

“NI 58-101” means National Instrument 58-101 “Disclosure of Corporate Governance Practices”;

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“Nomination and Compensation Committee” means the nomination and compensation committee ofthe Board;

“Non-Arm’s Length Party” means in relation to a company, a promoter, officer, director, other Insideror Control Person of that company (including an issuer) and any Associates or Affiliates of such Persons.In relation to an individual, means any Associate of the individual or any company of which theindividual is a promoter, officer, director, Insider or Control Person;

“Pala” means Pala Investments Limited, a company formed under the laws of Jersey;

“Person” means a company or individual;

“Proposed Acquisition” means, subject to the approval of the Exchange, the proposed acquisition by theCompany of 100% of the issued and outstanding shares of Belridge from the Belridge Shareholders andall matters relating thereto, as described in this Filing Statement;

“Resulting Issuer” means the Company following the completion of the Proposed Acquisition;

“Share Purchase Agreement” means the share sale and purchase agreement between the Company,Melior Australia and the Belridge Shareholders dated March 31, 2014 in respect of the ProposedAcquisition;

“Sojitz” means Sojitz Corporation;

“Stock Option Plan” means the stock option plan of the Company dated October 17, 2006, as amendedand restated September 28, 2007 and November 15, 2010 and as approved by the Company’sshareholders on November 20, 2013; and

“Technical Report” means the independent technical report with the effective date of February 25, 2014entitled “Resource Estimations of the Goondicum Ilmenite Deposit, SE Queensland, Australia” preparedby Simon Tear, PGeo, Eur Geol of H&S Consultants Pty. Ltd, Graham Lee, FAusImm, CP(Geo) ofGraham Lee and Associates Pty Ltd and Chris Desoe, FAusImm, RPEQ, MMICA of Australian MineDesign and Development Pty Ltd, regarding the Goondicum Project.

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SUMMARY OF FILING STATEMENT

(as at May 15, 2014 except as otherwise indicated)

The following is a summary of information relating to the Company and the Resulting Issuer (assumingcompletion of the Proposed Acquisition) and should be read together with the more detailed informationand financial data and statements contained elsewhere in this Filing Statement.

Melior Resources Inc.

The Company is incorporated under the laws of British Columbia with its Common Shares listed fortrading on the Exchange as a Tier 1 Investment Issuer. See “Information Concerning the Company”.

The trading price of the Common Shares of the Company on March 28, 2014, the last trading day beforeannouncement of the Proposed Acquisition, was Cdn$0.075.

Principal Terms of the Proposed Acquisition

The following summary is subject to the detailed provisions of the Share Purchase Agreement and isqualified in its entirety by reference to the Share Purchase Agreement which is available under theCompany’s profile on SEDAR at www.sedar.com.

The Share Purchase Agreement provides that Melior Australia (a direct wholly-owned subsidiary of theCompany) will acquire 100% of the issued share capital of Belridge in exchange for the issuance by theCompany of 38,087,971 Common Shares (the “Consideration Shares”) to the Belridge Shareholders.Each Belridge Shareholder is a company formed under the laws of Australia. The Consideration Shareswould represent 18.0% of the Company’s issued and outstanding shares immediately after the closing ofthe Proposed Acquisition. Closing of the Proposed Acquisition is subject to Exchange approval and othercustomary conditions. The Company expects closing of the Proposed Acquisition to occur shortlyfollowing the date of this Filing Statement.

The Company has committed to invest following the Closing Date up to US$15 million in the GoondicumProject, subject to the satisfaction of all applicable legal and regulatory requirements and fulfillment of allpermitting, approval and licensing requirements necessary to successfully achieve a full re-start of theGoondicum Project. The Board will direct and have ultimate approval over the total amount invested andthe schedule of drawdowns and conditions for the expenditure of these funds.

Following closing of the Proposed Acquisition, the Belridge Shareholders would be entitled to receive anearn-out payment, payable in Common Shares (or, at the Company’s election, in cash) based on theperformance of the Company by reference to the price of the Common Shares (“Earn-outConsideration”). The parties have agreed to predetermined earn-out payment amounts should the price ofthe Common Shares reach predetermined levels with such predetermined levels being well in excess ofthe price of the Common Shares as of the effective date of the Share Purchase Agreement. The maximumnumber of Common Shares that could be issued as payment for the Earn-out Consideration is 38,087,971.The Earn-out Consideration will be available for a period of up to four years from the date of closing ofthe Proposed Acquisition (“Validity Period”) and may be triggered by either of the following:

Change of control during the Validity Period: If a change of control event (as defined below)occurs during the Validity Period and the price at which the Common Shares are trading exceeds

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specified levels above the current market price, the Belridge Shareholders would have a right toreceive the Earn-out Consideration on a pro-rata basis.

No change of control during the Validity Period: In the event that no change of control eventoccurs during the Validity Period, the Belridge Shareholders would, at the end of the ValidityPeriod, be entitled to receive the Earn-out Consideration, on a pro-rata basis, if the trading priceof the Common Shares exceeds specified levels above the current market price.

A change of control event is defined as any party or parties acting in concert, other than Pala (theCompany’s current majority shareholder), acquiring more than 50% of the Common Shares on a fullydiluted basis. The payment of the Earn-out Consideration will be subject to the satisfaction of customaryeligibility and performance conditions including the continuation of operations of the Goondicum Projectand the Belridge Shareholders continuing to hold all the Consideration Shares. For example, assumingthat no change of control occurs during the Validity Period, the Earn-out Consideration payable at the endof the Validity Period will range from zero (if the price of the Common Shares is less than Cdn$0.41 pershare) to 38,087,971 shares if the price of the Common Shares exceeds Cdn$1.11 per share.

The Consideration Shares will be placed in escrow for a period beginning on the Closing Date and endingtwo years after the Closing Date. Should the Company have a successful claim against the BelridgeShareholders during the escrow period, such claim may be satisfied by cash or by a return of theConsideration Shares with equivalent value to such claim. Consideration Shares returned to the Companyare to be valued based on the price of the Common Shares on the Closing Date.

Following closing of the Proposed Acquisition, the Belridge Shareholders will be entitled to nominate onedirector to the Board for so long as they together hold at least 10% of the issued and outstanding CommonShares.

As the Proposed Acquisition is a “Change of Business” transaction, pursuant to Exchange Policy 5.2Melior shareholder approval is required. Melior’s majority shareholder, Pala, has provided writtenconsent approving the Proposed Acquisition which constitutes the requisite shareholder approval. TheProposed Acquisition will be at arm’s length, and accordingly, will not require shareholder approvalbeyond that described above.

Upon completion of the Proposed Acquisition, it is expected that the Company's listing status will changefrom that of a Tier 1 Investment Issuer to a Tier 1 Mining Issuer.

Element Settlement Deed

In connection with the Proposed Acquisition, the Company entered into a settlement deed (the“Settlement Deed”) among the Company, Belridge and Element Capital Management Pty Ltd(“Element”), pursuant to which the Company will following the Closing Date pay Element the sum ofA$250,000 in full and final settlement of all claims (as such term is defined in the Settlement Deed) thatElement has or may have against the Company, Belridge and their respective employees agents andassociates arising under or in connection with an agreement dated July 25, 2013 (the “ElementAgreement”), pursuant to which Element agreed to provide Belridge with certain advisory services withrespect to the sale of Belridge.

Loan Arrangement

Pursuant to a loan agreement, the Company has provided Belridge with short term financing in anaggregate amount of up to Cdn$1,400,000 for ongoing operational costs and to satisfy Belridge’s

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obligations with respect to an agreement between Belridge, Goody Investments Pty Ltd and Mr. JohnLeslie Goody, pursuant to which Belridge will purchase back from Goody Investments Pty Ltd, GoodyInvestments Pty Ltd’s royalty rights to a percentage of Belridge’s gross income from ilmenite and apatitesales from tenements including, among others, EPM 9100. It is intended that any amounts outstandingafter the Closing Date will be refinanced in a tax efficient manner for the Company.

See “Information Concerning the Company – General Development of Business”.

Escrow of Securities

See “Principal Terms of the Proposed Acquisition”.

Arm’s Length Transaction

The Proposed Acquisition is not a Change of Business involving Non-Arm’s Length Parties and istherefore not subject to Exchange Manual Policy 5.9.

Available Funds and Principal Purposes

The estimated funds available to the Resulting Issuer after giving effect to the Proposed Acquisition areapproximately US$20,000,000, based on the Company’s estimated consolidated working capital as atApril 15, 2014.

The Resulting Issuer intends to use the funds available to it upon completion of the Proposed Acquisitionto further the Resulting Issuer’s stated business objectives, being principally the restart, development andexpansion of the Goondicum Project. There may be circumstances where, for sound business reasons, areallocation of funds may be necessary or desirable as determined by the Board. See “InformationConcerning the Resulting Issuer – Available Funds and Principal Purposes”.

Selected Pro forma Financial Information

The following table shows selected pro forma balance sheet data for the Resulting Issuer, as at December31, 2013, after giving effect to the Proposed Acquisition:

Current Assets Cdn$21,628,472

Total Assets Cdn$29,662,424

Current Liabilities Cdn$1,388,667

Total Liabilities Cdn$4,036,194

Share Capital and Contributed Surplus Cdn$538,560,891

Deficit (Cdn$512,934,661)

See “Schedule “C” - Pro-Forma Financial Statements”

Directors and Officers

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Following completion of the Proposed Acquisition, the directors and officers of the Resulting Issuer willbe:

Name Title

Charles Entrekin Chairman of the Board

Mark McCauley CEO and Director

Thomas Masney CFO and Corporate Secretary

Glenn Black Director

Martyn Buttenshaw Director

Joe Connolly Director

Conflicts of Interest

Certain of the proposed directors and officers of the Resulting Issuer are also directors, officers orshareholders of other companies. Such associations may give rise to conflicts of interest from time totime. See “Risk Factors”.

Interests of Experts

The Company’s auditors, MNP LLP, Chartered Accountants, of 701 Evans Avenue 8th Floor, Toronto,Ontario, M9C 1A3, have audited the financial statements for the years ended June 30, 2013 and 2012included in this Filing Statement. MNP LLP report that they are independent from the Company.

Information regarding the Goondicum Project has been reproduced from the Technical Report entitled“Resource Estimations of the Goondicum Ilmenite Deposit, SE Queensland, Australia”, which wasprepared in compliance with NI 43-101 by Simon Tear, PGeo, Eur Geol of H&S Consultants Pty. Ltd,Graham Lee, FAusImm, CP(Geo) of Graham Lee and Associates Pty Ltd and Chris Desoe, FAusImm,RPEQ, MMICA of Australian Mine Design and Development Pty Ltd, regarding the Goondicum Project.The authors of the Technical Report and H&S Consultants Pty. Ltd, have no direct or indirect interest inthe Goondicum Project, Belridge, the Company or the Resulting Issuer. It is anticipated that the TechnicalReport will be filed on SEDAR at www.sedar.com prior to the completion of the Proposed Acquisition.

Conditional Approval

The Exchange has conditionally accepted the Proposed Acquisition, subject to the Company completingall of the requirements of the Exchange.

Sponsorship

The Exchange provided the Company with an exemption from the requirement to obtain a sponsor inconnection with the Proposed Acquisition.

CAUTION REGARDING FORWARD LOOKING STATEMENTS

Certain statements in this Filing Statement are forward-looking statements or information (collectively“forward-looking statements”) within the meaning of applicable securities legislation. The Company ishereby providing cautionary statements identifying important factors that could cause actual results oroutcomes to differ materially from those projected in the forward-looking statements. Any statements thatexpress, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events

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or performance are not historical facts and may be forward-looking and may involve estimates,assumptions and uncertainties and are subject to risks which could cause actual results or outcomes todiffer materially from those expressed in the forward-looking statements.

Often, but not always, forward-looking information can be identified by the use of words such as “plans”,“expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”,“projects”, “potential” or “believes” or the negatives thereof or variations of such words and phrases orstatements that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” betaken, occur or be achieved.

Forward-looking information in this Filing Statement includes, but is not limited to:

statements related to the completion of the Proposed Acquisition and the events related theretoand contingent thereon;

information with respect to the Company’s future financial and operating performance;

the skill and knowledge of the Company’s management with respect to the exploration anddevelopment of mineral properties, and the relevance of that skill and knowledge to theGoondicum Project;

the Company’s plan to re-start, develop, operate and expand the Goondicum Project;

the estimated Mineral Resources at the Goondicum Project and the benefits of the ProposedAcquisition;

the Company’s ability to successfully obtain any necessary environmental, mining and otherlicenses and permits;

future exploration, development operating and expansion activities, and the costs and timing ofthose activities;

timing and receipt of approvals, consents and permits under applicable legislation;

the Company’s assessment of potential environmental liabilities;

results of future exploration, drilling and operations;

adequacy of financial resources;

forward-looking information attributed to third party industry sources; and

statements related to the Company’s expected executive compensation.

Forward-looking information is based on the assumptions, estimates, analysis and opinions ofmanagement made in light of its experience and its perception of trends, current conditions and expecteddevelopments, as well as other factors that management believes to be relevant and reasonable in thecircumstances at the date that such statements are made, but which may prove to be incorrect.Management believes that the assumptions and expectations reflected in such forward-lookinginformation are reasonable. Assumptions have been made regarding, among other things: the Company’sability to carry on exploration and development activities and to restart, operate and expand the

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Goondicum Project, the timely receipt of required approvals, the price of minerals, the Company’s abilityto operate in a safe, efficient and effective manner and the Company’s ability to obtain financing as andwhen required and on reasonable terms. Readers are cautioned that the foregoing list is not exhaustive ofall factors and assumptions which may have been used.

By their nature, forward-looking statements involve numerous assumptions, inherent risks anduncertainties, both general and specific, which contribute to the possibility that the predicted outcomesmay not occur or may be delayed. The risks, uncertainties and other factors, many of which are beyondthe control of the Company or the Resulting Issuer, that could influence actual results include, but are notlimited to: risks relating to exploration, development and operating matters; dependence on theGoondicum project; delay and interruptions to re-start program; increase in capital costs for theGoondicum project; the Goondicum project may not meet its production targets or its cost estimates;mineral titles; history of losses; commodity prices; no off-take agreements; commodity hedging; fundingneeds; financing risks and dilution; limited operating history; reliability of resource estimates;uninsurable risks; environmental and safety regulations and risks; land reclamation; competition;personnel; litigation risk; government regulations, licenses and permits; conflicts of interest; currencyfluctuations; acquisition and integration risks; absence of dividend history or policy; and independentcontractors. See “Risk Factors”.

Readers are cautioned that the material assumptions used in the preparation of such information, althoughconsidered reasonable at the time of preparation, may prove to be imprecise. Actual results, performanceor outcomes could differ materially from those expressed in, or implied by, this forward-lookinginformation and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, when that might happen or what benefitsthe Company will derive therefrom. The Company disclaims any intention or obligation to update orrevise any forward-looking information, whether as a result of new information, future events orotherwise, except as required by applicable securities laws.

This Filing Statement contains references to estimates of Mineral Resources. The estimation of MineralResources is inherently uncertain and involves subjective judgments about many relevant factors. MineralResources that are not Mineral Reserves do not have demonstrated economic viability. The accuracy ofany such estimates is a function of the quantity and quality of available data, and of the assumptions madeand judgments used in engineering and geological interpretation (including estimated future production,the anticipated tonnages and grades that will be mined and the estimated level of recovery that will berealized), which may prove to be unreliable and depend, to a certain extent, upon the analysis of drillingresults and statistical inferences that may ultimately prove to be inaccurate. Mineral Resource estimatesmay have to be re-estimated based on: (i) fluctuations in mineral prices; (ii) results of drilling; (iii)metallurgical testing and other studies; (iv) proposed mining operations, including dilution; (v) theevaluation of mine plans subsequent to the date of any estimates; and (vi) the possible failure to receiverequired permits, approvals and licences.

OTHER INFORMATION

Currency

All references to “$”, “US$” or “dollars” in this Filing Statement mean U.S. dollars, unless otherwiseindicated. References to “Cdn$” mean Canadian dollars and references to “A$” mean Australian dollars.

Scientific and Technical Information

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The scientific and technical information with respect to the Goondicum Project contained in this FilingStatement is reproduced from the Technical Report. The full text of the Technical Report has been filedwith Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review underthe Company’s SEDAR profile at www.sedar.com.

Simon Tear, PGeo, Eur Geol of H&S Consultants Pty. Ltd, Graham Lee, FAusImm, CP(Geo) of GrahamLee and Associates Pty Ltd and Chris Desoe, FAusImm, RPEQ, MMICA of Australian Mine Design andDevelopment Pty Ltd have reviewed and approved the scientific and technical information in respect ofthe Goondicum Project contained in this Filing Statement. Each of Mr. Tear, Mr. Lee and Mr. Desoe areconsidered, by virtue of their education, experience and professional association, to be a qualified personfor the purposes of NI 43-101. Mr. Tear, Mr. Lee and Mr. Desoe are independent within the meaning ofNI 43-101.

RISK FACTORS

Following the Proposed Acquisition, the primary business of the Resulting Issuer will be the exploration,development, restart, operation and expansion of the Goondicum Project. Common Shares of theResulting Issuer will be a risky and speculative investment. The Resulting Issuer will be exposed to anumber of risks and uncertainties. Such risks could materially affect the Resulting Issuer’s future resultsand could cause actual events to differ materially from those described in forward-looking statementsrelating to the Resulting Issuer. The risks described herein will apply to the Resulting Issuer followingthe closing of the Proposed Acquisition and may not be the only risks facing the Resulting Issuer.Additional risks not currently known or not currently considered to be material may also have an adverseimpact on the Resulting Issuer’s business.

Overview of Exploration, Development and Operating Risk

The Company is a development stage company engaged in mineral exploration and development. Mineralexploration and development is highly speculative in nature, involves many risks and is frequently noteconomically successful. Increasing mineral resources or reserves depends on a number of factorsincluding, among others, the quality of a company’s management and their geological and technicalexpertise and the quality of land available for exploration. Once mineralization is discovered it may takeseveral years of additional exploration and development until production is possible, during which timethe economic feasibility of production may change. Substantial expenditures are required to establishproven and probable reserves through drilling or drifting to determine the optimal metallurgical processand to finance and construct mining and processing facilities. At each stage of exploration, development,construction and mine operation, various permits and authorizations are required. Applications for manypermits require significant amounts of management time and the expenditure of substantial capital forengineering, legal, environmental, social and other activities. At each stage of a project’s life, delays maybe encountered because of permitting difficulties. Such delays add to the overall cost of a project and mayreduce its economic feasibility. As a result of these uncertainties, there can be no assurance that a mineralexploration and development company’s programs will result in profitable commercial production. As ofthe date of this Filing Statement, the Goondicum Project has no established reserves and is not inoperation. There is no assurance that the project can be mined profitably. Accordingly, it is not assuredthat the Company will realize any profits in the short to medium term, if at all. Any profitability in thefuture from the business of the Company will be dependent upon developing and commercially mining aneconomic deposit of minerals.

The operations of companies engaged in mining activities are vulnerable to supply chain disruptionsincluding shortages of, as well as lead times to deliver, strategic spares, critical consumables and miningequipment. In the past, other mining companies have experienced shortages in critical consumables,

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particularly as production capacity in the global mining industry has expanded in response to increaseddemand for commodities, and have experienced increased delivery times for these items. Shortages ofstrategic spares, critical consumables or mining equipment, could in the future, result in production delaysand productions shortfalls, and increases in prices could result in an increase in both operating costs andthe capital expenditure to maintain and develop mining operations. In certain cases, there may be onlylimited suppliers for certain strategic spares, critical consumables or mining equipment who commandsuperior bargaining power relative to the Company. The Company could at times face increased costs,limited supply and/or increased lead time in the delivery of such items.

Companies engaged in mining activities are subject to all of the hazards and risks inherent in exploringfor, developing and operating natural resource projects. These risks and uncertainties include, but are notlimited to, environmental hazards, industrial accidents, labour disputes, social unrest, encounteringunusual or unexpected geological formations or other geological or grade problems, unanticipatedmetallurgical characteristics or less than expected mineral recovery, encountering unanticipated ground orwater conditions, cave-ins, pit wall failures, flooding, rock bursts, periodic interruptions due to inclementor hazardous weather conditions and other acts of God or unfavourable operating conditions and losses.Should any of these risks or hazards affect the Company’s exploration, development or mining activitiesit may: cause the cost of exploration, development or production to increase to a point where it would nolonger be economic to operate the Company’s mineral projects; result in a write down or write-off of thecarrying value of one or more mineral projects; cause delays or stoppage of exploration, development,mining or processing activities; result in damage to or the destruction of mineral properties, processingfacilities or third party facilities necessary to the Company’s operations; cause personal injury or deathand related legal liability; or result in the loss of insurance coverage — any or all of which could have amaterial adverse effect on the financial condition, results of operations or cash flows of the Company.

Dependence on the Goondicum Project

The Company is primarily focused on the development of the Goondicum Project. Other than its equityinterest in Asian Mineral Resources Limited (“AMR”), the Company does not own any significant assetsother than the Goondicum Project, which would be the Company’s only mineral property and representsthe Company’s only immediate potential for future generation of operating revenues. Unless theCompany acquires additional property interests, any adverse developments affecting the GoondicumProject such as, but not limited to, delays in or failure to successfully restart production, obtaining projectfinancing beyond the Company’s initial investment on commercially suitable terms, hiring suitablepersonnel and mining contractors, or securing supply agreements on commercially suitable terms, couldhave a material adverse effect upon the Company and would materially and adversely affect the potentialmineral resource production, profitability, financial performance and results of operations of theCompany.

Delay and Interruptions to Re-Start Program

There are significant risks that the re-start of the Goondicum Project could be delayed due tocircumstances beyond the Company’s control. There can be no assurance that the Goondicum Project willbe re-started on time, on budget or according to specifications. The Company depends on the third partieswith whom it works, including the management and labour force of its supply chain, for the supply ofconstruction materials and equipment. There can be no assurance that the required construction supplieswill be readily available and delivered on time to the construction site. Such supplies may be sourcedfrom additional third parties, which may be affected by factors beyond the Company’s control.Additionally, changes to government regulations, contractual and/or union disputes, labour stoppages,workplace accidents, availability of supplies, materials, tools and equipment, delay in shipment ofmaterials and unseasonable weather patterns and conditions may hinder the re-start timeline and progress.

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It is possible that issues with the design, specifications and/or physical location of the facilities of theGoondicum Project may arise during the re-start process due to unforeseen engineering, physical,geological and/or economic circumstances.

Government and building code regulations may change requiring substantial revision to the design planand specifications for the Goondicum Project. The resolution of these issues may require the additionalassistance and cost of experts, additional financing, a change to the construction plan, design,specifications, layouts and/or locations. Any such changes will delay the overall re-start of theGoondicum Project and will increase (possibly significantly) the costs associated therewith. Since theGoondicum Project will not earn income before re-start, longer construction times translate directly intohigher overall project costs. Further, the delay, cost and alterations required may potentially adverselyaffect the timeline and the expected output.

Increase in Capital Costs for the Goondicum Project

The Company plans to invest, subject to Board approval, up to US$15,000,000 in the re-start of theGoondicum Project operation. There can be no assurance that capital costs for the restart of theGoondicum Project will not exceed such amount. A significant increase in the capital costs of the restartof the Goondicum Project would have a material adverse effect on the Company’s ability to complete theGoondicum Project as well as on its financial condition.

The Goondicum Project may not meet its production targets or its cost estimates

The re-start of the Goondicum Project is premised on projected production, capital and operating costestimates. The Company’s ability to meet ilmenite production targets is dependent on the successful re-start of the mine and expansion of mining operations in the future. Meeting these targets will also dependon the accuracy of predicted factors including capital and operating costs, metallurgical recoveries,resource estimates future commodity prices, accuracy of applicable technical studies and reports,acquisition of land and surface rights and issuance of necessary permits/approvals. There is no assurancethat the mining operations will be expanded or that mining operations will be profitable if expanded.Actual production and costs may vary from the estimates for a variety of reasons such as grade, tonnage,dilution and metallurgical and other characteristics of the ore mined varying from estimates, revisions tomine plans, risks and hazards associated with mining, adverse weather conditions, unexpected laborshortages or strikes, equipment failures and other interruptions in production capabilities. Productioncosts may also be affected by increased stripping costs, increases in level of ore impurities, labor costs,raw material costs, inflation and fluctuations in currency exchange rates. Failure to achieve productiontargets or cost estimates could have a material adverse impact on the Company’s sales, profitability, cashflow and overall financial condition and performance.

Mineral Titles

Although the Company has obtained a title opinion for the tenements underlying the Goondicum Project,there is no guarantee that title to such mineral property interests will not be challenged or impugned andno assurances can be given that there are no title defects affecting its mineral properties. The Company’smineral property interests may be subject to prior unregistered agreements or transfers and title may beaffected by undetected defects.

History of Losses

Prior owners have experienced significant losses historically in connection with the Goondicum Project.There can be no assurance that significant additional losses will not occur in the future, or that the

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Company will be profitable in the future. The Company’s operating expenses and capital expendituresmay increase in the coming years as the costs for consultants, personnel and equipment associated withadvancing exploration, development and re-start of commercial production of the Goondicum Project areincurred.

Commodity Prices

The Company’s operations will be affected by commodity prices which are subject to significantfluctuation and are affected by a number of factors which are beyond the control of the Company. Suchfactors include, but are not limited to, interest rates, exchange rates, inflation or deflation, fluctuation inthe value of the United States dollar and other foreign currencies, global and regional supply and demand,and political and economic conditions. The prices of ilmenite and other minerals have fluctuated widelyin recent years, and future price declines could cause any future development and commercial productionto be impracticable. Depending on the price of ilmenite and other minerals, projected cash flow fromplanned mining operations may not be sufficient and the Company could be forced to discontinuedevelopment and/or operational activities.

No Off-Take Agreements

While Belridge has entered into an agreement with Sojitz, whereby Belridge grants Sojitz the exclusiveright to promote and sell ilmenite mined from ML 80044 into Japan and Korea and a non-exclusive rightto promote and sell ilmenite into other countries, the Resulting Issuer has not entered into any off-takeagreements for the sale of ilmenite and there can be no assurance that the Resulting Issuer will enter intoany off-take agreement or other binding sales commitment for the sale of ilmenite produced from theResulting Issuer’s operations.

Commodity Hedging

The Company does not currently have a policy in place to hedge future commodity sales. There is noassurance that a hedging program can be put in place. If put into place, there is no assurance that acommodity hedging program designed to reduce the risk associated with fluctuations in commodity priceswill be successful. Hedging may not protect adequately against declines in commodity prices. Althoughhedging may protect the Company from a decline in commodity prices, it may also prevent the Companyfrom benefiting fully from price increases.

Funding Needs, Financing Risks and Dilution

The Company has no history of significant earnings and, due to the nature of its business and theGoondicum Project, there can be no assurance that the Company will be profitable. Future exploration,development, mining, and processing of minerals from the Company’s properties will require substantialfinancing. The Company has paid no dividends on the Common Shares since incorporation and does notanticipate doing so in the foreseeable future. The only current sources of funds available to the Companyare current owned assets and cash reserves, the sale of additional equity capital and/or the borrowing offunds. There is no assurance that external funding will be available to the Company, that it will beobtained on terms favorable to the Company or that it will provide the Company with sufficient funds tomeet its objectives, which may adversely affect the Company’s business and financial position. TheCompany may not have sufficient funds to complete the re-start or expansion of the Goondicum Projector to pursue other exploration, development or acquisition activities. If available, future equity financingmay result in substantial dilution to existing shareholders of the Company and reduce the value of theirinvestment.

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Limited Operating History

The Resulting Issuer will be a development stage company with no recent history of profitability, and alimited recent operating history in the mineral exploration, development and production business. TheCompany has no history of producing minerals from the Goondicum Project and Belridge has limitedhistory in doing so. The Company is subject to all of the risks associated with the re-start, development,operation and expansion of mining operations and business enterprises including:

the timing and cost, which can be considerable, of the preparation and construction of mining andprocessing facilities;

the availability and costs of skilled labour and mining equipment; and

the need to obtain necessary environmental and other governmental approvals and permits, andthe timing of those approvals and permits.

It is common in mining operations to experience unexpected problems and delays during construction,development and mine start-up. In addition, delays in the commencement of mineral production oftenoccur. Accordingly, there are no assurances that the Company’s activities will result in profitable miningoperations or that the Company will successfully establish mining operations or profitably produceminerals at any of its current or future properties, or at all.

Reliability of Resource Estimates

There is no certainty that any of the mineral resource estimates described in the Technical Report areaccurate or will be realized. Until a deposit is actually mined and processed, the quantity of mineralresources and grades must be considered as estimates only. In addition, the quantity of mineral resourcesmay vary depending on, among other things, mineral prices. Any material change in quantity of mineralresources, grade or stripping ratio may affect the economic viability of any project undertaken by theCompany. In addition, there can be no assurance that ilmenite recoveries or other mineral recoveries insmall scale laboratory tests will be duplicated in a larger scale test under on-site conditions or duringproduction.

Fluctuations in ilmenite and other mineral prices, results of drilling, metallurgical testing and productionand the evaluation of studies, reports and plans subsequent to the date of any estimate may requirerevision of such estimate. Any material reductions in estimates of mineral resources could have a materialadverse effect on the Company’s results of operations and financial condition.

Uninsurable Risks

In the course of exploration, development and production of mineral properties, certain risks, and inparticular, unexpected or unusual geological operating conditions including rock bursts, cave-ins, fires,flooding and earthquakes may occur. It may not be possible to insure fully or at all against such risks andthe Company may decide not to take out insurance against such risks as a result of high premiums orother reasons. Should such risks arise, they could reduce or eliminate the funds available to the Companyto fund its operations or investments, increase costs to the Company, reduce future profitability and/ormaterially adversely affect the Company’s financial condition.

Environmental and Safety Regulations and Risks

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Environmental and safety laws and regulations will significantly affect the operations of the Company.These laws and regulations set various standards regulating environmental, health and safety matters,including air and water quality, mine reclamation, solid and hazardous waste handling and disposal andthe promotion of occupational health and safety. These laws provide for penalties and other liabilities forthe violation of such standards and establish, in certain circumstances, obligations to rehabilitate currentand former facilities and locations where operations are or were conducted. The permission to operate canbe withdrawn temporarily where there is evidence of serious breaches of health and safety standards, oreven permanently in the case of extreme breaches. Significant liabilities could be imposed on theCompany for damages, clean-up costs or penalties in the event of certain discharges into the environment,environmental damage caused by previous owners of acquired properties or noncompliance withenvironmental laws or regulations. To the extent that the Company becomes subject to environmentalliabilities, the satisfaction of any such liabilities would reduce funds otherwise available to the Companyand could have a material adverse effect on the Company. The Company intends to minimize risks bytaking steps to ensure compliance with environmental, health and safety laws and regulations andoperating to applicable environmental standards. There is a risk that environmental laws and regulationsmay become more onerous, making the Company’s operations more expensive or materially restrictingthose operations.

Land Reclamation

Although they vary, depending on location and the governing authority, land reclamation requirementsare generally imposed on mineral exploration companies, as well as companies with mining operations, inorder to minimize long term effects of land disturbance. Reclamation obligations may includerequirements to control dispersion of potentially deleterious effluents and to reasonably re-establish pre-disturbance land forms and vegetation. In order to carry out reclamation obligations imposed on theCompany in connection with its mining operations and mineral exploration, the Company may berequired to allocate significant financial resources and/or secure bonding or other financial assurancesrelating to such obligations.

Competition

The mining industry is intensely competitive in all its phases. There is a high degree of competition forthe discovery and acquisition of properties considered to have commercial potential. The Companycompetes for the acquisition of mineral properties, claims, leases and other mineral interests as well as forthe recruitment and retention of qualified employees with many companies possessing greater financialresources and technical facilities than the Company. Competition in the mining industry could have amaterial adverse effect on the Company’s ability to acquire suitable properties in the future and to attractand retain qualified employees.

Personnel

The Company’s prospects depend significantly on the ability of its executive officers and seniormanagement to operate effectively, both independently and as a group. The success of the Companydepends to a large extent upon its ability to retain the services of its senior management and key personneland to attract additional key personnel. The loss of the services of any of these persons could have amaterial adverse effect on the Company’s business and prospects. There is no assurance the Company canmaintain the services of its directors, officers or other qualified personnel required to operate or overseeits business or attract additional or replacement qualified personnel.

Litigation Risk

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All industries, including the mining industry, are subject to legal claims, with and without merit. TheCompany may be involved from time to time in various legal proceedings, which may include labourmatters such as unfair termination claims, supplier matters and property issues incidental to its business.Defence and settlement costs can be substantial, even with respect to claims that have no merit. Due to theinherent uncertainty of the litigation process, the resolution of any particular legal proceeding could havea material adverse effect on the Company’s financial position and results of operations.

Government Regulations, Licenses and Permits

Exploration and development activities and mining operations are subject to laws and regulationsgoverning health and worker safety, employment standards, environmental matters, mine development,prospecting, mineral production, exports, taxes, labour standards, reclamation obligations and othermatters. It is possible that future changes in applicable laws and regulations, or changes in theirenforcement or regulatory interpretation could result in changes in legal requirements or in the terms ofpermits applicable to the Company or its properties which could have a material adverse impact on theCompany’s business. Obtaining necessary permits and licences can be a complex, time consumingprocess and there can be no assurance that required permits will be obtainable on acceptable terms, in atimely manner, or at all. The costs and delays associated with obtaining permits and licenses andcomplying with these permits and licenses and applicable laws and regulations could stop, materiallydelay or restrict the Company from proceeding with the exploration and development activities or theoperation or further development of a mine.

Any failure to comply with applicable laws and regulations or permits, even if inadvertent, could result inenforcement actions, including orders issued by regulatory or judicial authorities causing interruption orclosure of exploration, development or mining operations or material fines and penalties, including, butnot limited to, corrective measures requiring capital expenditures, installation of additional equipment,remedial actions or other liabilities. Parties engaged in mining operations or in the exploration ordevelopment of mineral properties may be required to compensate those suffering loss or damage byreason of these activities and may have civil or criminal fines or penalties imposed for violations ofapplicable laws or regulations.

In addition, amendments to current laws and regulations governing the Company’s activities or morestringent implementation thereof could have a substantial adverse impact on the Company and causeincreases in exploration expenses, capital expenditures or production costs or reduction in levels ofproduction at producing properties or require abandonment or delays in development of new miningproperties.


Certain of the directors and officers of the Company may also serve as directors and/or officers of othercompanies involved in natural resource exploration and development and consequently there exists thepossibility for such directors and officers to be in a position of conflict. See “Directors and Officers –Other Reporting Issuer Experience”.

Currency Fluctuations;

The operations of the Company will be subject to currency exchange rate fluctuations and suchfluctuations may materially affect the financial position and results of the Company. The Company issubject to the risks associated with the fluctuation of the rate of exchange of the U.S. dollar, the Canadiandollar, the Australian dollar and other currencies. The majority of the Company’s operating costs areexpected to be incurred in Australian dollars, while the prices for its products are expected to be based in

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U.S. dollars or other currencies. The Company does not currently take any steps to hedge against currencyfluctuations. Although it may elect to hedge against the risk of currency fluctuations in the future, therecan be no assurance that steps taken by the Company to address such currency fluctuations will eliminateall adverse effects of currency fluctuations. Accordingly, the Company may suffer losses due to adverseforeign currency fluctuations.

Acquisition and Integration Risks

There are several risks relating to the Proposed Acquisition, including that the parties may be unable tocomplete the Proposed Acquisition, problems may arise with the ability to successfully integrate thebusiness of Belridge and the Company, the Company may not be able to achieve the benefits of theProposed Acquisition or it may take longer than expected to achieve those benefits and the ProposedAcquisition may involve unexpected costs and/or liabilities.

In addition, the Company may acquire additional mining properties and operations. However, there canbe no assurance that the Company will identify attractive acquisition candidates in the future or that it willsucceed in effectively managing the integration of any acquired operations.

If the expected synergies from such transactions do not materialize or if the Company fails to successfullyintegrate such acquired operations into its existing operations, the Company’s results could be adverselyaffected. To the extent that prior owners of businesses acquired by the Company failed to comply with orotherwise violated applicable laws or contractual requirements or otherwise incurred liabilities, theCompany, as a successor owner, may be financially responsible for these violations and other liabilities.The discovery of any material liabilities could have a material adverse effect on the Company’s business,financial condition and future prospects.

Absence of Dividend History or Policy

No dividends on the Common Shares have been paid by the Company to date. The Company anticipatesthat for the foreseeable future it will retain future earnings and other cash resources for the operation anddevelopment of its business. Payment of any future dividends will be at the discretion of the Board aftertaking into account many factors, including the Company’s operating results, financial condition andcurrent and anticipated cash needs.

Independent Contractors

The Company’s success depends, to a significant extent, on the performance and continued service ofindependent contractors. The Company will contract the services of professional drillers and others forexploration, environmental, construction and engineering services. Poor performance by such contractorsor the loss of such services could have a material and adverse effect on the Company and its business andresults of operations and could result in failure to meet business objectives.

Political Risk/Foreign Operations

The Goondicum Project is located in Australia. The Company believes that the government of Australiasupports the development of its natural resources by foreign operators. There is no assurance that futurepolitical and economic conditions in Australia will not result in the government adopting differentpolicies respecting foreign development and ownership of mineral resources. Any such changes in policymay result in changes in laws affecting ownership of assets, taxation, rates of exchange, sales of mineralproducts, environmental protection, labour relations, repatriation of income and return of capital, whichmay affect both the ability of the Company to undertake exploration and development activities in respect

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of future properties, as well as its ability to continue to explore, develop and operate the GoondicumProject. The possibility that a future government of Australia may adopt substantially different policies,which might extend to expropriation of assets, cannot be ruled out.

Trading in the Company’s Common Shares may be Volatile

The securities of publicly traded companies, particularly mineral exploration and developmentcompanies, can experience a high level of price and volume volatility and the value and trading price ofthe Company’s securities can be expected to fluctuate depending on various factors, not all of which aredirectly related to the success of the Company and its operating performance, underlying asset values orprospects. These include the risks described elsewhere in this “Risk Factors” section as well as thefollowing: worldwide economic conditions, changes in government policies, investor perceptions,movements in global interest rates and global stock markets, variations in operating costs and the cost ofcapital that the Company may require in the future and market conditions that are specific to the miningindustry.

INFORMATION CONCERNING THE COMPANY

Corporate Structure

The Company was incorporated under the laws of the Province of British Columbia on June 1, 1995 asMadoc Mining Company Ltd. The Company changed its name to Adobe Ventures Inc., on January 28,1999, to Coalcorp Mining Inc., on October 27, 2005, and subsequently to Melior Resources Inc., onSeptember 29, 2011. The Company is incorporated under the BCA.

The Company’s head office is located at 120 Adelaide Street West, Suite 2500, Toronto, Ontario M5H1T1. The Company’s registered office is located at 355 Burrard Street, Suite 1900, Vancouver, BritishColumbia V6C 2G8.

General Development of the Business

The following describes the general development of the business of the Company over the last threecompleted financial years.

Reorganization

In December 2010, Compañía Carbones del Cesar S.A., a former subsidiary of the Company domiciled inColombia, entered into voluntary liquidation. GC Coal Limited, a former subsidiary of the Companydomiciled in Ireland, was dissolved in the 2010-2011 fiscal year.

On March 16, 2012, the Company completed the sale of all of the common stock of its wholly-ownedsubsidiary, Coalcorp International A.V.V. (“Coalcorp AVV”), which was the holding company fornumerous off-shore subsidiaries. As a result of the sale, assets of discontinued operations ofapproximately Cdn$3.6 million, liabilities of discontinued operations of approximately Cdn$0.4 millionand other associated liabilities of approximately Cdn$3.0 million, as reported on the unaudited statementof financial position as at December 31, 2011, were removed from the Company’s balance sheet as of theclosing. Under the share purchase and wind-down agreement, the Company is entitled to receive, subjectto certain terms and conditions, a share of net recoveries of cash, if any, that the purchaser receives as aresult of winding up or reorganizing any of the Coalcorp AVV subsidiaries.

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Investment in Formation Metals Inc.

Pursuant to a subscription agreement dated May 6, 2010, the Company purchased a Cdn$8,000,000unsecured convertible debenture (the “Debenture”) from Formation Metals Inc. (“Formation”). TheDebenture had an initial term of 18 months with an interest rate of 12%, payable in common shares in thecapital of Formation (“Formation Shares”). The Debenture was convertible into Formation Shares atCdn$1.50 per Formation Share during the initial term.

On March 14, 2011, the Company announced that it had completed an agreement with Formation for theprepayment by Formation of the Debenture. Pursuant to such agreement, the Company surrendered theDebenture to Formation against payment of US$9,333,333 in cash and 400,000 Formation Shares. As atthe date hereof, the Company no longer holds any Formation Shares.

Investment in Oracle Mining Corp.

The Company entered into a subscription agreement dated October 25, 2010 with Gold Hawk ResourcesInc., which subsequently changed its name to Oracle Mining Corp. (“Oracle”). Pursuant to thesubscription agreement, the Company purchased 6,000,000 common shares in the capital of Oracle(“Oracle Shares”) at a price of US$1.25 per Oracle Share for an aggregate purchase price of US$7.5million. As at the date hereof, the Company no longer holds any Oracle Shares.

Settlement of Litigation

The Company, Xira Investment Inc. (“Xira”) and certain former members of the Company’s managementand other parties to various claims amongst them entered into a settlement agreement dated January 31,2010 (the “Settlement Agreement”). Under the terms of the Settlement Agreement, Xira agreed to payUS$34 million to the Company payable as follows: (i) US$7 million on February 8, 2010; (ii) US$17million on March 15, 2010; (iii) US$8 million on September 15, 2010; and (iv) US$2 million on January31, 2011. The Company received all such payments.

The Settlement Agreement also provided that: (i) on March 15, 2010, the 40% shareholding in CarbonesColombianos del Cessejon S.A. (“CCC”) (the owner of the Caypa Mine) held in escrow would bereleased to Xira and the remaining 60% shareholding in CCC held by certain of the Company’ssubsidiaries would be assigned to Xira; (ii) Andean Coal Corporation B.V.I. agreed to waive its salescommission on production from the Caypa Mine and cancel any outstanding payments; (iii) Blue PacificAssets Corp. agreed to terminate its royalty on production from the La Francia I Mine and cancel anyoutstanding royalty payments; (iv) all litigation and regulatory proceedings among the parties would beterminated; (v) all parties would release the others as part of the settlement; and (vi) the releases in favourof Xira and the former management group would be held in escrow until receipt of the final payment fromXira due on January 31, 2011.

On March 21, 2011 the Company announced that it had entered into a settlement and mutual release (the“GS Settlement Agreement”) with certain affiliates of the Goldman Sachs Group, Inc., includingColombian Natural Resources I SAS (“CNRI”). Pursuant to the GS Settlement Agreement, the partiesirrevocably released and discharged each other from any and all claims, including those raised by CNRIin the Notices of Claim announced on November 3, 2010 and December 3, 2010, arising out of or relatingto the sale by certain of the Company’s subsidiaries of the La Francia I Mine and related infrastructureassets and all of the issued and outstanding shares of Adromi Capital Corp., the holder of the La FranciaII Mine, to a subsidiary of the Goldman Sachs Group, Inc., which transaction was completed on March19, 2010 (the “La Francia Transaction”).

In accordance with the terms of an escrow agreement dated March 19, 2010 among Computershare TrustCompany of Canada (“Computershare”), the Company, and CNRI and Colombian Natural Resources II

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SAS (collectively, the “CNR Parties”), Computershare was holding US$8,000,000 in escrow inconnection with the La Francia Transaction. Pursuant to the GS Settlement Agreement, US$6,230,576was released to the CNR Parties and US$1,769,423 was released to the Company.

Changes in the Board of Directors and Management.

On March 24, 2011, the Company announced the appointment of Robert Dietrich to Board. In addition,Richard Lister, then Chairman of the Company, assumed the added responsibilities of CEO and StevenCresswell stepped down as Interim CEO and assumed the responsibility of CFO.

On August 17, 2011, the Company announced the appointment of Charles Entrekin to the positions ofCEO and Chairman of the Board. Charles Entrekin replaced Richard Lister following his resignation forpersonal reasons; however, the Company retained Richard Lister as a consultant for four months to assistin a smooth transition. On September 9, 2011, the Company announced the appointment of Daniel Dumasto the Board.

On December 1, 2011, the Company announced the appointment of Rishi Tibriwal, CA, as the CFOfollowing the resignation of Steven Cresswell.

On October 1, 2012, the Company announced the appointment of Thomas Masney, CA, as the CFO onthe resignation of Rishi Tibriwal.

On February 14, 2013, Charles Entrekin, Evgenij Iorich, Remo Mancini and Muneeb Yusuf were electedas directors of the Company at the annual and special meeting of the shareholders.

On March 30, 2014, Remo Mancini, Muneeb Yusuf and Evgenij Iorich resigned as directors of theCompany and Martyn Buttenshaw, Glenn Black and Joseph Connolly were appointed as directors of theCompany by the Board.

Graduation from NEX and Recategorization as an Investment Issuer

Effective April 1, 2011, the Company commenced trading on Tier 1 of the Exchange as an “InvestmentIssuer”. The Company received the consent of shareholders holding greater than 50% of the issued andoutstanding shares in the capital of the Company to the change of business from a mineral resourcecompany to an investment issuer. Shareholder approval was obtained by written consent.

In conjunction with its recategorization, the Company adopted an Investment Policy which providesguidelines and criteria for all of the Company’s investment activities. The Investment Policy is attachedas Schedule “A” to the Company’s news release issued and filed under the Company’s profile onSEDAR on March 31, 2011. In connection with the completion of the Proposed Acquisition, theCompany’s Investment Policy will be terminated.

Senior Notes

On August 31, 2011, the Company’s outstanding 12% senior secured guaranteed notes due August 31,2011 (Series A) matured and the Company made a final payment of US$8.4 million in respect of theaggregate principle amount of US$8.27 million, plus accrued interest.

2012 Strategic Alternatives Review

On May 16, 2012, the Company announced that the Board had commenced a review of strategicalternatives with the objective of enhancing shareholder value. A special committee of the Board wasestablished to oversee the review. The Company evaluated its options including, but not limited to,

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continuing to explore investment opportunities, a corporate reorganization, reverse takeovers and a returnof capital to shareholders. It was concluded that the Company should continue to pursue its businessstrategy of investing and aiding growth in projects in the mining, metallurgical and mineral industries,with the objective of growing the Company and increasing shareholder value.

Investment in Asian Mineral Resources Limited

On June 25, 2012, the Company entered into a subscription agreement (as amended on June 29, 2012, the“AMR Subscription Agreement”) with AMR, pursuant to which the Company acquired 47,272,727common shares in the capital of AMR (“AMR Shares”) at Cdn$0.11 per AMR Share for an aggregatepurchase price of Cdn$5,200,000 (the “AMR Investment”). As of December 31,2013, the Companyowned and controlled, directly and indirectly, a total of 47,272,727 AMR Shares representing 6% of theissued and outstanding AMR shares on an undiluted basis. As of May 14, 2014, the closing price of AMRShares on the Exchange was Cdn$0.07 per share

The Company and AMR also entered into an investor rights agreement (the “Investor RightsAgreement”) which contemplated that, for so long as the Company owns at least 10% of the outstandingAMR Shares, the Company would be entitled to designate one nominee for election or appointment to theboard of directors of AMR. The Company no longer owns over 10% of the outstanding AMR Shares.

Offer by Pala to Acquire Common Shares of the Company

On October 1, 2012, 0947446 B.C. Ltd., a wholly-owned subsidiary of Pala, made an offer to purchase(the “Offer”) all of the outstanding Common Shares in the capital of the Company that it did not own fora purchase price of Cdn$0.11 per Common Share in cash.

The Company formed a special committee of the Board to review and evaluate the Offer. The specialcommittee, after consulting with its financial and legal advisors, determined to recommend thatshareholders reject the Offer on the basis that the Offer did not reflect the fair market value of theCommon Shares and was therefore not in the best interests of the Company and its shareholders.

The Offer expired on December 24, 2012 and Pala took up all of the Common Shares deposited to theOffer, being an aggregate of 9,832,366 Common Shares, representing approximately 5.67% of theoutstanding Common Shares. After taking up such Common Shares, Pala owned, directly or indirectly,94,528,199 Common Shares or approximately 54.52% of the outstanding Common Shares.

Letter of Intent with Firestone Ventures Inc.

On July 5, 2013, the Company announced that it had entered into a letter of intent in connection with aproposed transaction pursuant to which the Company would acquire all of the issued and outstandingcommon shares of Firestone Ventures Inc. (“Firestone”) in consideration for the issuance to Firestoneshareholders of one Common Share for each 2.895 Firestone common shares held. The proposedtransaction was subject to a number of conditions including confirmatory due diligence by the Company.The Company also agreed to provide Firestone with a bridge loan of up to Cdn$500,000, subject tocertain conditions; however, no amounts were ever advanced. On August 30, 2013, the Companyannounced that it had terminated the bridge loan and that it no longer intended to proceed with itsproposed friendly acquisition of Firestone.

Melior Australia

On March 21, 2014, in contemplation of the Proposed Acquisition, the Company formed Melior Australiaas a wholly-owned subsidiary. As of the date hereof, Melior Australia has no material assets or liabilitiesother than its rights and obligations relating to the Proposed Acquisition.

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Selected Consolidated Financial Information and Management’s Discussion and Analysis

Selected Consolidated Financial Information

Year EndedJune 30, 2013

Interim PeriodEnded December 31,

2013

Total Expenses $1,154,000 $1,006,000

Amounts deferred in connection with theProposed Acquisition

Nil Nil

See Schedule “A” – “Financial Statements” for the Company’s financial statements for the interim periodended December 31, 2013, and the fiscal year ended June 30, 2013.

Management Discussion and Analysis

See Schedule “B” – “Management Discussion & Analysis” for the Company’s Management Discussion &Analysis for the interim period ended December 31, 2013, and the fiscal year ended June 30, 2013.

Description of the Securities

The authorized capital of the Company consists of an unlimited number of Common Shares without parvalue and an unlimited number of preferred shares without par value. As at the date of this FilingStatement, there are 173,380,974 Common Shares issued and outstanding and no preferred shares areissued and outstanding. As at the date of this Filing Statement, there are 1,710,000 options to acquireCommon Shares outstanding.

In addition, the Company will be issuing 38,087,971 Common Shares to the Belridge Shareholders uponthe closing of the Proposed Acquisition. Additional Common Shares may become issuable to theBelridge Shareholders pursuant to the earn-out arrangements provided for in the Share PurchaseAgreement. See “Principal Terms of the Proposed Acquisition”.

Following the completion of the Proposed Acquisition, the Company’s capital structure will become thecapital structure of the Resulting Issuer. See “Information Concerning the Resulting Issuer”.

Subject to the rights of the holders of preferred shares of the Company, the holders of Common Sharesare entitled to dividends, if, as and when declared by the Board, to one vote per Common Share atmeetings of the shareholders of the corporation and upon liquidation, dissolution or winding-up, to shareequally in such assets of the Company as are distributable to the holders of Common Shares.

The preferred shares of the Company may be issued in one or more series and, with respect to thepayment of dividends and the distribution of assets in the event that the Company is liquidated, dissolvedor wound-up, rank prior to the Common Shares. The Board has the authority to issue preferred shares inseries and to determine the price, number, designation, rights, privileges, restrictions and conditions,including dividend rights, redemption rights, conversion rights and voting rights, of each series withoutany further vote or action by shareholders.

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Stock Option Plan

The Company adopted the Stock Option Plan at its annual general meeting held on November, 20 2013.See “Executive Compensation – Description of the Stock Option Plan” for a summary of the terms of theStock Option Plan.

Prior Sales

The Company has not issued any Common Shares in the past 12 months.

Stock Exchange Trading Prices

The Common Shares are listed on the Exchange under the trading symbol “MLR”. The closing price ofthe Common Shares on May 14, 2014 was Cdn$0.135. The following table sets out the high and lowclosing prices of the Common Shares for the periods indicated as reported by the Exchange:

Date* High (Cdn$) Low (Cdn$) Trading Volume

May 1-May 14, 2014 0.145 0.125 82,650

March 2014 0.08 0.07 884,470

February 2014 0.085 0.075 945,741

January 2014 0.09 0.075 667,209

Q2 of Fiscal Year endingJune 30, 2014

0.095 0.07 3,088,002


0.09 0.07 2,274,750


0.095 0.07 3,088,002


0.09 0.065 1,137,792


0.095 0.075 607,877


0.11 0.07 4,452,162


0.135 0.105 19,053,153

Executive Compensation

Named Executive Officers

During the fiscal year ended June 30, 2013, the Company had three Named Executive Officers, beingCharles Entrekin, the CEO, Thomas Masney, the CFO and Rishi Tibriwal, the former CFO of theCompany.

* The quarterly information provided in this table reflects the Company’s fiscal year end of June 30.

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Named Executive Officer (“NEO”) means: (a) each Chief Executive Officer, (b) each Chief FinancialOfficer, (c) each of the three most highly compensated executive officers, or the three most highlycompensated individuals acting in a similar capacity, other than the Chief Executive Officer and ChiefFinancial Officer, at the end of the most recently completed financial year whose total compensation was,individually, more than $150,000; and (d) each individual who would be an NEO under paragraph (c) butfor the fact that the individual was neither an executive officer of the Company, nor acting in a similarcapacity, at the end of that financial year.

Compensation Discussion & Analysis

The Company’s policies on executive compensation are intended to provide appropriate compensation forexecutives that is internally equitable, externally competitive and reflects individual achievements in thecontext of the Company’s achievements. The overriding principles in establishing executivecompensation provide that compensation should reflect:

(a) fair and competitive compensation commensurate with an individual’s experience and expertisein order to attract and retain highly qualified executives;

(b) recognition and encouragement of leadership, entrepreneurial spirit and team work;

(c) an alignment of the financial interests of the executives with the financial interests of theshareholders of the Company;

(d) stock options and, in certain circumstances, bonuses to reward individual performance andcontribution to the achievement of corporate performance and objectives; and

(e) a contribution to enhancement of shareholder value.

Charles Entrekin, the CEO of the Company, has the responsibility for recommending the level of salaryand incentives for executive officers, including himself. The recommended salary and incentives are thenreviewed and approved by the Nomination and Compensation Committee in accordance with the Charterof the Nomination and Compensation Committee. The current Nomination and Compensation Committeeis comprised of Joseph Connolly, Glenn Black and Martyn Buttenshaw. Joseph Connolly and GlennBlack are independent within the meaning of NI 58-101.

There are three elements to the Company’s executive compensation program: (1) base salary; (2) short-term compensation incentives for annual and personal performance; and (3) long-term compensationincentives (primarily stock options) related to long-term increase in Common Share value. Officers anddirectors are not permitted to purchase financial instruments, including, for greater certainty, prepaidvariable forward contracts, equity swaps, collars, or units of exchange traded funds, that are designed tohedge or offset a decrease in market value of equity securities granted as compensation or held, directly orindirectly, by such officers and directors.

Base Salary

The base salary for executive officers of the Company is reviewed and established annually, at or near thebeginning of the financial year. Base salaries are based on the particular executive officer’s personalperformance and seniority, contribution to the business of the Company and the size and stage ofdevelopment of the Company. Base salaries are also reviewed from time to time to ensure comparabilitywith industry norms.

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Short-Term Compensation Incentives

The Company may from time to time award discretionary bonuses; however, the Nomination andCompensation Committee does not place great emphasis on the awarding of annual bonuses. Bonusesmay be awarded to certain executives where such executives meet personal objectives or where theCompany achieves certain objectives as a direct or indirect result of such executive’s efforts.

Long-Term Compensation Incentives

Long-term incentive compensation for executive officers is provided through grants of stock optionspursuant to the Company’s Stock Option Plan. Stock option grants to executive officers are generallyreviewed annually. The number of stock options granted is based on each executive’s salary range,responsibility and performance and takes into account the number and terms of stock options that havebeen granted to that executive previously. See “Securities Authorized For Issuance Under EquityCompensation Plans” for further details relating to the Company’s Stock Option Plan.

The compensation of executive officers is set within guidelines developed by the Nomination andCompensation Committee and approved by the Board and is consistent with the principles set out above.No specific quantitative targets are set by the Nomination and Compensation Committee with respect tothe compensation of executive officers. In addition, although the performance of the Company is a factorthat the Nomination and Compensation Committee considers when determining or approving thecompensation of executive officers, it is primarily the factors described above that determine thecompensation of the executive officers. The Board has considered the implications of the risks associatedwith the Company’s compensation policies and practices and has not identified any risks that arereasonably likely to have a material adverse effect on the Company.

Summary Compensation

Form 51-102F6 requires the disclosure of certain financial and other information relating to a reportingissuer’s NEOs. The following table sets forth the compensation earned in each of the Company’s threemost recently completed financial years by its NEOs.

Summary Compensation Table

Non-Equity IncentivePlan Compensation

(Cdn$)Name and

Principal PositionFiscalYear

Salaryand Fees(Cdn$)

OptionBased

Awards(Cdn$)

AnnualIncentive

Plan

LongTerm

IncentivePlan

All OtherCompensation(1)

TotalCompensation

(Cdn$)Charles Entrekin(2)

CEO

2014 (as ofMarch 31,2014)

161,980 Nil Nil Nil Nil 161,980

2013 215,592 Nil Nil Nil Nil 215,592

2012 202,196 187,450 Nil Nil Nil 389,646

2011 56,500 Nil Nil Nil Nil 56,500

Thomas Masney(3)

CFO

2014 (as ofMarch 31,2014)

72,000 Nil Nil Nil Nil 72,000

2013 84,000 Nil Nil Nil Nil 84,000

2012 Nil Nil Nil Nil Nil Nil


Rishi Tibriwal(4)2013 34,000 Nil Nil Nil Nil 34,000

2012 68,000 Nil Nil Nil Nil 68,000

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Non-Equity IncentivePlan Compensation

(Cdn$)Name and

Principal PositionFiscalYear

Salaryand Fees(Cdn$)

OptionBased

Awards(Cdn$)

AnnualIncentive

Plan

LongTerm

IncentivePlan

All OtherCompensation(1)

TotalCompensation

(Cdn$)


Notes:

(1) Amounts for perquisites and other personal benefits, securities or property are not reported unless the aggregate amount ismore than the lesser of $50,000 or 10% of the total salary of the NEO for the financial year.

(2) Charles Entrekin was appointed CEO and Chairman of the Board on August 17, 2011, after serving as a director sinceMarch 27, 2009. Charles Entrekin’s compensation for the fiscal year 2011 was for his services as a director and representsdirector fees. His compensation in fiscal year 2012 as CEO was US$12,000 per month plus Board and committee fees ofUS$77,891 and in fiscal year 2013 was US$12,000 per month plus Board and committee fees of US$68,990.

(3) Thomas Masney was appointed CFO on October 2, 2012.

(4) Rishi Tibriwal was appointed CFO on December 1, 2011 and resigned on October 1, 2012.

The Company issued options to acquire Common Shares to certain directors and officers on September21, 2011 pursuant to the terms of the Company’s Stock Option Plan. Each such option is exercisable forone Common Share at a price of Cdn$0.17 per Common Share. The value in the “Option-based Awards”column in the table above represents the total number of options issued to each NEO multiplied by thefair market value of such options as calculated using the Black Scholes method. The key assumptionsused to calculate the fair market value of the options were a risk-free interest rate of 1.85%, an expectedstock price annual volatility of 100% and an expected life of 6 years.

Incentive Plan Awards

There were no option-based awards granted to NEOs or directors that vested during the most recentlycompleted financial year. No non-equity incentive plan compensation was earned by the NEOs anddirectors during such year.

Description of the Stock Option Plan

The following information is intended as a brief description of the Company’s Stock Option Plan and isqualified in its entirety by the full text of the Stock Option Plan.

The Stock Option Plan provides for the grant of options to purchase Common Shares to eligible directors,senior officers, employees and consultants of the Company or any of its Affiliates (“Participants”). Thepurpose of the Stock Option Plan is to attract, retain, motivate and compensate Persons who are integralto the growth and success of the Company. The Stock Option Plan is administered by the Board. All ofthe powers exercisable by the Board under the Stock Option Plan may, to the extent permitted byapplicable law and as authorized by the Board, be exercised by the Nomination and CompensationCommittee. The aggregate number of Common Shares currently reserved for issuance upon the exerciseof options pursuant to the Stock Option Plan is equal to 10% of the number of issued and outstandingCommon Shares. The number of Common Shares reserved for issuance to any one participant upon theexercise of options pursuant to the Stock Option Plan shall not exceed 5% of the total number ofCommon Shares issued and outstanding. The number of Common Shares reserved for issuance to any onenon-employee director upon the exercise of options pursuant to the Stock Option Plan shall not exceed2% of the total number of Common Shares issued and outstanding.

- 28 -

The number of Common Shares issuable to Insiders pursuant to options granted under the Stock OptionPlan and all other security based compensation arrangements of the Company shall not, at any time,exceed 10% of the total number of Common Shares then issued and outstanding. The number of CommonShares issued to Insiders pursuant to options granted under the Stock Option Plan and all other securitybased compensation arrangements shall not, within a one year period, exceed 10% of the total number ofCommon Shares then issued and outstanding. The number of Common Shares issued to any Insider andsuch Insider’s Associates pursuant to options granted under the Stock Option Plan and all other securitybased compensation arrangements shall not, within a one year period, exceed 5% of the total number ofCommon Shares then issued and outstanding.

The number of options granted to any one Participant under the Stock Option Plan and all other securitybased compensation arrangements of the Company shall not result in the grant to such Participant of inexcess of 5% of the number of Common Shares outstanding immediately prior to the grant of any suchoptions within any 12 month period unless disinterested shareholder approval is obtained. The number ofoptions granted to any one consultant under the Stock Option Plan and all other security basedcompensation arrangements of the Company shall not result in the grant to such consultant of in excess of2% of the number of Common Shares outstanding immediately prior to the grant of any such optionswithin any 12 month period.

In addition to the limitations on the grant of options under the Stock Option Plan described above, thenumber of shares reserved for issuance to any one Person pursuant to options shall not exceed 5% of theissued and outstanding Common Shares and the number of Common Shares reserved for issuancepursuant to options granted to directors who are not also employees of the Company, in the aggregate,shall not exceed 1% of the issued and outstanding Common Shares.

The exercise price of an option is set by the Board at the time of grant, but may not be less than theclosing price of the Common Shares on the principal stock exchange on which the Common Shares arelisted on the last trading day preceding the date on which the grant of the option is approved by the Board.The Stock Option Plan provides for flexible vesting, at the discretion of the Board. Under the StockOption Plan, the Board determines the term of any options granted, which shall not exceed 10 years fromthe date of grant.

The expiration of any option will be accelerated if the Participant’s employment or other relationship withthe Company terminates. An optionee that ceases to be a Participant (for reasons other than terminationfor cause) has 90 days from the date of termination to exercise all existing vested options; provided that inno event shall such right extend beyond the option period. In the event of the death of a Participant, theoptions granted to the Participant shall be exercisable thereafter by the Person or Persons to whom theParticipant’s rights under the option shall pass by the Participant’s will or the laws of descent anddistribution; provided that in no event shall such right extend beyond the option period. If the date onwhich an option expires occurs during or within two business days after the last day of a trading black-outperiod imposed pursuant to the Company’s insider trading policy (as it may be amended from time totime), the expiry date of such option shall be the date that is 10 business days following the date of expiryof the black-out period.

Any exercises of options will make new grants available under the Stock Option Plan, effectivelyresulting in reloading of the number of options available to grant under the Stock Option Plan. In theevent that options granted are surrendered in accordance with the provisions of the Stock Option Plan, orterminate or expire without being exercised in whole or in part, the Common Shares reserved for issuancebut not purchased under such lapsed options shall be available for subsequent options to be granted underthe Stock Option Plan.

- 29 -

The benefits, rights and options accruing to any Participant in accordance with the terms and conditionsof the Stock Option Plan are not assignable or transferable by the Participant except: (a) from theParticipant to an entity controlled by the Participant or the Participant’s registered retirement savings plan(“RRSP”) or registered retirement income fund (“RRIF”) or from an entity controlled by the Participantor the Participant’s RRSP or RRIF to the Participant and, in either such event, the provisions of the StockOption Plan shall apply mutatis mutandis as though they were originally issued to and registered in thename of the Participant; or (b) as otherwise specifically permitted under the Stock Option Plan and inaccordance with applicable laws.

The Stock Option Plan further provides for the termination of options in connection with certainfundamental changes such as the dissolution, liquidation or merger of the Company, or in the event of achange of control of the Company and provides for accelerated vesting in such circumstances, at thediscretion of the Board. Subject to the approval of any stock exchange on which the Company’s securitiesare listed, the Board may suspend, amend or terminate the Stock Option Plan.

The following types of amendments to the Stock Option Plan or an option granted under the Stock OptionPlan require shareholder approval: (a) any increase in the maximum number of Common Shares issuableunder the Stock Option Plan; (b) any reduction in the exercise price of outstanding options; (c) thecancellation of any option for the purpose of exchange for re-issuance at a lower exercise price to thesame Person; (d) any extension of the expiry date of an outstanding option (other than in accordance withthe Stock Option Plan); (e) any increase in the term of options granted under the Stock Option Planbeyond 10 years from the date of grant; (f) any amendment to transfer provisions applicable to optionsgranted under the Stock Option Plan; (g) any amendment for which applicable law or rules of theExchange require approval of the shareholders of the Company; (h) any change in the matters requiringshareholder approval under the Stock Option Plan; and (i) any expansion in the class of Participants towhom options may be granted under the Stock Option Plan. The Board may approve all otheramendments to the Stock Option Plan or options granted under the Stock Option Plan.

The Stock Option Plan has not been amended in any respect since it was approved by the shareholders atthe last annual and special meeting of the Company. A copy of the Stock Option Plan is attached asSchedule “A” to the Company’s management information circular dated October 3, 2013 in respect of theannual and special meeting of the shareholders of the Company held on November 20, 2013. Pursuant tothe Exchange Corporate Finance Manual, rolling plans, such as the Stock Option Plan, must receiveshareholder approval yearly at the annual meeting of shareholders of the Company.

Pension Benefits

The Company does not provide retirement or pension benefits for directors or executive officers.

Termination and Change of Control Benefits

Thomas Masney, the CFO, is employed pursuant to terms set out in an employment agreement. Theagreement terms provide that Thomas Masney is entitled to the greater of one month’s written notice orsuch period of notice required by employment standards legislation of termination without just cause or,at the Company’s option, payment in lieu of such notice of one months’ salary (or such period required byemployment standards legislation) and accrued but unpaid salary, expenses and vacation pay. TheCompany can terminate Thomas Masney’s employment at any time for just cause without notice orpayment in lieu thereof. The agreement does not contain any payment provisions in connection with anychange of control of the Company.

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Director Compensation

Effective March 30, 2014 (i) the Company pays an annual retainer of US$20,000 to directors (US$40,000to the Chair) and (ii) an annual retainer to members of the committees of the Board as follows: AuditCommittee US$3,000 (US$5,000 to the Chair); Nomination and Compensation Committee US$3,000(US$5,000 to the Chair). Prior to March 30, 2014, the Company paid an annual retainer of US$25,000 todirectors (US$45,000 to the Chair) and the Company also paid an annual retainer to members of thecommittees of the Board as follows: Audit Committee US$4,000 (US$20,000 to the Chair); Nominationand Compensation Committee US$4,000 (US$8,000 to the Chair); Corporate Governance CommitteeUS$4,000.

Charles Entrekin’s compensation during the most recently completed financial year, ended June 30, 2013,is disclosed above under the heading “Summary Compensation Table”. The other directors of theCompany were compensated as follows:

Director Compensation Table

Name

Fees Earned Six Monthsended Dec 31, 2013

(Cdn$)

Option - basedAwards Six Monthsended Dec 31, 2013

(Cdn$)

Total

(Cdn$)

Remo Mancini 36,180 Nil 36,180

Muneeb Yusuf 27,540 Nil 27,540

Evgenij Iorich 21,600 Nil 21,600

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information concerning the Stock Option Plan as at December 31, 2013.The Company has no equity compensation plans other than the Stock Option Plan.

Stock Option Plan Category

Number ofsecurities

to be issuedupon exercise of

outstandingoptions

Weighted-average exerciseprice of outstanding options

Number of securitiesremaining available forfuture issuance underequity compensation

plans

Equity compensation plansapproved by shareholders

1,710,000 Cdn$0.17 15,628,097

Equity compensation plans notapproved by shareholders

N/A N/A N/A

Total 1,710,000 Cdn$0.17 15,628,097

The aggregate number of Common Shares reserved for issuance upon the exercise of options pursuant tothe Stock Option Plan is such number of Common Shares as is equal to 10% of the number of issued andoutstanding Common Shares from time to time. As at the date of this Filing Statement, the maximum

- 31 -

number of Common Shares which may be issued under the Stock Option Plan is 17,338,097 (representing10% of the 173,380,974 Common Shares currently issued and outstanding).

Management Contracts

No management functions of the Company are to any substantial degree performed by a Person other thanthe directors or officers of the Company. In the ordinary course of business, Pala provides consulting andtechnical services in connection with the Company’s investment and operational activities on arm’slength terms and conditions.

Arm’s Length Transaction.


Legal Proceedings

The Company is not a party to any legal proceedings and it is not aware of any pending or threatenedlegal proceedings against the Company.

Auditor, Transfer Agent and Registrar

MNP LLP of 701 Evans Avenue, 8th Floor, Toronto, Ontario, M9C 1A3, Chartered Accountants is theexternal auditor of the Company.

Equity Financial Trust Company in Toronto, Ontario is the transfer agent and registrar for the CommonShares.

Material Contracts

The Company is party to the Share Purchase Agreement.

INFORMATION CONCERNING BELRIDGE

Corporate Structure

Belridge was incorporated under the laws of the State of Queensland, Australia on November 5, 1992 asMonto Resources Pty Ltd. Belridge changed its name to Belridge Enterprises Pty Ltd on May 13, 2009following a period of administration.

Belridge’s head office is located at Level 19, 241 Adelaide Street, Brisbane, Queensland, 4000.Belridge’s registered office is located C/o 'Merrotts' Level 6, 241 Adelaide Street, Brisbane, Queensland,4000.

Belridge is privately owned by the Belridge Shareholders. Belmont Park – Monto Pty Ltd (as Trustee ofthe BPI Monto Trust (a family trust for Ian Robert McCauley and his family)) owns a 48.68% interest,Panorama Ridge – Monto Pty Limited (as Trustee of the PR Monto Trust (a family trust for John NevilleRawlins and his family)) owns a 48.68% interest and Sashimi Investments Pty Ltd (as Trustee of theMcCauley Investment Trust (a family trust for Mark McCauley and his family)) owns a 2.64% interest.

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General Development of the Business

Belridge

Belridge (as Monto Resources Pty Ltd) was formerly a wholly-owned subsidiary of Monto MineralsLimited (formerly Monto Minerals NL) (“Monto Minerals”) and was acquired by Belmont Park – MontoPty Ltd and Panorama Ridge – Monto Pty Limited in May 2009 after being placed into administrationfrom August 2008 to April 2009. Belridge was subsequently renamed Belridge Enterprises Pty Ltd andretained 100% ownership of the Goondicum Project.

In May 2011, Belridge approved the redevelopment of the Goondicum Project. Construction began inSeptember 2011 and was successfully completed in August 2012. In June 2013, after ten months ofoperation, production at the mine was suspended to complete a capacity upgrade plan with the objectiveof restarting operations after key process improvements and plant upgrades had been executed.

Significant Acquisitions and Dispositions

On March 3, 2014, Belridge acquired from SunWater Limited (“SunWater”) the 36km water pipelinesupplying water to the Goondicum Project. SunWater constructed this infrastructure asset specifically forthe Goondicum Project in 2007; however, Belridge has operated and maintained it since February 2012.Belridge has indemnified SunWater against all liability associated with the operations and maintenance ofthe pipeline and easements since this date.

Description of the Business

The following information regarding the Goondicum Project has been reproduced from the TechnicalReport and should be read in conjunction therewith.

The Goondicum Project

The Goondicum Project is a fully permitted ilmenite mine located in Central Queensland, Australia, 30kmdue east of the township of Monto. The project, currently on care and maintenance, benefits fromsignificant historical investment of over A$120 million on infrastructure and processing equipment. Thishistorical expenditure is expected to allow for a cost-efficient re-start of operations. Further, theGoondicum ore body is well understood due to a history of exploration and resource evaluation activities.

The Goondicum Project is located within the Goondicum crater, a topographic feature roughly circularand 6 km in diameter containing significant ilmenite, apatite (phosphate rock), titano-magnetite andfeldspar mineralization. The Goondicum Project comprises a mining lease (ML80044) which coversapproximately 20 percent of the Goondicum crater and exploration leases covering the remainder of thecrater, providing significant opportunity for resource and mine life extension.

The Goondicum Project is held under a granted mining lease, ML80044 which is valid until September30, 2031. Belridge has also applied for a number of mining leases covering electricity transmission linesand other infrastructure.

Infrastructure

Power Supply

The electricity supply to the Goondicum mine is provided via approximately 26km of privately owned66kV power lines running from the Ergon Energy Corporation Limited electricity distribution network tothe mine site.

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Belridge's present authorized demand for electricity is 1.7MW at the connection point.

Water Service Provider

Belridge holds a water license (74220M) which entitles Belridge to extract a maximum of 3,000megalitres (“ml”) of water per year from the Precipice Sandstone Basin. The water is pumped from theThree Moon Creek bore site to the Goondicum mine via a water pipeline owned by Belridge.

Mineral Resource Estimates

Current mineral resources for the Goondicum Project, reported at a cut-off grade of 2.5% availableilmenite, are estimated at 31.3 million tonnes of Indicated Resource and 30.9 million tonnes of InferredResource providing 1.90 and 1.93 million tonnes respectively of in-situ ilmenite.

Tonnes

(Mt)

AvailableIlmenite

(%)

AvailableIlmenite

(Mt)

RecoverableIlmenite

(%)

RecoverableIlmenite

(Mt)

Slimes

(%)

Indicated 31.3 6.1 1.90 4.9 1.52 22.9

Inferred 30.9 6.3 1.93 5.0 1.55 24.3

Resource estimates are from the Technical Report.

(1) Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate ofmineral resources may be materially affected by environmental, permitting, legal, title, socio-political, marketing, orother relevant issues.

(2) The quantity and grade of reported inferred mineral resources in this estimation are uncertain in nature and therehas been insufficient exploration to define these inferred mineral resources as an indicated or measured mineralresource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineralresource category.

Property Location

The Goondicum Project is located 30 km due east of Monto, or about 50 km by bitumen and dirt road,and has an approximate elevation of 430 m above sea level.

Tenure

The Goondicum Project is held under a granted mining lease (“ML”) ML80044 issued to Belridge, whichcomprises 518 hectares. The remaining area of the Goondicum crater is under a mining lease application(“MLA”) 80141, which was lodged by Belridge in April 2007. The MLA is being maintained untiloperations under the existing ML have successfully restarted. Belridge has also acquired ExplorationPermits (“EPM”) covering the area of the MLA.

A separate mining lease has been lodged by Belridge (ML80185) over the 66kv power line whichsupplies power from the main grid.

As noted above, the water pipeline that supplies the Goondicum Project and its associated easements wastransferred to Belridge from SunWater on March 3, 2014.

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Some relevant aspects of mining lease in Queensland are included below. The granting of a mining leaseby the Department of Natural Resources and Mines cannot proceed until an Environmental Authority(“EA”) has been issued by the Department of Environment and Heritage Protection (“EHP”). Once amining lease is granted for mining operations the following apply (source from the QueenslandGovernment website (February 2014)):

Entitles the holder to machine-mine specified minerals and carry out activities associated withmining or promoting the activity of mining

Is not restricted to a maximum term; the term of the mining lease is determined in accordancewith the amount of reserves identified and the projected mine life.

Can be granted for those minerals specified in either the prospecting permit, exploration permitor mineral development licence held prior to the grant of the lease.

Where an activity will result in significantly disturbed land, EHP may require an EA holder topay financial assurance (“FA”). FA is a type of financial security provided to the QueenslandGovernment to cover any costs or expenses incurred in taking action to prevent or minimiseenvironmental harm or rehabilitate or restore the environment, should the holder fail to meettheir environmental obligations. Subject to successful rehabilitation and the EA holder meetingtheir closure conditions, FA is returned at the end of the project

The FA for ML80044 is A$791,461 and is in the form of a cash backed bank guarantee.

EPM 9100 has an annual exploration commitment of A$40,000 with an annual rental of A$3,261. Thecurrent licence conditions contain no requirement for the relinquishment of sub-blocks.

EPM 19382 has an annual exploration commitment of A$40,000 with an annual rental of A$1,766.70. Ifrenewal of the licence is required after September 24, 2016, then a total of 5 sub-blocks must berelinquished.

A map of the relevant MLs, MLAs and EPMs is included as Figure 1. Note that MLAs 80182 and 80183,the water pipeline easements, have very recently become redundant.

- 35 -

Figure 1: Mining Lease and Exploration Permit Location Map

(supplied by Belridge)

Royalties & Other Payments

There are currently two separate entities that have a contractual entitlement to receive a royalty based onthe gross income of Belridge derived from all mineral sales from tenements including, among others,EPM 9100. The existence of these royalty arrangements dates back to the original delineation of theresource in the mid 1990s. The total of these royalties is 1 x 1.0125% + 1 x 0.225% = 1.2375% of grossincome. A third entity holds the right to receive a gross income royalty of 1.0125% of gross incomederived from tenements including, among others, EPM 9100 on all minerals except ilmenite and apatite.

- 36 -

Belridge pays the state government a royalty of 5% of the revenue for all ilmenite sales andapproximately A$0.80/tonne for all phosphate rock sales.

The property lies on ground belonging to a single landowner for which a compensation amount has beenagreed with the final installment of A$350,000 due in July 2014.

Environmental Liabilities

Previous mining has created some ground disturbance, but excavations are generally quite shallow exceptin a few small areas of depressed topography associated with palaeo river courses.

A tailings dam was built by Monto Minerals. The tailings and feed preparation plant rejects are non-hazardous processed subsoils and are placed in previously mined areas commencing in the lower levelsand working towards the higher levels.

Rehabilitation activities are planned to restore the landform to a shape which will restore the originaldrainage patterns.

A modest sized processing plant will need decommissioning with the facility footprint rehabilitated at theend of the mine life.

Significant Factors to Mining Operations

The main risk to undertaking mining operations on the mining lease and the exploration permits is failureto comply with their conditions and requirements.

Relations with local landowners are on a good footing with no issues reported by Belridge.

The original water pipeline to the property was built by SunWater. The pipeline and associated easementswere transferred to Belridge ownership in early 2014.

The mining lease ML80044 is not subject to a native title claim as demonstrated on the QueenslandGovernment website (February 2014). As part of its commitment to the general community, Belridge hasa procedure for identifying potential significant native sites. This encompasses the use of an approvedspotter to inspect areas earmarked for disturbance and their immediate environs.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Physiography

The terrain underlying the ML is typical cattle grazing country in a rural Australian setting and the areaconsists of small rolling hills with moderately broad watercourses. Vegetation is typically grassland withEucalyptus trees.

Accessibility

The Goondicum mine is well located with respect to infrastructure and services. The region is adeveloped rural area with a network of highways, roads, rail lines and electricity transmission corridors.

Public road access from Monto is via 22 km of sealed road to the Bancroft turn off, followed by a further2 km along Cannindah road to the Dakiel turn off. From that point there is a 24 km site access dirt roadwhich climbs around 500 m to the top of a range and then descends to the site and has been upgraded tohandle haulage trucks. Four creek crossings have been built in addition to around 7 km of road wideningand 5 km of road sealing.

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The ilmenite product from the Goondicum mine was previously hauled 260 km from the mine site viaMonto and Biloela to the port of Gladstone where it was shipped around the world to various customers.There is potential to reduce this haulage distance from 260 km down to 160km with the construction of anew 22km access road to the Bruce Highway, lowering off site logistics costs significantly. Furtherevaluation of this cost-saving opportunity is expected to be conducted during the mine re-start process.

Local Resources

The Monto township is located in the North Burnett Region, and has a population of about 1,250 people.Another 1,250 people live within the Shire boundaries. The community is well serviced with a hospital(two permanent doctors) and an ambulance station with two ambulance vehicles. The Monto all-weatherairstrip provides 24-hour availability for the air ambulance. Monto is 50 km by road from the minesiteand employees are able to commute by road with no accommodation required onsite.

Climate

The climate is classified as sub-tropical and comprises:

Annual mean maximum temperature of 27.3oC with temperatures ranging between 20o and 35oCdepending on the season.

Annual mean minimum temperature of 12.9oC with temperatures ranging between 5 to 20oCdepending on the season.

Rainfall averages 740mm per year generally as heavy storms related to the North AustralianMonsoon Trough during the summer months (“Northern Australia’s Wet Season”). The area issufficiently inland to be sheltered from any intense immediate impacts of cyclonic activity.However the area can be prone to flooding as demonstrated by the 2013 summer floods.

It would be reasonable to expect any operation could operate all year round unless unusual heavy rainfallwas to occur during the summer months.

Infrastructure

The Goondicum deposit lies in a relatively non-remote area of SE Queensland within 30 km of the smalltown and population centre of Monto. Approximately 2,500 people reside in the Monto area, half ofthose in the town itself, and the remainder being spread throughout the smaller communities of Mulgildie,Kalpowar and Mungungo and the rural area.

The area has power supply from the national grid.

A series of sealed roads service the area including access to the port city of Gladstone.

Gladstone is a major port with facilities for the export of mineral products. Belridge has previouslyshipped ilmenite from Gladstone and has a storage facility there.

History

In 1992 Monto Minerals commenced exploration of the surface of the Goondicum Complex and theBurnett River, which drains the complex.

Initial work by the company concentrated mostly on the alluvial deposits contained within the BurnettRiver channel. However, during this initial work period limited sampling and testing of eluvial

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mineralisation was carried out within the crater, which forms the surface of the gabbro complex. The areacovered by this work exceeded 10km2 and showed significant ilmenite concentrations to occur.

Subsequent to these initial investigations, Monto Minerals issued a prospectus and listed on the AustralianStock Exchange. Monto Minerals then undertook a number of investigations, of which the eluvialdeposits occurring on the surface of the gabbro became the focus for a possible future production facility.

At about the same time as Monto Minerals commenced its investigations, Groen (1993) undertook aprogramme of mapping and petrological studies into the complex for his honours degree thesis at theQueensland University of Technology.

Detailed resource evaluation of the crater area by Monto Minerals commenced in August, 1996, with aprogramme initially comprising 9 lines of hand auger drill holes. This was followed by a more closelyspaced programme of reverse circulation (“RC”) drilling in the north-western quadrant of the crater. (TheRC drilling is actually now known as aircore drilling but aircore was at the time a proprietary trademarkname). This RC programme was carried out in September 1996 with laboratory testing of samplescompleted during December 1996.

From 1997 to mid-1999 a number of studies and other works were undertaken leading to a decision thatfurther investigations were warranted in order to:

define additional resources, and

provide additional metallurgical test samples.

As a result of the 1996 investigation, further work was conducted between 1998 and 2000 comprising apitting and two additional drilling programmes (Lee, G, 2000).

“In 2003 additional pitting was conducted within ML 80044, this programme comprised 10 pits. Thetesting programme included samples from those 10 pits as well as the samples from the 16 pits completedin 1999, and material available from five of the 2000 diamond drill holes. The test work conducted in2003 focussed on determining the quantity and quality of both the feldspar and apatite contained in thesesamples from ML 80044.”

“Resource estimates for feldspar and apatite prepared in 2003 were based on a 200m radius of influencearound each sample point for Indicated Resources, and everything beyond the 200m radius, but withinthe boundaries of the 3.0% cut-off for 5.5 amp recovered magnetics was treated as Inferred Resources.”(Lee, G, 2003).

“This was followed by a 99 pit program in 2004-2005 aimed at more thoroughly examining the feldsparand apatite resources in the westernmost approximately 1/3 part of the ‘Initial Mine Area’, and at thesame time undertaking metallurgical work seeking to recover ilmenite with marketable TiO2 grade but atlower yield” (Lee, G, 2005).

In 2005 a feasibility study was completed by Monto Minerals. This was followed in 2006 by anindependent technical assessment (Oldroyd, 2006) with an update of the report completed in 2007(Oldroyd, 2007).

In August 2008, after eight months of production, the operation was terminated by voluntaryadministration of Monto Minerals.

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In 2009, Monto Resources Pty Ltd, a subsidiary of Monto Minerals, was purchased by Belmont ParkMonto Pty Ltd and Panorama Ridge Monto Pty Ltd and the company was renamed Belridge EnterprisesPty Ltd who then commissioned a redevelopment study. The work undertaken included a new drillingand analytical program to generate the development of a geological and a resource model for theredevelopment study.

“In March 2009, the historic data was used to build a detailed block model in Micromine covering theentire mining lease. Modelling of the historic data highlighted the lack of apatite data, in particularoutside the SW corner, and below 5 m depth. It was determined that a new drilling program was in thebest interest of the project. The main purpose of the drilling was to create a comprehensive and completedatabase for the apatite distribution. In addition, the drilling program was intended to confirm containedand recoverable ilmenite and titano-magnetite resource, and improve the understanding of the geology”(Hoogvliet & Whitehouse, 2011).

This new drilling programme resulted in a new resource estimate being generated that was published as apaper in November 2011 by Hoogvliet and Whitehouse. Unfortunately, the lead geologist Hoogvliet diedsoon after the presentation of the paper. Production recommenced at the minesite in 2012-2013, after anearlier phase in 2008, but the 2009/11 block model significantly underperformed against the 2012-2013production, with ilmenite production considerably higher than expectation.

A detailed description of previous resource and reserve estimates is contained in the Technical Report.

Previous Production

In October 2007 Monto Minerals commenced production which continued for nine months. Four mineralproducts were generated with the production listed in Table 1 (source: The Goondicum RedevelopmentPlan by Stanmore Resources Consultants, 2009).

Table 1: 2007-8 Production

Ilmenite Apatite Feldspar Titano-Magnetite

Total

Tonnes Produced 14,042 5,269 9,905 3,986 33,202

Revenue (A$) 1,071,760 263,623 147,175 0 1,482,559

Stock on hand (A$) 198,005 62,020 164,080 0 424,105

Revenue/t incl stock(A$)

90.43 61.08 31.42 0

In August 2008 Monto Minerals was placed into voluntary administration. The primary reasons forMonto Minerals failure at Goondicum were indicated in the Stanmore Resources Consultants 2009 reportand included the following comments:

Lack of real understanding of the physical and mineralogical attributes of the material beingprocessed leading to a grossly under designed Feed Preparation Plant (FPP). This resulted in theslurried feed being fed to the Wet Concentrator Plant (WCP) being of unsuitable quality andconsistency. The WCP ever only achieved 40% of design throughput.

Lack of effective process monitoring and control systems in the WCP that resulted in poor controlof the process and final product outcomes.

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General undercapitalisation resulting in poor engineering and decision making throughout theproject.

The global financial crisis made it very difficult to source the additional capital required to rectifythe engineering and design problems.

In 2012-2013 Belridge recommissioned the plant and resumed mining operations. In addition two newLiDAR airborne surveys were flown to provide detailed surface topography for pre-mining 2012 and postmining 2013.

The ilmenite production was in considerable excess of the block model prediction as shown in Table 2.

Table 2: 2012-13 Production

Production 2009 Block Model*

Ore Processed (wet) (t) 762,946

Ore Feed Moisture (%) 13.94

Ore Processed Dry (t) 656,718 282,582

Ore Stockpile Dry (t) 20,000

Mined Ore (Processed + Stockpile) (dry t) 676,718

Ore Head Grade (%) 10.0

Mill Recovery Grade (%) 7.3 6.5

Ilmenite Produced (t) 47,425 18,396

(Production figures supplied by Belridge)

(* The figures in this column were generated by reporting the resources estimates from the 2009 blockmodel between the two LiDAR surfaces within a defined area of disturbance (supplied by Belridge). Thesupplied model appeared to have fundamental issues as resource reporting by H&S Consultants Pty. Ltd forblocks with an ilmenite grade between the two surfaces could only achieve the tonnage figure listed inTable 2. According to the Technical Report, the problem is that there are blocks with no grade within thedisturbed area but no understanding as to why that should be).

Geological Setting and Mineralisation

Regional Geology

The Goondicum complex is a layered mafic intrusion, mostly comprised of gabbros and leucogabbros,with some oxide gabbros (Figure 2). The layers appear to represent segregations of the intrusion. Theyare further intruded by a later stage of oxide gabbro, which is observed in the laminated gabbro as aconcordant sill. A second oxide gabbro occurs in the central section of the pluton.

The gabbro has intruded Devonian mudstones, siltstones and sandstones, as well as higher metamorphicgrade schists and slates, east of the major regional structure, the Yarrol Fault. West of the Yarrol Faultlies later Upper Palaeozoic siliciclastic sequences in conjunction with slightly older basaltic and andesiticvolcanoclastic sequences including andesites, conglomerates and limestones. The Yarrol Fault skirts thesouth-western margin of the complex. Serpentinite bodies are associated with the fault and are observedin outcrop both to the north and south of the Goondicum Crater. It is speculated that the fault may havecontrolled the gabbro intrusion. There is no evidence of a meteorite impact triggering the gabbrointrusion.

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Figure 2: Regional Geology Map

Local Geology & Mineralisation

The mineralisation which is the subject of this report is associated with a sequence of gabbro rocks whichGroen (1993) has mapped from the crater rim as: “poikilitic marginal zone” (hornblende gabbro), “lowerzone laminated gabbro”, and “macrorhythmic zone”.

A ground based detailed magnetic survey has generated data covering the crater that shows a number ofconcentric zones. The largest of these zones is a magnetic high, which forms an annulus inside thehornfels rim of the gabbro. This zone is particularly well developed along the western part of the crater,where it is both widest and has the highest anomaly of 59,000 nanoteslas. Figure 3 shows a subset of themagnetic intensity data for the Goondicum deposit within the current mining lease. It appears to indicatedistinct zonation in arcuate patterns relative to the margin of the gabbro intrusive.

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Figure 3: Goondicum Deposit Detailed Ground Magnetic Intensity Map


Oxidation of the rocks due to weathering has generated both in-situ and colluvial material containingsignificant ilmenite mineralisation. During the chemical breakdown of the gabbro some of the chemicallyless stable minerals are removed, and the ilmenite together with other resistant minerals, concentrate, bywinnowing, at or near the surface in a clay and/or sand rich matrix.

The relatively complex weathering history of the gabbro has produced two main host rock types of‘oxide’ ilmenite mineralisation. The “clay/sand” unit or “CS” is believed to be an eluvial/colluvial depositi.e. some in-situ material and some transported material possibly due to both gravity slip and alluvialprocesses. The second type is called “decomposed gabbro” or “DG”, implying a less weathered eluvial orvery close to in-situ deposit. A subset of the clay/sand unit is called the “colluvium” unit or “CL”, andthis may have had a more water-transported related origin. The clay/sand unit occurs at or near surface, inthe most intensely weathered zone and includes the uppermost 20cm of the soil profile designated in thedrillhole logging as “soil horizon” or “SL”. The clay/sand unit can range in thickness, up to severalmetres, especially where the CL unit is associated. The CL is an important sub-set of the clay/sandmineralisation, having high slimes content, and may have formed from localised damming of alluvialchannels resulting in localised flooding where the clay material in suspension settled out in smalldepressions.

The CS unit can be subdivided on the slimes content into CS high slimes “CS_H” and CS low slimes“CS_L” with the divide being a nominal 14% slimes.

On occasions the drilling penetrated to relatively fresh gabbro “GA”.

ML Boundary

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Brown clay and sandy layers occur in the CL, and often predominate; these sometimes contain highilmenite grades particularly in the coarser grained, better sorted colluvial material. Some of the CL has avery black colour that is believed related to an excess of contained montmorillonite (a clay mineral).

Generally the higher grade mineralisation is hosted by the CS_H unit and locally the CL unit. There areoccasions where the CS_L unit also hosts higher grades but generally the DG is low grade. Theprocessing capabilities of the plant and its ability to handle the slimes material may mean that blending ofmineralisation will be required. The blending would likely use some of the CS_L material and the lowergrade DG material.

Ilmenite deposits occur along modern stream channels as terrace remnants, which the reactivated streamhas partly eroded. Less frequently, palaeo-stream channels are encountered which are filled with gravityflow colluvium with variable ilmenite grades.

The geological development of the resource is described below (supplied by regolith geologist RodDawney of Ausmec, consultant to Belridge):

Deep in-situ weathering of a zoned, ilmenite-rich gabbro at a stable tectonic time to produce arelatively thick blanket-type zone of DG on fresh gabbro, in a relatively subdued topography.

Change in tectonics and/or climate caused relatively rapid down-cutting erosion to occurproducing palaeo channels. DG is partly stripped irregularly across the old surface, andcompletely eroded in the down-cut valleys and gullies.

Another change in tectonics and/or climate where in part outwash-type erosion took place,depositing CS (sourced by reworking the pre-existing DG), particularly filling in the down-cutvalleys and gullies, where CS is generally at its thickest and less clay-rich. This resulted first in alow slimes CS unit (“CS_L”) occurring in coherent zones at the base of the thicker CSintersections. It mostly occurs in the palaeo-valleys where DG has been stripped off.

The CS_H is a high slimes unit that covered the CS_L and some of the DG as part of a broaderoutwash water flow-related phenomenon. Alternatively it may be a second phase of penetrativeweathering that resulted in the high slimes residue.

Another change in the erosional regime, perhaps being very recent, involved flooding, was/isresponsible for filling local topographic-related depressions with the CL material, generallycoincident with the earlier alluvial channels.

Finally the SL occurred and may be related in part to the deposition of the CL.

The primary commodity of the resource estimate is the ilmenite mineralisation. The mineralisation isessentially flat lying with an undulating base. Its dimensions are 3000 m by 1500 m with an approximateviable range in thickness of 2 to 10m (low grade mineralised DG can add to a maximum thickness of 25m).

The fundamental geological control to the mineralisation is the underlying spatial distribution of thegabbro, followed by the topography at the time of the different weathering phases. Ilmenite grades arenot entirely related to specific rock types although there is a marked segregation between the high slimesunits, CL and CS_H, having higher grades than the low slimes CS_L and DG host units. The ilmenitegrades of the DG unit are more directly related to the original grade within the gabbro.

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Deposit Type

The deposit type is unique in this part of Queensland. It is a flat lying residual oxide deposit of aweathered gabbro intrusion that has had modifications from surface water flow and soil creep. The hostrock comprises a combination of weathered material and alluvium. Ilmenite mineralisation occurs asliberated fine grains often concentrated by surface water into more slimes-rich material but theconcentration may in part be related to an underlying primary concentration in the gabbro. The gabbroappears to have a primary mineralogical zonation associated with the arcuate margin of the intrusion. Theilmenite has been widely distributed throughout the mining lease with no obvious specific lateralconcentrations.

Exploration

The Company has not conducted any exploration on any of the properties. For information relating to theexploration activities carried out by previous owners of the Goondicum Project please see “History”.

Drilling

The Company has not conducted any drilling at the Goondicum Project. The drilling reported in thissection has been carried out by Monto Minerals and Belridge.

Drilling data for the Goondicum Ilmenite deposit comprises two sets covering roughly the same area:

1996-2004: Monto Minerals: consists of aircore drillholes and test pits on a 100 m by 100m grid

2009: Belridge: aircore holes drilled with a similar system as 1996 and drilled on a 125 m by 125m grid

The resource estimates reported in this document are based on data from the 2009 Belridge drillingcampaign.

2009 Drilling

In 2009 Belridge undertook a new drilling programme as it was felt that the earlier drilling had notproperly tested the deposit. A total of 218 aircore (reverse circulation without hammer) holes, mounted ona 4WD vehicle, were drilled on a nominal 125 m by 125 m grid. In addition, six closer spaced drill holeswere drilled within a radius of 45 m to test short range variability. Overall the 224 drill holes drilled in2009 comprise 2,394 m as per the drillhole database. The locations of the drill holes are shown on atopographic backdrop, cut to the outline of ML80044 (Figure 4).

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Figure 4: Drillhole Location Map

The project’s EA requirements state that the top 20 cm of soil is to be stockpiled for future rehabilitation.The top 20 cm was therefore sampled separately during drilling. A typical hole therefore has 0.0 m to 0.2m as its first sample interval, and 0.2 m to 1.0 m as its second sample interval. All subsequent intervalsare 1 m, with the exception of the last interval, which may be less than 1 m.

Sample Preparation, Analyses and Security

The aircore drilling generated chip samples that were collected as bulk samples for each 1m drilledinterval. All sample material for each drilled interval was caught in a cyclone, and dumped in plastic bagsat the end of each drilled interval. All sample material was retained. The sample was weighed wet,sealed immediately and placed on a pallet at the back of a pick-up Ute. Typical sample weights werearound 2kg for the first sample (0.2m soil interval), to about 12kg for the bottom sample.

The samples were transported to the Goondicum minesite where they underwent sub-sampling prior tomagnetic separation. The sampling and assay flowsheet is included as Figure 5.

The samples then underwent size and magnetic fraction analyses at Belridge’s minesite before dispatch ofselected composited intervals to Downer EDI Mining – Mineral Technologies Pty Ltd (“Downer MineralTechnologies”) for Clerici float/sink testwork. The QAQC for the sampling has included the use of amatrix-matched standards and field duplicates of the original aircore samples.

Downer Mineral Technologies was at the time of the Clerici float/sink analyses in 2009, a wholly ownedsubsidiary of Downer Australia. This company had been audited and found to be in accordance with therequirements of the management system standards detailed below:

Delivery of integrated asset life-cycle solutions and services to customers in the following market sectors:

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capital project; minerals & metals / oil & gas; rail infrastructure; transport infrastructure; power;water; communications; and property.

With the following certifications:

AS/NZS 4801:2001 – Original Approval date December 4, 2002: Valid to September 12, 2013;AS/NZS 9001:2008 – Original Approval date December 24, 2000: Valid to September 12, 2013;and AS/NZS 14001:2008 – Original Approval date January 20, 2005: Valid to September 12,2013.

Figure 5: Sampling and Assaying Flowsheet†

† Note: AM refers to Amp Magnetics: the current input to the induced roll magnet to separate less magnetic particlesfrom more magnetic particles.

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Sample Processing at Goondicum

Upon receipt from the drill rig the sample material was stored in plastic bags until processing wasavailable. Processing was completed and supervised by suitably qualified Belridge personnel. Thesample material was split using a 1:1 riffle splitter to produce a sample of around 2kg and then dried at105˚C for 12 hours and then weighed. Each sample was then de-slimed wet at 53µm, re-dried and weighed. Material greater than 1mm was removed by passing through a 1mm screen and the remaining -1mm to 53µm fraction was weighed again. If the -1mm to 53µm fraction weighed over 400g the fractionwas split using a riffle splitter. The -1mm to 53µm fractions were then submitted to magnetic separationtestwork using an Eriez laboratory magnet at 0.3AM, 0.5AM, 5.5AM and 8.5AM.

Belridge inserted one standard into the sample sequence at a rate of approximately one per 20 samples toverify the splitting and magnetic testwork. In total 123 monitor standards were employed. Forinformation on the results and a discussion of these standards please see “QAQC - Standards & Blanks”.

Selected intervals, of which some were composited, were sent for off-site Clerici testwork.

Clerici Testwork

Clerici Testwork was carried out by Downer Mineral Technologies, an independent metallurgicaltestwork laboratory located at 11 Elysium Road, Carrara QLD, QLD 4211. They are a renownedAustralian metallurgical testwork facility which is recognised as a leader in mineral separation andmineral processing solutions worldwide, delivering a comprehensive range of integrated equipment andservices. The testwork was carried out in accordance with their standard metallurgical testworkprocedures. Downer Mineral Technologies is entirely independent of Belridge.

In total 163 samples were submitted for Clerici testwork. 34 of the 163 samples were individual 1msamples with the remaining 129 samples composed of composited intervals.

Composite samples were composed of intervals in the same logged lithology (SL, CS and DG) fromneighboring drillholes. No distinction was made between CS_H and CS_L lithologies as the distinctionhad not been identified at the time of testwork. The proportional weight of each sample to be added to thecomposite was defined by the relative weights of the 5.5AM fraction. Compositing was carried out byriffle splitting the 5.5AM fraction down to a representative weight.

Figure 6 shows an example of the drill holes included in a single composited Clerici sample. Each drillhole marked in red contributed between one and three metres to the composite.

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Figure 6: An Example of Sample Locations for a Single Clerici Composite

The Clerici testwork included an additional desliming, float/sink test in Clerici solution and XRF TiO2

assays on the float and sink fractions. The Clerici solution consists of thallium formate (Tl(CHO2)) andthallium malonate (Tl(C3H3O4)) dissolved in water and, with a density of 4.05 g/cm3, is one of theheaviest aqueous solutions available. The high density of the Clerici solution means liberated particles ofilmenite, with a density of over 4.7 g/cm3, sink whereas other common minerals float.

The composites were produced in order to decrease the cost of the testwork. The effect of compositingmaterial from different drill holes is likely to have smoothed any differences that may be present in therock type which will likely result in over-smoothed estimates of available ilmenite.

Assaying of Sink and Float Fractions

All laboratory analytical work was carried out by ALS Global, a NATA accredited laboratory facilitywith a global presence and whose analytical procedures are also accredited according to the internationalnorm EN ISO/IEC 17025:2005. The Clerici sinks and the floats were sent for XRF analysis to determinethe TiO2 content of the sinks and an XRD analysis was used to determine the ilmenite content of thefloats. The TiO2 in the Clerici sinks was used to calculate the liberated ilmenite while the ilmenite contentof the floats is considered to be composited ilmenite which can be liberated through grinding. By addingthe two ilmenite portions from the sinks and the floats, the total available ilmenite can be calculated.

Calculation of Available Ilmenite

For the H&S Consultants Pty. Ltd resource estimation work an ‘Available Ilmenite’ field was created inorder to represent the total amount of ilmenite present in the 5.5AM fraction. The available ilmenitevalues were calculated for each interval that had been submitted (usually as part of a composite sample)for the Clerici testwork and was calculated using the original 5.5AM recovered magnetic fraction data andthe Clerici data. The Clerici data included the float and sink weights, XRF assays of sink fraction andaverage ilmenite proportions of the float for CL, CS and DG. The Clerici samples underwent anadditional desliming at the laboratory but this fraction was ignored in the calculation of available ilmenite

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and the Clerici slimes are therefore essentially assumed to be of a similar composition to the rest of thesample.

The percentage of Clerici sinks is multiplied by the TiO2 XRF assay corrected to the stoichiometricformula for TiO2 relative to ilmenite (2.04). This gives the percentage of ilmenite in the sink fraction as apercentage of the total sample submitted for the Clerici testwork. The percentage of Clerici floats ismultiplied by the average ilmenite proportions of the float for CL (2.4%), CS (5%) and DG (7.2%). Theproportion of ilmenite in the floats was determined using XRD analysis. The proportions of ilmenite inthe float and sink fractions were then added together and multiplied by the 5.5AM fraction (expressed as afraction of the original sample) and the result divided by the total material field. The total material fieldrepresents a sum of the proportions of material in the different size fractions. The formula for theavailable ilmenite is given below:

%�) ∗ ((%�

) ∗ �.))) + %�) ∗ �� ((� ∗ . �%

�

The available ilmenite field therefore represents the total amount of ilmenite present in the 5.5AMfraction expressed as a fraction of the total sample. This formula may closely estimate total ilmenite inthe sample, but not necessarily reflect recoverable ilmenite due to ilmenite in composite particles,especially from the float fraction and/or the float fraction may contain materials that reduce the TiO2

content of ilmenite product were they to form part of the product.

Stoichometrically there is 52.6% TiO2 in ilmenite which translates as a TiO2-to-ilmenite factor of 1.9.However this assumes that all the 5.5AM TiO2 is ilmenite which is not the case with Goondicum. In theabove formula a TiO2-to-ilmenite factor of 2.04 is used. This factor was determined through testworkconducted by Downer Mineral Technologies that indicated that the Goondicum ilmenite could beupgraded to 49% TiO2.

H&S Consultants Pty. Ltd investigated ways to relate the results of the Clerici testwork to the dataavailable for each drilled interval with the aim to interpolate available ilmenite values from the 5.5AMfraction for example. Unfortunately no reliable relationship was found and so available ilmenite was notcalculated for samples that were not submitted for Clerici testwork.

The lack of distinction between the CS_H and CS_L lithologies at the time the Clerici testwork wasconducted means that two lithologies, with possibly different responses to Clerici testwork, were analysedtogether. H&S Consultants Pty. Ltd recommends that the Company should investigate the effect of thisissue.

QAQC

(italics = Hoogvliet & Whitehouse)

Standards & Blanks

For the 2009 drilling program, two 200 litre drums of freshly excavated Goondicum decomposed gabbrowere sent to Ore Research & Exploration Pty Ltd in Melbourne. This material was used to prepare aGoondicum-specific ‘monitor’ standard and the material was treated as follows:

dry at 105o C;

screen at 3 mm;

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attrition oversize in tumble blender, and rescreen at 3 mm; discard oversize; and

following a specific sequence of blending and splitting, 2 kg parcels were produced, each ofwhich is a monitor standard.

During the drilling, a monitor standard was inserted into the sample sequence at a rate of approximatelyone per 20 samples. The sealed bag was broken, and the sample put in a normal drill sample plastic bag.In total 123 monitor standards were employed for the resource drilling. Each monitor standard wastheoretically “blind” having a number in sequence with the drill samples. However, they could easily berecognised during the sample processing due to their uniform weight, low slimes and low moisturecontent.

In addition, ten monitor standards were processed by Titanatek Pty Ltd (“Titanatek”) of Ballina, NewSouth Wales, to obtain umpire results. Titanatek is an independent professional sample preparationlaboratory specialising in the heavy minerals industry. The results of both the on-site processing andthose processed by Titanatek are presented in Figure 6.

Table 3: Results of Standards

%Slimes %0.5AM %5.5AM %8.3AM %floats %Sinks

SITE RESULTS

Mean 11.67 19.31 19.28 2.06 19.21 2.54

Maximum 15.50 21.80 23.30 3.30 22.10 4.20

Minimum 9.60 15.80 17.00 0.90 16.50 1.60

standard deviation 1.00 1.34 1.10 0.34 1.08 0.28

Range 5.90 6.00 6.30 2.40 5.60 2.60

Number 118 118 118 118 118 118

TITANATEK RESULTS

Mean 11.36 21.82 18.80 2.72 20.40 2.24

Maximum 12 23.12 20.70 4.25 21.48 2.61

Minimum 11 18.61 16.75 2.00 17.81 1.94


Range 1.00 4.51 3.95 2.25 3.67 0.67

Number 10 10 10 10 10 10

(from Hoogvliet and Whitehouse, 2011)

As the results of the monitor standards became available during normal processing, it was noticed that agroup of standards yielded significantly higher slimes content than the other standards, and thediscrepancy was apparently increasing over time. An investigation into the issue revealed that the Kasonscreen had developed worn patches and several minor holes and material other than the -54 µm wasreporting to the undersize (slimes) fraction. After review, 95 drilling samples were reprocessed.

Plots of the standards with +/-10% margins to the mean values are shown in Figure 7. Most outcomesappear acceptable with no obvious bias.

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Figure 7: Results from Standards

Another outcome from the use of monitor standards was that it was noted that some standards reportedsignificantly more +1mm material than other standards. The error was possibly operator-related.Following a detailed investigation, a total of 456 samples were reprocessed. Reprocessing included re-

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screening the +1mm fraction, and combining the additional -1mm with all -1mm +54µm fractions, andreprocessing them from the magnetic separation stage onwards.

When processing a large sample of topsoil using the same method as used for the drilling samples, it wasnoticed that significant amounts of ilmenite reported to the middlings of the 0.5 AM fractions (middlingsreport neither to the magnetic nor the non-magnetic fraction). The middlings had been combined with themagnetics fraction. This prompted a review of all the 0.5 AM magnetic fractions from the duplicatesamples with a hand magnet. The high-slimes and topsoil samples were found to contain significant non-magnetic material that looked like ilmenite. It appeared there might be a risk that the recoverable ilmenitegrade at Goondicum had been underestimated. After detailed testing and extensive discussions it wasdecided to reprocess the 0.5 AM fraction at 0.3 AM. This resulted in a lower titano-magnetite concentrate(but with expected higher recovery), and a larger 5.5 AM fraction. Almost all 0.5 AM fractions from theresource drilling (2,628 samples) were reprocessed.

According to the Technical Report, the 0.5/0.3AM issue is a function to the deposit being ‘young’ i.e.close to the ilmenite source with the ilmenite relatively unoxidised and is therefore quite magnetic to theextent that some of it will report to the 0.5AM (the TiMag magnetic fraction). The Technical Reportnoted that this phenomenon was recognised in the 1996/2000 work and its likely impact should beconsidered in any future work. Any such work would involve further metallurgical studies to measure theilmenite distribution within the magnetic fractions.

Duplicates

Due to the speed of drilling, duplicates could not be created in the field. Instead, as samples wereprocessed, approximately every 50th sample was split again to create a duplicate sample. Each duplicatewas given a unique number, in sequence from the last drill sample.

A total of 56 duplicates were collected. All duplicates were processed near the end of all of the sample

processing. The comparison between the original and duplicates are presented in Table 4.

Table 4: Results of Duplicates

%slimes %0.5AM %5.5AM %8.3AM %floats %sinks

ORIGINAL

Mean 16.18 9.01 18.43 3.65 21.65 1.99


DUPLICATE

Mean 16.61 9.11 18.21 3.73 22.81 2.10


GENERAL

correlation coefficient 0.91 0.90 0.84 0.68 0.91 0.82

number of pairs 56 56 56 56 56 56

(from Hoogvliet and Whitehouse, 2011)

An Excel file (Lab Calc Sheet ACopy.xlsx) of duplicates was supplied, but contained only 45 of theexpected 56 duplicate samples. However a plot of the duplicates is included as Figure 8. There are somediscrepancies in repeatability especially for the -1mm to 53µm size fraction (red squares) in which thereis a slight bias towards the duplicates returning higher values.

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Figure 8: Duplicate Results

Hole Twinning

In Hoogvliet’s report mention is made of 2009 hole twinning with the 1996 drilling. The followingstatement is replicated here.

“In all twelve holes were drilled as twins, of which ten had meaningful results. In total there were 79sample pairs. The average ilmenite content of the old samples was 5.47 per cent, and of the new samplesit was 5.09 per cent. The correspondence between the two means is considered reasonable given that theanalytical methods applied to the samples varied between the 1996 and 2009 holes.”

The Technical Report noted that with the acknowledged incorrect ilmenite data generated by the 2009work the above supposition needs to be reviewed.

Second Lab Checks

None completed.

Coarse Rejects

None completed and unlikely to show anything useful.

Audits

As part of the quality control procedures, GJN Enterprises Pty Ltd (Geos Mining) of Sydney visited theproject site in July, 2009, to carry out an independent review of the sampling procedures on site. GeosMining has extensive experience in industrial minerals and following the review concluded that:

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“The sample testing program has been generally well designed and sufficient checks have been built in toensure that the resulting data can be used in resource estimations which can be classified according tothe JORC code. The testwork is typical of that common in the industry, and has been designed as acompromise between industry best practice and cost and practicalities” (Border, 2009).

Conclusions on Sample Preparation, Analyses and Security

The Technical Report concluded that:

The drilling technique and sampling methodology are considered appropriate for the deposit type. Therehas been a consistency to the sampling with well documented procedures. All sampling methods andsamples sizes are deemed appropriate though the compositing of samples for Clerici testwork may haveintroduced unnecessary smoothing. An appropriate level of QA/QC checks and audits have beenundertaken to ensure that sample testing has been properly carried out. While some minor deficiencieswere found, these were either corrected or of such nature in terms of the overall objectives to beinsignificant. The QAQC programme comprises monitor standards and duplicate field samples and theprogramme indicates acceptable precision and no obvious biases. The test procedure adopted (as outlinedin Figure 5) is typical of that expected for evaluating this type of deposit. The immediate removal ofsamples from drill sites to the mine site laboratory for sub sample preparation has significantly reducedthe risk of sample tampering. Some of the more critical and specialist aspects (e.g. Clerici separationsand TiO2 assays) were undertaken by well- regarded industry laboratories. It would appear, based on theinformation made available, that the testing approach adopted is suited to the objective of assessing theilmenite content of the drill hole samples.

Data Verification

The 2009 drilling programme was instigated in answer to a perception that the 1996-2000 phase ofdrilling had not drilled to refusal with sampling limited to a visual inspection of >3% ilmenite. There wasalso limited apatite data. For the new resource estimates H&S Consultants Pty. Ltd has used the supplied2009 drilling data.

H&S Consultants Pty. Ltd have assumed the supplied drilling data is a fair and accurate record of workcompleted on the deposit.

In total 224 aircore drill holes, drilled for 2,394m, were used for the resource estimates.

Supplied Data Files

Validation of the drillhole database was conducted by H&S Consultants Pty. Ltd to ensure that thedatabase is internally consistent. The data was supplied as an Excel spreadsheet (Drilling Raw Data 2009– Reviewed 20140203.xlsx dated 03/02/14) which was loaded into an Access database (goondicum.mdb)with indexed fields. This allowed for additional checks e.g. duplicate sample intervals. The database wasincorporated into a Surpac (mining software) workspace (goondicum.ddb) with an additional audit foroverlapping samples. Validation also included checking that no assays, density measurements orgeological logs occur beyond the end of hole and that all drilled intervals have been geologically logged.The minimum and maximum values of assays and density measurements were checked to ensure valuesare within expected ranges. A summary of the drilling information is included as Table 5.

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Table 5: Drillhole Information

Data TypeNumber ofDrill Holes

Number ofRecords

Number ofMetres

Collar Records 224 224 2394.0

Lithologs 224 2655 2394.0

Clerici Data 217 977 905.0

Slimes Data 224 2653 2392.2

Almost all intervals contained data for the various magnetic recovery fractions e.g. 0.3AM, 0.5AM,5.5AM and 8.5AM and size fractions e.g. slimes, 1mm to 53µ etc. Selected intervals were composited toform 163 samples and sent for Clerici testwork. The results from the Clerici work were applied to thedrillhole samples that contributed to the relevant composite sample, hence 163 Clerici samples equates to977 records in the drillhole database.

Field Checking

A total of 16 holes (8% of the total number of holes) were selected at random for spot checks on collaraccuracies and consistency in geological logging. Unfortunately many of the original collars, usuallymarked with a wooden stake, were overgrown and the stakes uprooted. Thus the collars were located byBelridge personnel using a hand held GPS in the MGA94 Zone 56 grid projection. Efforts were made tofind the uprooted stakes and in seven instances the original peg was located. The pegs were labelled withcoordinates in the AGD66 Zone 56 projection and matched the H&S Consultants Pty. Ltd check readingsusing a hand held GPS (in AGD66). According to the Technical Report, this both confirms the relativeaccuracy of the hole collar locations, consistency with the database and the grid conversion (to MGA94)used for the 2014 block model. The Technical Report thus concluded that the location methods used todetermine accuracy of drillhole collars is considered appropriate.

The 2009 drillhole samples are stored in wooden crates at Belridge’s Dakiel depot and the samples aregenerally in good condition. The samples for the 16 holes were laid out and compared with the geologicallogging. A key part of the geological interpretation is the colour designation for the individual samples asthat often helped to define the host unit. No issues were noted with the logging.

The original assay sheets for the Clerici testwork were compared to the data supplied. No issues werenoted.

The Technical Report concluded that the data supplied by Belridge is suitable for geological interpretationand resource estimation detailed in the report.

Mineral Processing and Metallurgical Testing

The 2012-13 mining operation consisted of a 250tph mineral processing facility which was fullyoperational. A substantial amount of testwork has been completed prior to mining but this has beensuperseded by the operational plant. Ilmenite production was considerably greater than the anticipated2009 block model.

The mined material consists of mineralised sand-sized grains containing the minerals ilmenite, magnetite,apatite and feldspar as both discreet and composite particles, held within a barren clay matrix.

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In each lithological type almost all of the mineral content is present as relatively heavy particles withinthe <1mm size fraction. Because of the differing behaviour of the lithological types, each type isstockpiled separately and blended with a front-end loader bucket as it is fed into the processing plant.

A two stage process has been developed and built for recovery of the mineral values, based on theprinciple that most of the mineral is contained in the (+53µm to -1mm) particle size fraction, and based onthe differing physical properties of the mineral components.

In the Feed Preparation Plant (FPP) the clay matrix rapidly breaks down on tumbling and attrition in anautogenous rotating scrubber with water and rocks. After scrubbing, the +1mm fraction is extracted fromthe ore through a wet screen. The remaining material is then deslimed through a cluster of cyclonesbefore the remaining feed material (+53 µm to -1mm) is stored in a Constant Density tank as feed for theWet Concentration Plant (WCP).

In the WCP, a combination of wet grinding, gravity and magnetic separation is used to recover theilmenite as a concentrate. An apatite concentrate is recovered as an additional product.

Based on the previous metallurgical testwork, actual achieved plant recoveries and the proposed plantimprovements, the forecast plant recovery is 80%. These expected recoveries are based on laboratorybased gravity and magnetic separation testwork, and actual production results. Aspects of the testworkused to derive the 80% figure are:

Substantial testwork has been completed by Downer Mineral Technologies (Report numberMS.01/80354/1, 07/03/2001 & Report no. 09/81947/1 – 23/3/09).

The plant has been designed and commissioned. After 8 months of operation under MontoMinerals Ltd and 9 months under Belridge Enterprises, metallurgical recoveries of 73% wereachieved.

Metallurgical surveys carried out during operation indicated that a further 10% of ilmenite waslost in clay balls in the DD Screen oversize sand. The scrubbing capacity will be doubled throughthe installation of a second scrubber and an intermediate trommel will be relocated whenoperations are restarted. The Company believes this will reduce or eliminate the mineral losses inclay balls, and the testwork target of 80% recovery is likely to be achieved.

Mineral Resource Estimates

The resource estimates were prepared using Ordinary Kriging (“OK”) in the Micromine softwarepackage. H&S Consultants Pty. Ltd considers OK to be an appropriate estimation technique for the typeof mineralisation and extent and nature of the available data. The resource estimation includes internalmining dilution.

The available ilmenite (997 points) and slimes (2430 points) composite data were modelled. A hardboundary was used to differentiate the CL-CS_H units from the CS_L-DG units for the available ilmeniteand slimes modelling.

The available ilmenite data was modelled without any recoverable ilmenite factor applied. This wasapplied as an additional field in the block model.

The resulting model was loaded into the Surpac mining software for resource estimate reporting and tofacilitate any transition to future mining studies.

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Composite Data

Samples were composited to 1m intervals within the mineralised zones with a minimum composite lengthof 0.5m. Each composite sample was assigned to the CL, CS_H, CS_L or DG zones. For the purpose ofmodelling the CL, CS_H and CS_L data were combined with the SL sample and treated as part of the CSunit. The DG unit contained the occasional GA (fresh gabbro) sample; both were treated as one unit.

A total of 2,430 composites were generated for the slimes but because of the Clerici testwork only 977 ofthe intervals contained available ilmenite data. These numbers do not match exactly with the numberspresented in “Data Verification – Supplied Data Files” because the down hole data was composited.

Four available ilmenite plan maps showing the data distribution and grades (of the uppermost sample) forthe CL, CS_H, CS_L and DG units are shown in Figure 9, Figure 10, Figure 11 and Figure 12,respectively. There is a fairly even distribution of grade with no obvious high grade zones within any ofthe four lithologies. However it is quite obvious that the CL and CS_H are markedly higher in ilmenitegrade than the CS_L and DG. The SW corner of the deposit contains lower ilmenite grades in the CS_Hunit, also possibly extending into the CL unit. The SE quadrant area, particularly for the DG, containslower grade believed to be due to the underlying variation in the host gabbro reflecting the arcuatezonation associated with the curved margin of the original intrusive phases. There is little CS_H andCS_L material in this quadrant.

The blue line in the following figures represents the outline of the block model.

Figure 9: Composite Data Available Ilmenite CL Unit

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Figure 10: Composite Data Available Ilmenite CS_H Unit

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Figure 11: Composite Data Available Ilmenite CS_L Unit

Figure 12: Composite Data Available Ilmenite DG Unit

The DG zonation has some pattern similarities with the magnetic image of Figure 3.

The slimes for the CL and CS_H show widespread high grades with no particular zonation, possiblyreflecting topography and drainage. Likewise the CS_L and DG show low slimes grades with noparticular zonation.

Figure 13 and Figure 14 show box plots of the available ilmenite and slimes composite grades for eachzone. The CL and CS_H grades are similar but very different from the CS_L and DG grades for bothavailable ilmenite and slimes. The Technical Report notes that there is potential mis-logging in the DGslimes as there are a considerable number of outliers and that this could be addressed if further modellingis undertaken.

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Figure 13: Box Plot of Available Ilmenite Composite Grades by Lithology

(box plots show the distribution of composite data; interquartile range lies within the box, with the median marked bythe red line. Minimum and maximum values (not including outliers) are covered by the whiskers. Outliers are markedby the blue crosses. The red dots denote the mean. The top row of numbers represents the number of compositeswithin each lithology)

Figure 14: Box Plot of Slimes Composite Grades by Lithology

A review of composite grade variations across the interpreted CS_H & CS_L boundary (Figure 15)indicates that the available ilmenite and slimes grades show a significant difference across the actualboundary. The available ilmenite in the CS_L unit is consistently low but the average increases steadily

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once into the CS_H unit (this may be due to a lack of segregation in the original sampling where CS_Hand CS_L were not identified).

Figure 15: Box Plot of Available Ilmenite Grade Variation Across the CS_H - CS_L Contact

(box plots show the distribution of composite data; interquartile range lies within the box, with the median marked bythe red line. Minimum and maximum values (not including statistical outliers) are covered by the whiskers. Outliersare marked by the blue crosses. The red dashed line marks the mean. The top row of numbers represents thenumber of points within each 1m interval away from the contact)

The percentage of slimes shows a marked difference across the boundary indicating an abrupt boundarywith no suggestion of any gradation (Figure 16). The base of CS_H was therefore treated as a hardboundary for the estimation of both available ilmenite and slimes.

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Figure 16: Box Plot of Slimes Grade Variation Across the CS_H - CS_L Contact

The difference between grades of the CS_L and DG units was much less pronounced and therefore noboundary was used in the estimation for either available ilmenite or slimes.

Zone and Domain Characterisation

The geological domains from the sectional interpretation were based on a combination of the loggingcodes (modified after a 3D review with the lithology colour coding), the topographic surface and theilmenite and slimes assays. The division for the CS unit into high and low slimes was based on ahistogram review of the data which indicated a break at approximately 14% (R. Dawney, personalcommunication). Recognising that the relevant aircore sample for any lithology contact could have bothlithologies present, the Technical Report applied geological judgment in the location of the lithologicalboundary within the drillhole.

As described in the Technical Report, each lithological boundary in each hole tended to be a geologicaldecision based on the available data. Table 6 indicates the general definitions for the lithologies.

Table 6: Definition of Geological Domains

Lithology Logging Code Ilmenite Grade Slimes ColourColluvium CL Variable >40% Brown/BlackClay Sand high slimes CS_H Variable >14% Red includedClay Sand low slimes CS_L Variable <14% Red includedDecomposed Gabbro DG Variable <14% Yellow included

However, the Technical Report noted that there are discrepancies when trying to apply the above as arigid set of criteria to the lithology definitions. Generally the CL has high to very high slimes and lowilmenite, but this is not always the case. The decomposed gabbro has low slimes although in one or two

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instances significantly higher slimes were noted suggesting a different host unit. In these cases the DGcode was based on the lithology colour and so the coding was retained.

Univariate Statistics

Summary statistics for the composite samples from the drilling, split by rock type can be seen in Table 7.

Table 7: Univariate Statistics for Composites

CL Unit CS_H Unit

AvailableIlmenite

SlimesAvailableIlmenite

Slimes

Count 149 303 180 373

Mean (%) 11.7 54.6 11.9 46.5

Minimum (%) 1.7 7.4 1.4 13.7

Maximum (%) 40.5 87.9 42.4 90.8

Variance 48.2 188.6 78.1 270.9

Std Dev 6.9 13.7 8.8 16.5

CV 0.6 0.3 0.7 0.4

CS_L Unit DG Unit

AvailableIlmenite

SlimesAvailableIlmenite

Slimes

Count 154 438 494 1316

Mean (%) 4.0 10.2 3.4 12.0

Minimum (%) 0.5 2.7 0.6 2.0

Maximum (%) 9.8 44.4 11.3 79.4

Variance 2.0 16.4 2.4 70.3

Std Dev 1.4 4.0 1.6 8.4

CV 0.3 0.4 0.5 0.7

According to the Technical Report, the low coefficients of variation (“CV”) indicate that the data is notskewed and that OK is a suitable modelling method.

No top cuts were applied to the data as no extraordinary values were identified.

Figure 17, Figure 18, Figure 19 and Figure 20 contain histograms for the available ilmenite grade for theCL, CS_H, CS_L and DG lithologies respectively. According to the Technical Report, there aresuggestions of more than one population, particularly in the CS_H unit, but the composite plan figuresabove suggest that this observation is related to host lithology variations rather than spatially overlappingpopulations. There is a clear difference between the grade distributions of the CL and CS_H unitscompared to the CS_L and DG units. According to the Technical Report, the similarities in the CL-CS_Hgrade distributions as well as in the CS_L-DG grade distributions appear to suggest two similar datasetsand negate the need for hard boundaries between the relevant composite sets.

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Figure 17: Histogram of Available Ilmenite Composites in CL Unit

Figure 18: Histogram of Available Ilmenite Composites in CS_H Unit

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Figure 19: Histogram of Available Ilmenite Composites in CS_L Unit

Figure 20: Histogram of Available Ilmenite Composites in DG Unit

Figure 21, Figure 22, Figure 23 and Figure 24 show the histograms of the slimes grade for the CL, CS_H,CS_L and DG lithologies, respectively. Clearly there is segregation between the CL-CS_H and theCS_L-DG pairings. According to the Technical Report, the former would appear to contain more than onepopulation, some of which might be due to mis-logging, but H&S Consultants Pty. Ltd suspects that itmight be due to the complex multiphase weathering and material transportation regimes.

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Figure 21: Histogram of Slimes Composites in CL Unit

Figure 22: Histogram of Slimes Composites in CS_H Unit

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Figure 23: Histogram of Slimes Composites in CS_L Unit

Figure 24: Histogram of Slimes Composites in CS_L Unit

Bivariate Statistics

A correlation matrix for the available ilmenite and slimes content is presented in Table 8. The elementsare not strictly independent variables as the available ilmenite is weighted by the 1mm to 53µ sizefraction imparting the slight negative correlation seen in the CL and CS_H units. According to the

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Technical Report, the weak positive correlation in the CS_L and DG units may indicate that enrichedilmenite grades are associated with more intensely weathered zones, as might be expected.

Table 8: Correlation Coefficients for Lithologies

CL Unit Ilmenite Slimes

Ilmenite 1

Slimes -0.37 1

CS_H Unit Ilmenite Slimes

Ilmenite 1

Slimes -0.11 1

CS_L Unit Ilmenite Slimes

Ilmenite 1

Slimes 0.33 1

DG Unit Ilmenite Slimes

Ilmenite 1

Slimes 0.47 1

Figure 25, Figure 26, Figure 27 and Figure 28 show the scatterplots of ilmenite versus slimes for the CL,CS_H, CS_L and DG lithologies respectively. Clearly the CL and CS_H have a similar pattern, as do theCS_L and DG. The Technical Report noted that the CL and CS_H diagrams appear to show a smallamount of material that is similar to the DG and CS_L units suggesting some mixing of the two types thatmaybe a function of the logging, particularly where colour was used to decide the lithology or may be dueto the impact of the aircore sample straddling the lithological boundary.

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Figure 25: Scatter Plot of Ilmenite and Slimes Composites for the CL Unit

Figure 26: Scatter Plot of Ilmenite and Slimes Composites for the CS_H Unit

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Figure 27: Scatter Plot of Ilmenite and Slimes Composites for the CS_L Unit

Figure 28: Scatter Plot of Ilmenite and Slimes Composites for the DG Unit

Spatial Analysis

The approach used to analyse the data and generate models in the Technical Report is essentially ageostatistical modelling method which necessarily uses spatial continuity functions or variograms as partof the modelling process.

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In the data analytical process, sample variograms are generated from the sampling data. The samplevariograms like other statistical summaries provide a numerical measure of the spatial continuity of theelement grades for specific populations of samples. The properties of sample variograms reflect both thespatial variation of the grades and the spatial limitations of the data sets. If a sample population has alimited or discontinuous spatial extent, this directly affects the ability to understand the spatial continuity.The variograms are used to generate a 3D variogram model.

Variogram models are required to serve as parameters for the OK modelling method with one variogrammodel required for each element.

As described in the Technical Report, variography, using the GS3M software, was completed on theflattened composite data for available ilmenite and slimes content. To make sure sufficient data wasavailable for meaningful analysis and in recognition of the lack change in grade across lithologicalboundaries all lithological data was combined into a single file.

Figure 29 shows the direction variograms for the available ilmenite data, which are shown in Figure 30 asa three dimensional contour model. As described in the Technical Report, the range of the vertical axis ismuch shorter, as to be expected from weathered residual deposits such as Goondicum. A ten timesvertical exaggeration was used when modelling the variography to decrease anisotropy. The ranges in thedownhole variogram (bottom) are therefore ten times the actual value. Direction variograms for theslimes content are shown in Figure 31.

Figure 29: Variograms for Available Ilmenite

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Figure 30: Variogram Model for Available Ilmenite

Figure 31: Variograms for Slimes

Details of the variogram models are included in Table 9.

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Table 9: Variogram Models

ElementAxis 1 Axis 2 Axis 3

Nugget SillAxis 1 Axis 2 Axis 3

Orientation Orientation Orientation Range Range Range

Ilmenite 0 to 045 0 to 135 90 to 315 0.05

0.73 205.5 110 6

0.11 330 300 39

0.11 1068 1050 421

Slimes 0 to 045 0 to 135 90 to 315 0.01

0.76 91 96 19

0.13 100 98 19

0.10 360 350 19

Block Model Dimensions

The block model was created under the assumption that mining at the Goondicum deposit will beconducted using shallow open pit mining methods. The effective minimum mining dimensions are equalto the block size. The coordinates of the centroids of these blocks can be found in Table 10. The east-westand north-south block dimensions were selected primarily on the drill hole spacing and the verticaldimension was chosen in recognition of the lithology thicknesses, horizontal layering and sample spacing.

Table 10: Block Model Dimensions

Parameter East North RL

Minimum coordinate 337525 7250425 390

Maximum coordinate 340725 7252325 500

Block size (m) 50 50 1

No. of blocks 65 39 111

No sub-blocking was used.

The block model was restricted to the plan extents of the CS-DG boundary wireframes.

Flattening

The thickness of the lithological units is relatively small compared to the variation in elevation of the baseof each unit. The composite data and block model were therefore ‘flattened’ relative to the originaltopographic surface in order to remove the effects of topographic variation. This process effectivelyassigns each of the drillhole collars with a similar elevation. The original topographic surface was used asthe 2013 surface contained depressions associated with the recent mining. As described in the TechnicalReport, slight errors are present in the flattened data as original drillhole collars are not always perfectlyaligned with the original topographic surface. The Technical Report recommends that this original surfacehas the drillhole collars included in the dataset.

Figure 32 shows the effect of flattening the composite data and block model.

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Figure 32: Example Section of Flattening

Search Criteria

The search criteria used for the estimation can be seen in Table 11 and consist of two search passesincreasing in search radii and decreasing in data requirements. The search criteria were selected inrecognition of the data spacing and the short vertical range shown in the variography. Declustering wascarried out by the use of search sectors. There are no search rotations as the search ellipsoids are circular.Discretisation of blocks is based on 5 x 5 x 2 points (east, north and vertical respectively).

Table 11: Block Model Search Criteria

Axis Pass 1 Pass 2

Axis 1 200 m 300 m

Axis 2 200 m 300 m

Axis 3 4 m 6 m

Composite Data Requirements

Minimum data points (total) 8 4

Max points (total) 24 24

Sectors 4 4

Minimum drill holes 3 2

Maximum points per hole 4 6

Maximum extrapolation beyond the bounding drillholes was approximately 230m.

For reference, a plan view map of the search ellipses and the block model coloured by Pass is shown inFigure 33. The figure also shows the extent of the block model relative to the drillhole spacing.

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Figure 33: Pass 1 and 2 Block Locations

Domaining

Lithological domaining of the block model was completed by using the lithological surfaces in relation tothe block centroids. Additional domaining consisted of flagging blocks in the DG unit that had a centroidinside the 3D solid for stripped DG.

There were no domains based on multiple search ellipse scenarios as it was a simple circular search in theX-Y directions; previous modelling had used ovoid search ellipses oriented to the strike of the arcuatezones of the intrusion mentioned previously.

Density Model

Default densities from Monto Minerals’ 1996 to 2000 work were inserted into the block model for thedifferent geological domains (Table 12).

Table 12: Default Densities

Lithotype Density t/m3CL 1.6CS_H 1.6CS_L 1.6DG 2.1

In the 1996-2000 work the CL unit had an allocated density of 1.35t/m3 but H&S Consultants Pty. Ltdconsiders that as there is more than one population within this unit, one of which is well mineralised, ithas decided to retain 1.6t/m3. This decision is supported by the reconciliation work completed by H&SConsultants Pty. Ltd.

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Resource Classification

The classification of the resources in the Technical Report is primarily based on the search ellipseparameters (Table 13), subject to the impact of other relevant aspects e.g. geological understanding,QAQC etc. The resources are planned to be mined in an open pit scenario and classification is also basedon this assumption.

Table 13: Resource Classification

Pass No Classification1 Indicated2 Inferred

Impact on classification of aspects of the resource estimates as noted in the Technical Report are includedbelow:

Positives

Regular drill pattern, accurately located holes, testing all lithological units

Suitable drilling method

Accurate topographic surfaces

QAQC data indicates no critical issues

An improved geological understanding

Horizontal geological continuity between drillholes for each lithology

Use of a more sophisticated modelling method i.e. OK, allowing for a greater interaction betweensample points

Negatives

Wide drillhole spacing and limited data points for the available ilmenite, requiring large searchparameters for modelling, insufficient close spaced drilling to allow for greater confidence fromgeostatistical analysis

Complex geology with the main host unit having local variations with ilmenite and slimes grades

Limited Clerici testwork applied to composited intervals

Minor issues with the QAQC data

Clerici composites include material from several drill holes and mix CS_H and CS_L materialtogether

Uncertain definition of geological boundaries between drillholes. The wide drillhole spacingmeans lithological contacts can only have an accuracy +/-100m

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Lack of density data plus the added fact that the original work was based on a single CS unitrather than the high and low slimes sub-divisions

Possible suspect available ilmenite grades due to the high drilling recoveries in the CS_L unit.Resource grades could be higher than the current estimates for the unit

Possible suspect available ilmenite grades with the SL samples. Sample grades could be higherdue to difficulty in obtaining representivity of sample in the drilling

Estimation Results

The resource estimates included in the Technical Report are reported in Table 14 at a 2.5% availableilmenite cut-off grade with a partial percent volume adjustment for blocks cutting the topography i.e. the2013 LiDAR surface. The base of drilling also acted as a constraint to the block model. The ilmenitegrade is reported for both the available data and with the metallurgical recovery factor of 0.8 applied toproduce the recoverable ilmenite figures. The recoverable ilmenite factor was supplied by Belridge and isbased on metallurgical testwork with the recent mining. In addition DG blocks deemed to be inside thestripped DG wireframe were not reported. This amounted to roughly <4% of the total material.

Table 14: H&S Consultants Pty. Ltd Block Model Goondicum Resource Estimates by

Classification

CategoryTonnes

(Mt)Available

Ilmenite (%)RecoverableIlmenite (%)

Slimes (%)

Indicated 31.3 6.1 4.9 22.9

Inferred 30.9 6.3 5.0 24.3(minor rounding errors)

Mineral Tonnes

CategoryAvailable

Ilmenite (Mt)RecoverableIlmenite (Mt)

Slimes (Mt)

Indicated 1.90 1.52 7.17

Inferred 1.93 1.55 7.51(minor rounding errors)

No allowance in the estimates has been made for any material sterilised by the plant which lies in thesouthern central part of the resource. The likely impact if this material is not mined is detailed in Table 15as included in the Technical Report.

Table 15: H&S Consultants Pty. Ltd Block Model Resource Estimates associated with the

General Plant Area

Lithology Category Volume TonnageAvailableIlmenite

RecoverableIlmenite Slimes

(m3) Mt % % %

CS_H Indicated 35,000 0.06 16.6 13.3 54.8

DG Indicated 90,000 0.19 3.2 2.6 11.9

Total 125,000 0.25 6.3 5.0 21.8

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CS_H Inferred 284,000 0.45 14.5 11.6 52.5

DG Inferred 606,000 1.24 3.0 2.4 11.9

Total 890,000 1.69 6.1 4.9 22.8(minor rounding errors)

Lithology Category TonnageMt

AvailableIlmenite Kt

RecoverableIlmenite Kt

SlimesKt

CS_H Indicated 0.06 9 8 31

DG Indicated 0.19 6 5 22

Total 0.25 15 12 54

CS_H Inferred 0.45 66 53 238

DG Inferred 1.24 37 30 148

Total 1.69 103 83 386(minor rounding errors)

The estimated resources included in the Technical Report for the Goondicum deposit are presented inTable 16 by lithology.

Table 16: H&S Consultants Pty. Ltd Block Model Goondicum Resource Estimates by

Lithology

Lithology Category Tonnes MtAvailable Ilmenite

%RecoverableIlmenite %

Slimes %

CL Indicated 4.1 10.8 8.7 52.9

CS_H Indicated 4.9 12.9 10.3 52.4

CS_L Indicated 5.0 4.0 3.2 10.2

DG Indicated 17.3 3.6 2.9 11.1

Totals Indicated 31.3 6.1 4.9 22.9

CL Inferred 2. 5 10.1 8.1 53.1

CS_H Inferred 8.8 11.2 9.0 46.3

CS_L Inferred 5.9 4.0 3.2 11.0

DG Inferred 13.7 3.3 2.7 10.7

Totals Inferred 30.9 6.3 5.0 24.3(minor rounding errors)

Mineral TonnesLithology Category Available Ilmenite

MtRecoverableIlmenite Mt

Slimes Mt

CL Indicated 0.45 0.36 2.22CS_H Indicated 0.63 0.50 2.55CS_L Indicated 0.20 0.16 0.51DG Indicated 0.62 0.50 1.92

Totals Indicated 1.90 1.52 7.17

CL Inferred 0.25 0.20 1.30CS_H Inferred 0.99 0.79 4.10

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Mineral TonnesLithology Category Available Ilmenite

MtRecoverableIlmenite Mt

Slimes Mt

CS_L Inferred 0.23 0.19 0.64DG Inferred 0.46 0.37 1.47

Totals Inferred 1.93 1.55 7.51(minor rounding errors)

As noted in the Technical Report, reporting the resource estimates using the block centroid below thetopographic surface rather than the partial percent volume adjustment resulted in a very minor differenceof +0.5%. Reporting the resource estimates using the original topographic surface resulted in reduction ofthe resource by 1.6%.

Figure 34, Figure 35, Figure 36 and Figure 37 show plan views of the available ilmenite mineralisationfor the different lithologies (note that only the top block of each column of blocks is showing). Figure 34shows the distribution of the blocks of the CL unit coincident with the topographic lows with the highergrade zones generally associated with the centre of the valleys. As noted in the Technical Report, theevidence for transportation of the ilmenite is clear when the high grade SE Quadrant in Figure 34 iscompared with the low grade in the DG unit in Figure 37.

Figure 34: H&S Consultants Pty. Ltd Block Model Global Resources Plan View CL Unit

Ilmenite

In Figure 35 the high grade available ilmenite blocks are visible within the CS_H unit. The lower gradeportions are normally associated with local topographic highs.

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Figure 35: H&S Consultants Pty. Ltd Block Model Global Resources Plan View CS_H Unit

Ilmenite

In Figure 36 the localised distribution to the CS_L unit does not provide evidence for mineral zonation.

Figure 36: H&S Consultants Pty. Ltd Block Model Global Resources Plan View CS_L Unit

Ilmenite

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Figure 37 shows the DG unit with an arcuate grade pattern similar to the aero-magnetic image (see Figure3). The relatively barren SE Quadrant can be clearly seen.

Figure 37: H&S Consultants Pty. Ltd Block Model Global Resources Plan View DG Unit

Ilmenite

Table 17 contains the Indicated Mineral Resource estimates noted in the Technical Report for a range ofavailable ilmenite cut off grades. The figures are represented as grade–tonnage curves for all lithologies(Figure 38) and as tonnage curves for all the lithologies (Figure 39).

Table 17: H&S Consultants Pty. Ltd Block Model Indicated Mineral Resource Estimates for

Grade-Tonnage Curves

Avail Ilm Avail Ilm Rec Ilm Slimes Avail Ilm Rec Ilm Slimes

Cut off % Domain MTonnes % % % KTonnes KTonnes KTonnes

0 CL 4.1 10.8 8.7 52.9 450 360 2,195

CS_H 4.9 12.9 10.3 52.4 625 500 2,550

CS_L 5.1 4.0 3.2 10.2 204 163 519

DG 19.5 3.4 2.7 11.1 662 529 2,154

All Units 33.6 5.8 4.6 22.1 1,941 1,552 7,417

Avail Ilm Rec Ilm Slimes Avail Ilm Rec Ilm Slimes

Domain MTonnes % % % KTonnes KTonnes KTonnes

2.5 CL 4.1 10.8 8.7 52.9 450 360 2,195

CS_H 4.9 12.9 10.3 52.4 625 500 2,550

CS_L 5.0 4.0 3.2 10.2 202 161 511

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Avail Ilm Avail Ilm Rec Ilm Slimes Avail Ilm Rec Ilm Slimes

Cut off % Domain MTonnes % % % KTonnes KTonnes KTonnes

DG 17.3 3.6 2.9 11.1 623 498 1,918

All Units 31.3 6.1 4.9 22.9 1,899 1,519 7,174



4 CL 4.1 10.9 8.7 52.9 449 360 2,190

CS_H 4.9 12.9 10.3 52.4 625 500 2,546

CS_L 2.6 4.6 3.7 10.9 117 93 277

DG 4.1 4.6 3.7 14.6 186 149 595

All Units 15.6 8.8 7.1 35.9 1,377 1,101 5,608



8 CL 3.3 12.0 9.6 52.6 393 314 1,720

CS_H 4.4 13.4 10.8 52.1 593 474 2,300

All Units 7.7 12.8 10.3 52.3 986 789 4,020



10.5 CL 2.2 13.4 10.7 51.8 292 233 1,125

CS_H 3.2 15.0 12.0 51.6 478 382 1,643

All Units 5.4 14.4 11.5 51.7 770 616 2,768

As noted in the Technical Report, there appears to be a natural cut off at about 2.5% available ilmenite(see grade tonnage figures Table 17 & Figure 37) for the resource as a whole, which is believed due to theprimary concentration of ilmenite in the underlying gabbro.

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Figure 38: H&S Consultants Pty. Ltd Block Model Indicated Resource Grade-Tonnage Curves

Figure 39 shows the tonnages for the different lithologies at different cut off grades.

Figure 39: H&S Consultants Pty. Ltd Block Model Indicated Resource Tonnage Curves All

Lithologies

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Block Model Validation

Validation of the block model consisted of visual comparison of block grades with the drillhole data and areview of global statistics for composites and block grades. Reconciliation with the 2012-2013production was also undertaken.

Block Grade Visualisation

A sectional review was completed of block grades against both assay grades and geological domaining.As noted in the Technical Report, the review indicated no issues with the modelling.

Composite/Block Grade Comparison

Comparison of global block available ilmenite and slimes grades with composite values for the differentlithologies is included as Figure 40. The graphs show the cumulative frequency of the block grades(green line) with the cumulative frequency of the composite values (blue line). The Technical Reportnotes that the patterns displayed indicate no problems with the modelling of available ilmenite and slimescontent.

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Figure 40: Composite-Block Grade Comparisons

(Zone 1 = CL, Zone 2 = CS_H, Zone 3 = CS_L, Zone 4 = DG)

Summary Statistics for Block Grades & Composites

A simple check on the grade interpolation for the block model is to compare summary statistics for thecomposite grades with the global block grades. The Technical Report notes that generally in this type ofdeposit the composite means are expected to be marginally higher than the block grade means. Table 19

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shows the comparisons for all the lithologies. In the majority of the cases the composite mean is higherthan the block grade mean. The exceptions are for slimes in the CS_H and CS_L units. The exceptions areminor in scale and H&S Consultants Pty. Ltd does not consider these exceptions to be significant.

Table 18: Summary Statistics for Block Grades & Composites

Zone Stats Available Ilmenite (%) Slimes (%)

CL Unit Comp Blocks Comp Blocks

Count 149 2878 303 2878

Mean (%) 11.7 10.6 54.6 53.0

Minimum (%) 1.7 3.0 7.4 24.4

Maximum (%) 40.5 28.2 87.9 69.3

Variance 48.2 11.9 188.6 27.4

Std Dev 6.9 3.4 13.7 5.2

CV 0.6 0.3 0.3 0.1

CS_H Unit Comp Blocks Comp Blocks

Count 180 6099 373 6099

Mean (%) 11.9 11.8 46.5 48.5

Minimum (%) 1.4 2.5 13.7 24.3

Maximum (%) 42.4 31.8 90.8 73.1

Variance 78.1 18.9 270.9 71.3

Std Dev 8.8 4.4 16.5 8.4

CV 0.7 0.4 0.4 0.2

CS_L Unit Comp Blocks Comp Blocks

Count 154 2965 438 2965

Mean (%) 4.0 3.9 10.2 10.6

Minimum (%) 0.5 1.2 2.7 6.1

Maximum (%) 9.8 7.0 44.4 20.3

Variance 2.0 0.7 16.4 4.6

Std Dev 1.4 0.8 4.0 2.2

CV 0.3 0.2 0.4 0.2

DG Unit Comp Blocks Comp Blocks

Count 494 7551 1316 7551

Mean (%) 3.4 3.2 12.0 10.8

Minimum (%) 0.6 1.0 2.0 5.7

Maximum (%) 11.3 7.7 79.4 53.0

Variance 2.4 0.8 70.3 14.0

Std Dev 1.6 0.9 8.4 3.7

CV 0.5 0.3 0.7 0.3

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Reconciliation

Resource estimates for the perceived mined area are reported from the latest block model using a 0%ilmenite cut off for material between the 2012 and 2013 LiDAR surfaces with a partial percent volumeadjustment within the area defined as the Disturbed Area (as defined by a stringfile supplied to H&SConsultants Pty. Ltd). Table 19 shows the estimates along with the contained ilmenite tonnes and theproduction figures. The recoverable ilmenite actual tonnes field is the result of applying the plantrecovery factor of 0.73, from Belridge’s 2012-3 mining & processing operation, to the available ilmenitegrade. The total recoverable ilmenite actual tonnes are within 10% of the production ilmenite tonnes,which suggests the model may be slightly conservative. The Technical Report notes that the difference isconsidered acceptable for an Indicated Resource. As a result H&S Consultants Pty. Ltd conclude that itsnew 2013 model reconciles with the 2012-2013 production. As a comparison the expected amount ofilmenite (planned) from the block model assuming a plant recovery factor of 0.8 is included in the table.

Table 19: H&S Consultants Pty. Ltd Block Model 2012/2013 Mined Material

LithologyVolume

(m3)Tonnes

AvailableIlmenite

(%)

RecoverableIlmenite

actual (%)

RecoverableIlmenite

planned (%)

RecoverableIlmeniteactual (t)

RecoverableIlmenite

planned (t)

CL 618 988 16.5 12.0 13.2 119 130

CS_H 289,785 463,656 11.4 8.3 9.1 38,585 42,264

CS_L 39,460 63,136 4.1 3.0 3.3 1,890 2,088

DG 40,188 80,774 3.8 2.8 3.0 2,241 2,438

Totals 370,050 608,554 9.6 7.0 7.7 42,647 46,920

Production 656,718 10 7.3 47,425

The estimated average slimes content for the mined area from the block model was 39.3% compared to aproduction figure of 43%.

SL (Soil) Sampling

Earlier in this section mention was made of the preservation of the top 0.2m of soil for groundrehabilitation after mining. This 20cm of soil material was a separate sample in each drillhole, the SLlithology code was used, but for the purposes of modelling was composited as part of the first 1m sampleof each hole. The discussion below provides some detail of that soil layer as it may have an impact onany mine scheduling.

Figure 41 shows a plot of the available ilmenite grades for the SL samples; there is only one sample perdrillhole. There is some weak zonation to the ilmenite grades mostly related to the underlying CS_H unit.

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Figure 41: Plot of SL Sample Grades Available Ilmenite

Table 20 contains the summary statistics for the SL unit. It quite clearly shows that the ilmenite gradesare significantly higher for the SL unit than all the other lithology units. The Technical Report notes thatthis presumably is because recent weathering and erosion has removed finer grained, lighter material,upgrading the heavy mineral material of the soil including the ilmenite content.

Table 20: SL Unit Summary Statistics

SL Unit Available Ilmenite (%) Slimes (%)

Count 128 224

Mean 16.5 48.6

Minimum 2.0 14.5

Maximum 42.4 79.0

Variance 92.5 121.3

Std Dev 9.6 11.0

CV 0.6 0.2

The SL samples may not fully reflect the ilmenite grade due to the difficulty in getting proper and goodsample return for the first 0.5m of aircore drilling. The samples collected with the 2009 drilling will likelyhave underestimated the ilmenite content in the soil.

There is a moderate negative correlation between the available ilmenite and the slimes grades (Table 21).The available ilmenite and slimes content are not strictly independent variables as the available ilmenite isweighted by the 1mm to 53µm size fraction impacting on the negative correlation.

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Table 21: SL Unit Mineral Correlations

SL Unit Ilmenite Slimes

Ilmenite 1

Slimes -0.66 1

The Technical Report notes that the amount of SL material for the whole deposit is likely to be in therange of 600,000 to 800,000m3 with a grade range of 13 to 20% ilmenite.

Exploration Target

Based on investigations conducted by Monto Minerals there is potential for resources in addition to thosethat are the subject of the Technical Report, see Lee (2000).

The potential quantity and grade of the exploration target is conceptual in nature and there has beeninsufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result inthe determination of a Mineral Resource.

Figure 42: Location of 2000 Resource Estimates (Lee 2000)

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Referring to Figure 42 four areas are marked which have been drilled and tested using a mixture of handauger and aircore drill on grids from 100 x 100m to 100 x 400m. The sample processing was the same asfor the other Monto work in 1996-2000. These areas had estimated resources after applying a cut off 3%to the 5.5AM recovered magnetic fraction and ilmenite conversion factors of 85% for the CS unit and63% for DG unit.

The Company does not treat the historical estimates as a current mineral resource.

Details of the exploration targets at a 3% ilmenite cut off are included in Table 22.

Table 22: Exploration Targets for Ilmenite

Figure 42 Area Tonnage (Mt) Ilmenite (kt) Ilm Grade (%)

South and South West 10 to 15 600 to 800 5 to 6

Central West 4 to 5.5 200 to 250 4 to 5

North East 8 to 12 400 to 500 4 to 5

Southern 10 to 12 400 to 600 4 to 5

Total 35 to 45 1,500 to 2,000 4 to 5

Figure 42 also shows areas that are known to be mineralised at surface within the Goondicum Crater buthave not been drilled at all. These areas also represent exploration potential.

Impacts on Resource Estimates

The Technical Report notes the belief of management and H&S Consultants that the size andclassification of the resource estimates are unlikely to be affected by any non-geological factors. TheTechnical Report also notes that additional drilling could result in a change in the classification of thedeposit but is unlikely to affect the resource size. Extensional drilling around the periphery of the depositcould make for a larger resource.

In respect to impacts on the resource estimates of known environmental, permitting, legal, title, taxation,socio-economic, marketing, political, or other relevant factors management and H&S Consultants are ofthe view that:

Australia and the state of Queensland are politically and socially stable with an establishedmining culture and a strong mining law.

Environmental permits have been granted for the project with the approval of the mine lease andenvironmental surveys have indicated no protected species or threatened habitats.

The mining lease has been granted; revocation of a mining lease is rare in Australia.

The local population is supportive of the project.

There are no pending legal threats to the project.

The product is a bulk commodity with a track record of saleability. A plunge in the commodityprice of the ilmenite at some point in the future could affect any reserves generated from theresource estimates. Usually the product is sold under long lasting supply agreements.

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The Australian Government has recently imposed a tax on mining company profits for coal andiron ore but the current government is looking to repeal the tax and it is unlikely there will be anystrong political will to re-instate it in the future.

Mineral Reserve Estimates

No Mineral Reserves have been generated.

Mining Methods

The previous operations have been open pit excavations and this is still the intention for future mining.The mineralisation is at the surface hence there is no overburden to remove and the mineralisation doesnot require blasting or ripping. The land is cleared of vegetation (trees and grass) using a bulldozer toprepare the area for mining.

A dry open pit mining method is proposed using a combination of scrapers, and an excavator and truckmodel. The mineralisation is expected to be relatively easy digging for an excavator.

Normal mining practice will be for the excavator to sit on top of the mineralisation being mined and loadtrucks in the pit below the excavator. This reduces the cycle time of the excavator to maximiseexcavation efficiency. Four 40 tonne 6WD trucks will be used to haul the mineralisation from theexcavator to the ore stockpile at the FPP plant. The average haul distance is expected to be 300 metresand the maximum haul distance is expected to be 2000 metres.

The mining operation will also utilise scrapers on short haul, low vertical lift cycles to remove themineralisation and deliver it to the FPP. The scrapers are more suitable for mining material which isoutside the gullies. Two scrapers will be used mostly for mining in the shallow areas, while the excavatorand trucks will concentrate in the gullies.

The mining fleet is planned to be supplied by a mining contractor on a dry hire basis and is expected tocomprise of a Komatsu PC1250 Digger, 4 x CAT740 articulated dump trucks, 1 x CAT D10 Dozer, 3 xCAT639 Scrapers, and a CAT980 front-end loader. The dry hire cost is expected to include fullmaintenance by the mining contractor.

Stockpiling mineralisation will be minimised to keep rehandling costs low and improve the flow of themineralisation through the FPP.

Appropriate mine planning and grade control will be essential to ensure that the designed optimal feedblend is provided to the FPP. Grade control drilling and face sampling will be used to give advancewarning of potential changes to the feed quality. GPS technology may be used during mining torecognise the bottom of the mineralisation to avoid digging too deep. GPS coordinates of the geologicaldrill holes will help to identify different grade material prior to mining.

A simple production schedule, referred to as the life of mine plan, was prepared by mining engineeringconsultant Australian Mine Design and Development Pty Ltd based on the estimated ilmenite and slimesgrades, and dry density values in the H&S Consultants Pty. Ltd resource model (Table 23). Thefollowing table is a summary of the life of mine plan, including total movement of mineralised materialcomprised of direct feed from the excavated pit to the FPP as well as pit to stockpile and rehandle fromstockpile to FPP. The life of mine plan is preliminary and does not constitute a Mineral Reserve estimate.It has been sequenced on the basis that mining would progress in 50m x 50m zones corresponding to theresource model blocks. The schedule does not incorporate any additional adjustment of the resource formining dilution and loss at the bottom and lateral extents of excavation. It excludes approximately 3.1

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million tonnes of intervening sub-grade or zero grade material above the base of excavation over the lifeof mine that in practice may be included in the ore. Otherwise, all mineralised colluvium and clay sandsare included in the scheduled production, as well as decomposed gabbro above a cut-off grade of 3.7%ilmenite.

Table 23: Life of Mine Plan

The proposed mine plan is subject to ilmenite price variations which could affect cut-off grades. The lifeof mine plan shows an average annual production of 210kt per year over a mine life of 12 years, giving atotal ilmenite production of 2.4Mt.

Past mining has worked on the principle that the tailings will be stored within previously mined areas. Itis planned that this procedure will be continued with future mining. Figure 43 shows a photograph of theexisting tailings dam.

Period Year: 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL

Total Movement tonnes 2,904,615 2,857,759 3,706,017 3,609,836 3,603,061 3,666,154 3,683,566 3,626,831 3,650,703 3,651,240 3,604,583 998,041 39,562,406

tonnes 2,800,000 2,800,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 998,041 38,998,041

m3 1,728,821 1,702,651 2,003,782 1,917,790 2,071,538 2,050,313 2,166,175 2,171,731 2,185,808 2,189,259 2,224,662 576,858 22,989,389

Available Ilm (%) % 7.46 7.26 7.18 6.90 7.06 6.96 8.16 8.77 8.94 9.72 6.42 5.23 7.66

Slimes(%) % 27.99 30.35 26.83 25.44 26.25 26.25 30.36 32.23 39.00 39.14 31.61 33.63 30.63

Production (tonnes)

Recovered Ilminite tonnes 167,160 162,592 206,879 198,788 203,365 200,532 235,123 252,661 257,391 279,815 184,786 41,785 2,390,876

Total Feed

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Figure 43: Goondicum Tailings Dam

The quantity of tailings produced will depend on mining rate, slimes content, and mineral grades in theplant feed. The tailings management plan involves creating dams for containment and settling of slimes.Water will be recovered from the tailings and reused in the plant.

Recovery Methods

It is anticipated that mineral blending will be done on the run-of-mine (ROM) stockpile, as the material isfed into the processing plant. The Company intends to restart operations and expand the Goondicumprocessing plant from the current 250t/hr to a throughput of 375t/hr. Following successful commission theCompany will consider a further expansion to 485t/hr throughput to commence after 18 months ofoperation.

The FPP plant uses a combination of slurring, scrubbing/attritioning, screening and cyclone desliming toextract the (+53 µm to -1mm) sand fraction, containing almost all of the mineral values, from the barrenclay fraction. The FPP processing flowsheet is included as Figure 44.

Figure 44: The FPP Processing Flowsheet


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The function of the WCP is to extract an ilmenite concentrate from the FPP product by taking advantageof major physical differences between the contained minerals.

Figure 45: The WCP Processing Plant


Project Infrastructure

Belridge has provided a list of the historical acquisition value of its assets, including currently heldmining and plant machinery and equipment, amounting to approximately A$95,000,000. The recentlytransferred ownership of the water pipeline from SunWater is believed to be valued at A$23,000,000. Inaddition to this there is the expenditure that was expensed and not capitalised, including a large part of themost recent project commissioning. This is reported as A$9,700,000 (documented) with a likely similaramount expended by Monto Minerals (not documented) for the original exploration and commissioningof the plant.

The surface rights and the dimensions of the mine lease allow sufficient access to the deposit for miningpurposes.

Prior owners of the Goondicum Project have previously built a 23km, 66kV spur line from the Dakieljunction up to the minesite. The power is taken from an existing, Ergon owned, 66kV line near Dakiel and

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a 66kV transmission installation takes the power 23km to site. A 66kV/11kV substation on site distributespower to the different plant areas. The installation has a capacity of 5MW which has surplus capacity tothe likely mine requirements of approximately 4MW. The current agreement with Ergon is for an uptakeof 1.7MW and an application has been submitted to extend that to 4 MW. The power line mostly followsthe council road easement wherever possible. The road route from Dakiel to Goondicum following Ball’sRoad and Hay’s Road is reasonably direct.

On site power transformers and reticulation are already installed and commissioned.

The site is supplied by a 35km water pipeline from Mulgildie that has a design capacity of 2,000 ml perannum. The locations of the power line and water pipeline are shown in Figure 1.

The Goondicum Project has water licences to draw up to 3,000 ml of water from the Mulgildie borefield.The existing bore is allowed to draw 1500 ml of water per annum, which is expected to be sufficient tosustain the current plant when it is in operation.

There is no permanent surface water in the Goondicum Crater. Some semi-permanent waterholes exist ina gully towards the northern boundary of the mining lease. Groundwater suitable for extraction by bore isscarce and flows will only sustain small stock water supplies. The landholder has installed a very lowflow bore for stock water supply but it is subject to seasonal variation. Groundwater is sourced fromsmall fractures in the gabbro up to 30 metres depth and the bore flows are generally in the order of 0.3L/sor less and only suitable for intermittent pumping for stock water.

The waterholes are planned to be removed during the mining operation and Belridge will provide thelandholder with a replacement stock bore. On completion of mining and tailings activities in the area ofthe waterhole, the surface of the land will be reshaped to provide a replacement waterhole.

A series of seven monitoring bores have been installed in addition to the two pre-existing bores. Theinstalled bores are small diameter shallow monitoring bores up to 20m in depth. These are used formonitoring groundwater levels and quality.

Selected Consolidated Financial Information and Management’s Discussion and Analysis

Annual Information

Year ended 30 June 2013 30 June 2012 30 June 2011

Revenues (A$) 9,606,000 Nil Nil

Net profit (loss) (A$) (27,470,000) (2,504,000) (1,159,000)

Total assets (A$) 12,116,000 25,622,000 4,595,000

Management Discussion and Analysis

For a discussion on Belridge’s Management Discussion and Analysis, see Schedule “B” - ManagementDiscussion & Analysis to this Filing Statement.

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Description of the Securities

As at the date of this Filing Statement, there are 1,027,075 ordinary shares in the capital of Belridgeissued and outstanding. As at the date of this Filing Statement, there are no other shares in Belridge, orsecurities convertible into shares in Belridge issued and outstanding.

The rights attaching to the shares in the capital of Belridge are determined by Belridge's constitution. Inaccordance with the Share Purchase Agreement, Belridge’s existing shareholders have resolved thatBelridge will adopt a new constitution effective on the Closing Date. Both before and after adoption ofthe new constitution, all ordinary Belridge shares will have the following rights, privileges andconditions:

the right to receive notice of and to attend and vote at all general meetings of Belridge at one voteper share;

the right to receive dividends; and

in a winding up, the right to participate equally in the distribution of the assets of Belridge (bothcapital and surplus).

The new constitution will also provide that, subject to the constitution and the Corporations Act 2001(Cth), the directors of Belridge may issue or dispose of shares or other securities (including preferenceshares or other shares that are liable to be redeemed) to persons:

on terms determined by the directors;

at the issue price that the directors determine; and

at the time that the directors determine.

Consolidated Capitalization

As at the date of this Filing Statement, the only material changes to Belridge’s share and loan capitalsince the date of its latest financial statements are as follows:

the issue of an additional 26,975 ordinary shares upon the conversion of a convertible note heldby Sashimi Investments Pty Ltd;

the elimination of all outstanding shareholder loans by way of:

o the forgiveness of loans amounting to A$18,037,360.50 by Belmont Park – Monto PtyLtd; and

o the forgiveness of loans amounting to A$18,037,360.50 by Panorama Ridge – Monto PtyLtd.

Prior Sales

No shares in Belridge have been sold over the last 12 months.

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Executive Compensation

Belridge has one NEO, Mark McCauley, Managing Director, who is remunerated by Belridge at a levelcommensurate with his experience and level of responsibility. The overall level of the executivecompensation is not expected to materially change as a result of the Proposed Acquisition.

Belridge has not granted stock options to any of its employees.

Management Contracts

No management functions of Belridge are to any substantial degree performed by a Person other than thedirectors or officers of Belridge.

Arm’s Length Transaction


Legal Proceedings

Belridge is not a party to any legal proceedings and it is not aware of any pending or threatened legalproceedings against Belridge.

Material Contracts

Belridge entered into an agreement with Sojitz, a trading group listed in Japan and operating a broadrange of divisions including machinery and equipment, agricultural and forestry resources, energy andmining resources, real estate and consumer goods, to distribute and promote the sale of ilmenite minedfrom ML 80044. The agreement is for an initial term of three years beginning in April 2013. Theagreement is subject to automatic renewal for successive three year terms, unless either party to theagreement gives the other notice that it wishes to terminate the agreement.

Under the agreement, Belridge grants Sojitz the exclusive right to promote and sell ilmenite mined fromML 80044 into Japan and Korea and a non-exclusive right to promote and sell ilmenite into othercountries. Belridge agrees to pay Sojitz a marketing fee equal to five percent (5%) of the receipt of thesales amounts of ilmenite marketed and sold by Sojitz.

Belridge is party to a Pipeline Transfer Agreement with SunWater and Monto Pipeline Services Pty Ltddated February 22, 2012 (as amended). While the transfer of the pipeline has been completed, Belridgehas an obligation under this agreement to pay a one-off success fee to SunWater in the amount ofA$500,000 (excluding GST) less the aggregate amount of SunWater’s legal fees (excluding GST) inrespect of the Pipeline Transfer Agreement that have been reimbursed by Belridge to SunWater. Thesuccess fee will be paid to SunWater when the gross revenue (exclusive of GST) derived by Belridge orits related bodies corporate from operations conducted in respect of the Goondicum Project during anyconsecutive 12 month period exceeds A$23,000,000 (excluding GST).

Belridge is party to the Share Purchase Agreement and a loan agreement with the Company pursuant towhich the Company agreed to loan up to Cdn$1,400,000 to Belridge.

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INFORMATION CONCERNING THE RESULTING ISSUER

Corporate Structure

The corporate structure of the Resulting Issuer as set out under “Information Concerning the Company”will not change following completion of the Proposed Acquisition, except as described below under“Intercorporate Relationships”.

The head office of the Resulting Issuer will be located at 120 Adelaide Street West, Suite 2500, Toronto,Ontario M5H 1T1. The Resulting Issuer’s registered office will be located at 355 Burrard Street, Suite1900, Vancouver, British Columbia V6C 2G8.

Intercorporate Relationships

The Company will own the following subsidiaries following the completion of the Proposed Acquisition:

100%

100%

100%

Description of the Business

The Resulting Issuer plans to re-start and operate the Goondicum Project. Pursuant to the Share PurchaseAgreement, the Resulting Issuer has agreed to invest, subject to the approval of the Board, up to US$15million in the re-start and development of the Goondicum Project. As such, the Resulting Issuer’s mainasset will be the Goondicum Project. Its listing status on the Exchange will change from a Tier 1Investment Issuer to a Tier 1 Mining Issuer.

For information relating to the risks associated with the new business of the Resulting Issuer please see“Risk Factors”.

Stated Business Objectives

The Resulting Issuer plans to restart and expand mining operations at the Goondicum Project.

The Resulting Issuer’s long-term objectives will be to: (i) expand capacity and ramp-up production at theGoondicum Project, and (ii) maximize shareholder value.

The Resulting Issuer may, at the discretion of its Board, engage in asset or corporate acquisitions orinvestments with respect to other assets, businesses or properties.

Melior Australia(Australian Company)

The Company

Belridge (AustralianCompany)

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There is no assurance that the Resulting Issuer will be successful in meeting the objectives describedabove. For information relating to the risks associated with the business of the Resulting Issuer please see“Risk Factors”.

Milestones

To reach the foregoing stated business objectives, the Resulting Issuer will target the followingmilestones: (i) the restart, development and expansion of the Goondicum Project in the first half of its2015 fiscal year, and (ii) the achieving commercial production in the second half of its 2015 fiscal year.

Exploration and Development

After completion of the Proposed Acquisition, the Resulting Issuer may engage in further exploration ofthe Goondicum crater and the surrounding areas.

While the mineralization and metallurgy is expected to be similar to the current mining area, neitherBelridge nor the Company have completed resource estimates on this area, and the recommendedexploration program is preliminary in nature.

Description of Securities

Upon completion of the Proposed Acquisition, the Resulting Issuer will continue to have an authorizedshare capital consisting of an unlimited number of Common Shares without par value and an unlimitednumber of preferred shares without par value. Upon the issuance of 38,087,971 Common Shares inconnection with the closing of the Proposed Acquisition, a total of 211,468,945 Common Shares will beissued and outstanding. See “Information Concerning the Company – Description of the Securities”.

Pro forma Consolidated Capitalization

The pro forma consolidated capitalization of the Resulting Issuer following completion of the ProposedAcquisition will be as shown in the following table:

Designation of SecurityAmount

authorized

Amount outstanding afterCompletion

of the Proposed Acquisition

Common Shares Unlimited 211,468,945

Preferred shares Unlimited Nil

Options10% of the number ofissued and outstanding

Common Shares1,710,000

Fully Diluted Share Capital

The following table shows the diluted share capital of the Resulting Issuer following the completion ofthe Proposed Acquisition:

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Securities Number

Approximate %Outstanding

on a Non-Fully Diluted Basis

Following Completion ofProposed Acquisition

Approximate %Outstanding

on a Fully Diluted Basis

Following Completion ofProposed Acquisition

Common Shares

Issued prior to theProposed Acquisition

173,380,974 82.0% 69.0%

Issuable in connectionwith the closing of theShare Purchase Agreement

38,087,971 18.0% 15.16%

Preferred shares

Current preferred shares Nil N/A N/A

Options

Current Options 1,710,000 N/A 0.68%

Earn-Out Consideration

Maximum number ofshares issuable as Earn-Out Consideration

38,087,971 N/A 15.16

Totals 213,178,945 100% 100%

Available Funds and Principal Purposes

Funds Available

The Resulting Issuer has committed to invest up to US$15,000,000 in the Goondicum Project, subject tothe satisfaction of all applicable legal and regulatory requirements and fulfillment of all permitting,approval and licensing requirements necessary to successfully achieve a full re-start of the GoondicumProject. The Resulting Issuer’s Board will direct, and have ultimate approval over, the total amountinvested and the drawdowns and conditions for the expenditure of these funds. As of March 31, 2014, theCompany had US$21,100,000 in cash and cash equivalents.

Principal Purposes of Funds

The following table sets out the principal purposes, using approximate amounts, for which the ResultingIssuer currently intends to use its available working capital on completion of the Proposed Acquisition.

Item Approximate Amount (A$ ‘000)

Reconfigure existing plant 1,107

Upgrade plant capacity – Stage 1 3,446

Offsite work 1,815

Other capital (including Eastern Access Road) 3,600

Upgrade plant capacity – Stage 2 7,870

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Item Approximate Amount (A$ ‘000)

Total 17,838

Dividends

Other than pursuant to applicable Exchange rules, there are no restrictions on the Resulting Issuer thatwould prevent it from paying a dividend. However, the Resulting Issuer intends to retain future earningsfor reinvestment in the Resulting Issuer’s business and, therefore, has no current intention to paydividends on its Common Shares in the foreseeable future.

Risk Factors

For information relating to the risks associated with the new business of the Resulting Issuer please see“Risk Factors”.

Principal Securityholders

To the knowledge of the directors and executive officers of the Resulting Issuer, the following Personsare believed to own of record or beneficially, directly or indirectly, or exercise control or direction over,directly or indirectly, 10% or more of the issued and outstanding Common Shares of the Resulting Issuerimmediately after giving effect to the Proposed Acquisition:

Name Number of CommonShares

Percentage of Issued CommonShares

Pala 94,528,199 44.7%

Takota Asset Management 23,766,559 11.2%

Directors and Officers

The names, places of residence, the number of voting securities beneficially owned, directly or indirectly,or over which each exercises control or direction, following the completion of the Proposed Acquisition,and the offices to be held by each in the Resulting Issuer and the principal occupation of the proposeddirectors and senior officers of the Resulting Issuer during the past five years are as follows:

Name ofDirector orOfficer and

Place ofResidence

Offices to beHeld (2)

Principal Occupation DuringPast 5 years

Number ofCommon Shares

BeneficiallyOwned orControlled

following theCompletion of the

ProposedAcquisition

Percentage ofCommon Shares



ProposedAcquisition(1)

Dr. CharlesEntrekin

Pennsylvania,U.S.A.

Director, CEOand Chair of theBoard

Member ofAuditCommittee

Independent consultant sinceApril, 2008.

0 0

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Name ofDirector orOfficer and

Place ofResidence

Offices to beHeld (2)

Principal Occupation DuringPast 5 years

Number ofCommon Shares



ProposedAcquisition

Percentage ofCommon Shares



ProposedAcquisition(1)

Mark McCauley

Queensland,Australia

ProposedDirector andProposed CEO

Managing Director of Belridge,previously Managing Director ofRMM Capital, Non-ExecutiveDirector and Chair of AuditCommittee at Norton Goldfields,CFO and Company Secretary ofFelix Resources.

1,000,339(3) 0.5%

Thomas Masney

Ontario, Canada

CFO andCorporateSecretary

CFO of Melior since October 1,2012. Part-time Chief FinancialOfficer of Pond Biofuels Inc. sinceApril 1, 2013. Chief FinancialOfficer of Astar Minerals PLCfrom August 30, 2009 to May 9,2012. Chief Financial Officerdesignate of Pan PacificAggregates PLC from November1, 2008 to August 29, 2009.

0 0

MartynButtenshaw

Zug, Switzerland

Director

Member ofNomination andCompensationComittee

Senior Manager at Pala and Non-Executive Director of Sierra RutileLtd.

0 0

Glenn Black

Cape Town,South Africa

Director

Member ofAuditCommittee andNomination andCompensationComittee

Chief Operating Officer ofPeninsula Energy and ChiefProject Officer of FirestoneDiamonds.

0 0

Joe Connolly

Hertfordshire,United Kingdom

Director

Member ofAuditCommittee andNomination andCompensationComittee

Co-founder and Chief ExecutiveOfficer of Buckthorn Partners Ltd,previous Chief Financial Officer ofSierra Rutile Ltd and Director ofBusiness Development at ClipperWindpower.

0 0

Notes:

(1) Based on the aggregate number of issued and outstanding Common Shares after the completion of the ProposedAcquisition.

(2) The directors of the Resulting Issuer are elected annually and hold office until the next annual general meetingof the shareholders or until their successors are elected or appointed. Charles Entrekin is the current CEO and

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Chair of the Board. Upon the closing of the Proposed Acquisition, Mark McCauley will become the CEO andthereafter Charles Entrekin will be the Chair of the Board.

(3) Sashimi Investments Pty Ltd (as Trustee of the McCauley Investment Trust (a family trust for Mark McCauleyand his family)) owns a 2.63% interest in Belridge and upon closing of the Proposed Acquisition will own1,000,339 shares of the Resulting Issuer. Belmont Park – Monto Pty Ltd (as Trustee of the BPI Monto Trust (afamily trust for Ian Robert McCauley and his family)) owns a 48.69% interest in Belridge and upon closing ofthe Proposed Acquisition will own 18,543,816 shares of the Resulting Issuer.

Biographies of Directors and Management

The following sets out details respecting the proposed directors and management of the Resulting Issuer:

Charles Entrekin - Chair of the Board of Directors

Dr. Entrekin has over thirty five years of experience in the mining and metals sector and possessessignificant public company experience at the executive officer level. He has been a director of theCompany since March 27, 2009 and the Chairman and CEO of the Company since August 17, 2011. Dr.Entrekin will be replaced as CEO by Mark McCauley upon the completion of the Proposed Acquisition.He has also served as President and Chief Operating Officer of Titanium Metals Corporation, a New YorkStock Exchange listed producer of primary titanium and its alloys, as well as President and ChiefExecutive Officer of Timminco Ltd., a Toronto Stock Exchange listed magnesium, silicon and aluminumcompany. Through his career Dr. Entrekin has led and implemented successful restructurings andturnarounds of mining and metals companies in North America and worldwide. Dr. Entrekin holds aB.Sc. from Lehigh University, an MBA from the University of Delaware and an M.Sc. and Ph.D. fromDrexel University. Dr. Entrekin is also a director of Sierra Rutile Ltd. a company listed on AIM

Mark McCauley – Proposed Director and Proposed CEO

Mr. McCauley is currently Managing Director of Belridge, which has been the owner of the GoondicumProject since 2009. Mr. McCauley will become CEO and a Director of the Company upon completion ofthe Proposed Acquisition and will continue on as the Managing Director of Belridge. Mr. McCauley hassubstantial mining experience and has been involved in the development of several major mining projectsin Australia and Argentina, including turnarounds and organizational restructuring. Mr. McCauley was aNon-Executive Director and Chair of the Audit Committee for Norton Goldfields Limited fromSeptember 2007 until June 2010 during which time he was also Managing Director for a nine monthperiod of restructuring. Mr. McCauley served as Chief Financial Officer and Company Secretary of FelixResources Ltd, an ASX listed coal mining company, from October 2003 to February 2007 during whichtime it went from a market cap of $35 million to a market cap of over $1 billion. Mr. McCauley haspreviously been a director of several AIM and ASX listed mining and exploration companies. Mr.McCauley completed an Advanced Management Programme at Harvard Business School in 2003, holdsan MBA from Bond University in Australia (with Majors in Finance and Accounting) and has a Bachelorof Engineering from the University of Queensland.

Thomas Masney – CFO and Corporate Secretary

Mr. Masney is currently the CFO of the Company and has been the part-time Chief Financial Officer ofPond Biofuels Inc. since April 1, 2013. He was previously the Chief Financial Officer of Astar MineralsPLC (formerly Pan Pacific Aggregates PLC) which is listed on the AIM. He is a Chartered Accountant.

Martyn Buttenshaw –Director

Mr. Buttenshaw has been a director of the Company since March 31, 2014. He has over eleven years ofdirect mining experience and is a former Senior Mining Engineer at Rio Tinto Minerals’ borax operations,

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overseeing all aspects of mine planning at its US and international mining operations. Mr. Buttenshaw hasextensive experience advising Sierra Rutile (a UK listed rutile and ilmenite producer) on strategic mineplanning, business improvement and project feasibility studies, and Mr. Buttenshaw is currently a directorof Sierra Rutile. Mr. Buttenshaw holds an MBA (with distinction) from the London Business School anda MEng (First Class) in Mining Engineering from the Royal School of Mines, Imperial College, London.

Glenn Black –Director

Mr. Black has been a director of the Company since March 31, 2014. He is a professional mechanicalengineer with over thirty nine years of experience in senior management and operational positions,including construction and operation, and managing and implementing the delivery of major projects inSouth Africa, Namibia, Botswana and Canada. Mr. Black is Chief Operating Officer of PeninsulaEnergy, an Australian listed uranium producer with assets in Wyoming, USA and Karoo, South Africa.Mr. Black is also Chief Executive Officer of Tasman Pacific Minerals and Tasman RSA Holdings, whichare Peninsula Energy’s South African subsidiaries. Mr. Black graduated from New College, Durham,England and received a T4 Certificate of Mechanical Engineering, and the Association of MiningElectrical and Mechanical Honors Certificate and the Mechanical Engineers Certificate from the NationalCoal Board. Mr. Black also received the Government Certificate of Competency (Mechanical) in 1987 inSouth Africa. Mr. Black completed the Executive Development Program of the Gordon Institute ofBusiness Science in 2004.

Joe Connolly - Director

Mr. Connolly has been a director of the Company since March 31, 2014. He is an experienced financeprofessional with deep experience in the natural resource sector. Mr. Connolly was previously the ChiefFinancial Officer of Sierra Rutile Limited (a UK listed rutile and ilmenite producer) where he wasresponsible for strategic business planning, financial reporting, budgeting and compliance. Mr. Connollyhas previously served as a director of business development of Clipper Windpower Plc, was a seniormanager at Deloitte, and was co-founder and CEO of Buckthorn Partners Limited, a financial servicesadvisory business, regulated by the UK Financial Conduct Authority. Mr. Connolly has been a CharteredAccountant since 2004 and graduated from the University of Cambridge in 2000 with an MA in NaturalScience.

Corporate Cease Trade Orders or Bankruptcies

Except as disclosed below, no director, proposed director or executive officer of the Resulting Issuer is, orwithin the ten years prior to the date of this Filing Statement has been, a director or executive officer ofany company, including the Resulting Issuer, that while that individual was acting in that capacity:

(a) was the subject of a cease trade order or similar order or an order that denied thecompany access to any exemption under securities legislation for a period of more than30 consecutive days; or

(b) became bankrupt, made a proposal under any legislation relating to bankruptcy orinsolvency or was subject to or instituted any proceedings, arrangement or compromisewith creditors or had a receiver, receiver manager or trustee appointed to hold its assets.

On October 19, 2009, the Ontario Securities Commission (“OSC”) issued a management cease tradeorder (“MCTO”) related to the securities of the Company against Mr. Belan, the CEO of the Company atsuch time, with respect to the delayed filing of the Company’s annual financial statements, the relatedMD&A and the annual information form, each for the year ended June 30, 2009. The terms of the MCTOprovided that trading in and all acquisitions of securities of the Company, whether direct or indirect, by

- 105 -

Mr. Belan should cease until two full business days following the receipt by the OSC of all filings theCompany was required to make under Ontario securities law. The MCTO was replaced by the TemporaryOrder.

On September 29, 2010, the OSC issued a general cease trade order (the “Temporary Order”) for aperiod of 15 days against the Company for failure to file its audited annual financial statements, therelated MD&A, its annual information form, each for the year ended June 30, 2010, and the certificationof the foregoing filings. The Temporary Order provided that, if the default continued, a hearing would beheld to consider whether an order should be made that all trading in the securities of the Company ceasepermanently or for such period as is specified in such order by reason of the continued default.

On September 29, 2010, the British Columbia Securities Commission issued a cease trade order (the “BCOrder”) against the Company until such time as it filed the required documentation and the BC Order isrevoked.

On October 12, 2010, the OSC issued a cease trade order (the “ON Order”) against the Company whichprovided that all trading in the securities of the Company, whether direct or indirect, must cease until theON Order is revoked.

On October 15, 2010, the Manitoba Securities Commission issued a cease trade order (the “MB Order”,and together with the ON Order and the BC Order, the “Orders”) against the Company until such time asit filed the required documentation, paid the outstanding filing fees, if any, and the MB Order is revoked.

The Company filed its annual financial statements, the related MD&A, its annual information form andthe certification of the foregoing filings on October 29, 2010 and made an application to have the Ordersrevoked. On November 15, 2010 the Orders were revoked.

Thomas Masney was a director of Pan Pacific Aggregates PLC which made a proposal to its creditorswhich was approved on June 7, 2011 and was a director of Pumptown Quarry Inc. which made a proposalto its creditors which was approved by the Supreme Court of British Columbia on July 21, 2009.

Penalties or Sanctions

None of the proposed directors, officers, promoters or Control Persons of the Resulting Issuer have beensubject to any penalties or sanctions imposed by a court or by a securities regulatory authority relating tosecurities legislation, has entered into a settlement agreement with a securities regulatory authority or hasbeen subject to any other penalties or sanctions imposed by a court or regulatory body that would belikely to be considered important to a reasonable person making an investment decision relating to theCompany’s securities.

Personal Bankruptcies

None of the proposed directors, officers, promoters or Control Persons of the Resulting Issuer or apersonal holding company of such Persons have, during the past ten years, been declared bankrupt ormade a voluntary assignment in bankruptcy, made a proposal under bankruptcy or insolvency legislationor been subject to or instituted any proceedings, arrangement or compromise with creditors or had areceiver, receiver manager or trustee appointed to hold his assets.


There are potential conflicts of interest to which the directors, officers, Insiders and Control Persons ofthe Resulting Issuer may be subject in connection with the operations of the Resulting Issuer. All of suchpersons are engaged in or involved with and will likely continue to be engaged in or involved with

- 106 -

resource sector businesses which may be in competition with the business of the Resulting Issuer.Accordingly, situations may arise where such persons will be in direct competition with the ResultingIssuer, including, but not limited to, the fact that Pala owns over 53.8% of Sierra Rutile Limited (“SierraRutile”) and the core product of which is rutile, one of a group of titanium dioxide minerals (TiO2),which may serve as a substitute product for ilmenite. The Company intends to address such conflicts asrequired by applicable law and regulatory requirements. See also “Risk Factors”.

Other Public Company Experience

The following table sets out the proposed directors and officers of the Resulting Issuer that are, or havebeen within the last five years, directors, officers or promoters of other public companies:

Name ofDirector or

OfficerName of Reporting

Issuer

Name ofExchange

orMarket Position Term

Charles Entrekin Sierra Rutile Ltd AIM Non-ExecutiveDirector

December 2010 – Present

Mark McCauley Elementos Ltd ASX Non-ExecutiveDirector

October 2010 – August 2013

Norton Gold Fields Ltd ASX Non-ExecutiveDirector andManagingDirector

September 2007 – July 2011

Thomas Masney Astar Minerals PLC AIM Chief FinancialOfficer

November 2008 – August2012

Martyn Buttenshaw Sierra Rutile Ltd AIM Director July 2013 – Present

Joe Connolly Sierra Rutile Ltd AIM Chief FinancialOfficer

February 2011 – January2013

Clipper WindpowerLimited

AIM Director ofBusiness

Development

March 2008 – February 2011

Anticipated Executive Compensation

Named Executive Officers

Upon completion of the Proposed Acquisition, the Company will have two NEOs, being Mark McCauley,the CEO, and Thomas Masney, the CFO and Corporate Secretary.

Compensation Discussion & Analysis

There is no additional compensation for the Resulting Issuer’s NEOs beyond the compensation describedbelow.

Belridge and Mark McCauley are party to a managing director employment agreement (the “McCauleyBelridge Agreement”), pursuant to which Mr. McCauley agrees to serve in the role of managing directorof Belridge effective as of December 1, 2013. Under the terms of the McCauley Belridge Agreement,

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McCauley will be paid A$270,000 per year plus a discretionary bonus as determined by Belridge andsuperannuation fund contributions. The McCauley Belridge Agreement prohibits McCauley fromengaging in any other employment or competitive activity with Belridge during the course of hisemployment without the prior written approval of Belridge. Either Belridge or McCauley may terminatethe McCauley Belridge Agreement upon 12 weeks prior written notice. Belridge may terminate theMcCauley Belridge Agreement if McCauley commits an act of serious misconduct.

The Company and Mr. McCauley are party to a chief executive officer employment agreement (the“McCauley Melior Agreement”), pursuant to which McCauley agrees to serve in the role of CEO of theCompany effective as of the Closing Date of the Proposed Acquisition. Under the terms of the McCauleyMelior Agreement, Mr. McCauley will be paid A$30,000 per year plus a discretionary bonus asdetermined by the Company and superannuation fund contributions. The McCauley Melior Agreementprohibits Mr. McCauley from engaging in any other employment or competitive activity with theCompany during the course of his employment without the prior written approval of the Company. Eitherthe Company or McCauley may terminate the McCauley Melior Agreement upon 12 weeks prior writtennotice. The Company may terminate the McCauley Melior Agreement if Mr. McCauley commits an actof serious misconduct.

Option-based Awards

See “Executive Compensation – Stock Option Plan” for a summary of the terms of the Stock Option Plan.


Set out below is a summary of anticipated compensation to be paid to the NEOs:


Name and

principal

position Year

Salary

(A$ orCdn$)

Share-

based

awards

($)

Option-

based

awards

($)

Non-equityincentive plancompensation

($)

Pension

value

($)

All other

compensation

($)

Total

compensation

(A$ or Cdn$)

Annual

incentive

plans

Long-

term

incentive

plans

MarkMcCauley,

ProposedCEO

2014 A$300,000

Nil Nil Nil Nil Nil Nil A$ 300,000

ThomasMasney,CFO andCorporateSecretary

2014 Cdn$96,000

Nil Nil Nil Nil Nil Nil Cdn$ 96,000

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Incentive Plan Awards

The following table sets forth the incentive plan awards to be granted to the NEOs upon completion of theProposed Acquisition:

Share-Based Awards andOption-Based Awards

Option-based Awards Share-based Awards

Name

Number ofsecurities

underlyingunexercised

options

(#)

Optionexercise price

($)Option

expiration date

Value of

unexercised in-the- money

options

($)

Number ofshares or units

ofshares that

have

not vested

(#)

Market orpayoutvalue

of share-based

awardsthat have

notvested

($)

MarkMcCauley

Nil Nil Nil Nil Nil Nil

ThomasMasney

Nil Nil Nil Nil Nil Nil

Termination and Change of Control Benefits

There are no contractual termination or change of control benefits for the NEOs other than statutoryprovisions.

Director Compensation

Other than compensation paid to the NEOs, and except as noted below, no compensation will be paid todirectors in their capacity as directors of the Company or its subsidiaries, in their capacity as members ofa committee of the Board or of a committee of the board of directors of its subsidiaries.

The following table sets forth the details of compensation to be provided to the directors, other than theNEOs, upon completion of the Proposed Acquisition:

Director Compensation Table

Name(1)

FeesEarned(US$)

Sharebased

Awards

Optionbased

Awards($)

Non-EquityIncentive PlanCompensation

($)

PensionValue

($)

All OtherCompensation

($)Total(US$)

Charles Entrekin 43,000 Nil Nil Nil Nil Nil 43,000

Martyn Buttenshaw 25,000 Nil Nil Nil Nil Nil 25,000

Glenn Black 26,000 Nil Nil Nil Nil Nil 26,000

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Name(1)

FeesEarned(US$)

Sharebased

Awards

Optionbased

Awards($)

Non-EquityIncentive PlanCompensation

($)

PensionValue

($)

All OtherCompensation

($)Total(US$)

Joe Connolly 28,000 Nil Nil Nil Nil Nil 28,000

Notes:

(1) Mr. McCauley does not appear on this table as he will be an NEO of the Resulting Issuer.

Indebtedness of Directors and Officers

No director or officer of the Company or Person who acted in such capacity in the last financial year ofthe Company or proposed director or officer of the Resulting Issuer, or any Associate of any such directoror officer is, or has been, at any time since the beginning of the most recently completed financial year ofthe Company, indebted to the Company nor is, or at any time since the incorporation of the Company has,any indebtedness of any such Person been the subject of a guarantee, support agreement, letter of credit orother similar arrangement or understanding provided by the Company.

Investor Relations Arrangements

The Company has not entered into any written or oral agreement or understanding with any Person toprovide any promotional or investor relations services for the Company or its securities. Following thecompletion of the Proposed Acquisition, the Resulting Issuer may enter into investor relationsarrangements.

Options to Purchase Securities

The table below sets forth the options that will be held by optionees upon completion of the ProposedAcquisition:

Name of Optionee Position

Securities UnderOptions/SARs

Granted (#) uponCompletion of the

ProposedAcquisition

ExercisePrice Expiry Date

Charles Entrekin Chairman 1,710,000 0.17 September 21, 2018

Total: 1,710,000

Escrowed Securities

See “Principal Terms of the Proposed Acquisition”.

The table below sets out the number of securities expected to be subject to escrow:

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Name and Residenceof Shareholder

Number of EscrowedSecurities Subject to

ValueSecurity Escrow

Percentage of CommonShares of Resulting IssuerSubject to Escrow After

Giving Effect to theProposed Acquisition

Belmont Park – Monto Pty Ltd (asTrustee of the BPI Monto Trust)

(Australia)

18,543,816 8.77%

Panorama Ridge – Monto Pty Ltd (asTrustee of PR Monto Trust)

(Australia)

18,543,816 8.77%

Sashimi Investments Pty Ltd (as Trusteeof the McCauley Investment Trust)

(Australia)

1,000,339 0.5%

Auditors, Transfer Agent and Registrar

The auditors of the Resulting Issuer will continue to be MNP LLP, Chartered Accountants, 701 EvansAvenue, 8th Floor, Toronto, Ontario, M9C 1A3.

Equity Financial Trust Company in Toronto, Ontario will continue to be the transfer agent and registrarfor the Resulting Issuer’s Common Shares.

GENERAL MATTERS

Sponsorship

The Exchange provided the Company with an exemption from the requirement to obtain a sponsor inconnection with the Proposed Acquisition.

Experts

The Company retained Simon Tear, PGeo, Eur Geol of H&S Consultants Pty Ltd, Graham Lee,FAusImm, CP(Geo) of Graham Lee and Associates Pty Ltd and Chris Desoe, FAusImm, RPEQ, MMICAof Australian Mine Design and Development Pty Ltd to prepare the Technical Report. The TechnicalReport with an effective date of February 25, 2014, has been delivered to the Company. The contents ofthe Technical Report are summarized under the heading “Information Concerning Belridge”.

To the knowledge of the Company, Simon Tear, Graham Lee, Chris Desoe, H&S Consultants Pty Ltd,Graham Lee and Associates Pty Ltd and Australian Mine Design and Development Pty Ltd, do not have adirect or indirect interest in the Goondicum Project or in the properties of any Associate or Affiliate of theCompany nor will any of them receive any such interest. To the knowledge of the Company, Simon Tear,Graham Lee, Chris Desoe, H&S Consultants Pty Ltd, Graham Lee and Associates Pty Ltd and AustralianMine Design and Development Pty Ltd, do not have beneficial ownership, direct or indirect, in thesecurities of the Company or in the securities of any Associated or Affiliated corporations.

MNP LLP, Chartered Accountants, prepared the Auditor’s Report for the Company for the year endedJune 30, 2013. MNP LLP, Chartered Accountants, are independent in accordance with the Rules ofProfessional Conduct of the Institute of Chartered Accountants of Ontario.

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Other Material Facts

To the best of the knowledge of management of the Company, there are no other material factsconcerning the Company or the Proposed Acquisition.

Board Approval

The Board has approved the contents of this Filing Statement.

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CERTIFICATE OF THE ISSUER

The foregoing document constitutes full, true and plain disclosure of all material facts relating to thesecurities of Melior Resources Inc. assuming completion of the Proposed Acquisition.

“Charles Entrekin”Dr. Charles EntrekinChief Executive Officer

ON BEHALF OF THE BOARD

“Martyn Buttenshaw” “Joe Connolly”Martyn Buttenshaw Joe ConnollyDirector Director

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CERTIFICATE OF BELRIDGE

The foregoing document constitutes full, true and plain disclosure of all material facts relating to thesecurities of Belridge Enterprises Pty Ltd assuming completion of the Proposed Acquisition.

“Mark McCauley”Mark McCauleyManaging Director

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Acknowledgement – Personal Information

The undersigned hereby acknowledges and agrees that it has obtained the express written consent ofeach individual to:

a) the disclosure of Personal Information by the undersigned to the Exchange (as defined inAppendix 6B to the TSX Venture Exchange Corporate Finance Manual (“Appendix 6B”))pursuant to the Filing Statement; and

b) the collection, use and disclosure of Personal Information by the Exchange for the purposesdescribed in Appendix 6B or as otherwise identified by the Exchange, from time to time

“Personal Information” means any information about an identifiable individual, and includesinformation contained in any Items in the attached filing statement/information circular that areanalogous to Items 4.2, 11, 13.1, 16, 18.2, 19.2, 24, 25, 27, 32.3, 33, 34, 35, 36, 37, 38, 39, 41 and 42of TSXV Exchange Form 3D2, as applicable.

“Charles Entrekin”Dr. Charles EntrekinChief Executive Officer

SCHEDULE “A” - FINANCIAL STATEMENTS

CONDENSED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2013 AND 2012 (EXPRESSED IN CANADIAN DOLLARS)

(UNAUDITED)

Melior Resources Inc. Condensed Interim Statements of Financial Position (Expressed in Thousands of Canadian Dollars) (Unaudited)

As at

Assets

Current Assets

Cash and cash equivalents Prepaid expenses and other receivables

Investment in Asian Mineral Resources Limited (Note 3)

Liabilities

Current Liabilities

Accounts payable and accrued liabilities (Note 5)

Shareholders' Equity

Share capital (Note 4(a)) Contributed surplus Accumulated other comprehensive loss Deficit

Nature of Operations (Note 1)

Approved on behalf of the Board:

"Mr. Ramo Mancini" Director

December 31, 2013

$ 22,287 75

22,362 1,655

$ 24,017

$ 423

375,885 159,058

(3,545) (507,804)

23,594

$ 24,017

"Dr. Charles Entrekin" Director

The accompanying notes are an integral part of these condensed interim financial statements

-2-

June 30 2013

$ 22,877 82

22,959 1,418

$ 24,377

$ 165

375,885 159,058

{3,782) (506,949)

24,212

$ 24,377

Melior Resources Inc. Condensed Interim Statements of Operations and Comprehensive Loss (Expressed in Thousands of Canadian Dollars) (Unaudited)

Three Months Six Months Ended December 31, Ended December 31 ,

2013 2012 2013 2012

Administrative Expenses Office and administration $ 569 $ 422 $ 1,006 $ 692

Loss before other expenses and income taxes (569) (422) (1,006) (692)

Other Income (Expense) Interest income 73 61 147 130 Foreign exchange gain (loss) 5 6 4 (5)

78 67 151 125

Loss from continuing operations (491) (355) (855) (567) Income from discontinued operations 397 860

Net (loss) Income for the period $ (491) $ 42 $ (855) $ 293

Other Comprehensive Gain (Loss)

Items that will be reclassed subsequently into income: Re-classification adjustment for net losses

included in (income) loss for the period Unrealized gain (loss) on available-for-sale

financial assets 237 237 (1 ,891)

Total comprehensive loss $ (254) $ 42 $ (618) $ (1 ,598)

Per common share, basic and fully diluted:

(Loss) income from continuing operations $ (0.003) $ (0.002) $ (0.005) $ (0.003) (Loss) Income from discontinued operations $ 0.000 $ 0.002 $ 0.000 $ 0.005 Net (loss) income $ (0.003) $ 0.000 $ (0.005) $ 0.002

Weighted average number of shares outstanding 173,380,974 173,380,974 173,380,974 173,380,974


-3-

Melior Resources Inc. Condensed Interim Statements of Changes in Shareholders' Equity (Expressed in Thousands of Canadian Dollars) (Unaudited)

Accumulated Other

Common Shares Contributed Comprehensive Number Amount Surplus Loss Deficit Total

Balance, June 30,2012 173,380,974 $ 375,885 $ 159,058 $ (945) $ (507,233) $ 26,765 Net income - - - - 293 293 Unrealized loss on available-for-sale

financial assets - - - (1 ,891) - (1 ,891)

Balance, December 31, 2012 173,380,974 $ 375,885 $ 159,058 $ (2,836) $ (506,940) $ 25,167

Balance, June 30,2013 173,380,974 $ 375,885 $ 159,058 $ (3,782) $ (506,949) $ 24,212 Net loss - - - - (855) (855) Unrealized loss on available-for-sale

financial assets - - - 237 - 237 Balance, December 31, 2013 173,380,974 $ 375,885 $ 159,058 $ (3,545) $ (507,804) $ 23,594


-4-

Melior Resources Inc. Condensed Interim Statements of Cash Flows (Expressed in Thousands of Canadian Dollars) (Unaudited)

For the Six Months Ended December 31, 2013 2012

Cash and cash equivalents (used in) provided by:

Operating Activities Net loss from continuing operations $ (855) $ (567) Non-cash items included in net loss:

Changes in non-cash working capital balances 265 156

Cash flows from continuing operations (590) (411) Cash flows from discontinued operations 860

Cash flows from operating activities (590) 449

Investing Activities Repayment from Asian Mineral Resources Limited 300

Cash flows from continuing operations 300 Cash flows from discontinued operations

Cash flows from investing activities 300

Change in cash and cash equivalents during the period (590) 749 Cash and cash equivalents, beginning of period 22,877 22,333

Cash, end of period $ 22,287 $ 23,082


-5-

Melior Resources Inc. Notes to Condensed Interim Financial Statements Six Months Ended December 31, 2013 and 2012 (Expressed in Thousands of Canadian Dollars) (Unaudited)

1. Nature of Operations

Melior Resources Inc., (the "Corporation"), is a Canadian investment company focused on making strategic investments in, and developing, resource based opportunities offering capital appreciation potential.

The Corporation is incorporated under the laws of the province of British Columbia, Canada. The Corporation's principal place of business is 120 Adelaide Street West, Suite 2500, Toronto, Ontario, Canada.

As at December 31, 2013, Pala Investments Limited ("Pala") owned directly or indirectly 54.52% of the Corporation's issued and outstanding common shares.

2. Summary of Significant Accounting Policies

Statement of Compliance

The Corporation applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"). These condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by I FRS as issued by IASB and interpretations issued by IFRIC.

The policies applied in these condensed interim financial statements are based on IFRS issued and outstanding as of February 13, 2014, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these condensed interim financial statements as compared with the most recent annual financial statements as at and for the year ended June 30, 2013. Any subsequent changes to IFRS that are given effect in the Corporation's annual financial statements for the year ending June 30, 2014 could result in restatement of these condensed interim financial statements.

New Standards Not Yet Adopted and Interpretations Issued But Not Yet Effective

IFRS 9- Financial Instruments ("IFRS 9") was issued by the IASB in October 2010 and will replace lAS 39 -Financial Instruments: Recognition and Measurement ("lAS 39"). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in lAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in lAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in lAS 39. I FRS 9 will be effective as at January 1, 2018. The Company is in the process of assessing the impact of this pronouncement.

-6-


2. Summary of Significant Accounting Policies (Continued)

New Standards Adopted During the Current Period

(i) I FRS 10- Consolidated financial statements ("I FRS 1 0") was issued by the IASB in May 2011. I FRS 10 is a new standard which identifies the concept of control as the determining factor in assessing whether an entity should be included in the consolidated financial statements of the parent company. Control is comprised of three elements: power over an investee; exposure to variable returns from an investee; and the ability to use power to affect the reporting entity's returns. I FRS 10 is effective for annual periods beginning on or after January 1, 2013. The Company adopted this standard on July 1, 2013, with no resulting impact on its condensed interim financial statements.

(ii) I FRS 11 - Joint arrangements ("I FRS 11 ") was issued by the IASB in May 2011. I FRS 11 is a new standard which focuses on classifying joint arrangements by their rights and obligations rather than their legal form. Entities are classified into two groups: parties having rights to the assets and obligations for the liabilities of an arrangement, and rights to the net assets of an arrangement. Entities in the former case account for assets, liabilities, revenues and expenses in accordance with the arrangement, whereas entities in the latter case account for the arrangement using the equity method. I FRS 11 is effective for annual periods beginning on or after January 1, 2013. The Company adopted this standard on July 1, 2013, with no resulting impact on its condensed interim financial statements.

(iii) IFRS 12- Disclosure of interests in other entities ("IFRS 12") was issued by the IASB in May 2011. IFRS 12 is a new standard which provides disclosure requirements for entities reporting interests in other entities, including joint arrangements, special purpose vehicles, and off balance sheet vehicles. I FRS 12 is effective for annual periods beginning on or after January 1, 2013. The Company adopted this standard on July 1, 2013, with no resulting impact on its condensed interim financial statements.

(iv) I FRS 13- Fair value measurement ("I FRS 13") was issued by the IASB in May 2011. I FRS 13 is a new standard which provides a precise definition of fair value and a single source of fair value measurement considerations for use across IFRSs. The key points of I FRS 13 are as follows:

• fair value is measured using the price in a principal market for the asset or liability, or in the absence of a principal market, the most advantageous market;

• financial assets and liabilities with offsetting positions in market risks or counterparty credit risks can be measured on the basis of an entity's net risk exposure;

• disclosures regarding the fair value hierarchy have been moved from I FRS 7 to I FRS 13, and further guidance has been added to the determination of classes of assets and liabilities;

• a quantitative sensitivity analysis must be provided for financial instruments measured at fair value; • a narrative must be provided discussing the sensitivity of fair value measurements categorized

under Level 3 of the fair value hierarchy to significant unobservable inputs; • and information must be provided on an entity's valuation processes for fair value measurements

categorized under Level 3 of the fair value hierarchy.

IFRS 13 is effective for annual periods beginning on or after January 1, 2013. The Company adopted this standard on July 1, 2013, with no resulting impact on its condensed interim financial statements.

(v) In addition, there have been amendments to existing standards, including lAS 27, Separate Financial Statements (lAS 27), and lAS 28, Investments in Associates and Joint Ventures (lAS 28). lAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates in non-consolidated financial statements. lAS 28 has been amended to include joint ventures in its scope and to address the changes in IFRS 10 to IFRS 13.

-7-


3. Investment in Asian Mineral Resources Limited

On June 29, 2012, the Corporation completed a strategic investment in Asian Mineral Resources Limited ("AMR") by means of a private placement whereby it purchased 47,272,727 common shares of AMR (the "AMR Shares") at $0.11 per AMR Share for total consideration of $5,200 (the "Strategic Investment"). The common shares are recorded at fair value. The Corporation owns and controls, directly and indirectly, a total of 47,272,727 AMR Shares representing approximately 6% of the issued and outstanding AMR Shares on an undiluted basis.

In connection with the transaction, the Corporation advanced $300 to AMR, which was repaid during fiscal 2013.

4. Share Capital

(a) Authorized

Unlimited preferred shares without par value Unlimited common shares without par value

Issued

Balance, June 30, 2012, June 30, 2013, and December31, 2013

(b) Stock Options

Number of Common Shares

173,380,974 $

Stated Value

375,885

As at December 31, 2013, 18,718,097 common shares remain available for grant under the plan. Under the plan, the exercise price of each option equals the market price of the Corporation's common shares on the date of grant or the price determined by the Board of Directors, not being less than the market price, and an option's maximum term is ten years. Options are granted upon approval by the Board of Directors.

Number of Weighted Average Stock Options Exercise Price

Balance, June 30, 2012 and December 31, 2012 3,390,000 $ 0.25

Balance, June 30, 2013 and December 31, 2013 2,010,000 $ 0.31

As at December 31, 2013, the Corporation had the following stock options outstanding and exercisable:

Weighted Average

Number Number Remaining of Options of Options Contractual Exercise

Expiry Date Exercisable Outstanding Life (years) Price

March 27, 2014 150,000 150,000 0.24 $ 1.50 March 27, 2014 150,000 150,000 0.24 0.75 Sept. 21, 2018 1,710,000 1,710,000 4.73 0.17

2,010,000 2,010,000 4.06 $ 0.31

-8-


5. Related Party Transactions

Remuneration of key management personnel of the Corporation was as follows:

Salaries and benefits Directors fees Share based payments Share-based compensation

$ $ $ $

Three Months Ended December 31, 2013 2012

62 $ 60 $

$ $

84 $ $ $ $

Six Months Ended December 31,

2013 2012

123 $ 116 $

$ $

157 51

The Corporation has entered into an Advisory Services Agreement with Pala Investments Limited to provide the Corporation with consultancy support in evaluating potential capital investments. During the three and six months ended December 31, 2013 the Corporation incurred consultancy fees of US$1 00,000 and US$200,000, respectively, paid to Pala Investments Limited under the terms of the Agreement. Included in accounts payable and accrued liabilities as at December 31, 2013 is $200,000 (June 30, 2013- $Nil) pertaining to these fees.

-9-

FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30,2013 AND 2012 (EXPRESSED IN CANADIAN DOLLARS)

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying financial statements of Melior Resources Limited were prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the financial statements. Management acknowledges responsibility for the preparation and presentation of the annual financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Corporation's circumstances. In the opinion of management, the financial statements have been prepared within acceptable limits of materiality using accounting policies consistent with International Financial Reporting Standards appropriate in the circumstances.

Management has established processes which are in place to provide them sufficient knowledge to support management representations that they have exercised reasonable diligence that (i) the financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the financial statements and (ii) the financial statements fairly present in all material respects the financial condition, financial performance and cash flows of the Corporation, as of the date of and for the periods presented by the financial statements.

The Board of Directors is responsible for reviewing and approving the financial statements together with other financial information of the Corporation and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the financial statements together with other financial information of the Corporation. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the financial statements together with other financial information of the Corporation for issuance to the shareholders.

Management recognizes its responsibility for conducting the Corporation's affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

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Melior Resources Inc. Statements of Financial Position (Expressed in Thousands of Canadian Dollars)

As at June 30,

Assets

Current Assets

Cash and cash equivalents Prepaid expenses and other receivables Due from Asian Mineral Resources Limited (Note 7)

Investment in Asian Mineral Resources Limited (Note 7)

Liabilities

Current Liabilities

Accounts payable and accrued liabilities

Shareholders' Equity Share capital (Note 8(a)) Contributed surplus Accumulated other comprehensive loss Deficit

Nature of Operations (Note 1) Subsequent Event (Note 13)


"Mr. Remo Mancini" Director

2013

$ 22,877 82

22,959 1,418

$ 24,377

$ 165

375,885 159,058

(3,782) (506,949)

24,212

$ 24,377

"Dr. Charles Entrekin" Director

The accompanying notes are an integral part of these financial statements

-2-

2012

$ 22,333 113 300

22,746 4,255

$ 27,001

$ 236

375,885 159,058

(945) (507,233)

26,765

$ 27,001

Melior Resources Inc. Statements of Operations and Comprehensive Income (Loss) (Expressed in Thousands of Canadian Dollars)

For the years ended June 30, 2013 2012

Administrative Expenses Office and administration $ 1,154 $ 1,344

Loss before other expenses and income taxes (1,154) (1 ,344)

Other Income (Expense) Interest income 290 210 Share-based compensation (425) Interest on bonds payable (191) Foreign exchange gain 7 139 Loss on sale of marketable securities (2,976)

297 {3,243)

Loss from continuing operations (857) {4,587) Income from discontinued operations (Note 5) 1,141 (271)

Net income (loss) for the year $ 284 $ {4,858)

Other Comprehensive Income (Loss)

Re-classification adjustment for net losses included in (income) loss for the year 8

Unrealized loss on available-for-sale financial assets (2,837) (945)

Total comprehensive loss $ (2,553) $ (5,795)


lncome(Loss) from continuing operations $ 0.00 $ (0.03) Income from discontinued operations $ 0.01 $ (0.00) Net income $ 0.00 $ (0.03)

Weighted average number of shares outstanding 173,380,974 173,288,773


-3-

Melior Resources Inc. Statements of Changes in Shareholders' Equity (Expressed in Thousands of Canadian Dollars)

Accumulated Other

Common Shares Contributed Comprehensive Number Amount Surplus Loss Deficit Total

Balance, June 30, 2011 173,007,049 $ 375,836 $ 158,633 $ (8) $ (502,375) $ 32,086 Issued during the year 373,925 49 - - - 49 Share-based compensation - - 425 - - 425 Net loss - - - - (4,858) (4,858) Re-classification adjustment for net losses

included in loss for the period - - - 8 - 8 Unrealized loss on available-for-sale

financial assets - - - (945) - (945)

Balance, June 30,2012 173,380,974 $ 375,885 $ 159,058 $ (945) $ (507,233) $ 26,765 Net income - - - - 284 284 Unrealized loss on available-for-sale

financial assets - - - (2,837) - (2,837) Balance, June 30,2013 173,380,974 $ 375,885 $ 159,058 $ (3,782) $ (506,949) $ 24,212


-4-

Melior Resources Inc. Statements of Cash Flows (Expressed in Thousands of Canadian Dollars)

For the years ended June 30, 2013 2012


Operating Activities Net loss from continuing operations $ (857) $ (4,587) Non-cash items included in net loss:

Share-based compensation 425 Shares issued for non-cash consideration 49 Foreign exchange loss 165 Loss on sale of marketable securities 2,976

Changes in non-cash working capital balances (33) 120

Cash flows from continuing operations (890) (852) Cash flows from discontinued operations 1,141 (1 ,243)

Cash flows from operating activities 251 (2,095)

Investing Activities Acquisition of investment in Asian Mineral Resources Limited (5,200) Repayment from Asian Mineral Resources Limited 300 (300) Proceeds on sale of marketable securities 6,236

Cash flows from continuing operations 300 736 Cash flows from discontinued operations

Cash flows from investing activities 300 736

Financing Activities Repayment of long-term debt (8,592)

Financing cash flows from continuing operations (8,592) Financing cash flows from discontinued operations

Cash flows from financing activities (8,592)

Foreign exchange (gain) loss on cash held in foreign currency (7) 214

Change in cash and cash equivalents during the year 544 (9,737) Cash and cash equivalents, beginning of year 22,333 32,070

Cash, end of year $ 22,877 $ 22,333


-5-

Melior Resources Inc. Notes to Financial Statements Years Ended June 30, 2013 and 2012 (Expressed in Thousands of Canadian Dollars)




On March 16, 2012, the Corporation completed the sale of all of the common stock of its wholly-owned subsidiary, Coalcorp International, AW, which was the holding company for all of the Corporation's off-shore subsidiaries.

On October 1, 2012, Pala Investments Limited ("Pala") made an offer to purchase, for $0.11 per share in cash, all of the outstanding common shares of the Corporation it did not own (the "Offer"). The Offer included any common shares that may have become outstanding after the date of the Offer and prior to its expiry, upon the exercise of options, warrants or other rights to acquire common shares. The Offer was extended to December 21, 2012, at which time it expired. As at June 30, 2013, Pala owned directly or indirectly 54.52% of the Corporation's issued and outstanding common shares.

2. Statement of Compliance

These financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards ("IFRS") and their interpretations adopted by the International Accounting Standards Board ("IASB") and the Interpretations of the I FRS Interpretations Committee ("IFRIC") which the Canadian Accounting Standards Board has approved for incorporation into Part 1 of the Handbook of the Canadian Institute of Chartered Accountants.

The financial statements were authorized for issue by the Audit Committee on behalf of the Board of Directors of the Company on September 11, 2013.

These financial statements are presented in Canadian dollars.

3. Summary of Significant Accounting Policies

(a) Basis of presentation:

These financial statements have been prepared on a historical cost basis, with the exception of financial instruments classified as at fair value through profit or loss or available-for-sale, which are measured at fair value.

(b) Translation of foreign currencies:

The Corporation's functional and presentation currency is the Canadian dollar.

Transactions in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities not denominated in the functional currency are translated at the period end rates of exchange. Foreign exchange gains and losses are recognized in the statement of operations and comprehensive income (loss).

-6-


3. Significant Accounting Policies (Continued)

(c) Financiallnstruments:

The Corporation recognizes financial assets and financial liabilities when the Corporation becomes a party to a contract.

Measurement in subsequent years depends on the classification of the financial instrument.

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

Financial assets are classified as FVTPL when acquired principally for the purpose of trading, if so designated by management (fair value option), or if they are derivative assets that are not part of an effective and designated hedging relationship. Financial assets classified as FVTPL are measured at fair value, with changes recognized in the statements of operations and comprehensive income (loss).

The Corporation's financial assets classified as FVTPL include cash and cash equivalents.

ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as such by management or not classified in any of the other categories. Available-for-sale financial assets are measured at fair value with changes recognized in other comprehensive income. Upon sale or impairment, the accumulated fair value adjustments recognized in other comprehensive income are recorded in the statements of operations.

Available-for-sale financial assets is comprised of the investment in Asian Mineral Resources Limited.

iii) Loans and receivables

Loans and receivables are non-derivative financial assets that have fixed or determinable payments and are not quoted in an active market. Subsequent to initial recognition, loans and receivables are carried at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of an instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the instrument to the net carrying amount on initial recognition.

Other receivables are classified as loans and receivables.

iv) Other financial liabilities

Other financial liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.

The Corporation's financial liabilities classified as other financial liabilities include accounts payable and accrued liabilities.

-7-



(d) Cash and cash equivalents:

Cash and cash equivalents consist of cash on hand, deposits in banks and highly liquid investments with an original maturity of ninety days or less.

(e) Income taxes:

Income taxes are determined using the assets and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred income tax assets are recognized to the extent that realization is considered probable.

(f) Stock-based compensation:

Stock options granted are settled with shares of the Corporation. The expense is determined based on the fair value of the award granted and recognized over the period when services are received, which is usually the vesting period. For awards with graded vesting, the fair value of each tranche is recognized over its respective vesting period. At the end of each reporting period, the Corporation re-assesses its estimates of the number of awards that are expected to vest and recognizes the impact of the revisions in the statement of operations and comprehensive income (loss).

(g) Per share information:

Basic loss per share is computed by dividing the loss for the year available to common shareholders by the weighted average number of shares outstanding during the years. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the years. Options and warrants are anti-dilutive and, therefore, have not been taken into account in the per share calculations.

Future Accounting Changes

The following standards have not yet been adopted and are being evaluated to determine their impact on the Company.

(i) I FRS 9- Financial instruments ("I FRS 9") was issued by the IASB in October 2010 and will replace lAS 39 Financial Instruments: Recognition and Measurement ("lAS 39"). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in lAS 39. The approach in I FRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in lAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in lAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2015.

-8-



Future Accounting Changes (Continued)

(ii) I FRS 10- Consolidated financial statements ("'FRS 1 0") was issued by the IASB in May 2011. I FRS 10 is a new standard which identifies the concept of control as the determining factor in assessing whether an entity should be included in the consolidated financial statements of the parent company. Control is comprised of three elements: power over an investee; exposure to variable returns from an investee; and the ability to use power to affect the reporting entity's returns. I FRS 10 is effective for annual periods beginning on or after January 1, 2013. Earlier adoption is permitted.

(iii) I FRS 11 - Joint arrangements ("I FRS 11 ") was issued by the IASB in May 2011. I FRS 11 is a new standard which focuses on classifying joint arrangements by their rights and obligations rather than their legal form. Entities are classified into two groups: parties having rights to the assets and obligations for the liabilities of an arrangement, and rights to the net assets of an arrangement. Entities in the former case account for assets, liabilities, revenues and expenses in accordance with the arrangement, whereas entities in the latter case account for the arrangement using the equity method. I FRS 11 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

(iv) IFRS 12- Disclosure of interests in other entities ("IFRS 12") was issued by the IASB in May 2011. IFRS 12 is a new standard which provides disclosure requirements for entities reporting interests in other entities, including joint arrangements, special purpose vehicles, and off balance sheet vehicles. I FRS 12 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

(v) I FRS 13- Fair value measurement ("I FRS 13") was issued by the IASB in May 2011. I FRS 13 is a new standard which provides a precise definition of fair value and a single source of fair value measurement considerations for use across IFRSs. The key points of I FRS 13 are as follows:

• fair value is measured using the price in a principal market for the asset or liability, or in the absence of a principal market, the most advantageous market;

• financial assets and liabilities with offsetting positions in market risks or counterparty credit risks can be measured on the basis of an entity's net risk exposure;

• disclosures regarding the fair value hierarchy have been moved from I FRS 7 to I FRS 13, and further guidance has been added to the determination of classes of assets and liabilities;

• a quantitative sensitivity analysis must be provided for financial instruments measured at fair value; • a narrative must be provided discussing the sensitivity of fair value measurements categorized

under Level 3 of the fair value hierarchy to significant unobservable inputs; • and information must be provided on an entity's valuation processes for fair value measurements

categorized under Level 3 of the fair value hierarchy.

I FRS 13 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

(vi) In addition, there have been amendments to existing standards, including lAS 27, Separate Financial Statements (lAS 27), and lAS 28, Investments in Associates and Joint Ventures (lAS 28). lAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates in non-consolidated financial statements. lAS 28 has been amended to include joint ventures in its scope and to address the changes in IFRS 10 to IFRS 13.

-9-


4. Critical Accounting Estimates and Judgements

The preparation of these financial statements requires the Corporation to apply judgment when making estimates and assumptions that affect the reported amounts recognized in the financial statements. These estimates have a direct effect on the measurement of transactions and balances recognized in the financial statements. Actual results could differ from estimates.

In addition, the Corporation has made judgments, aside from those that involve estimates, in the process of applying the accounting policies. These judgments can have an effect on the amounts recognized in the financial statements.

Share-based compensation

Management is required to make certain estimates when determining the fair value of stock options awards and the number of awards that are expected to vest. These estimates affect the amount recognized as stock-based compensation in the statement of operations. For the year ended June 30, 2013 the Corporation recognized $nil of stock-based compensation expense (2012- $425).

5. Discontinued Operations

On March 16, 2012, the Corporation completed the sale of all of the common stock of its wholly owned subsidiary, Coalcorp International, AW, which was the holding company for all of the Corporation's off-shore subsidiaries. As of the closing date, the purchaser acquired, on an 'as is, where is' basis, all of the issued and outstanding shares of Coalcorp International, AW for net proceeds of $0.001 ('the Coalcorp AW Transaction'). The Corporation incurred legal and other professional expenses of $75. As a result of the Coalcorp AW Transaction, assets of discontinued operations of $3.9 million, liabilities of discontinued operations of $0.4 million and other associated liabilities of $3.0 million were removed from Melior's statement of financial position as of the closing date, resulting in a net loss on disposal of $275 during the year ended June 30, 2012.

Under the terms of the agreement for the sale of Coalcorp International AW noted in the annual financial statements for the year ended June 30, 2012, the Corporation is entitled to receive, subject to certain terms and conditions, a share of net recoveries of cash, if any, that the purchaser receives as a result of winding up or reorganizing any of the Coalcorp International AW subsidiaries. During the year ended June 30, 2013, the Corporation received $1,141(US$1,138) from the purchaser of Coalcorp International AW for its share of cash recovered. The $1,141 (US$1, 138) was recognised as a gain from discontinued operations.

6. Investment in Oracle Mining Corp.

On November 8, 2010, the Corporation acquired 6,000,000 common shares of Oracle Mining Corp. ("Oracle"), a company listed on the TSXV, by means of a non-brokered private placement at a subscription price of $1.25 per common share for an aggregate cost of $7,846, including transaction costs. During fiscal 2011, the Corporation sold 123,100 shares for a net realized gain of $14, and acquired a further 119,900 shares on the open market.

On June 30, 2011, the Corporation held 5,996,800 common shares of Oracle, with a market value of $7,589.

During the year ended June 30, 2012, the Corporation sold its holdings in Oracle for net proceeds of $5,309, resulting in a loss on disposition of $2,369, which has been recorded on the statement of operations and comprehensive income (loss).

- 10-



On June 29, 2012, the Corporation completed a strategic investment in Asian Mineral Resources Limited ("AMR") by means of a private placement whereby it purchased 47,272,727 common shares of AMR (the "AMR Shares") at $0.11 per AMR Share for total consideration of $5,200 (the "Strategic Investment"). The common shares are recorded at fair value. The Corporation owns and controls, directly and indirectly, a total of 47,272,727 AMR Shares representing approximately 6% of the issued and outstanding AMR Shares on an undiluted basis.

In connection with the transaction, the Corporation advanced $300 to AMR, which was repaid during fiscal 2013.

8. Share Capital

(a) Authorized


Issued

Balance, June 30, 2011 Shares issued for services (i)

Balance, June 30, 2012 and 2013


173,007,049 373,925

173,380,974

$

$

Stated Value

375,836 49

375,885

(i) During year ended June 30, 2012, 373,925 shares were issued to one of the former Directors of the Corporation in accordance with a consulting agreement. These shares have been valued and recorded at the market price on the day of their issuance and the corresponding charge was recorded in office and administration expenses.

(b) Warrants

The following summarizes the warrant activity for the years ended June 30, 2013 and 2012:

Number of Weighted Average Warrants Exercise Price

Balance, June 30, 2011 81,752,467 $ 3.93 Expired (19,878,577) 8.40

Balance, June 30,2012 61,873,890 $ 2.50 Expired (61 ,873,890) 2.50

Balance, June 30,2013 $

- 11 -


8. Share Capital (Continued)

9.

(c) Stock Options

As at June 30, 2013, 18,718,097 common shares remain available for grant under the plan. Under the plan, the exercise price of each option equals the market price of the Corporation's common shares on the date of grant or the price determined by the Board of Directors, not being less than the market price, and an option's maximum term is ten years. Options are granted upon approval by the Board of Directors.


Balance, June 30, 2011 600,000 $ 1.13 Granted and issued during the period (i) 3,875,000 0.17 Cancelled/forfeited (1 ,085,000) 0.43

Balance, June 30,2012 3,390,000 $ 0.25 Cancelled/forfeited (1 ,380,000) 0.17

Balance, June 30,2013 2,010,000 $ 0.31

(i) The Corporation used the Black Scholes option pricing model to estimate the fair value of the options granted in fiscal2012 using the following assumptions:

Risk-free interest rate Expected stock price annual volatility Expected life Estimated forfeiture rate Expected dividend yield Fair value cost per option

1.85% 100.0% 6 years Nil 0.0% $0.108

As at June 30, 2013, the Corporation had the following stock options outstanding and exercisable:

Weighted Average



March 27, 2014 150,000 150,000 0.74 $ 1.50 March 27, 2014 150,000 150,000 0.74 0.75 Sept. 21, 2018 1,710,000 3,090,000 5.23 0.17

2,010,000 3,390,000 4.56 $ 0.31

Related Party Transactions


For the years ended June 30,

Salaries and benefits Directors fees Share based payments Share-based compensation

- 12-

$ $ $ $

2013

257 $ 216 $

$ $

2012

259 313 49

220


10. Income Taxes

The following table reconciles the expected tax recovery at the Canadian Federal and Provincial statutory rate of 26.50% (2012- 27.25%) to the amount recognized in the statement of loss and comprehensive loss:

Net income (loss), before income taxes

Expected income tax expense (recovery) Capital gain on expiry of warrants Non-recognition of tax assets and future tax rate reductions Foreign exchange differences, non-deductible expenses and other

Gain on sale of investment not subject to taxation Expiry of loss not previously recognized Changes in tax benefits not recognized

Deferred income tax recovery

$

$

$

2013

284

75 6,193

6

1

34 (6,309)

$

$

$

2012

(4,858)

(1 ,324)

492

(53) 885

Deferred income taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred income tax assets have not been recognized in respect of the following items:

Non-capital loss carry-forwards Eligible capital expenditures Capital loss carry-forwards Mineral property exploration and development Investment Other

2013

$ 109,310 7,325

1,434 3,782

76

$ 121 927

$

$

2012

131,084 8,470 1,459

841 945

98

142,897

At June 30, 2013 the Corporation had Canadian non-capital loss carried forwards of approximately $109 million for income tax purposes. The losses may be utilized to reduce future years taxable income earned in Canada and expire between 2027 and 2032. Deductible temporary differences and exploration expenditures do not expire under current tax legislation and can be carried forward indefinitely. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.

- 13-


11. Capital Disclosures

The Corporation's objectives, when managing capital, are to safeguard cash as well as maintain financial liquidity and flexibility in order to preserve its ability to meet financial obligations and deploy capital to grow its business. In the definition of capital, the Corporation includes, as disclosed on its statement of financial position: deficit of $506,949; capital stock, contributed surplus $375,885 and $159,058 respectively.

The Corporation's financial strategy is designed to maintain a flexible capital structure consistent with the objectives stated above and to respond to business growth opportunities and changes in economic conditions. In order to maintain or adjust its capital structure, the Corporation may purchase shares for cancellation pursuant to normal course issuer bids, issue new shares, issue new debt (secured, unsecured, convertible and/or other types of debt instruments), acquire or dispose of assets or adjust the amount of cash and cash equivalents. The Corporation is currently not subject to externally imposed capital requirements.

12. Financiallnstruments

Fair Values

Assets and liabilities carried at fair value must be classified using a three-level hierarchy that reflects the significance and transparency of the inputs used in making the fair value measurements. The classifications are as follows: the use of quoted market prices for identical assets or liabilities (Level 1 ), internal models using observable market information as inputs (Level 2) and internal models without observable market information as inputs (Level 3).

The Corporation's financial instruments measured at fair value include cash and cash equivalents, and Investment in Asian Mineral Resources Limited. These financial assets are reported at Level 1 of the fair value hierarchy. The Corporation has no financial assets and liabilities measured at fair value at Level 2 or Level 3 as at June 30, 2013 or 2012.

Risk Management

The Corporation's risk exposures and their impact on the Corporation's financial instruments are summarized below:

Credit Risk

Credit risk on financial instruments arises from the potential for counterparties to default on their obligations to the Corporation. Current credit exposure relates to the loss that would be incurred if the Corporation's counterparties were to default on their current obligations. To minimize the Corporation's exposure to credit risk, the Corporation holds all its cash and cash equivalent balances at a major Canadian financial institution with an AA rating from Standard and Poors.

Liquiditv Risk

The Corporation's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities as they become due. As at June 30, 2013, the Corporation had cash and cash equivalents of $22,877 (June 30, 2012- $22,333) to settle current liabilities of $165 (June 30, 2012- $236). Most of the Corporation's financial liabilities have contractual maturities of less than 90 days and are subject to normal trade terms.

- 14-


12. Financial Instruments (Continued)

Risk Management (Continued)

Market Risk

Market risk is the risk of loss that may arise from changes in interest rates, foreign exchange rates and commodity prices.

(a) Interest Rate Risk

Interest on the Corporation's cash and cash equivalents is based on both fixed and variable rates and exposes the Corporation to interest rate risk. The Corporation has not entered into any derivative agreements to mitigate this risk. The impact in the change in interest rates of 1% in either direction at June 30, 2013 would be $229 per year on the interest earned on cash and cash equivalents.

(b) Foreign Currency Risk

As at June 30, 2013, a nominal portion of the Corporation's cash and cash equivalents were held in United States dollars, accordingly, the Corporation is not exposed to material foreign exchange risk. Derivative financial instruments are not used to reduce exposure to fluctuations in foreign exchange rates.

(c) Price Risk

The Corporation's investment in the common shares of AMR is subject to fair value fluctuations. As at June 30, 2013, if the stock price of the common shares of Asian had changed by 1 0% with all other variables held constant, comprehensive loss for the year would have varied by approximately $142 and reported shareholders' equity would have varied by approximately $142.

13. Subsequent Event

On July 5, 2013, the Corporation announced it had have entered into a letter of intent (the "Letter of Intent") in connection with a proposed transaction (the "Proposed Transaction") pursuant to which the Corporation would acquire all of the issued and outstanding common shares of Firestone Ventures Inc. ("Firestone") in consideration for the issuance to Firestone shareholders of one of the Corporation's common shares for each 2.895 Firestone common shares held. The Proposed Transaction is subject to a number of conditions, including confirmatory due diligence by the Corporation and the negotiation of mutually satisfactory definitive acquisition documentation. There can be no assurance that any such definitive documentation will be entered into or that the Proposed Transaction will be completed. The Corporation has agreed to provide Firestone with a bridge loan (the "Bridge Loan") of up to $500,000.

On August 30, 2013, the Corporation announced it had terminated the Bridge Loan. No amounts had been advanced under the Bridge Loan to date. The Corporation also announced that it no longer intended to proceed with its proposed friendly acquisition of Firestone, as set out in the previously announced letter of intent.

- 15-

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(EXPRESSED IN CANADIAN DOLLARS)

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements of Melior Resources Limited were prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the financial statements. Management acknowledges responsibility for the preparation and presentation of the annual consolidated financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Corporation's circumstances. In the opinion of management, the consolidated financial statements have been prepared within acceptable limits of materiality using accounting policies consistent with International Financial Reporting Standards appropriate in the circumstances.

Management has established processes which are in place to provide them sufficient knowledge to support management representations that they have exercised reasonable diligence that (i) the consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the consolidated financial statements and (ii) the consolidated financial statements fairly present in all material respects the financial condition, financial performance and cash flows of the Corporation, as of the date of and for the periods presented by the consolidated financial statements.

The Board of Directors is responsible for reviewing and approving the consolidated financial statements together with other financial information of the Corporation and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the consolidated financial statements together with other financial information of the Corporation. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the consolidated financial statements together with other financial information of the Corporation for issuance to the shareholders.

Management recognizes its responsibility for conducting the Corporation's affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

MSCMLLP ( ) Accountants & Advisors for a Complex World

To the Shareholders of Melior Resources Inc.

Report on the Financial Statements

Independent Auditors' Report

We have audited the accompanying consolidated financial statements of Melior Resources Inc., which comprise the consolidated statements of financial position as at June 30, 2012, June 30, 2011 and July I, 2010 and the consolidated statements of operations and comprehensive loss, changes in shareholders ' equity and cash flows for the years ended June 30, 2012 and 2011 , and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the fmancial statements are free from material misstatement.

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

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

Opinion

In our opinion, the consolidated fmancial statements present fairly , in all material respects, the financial position of Melior Resources Inc. as at June 30, 2012, June 30, 2011 and July I, 2010 and its financial performance and its cash flows for the years ended June 30, 2012 and 201 I in accordance with International Financial Reporting Standards.

Toronto, Ontario October 16, 20 12

Signed: "MSCM LLP"

Chartered Accountants Licensed Public Accountants

701 Evans Avenue , 8th Floor, Toronto ON M9C 1A3, Ca nada T (4 16) 626-6000 F (4 16) 626-8650 MSCM .CA

Melior Resources Inc. Consolidated Statements of Financial Position (Expressed in Thousands of Canadian Dollars)

June 30, June 30, July 1, As at 2012 2011 2010

Assets

Current Assets

Cash and cash equivalents $ 22,333 $ 30,827 $ 19,218 Accounts receivable 99 Prepaid expenses and deposits 113 242 103 Restricted cash (Note 6) 8,384 Due from Asian Mineral Resources Limited (Note 9) 300 Investment in Formation Metals Inc. (Note 7) 1,211 Investment in Oracle Mining Corp (Note 8) 7,589 Assets of discontinued operations (Note 5) 3,937 19,211

22,746 43,806 47,015

Investment in Formation Metals Inc. (Note 7) 7,865 Investment in Asian Mineral Resources Limited (Note 9) 4,255

$ 27,001 $ 43,806 $ 54,880

Liabilities Current Liabilities

Accounts payable and accrued liabilities $ 236 $ 3,245 $ 4,388 Current portion of bonds payable (Note 1 0) 8,057 Liabilities of discontinued operations (Notes 1 and 5) 418 4,483

236 11,720 8,871

Long-term debt (Note 1 0) 8,530 Liabilities of discontinued operations (Notes 1 and 5) 210

236 11,720 17,611

Shareholders' Equity Share capital (Note 11 (a)) 375,885 375,836 375,836 Contributed surplus 159,058 158,633 158,633 Accumulated other comprehensive loss (945) (8) Deficit (507,233) (502,375) (497,200)

26,765 32,086 37,269

$ 27,001 $ 43,806 $ 54,880

Nature of Operations (Note 1) Subsequent Events (Note 19)


"Mr. Robert Dietrich" "Dr. Charles Entrekin" Director Director

The accompanying notes are an integral part of these consolidated financial statements -2-

Melior Resources Inc. Consolidated Statements of Operations and Comprehensive (Loss) (Expressed in Thousands of Canadian Dollars)

For the years ended June 30, 2012

Administrative Expenses Office and administration $ 1,344

Loss before other income (expenses) and income taxes (1,344)

Other Income (Expense) Interest Income 210 Share-based compensation (Notes 4(a), 11 (c)) (425) Interest on bonds payable (191) Foreign exchange gain (loss) 139 (Loss) Gain on sale of marketable securities (2,976) Gain on disposition of convertible debenture Loss on settlement with Goldman Sachs (Note 6)

(3,243)

Loss from continuing operations (4,587) (Loss) Income from discontinued operations (Note 5) (271)

Net loss for the year $ (4,858)

Other Comprehensive Loss

Re-classification adjustment for net gains and (losses) included in loss for the year 8

Unrealized loss on available-for-sale financial assets (945)

Total comprehensive loss $ (5,795)


Loss from continuing operations $ (0.03) (Loss) Income from discontinued operations $ (0.00) Net loss $ (0.03)

Weighted average number of shares outstanding 173,288,773


2011

$ 1,573

(1 ,573)

950

(1 '125) (1 '110)

286 2,917

{6, 144)

{4,226)

(5,799) 624

$ (5, 175)

(8)

$ {5, 183)

$ (0.03) $ 0.00 $ (0.03)

173,007,049

Melior Resources Inc. Consolidated Statements of Changes in Shareholders' Equity (Expressed in Thousands of Canadian Dollars)

Balance, July 1, 2010 Net loss Unrealized (loss) on available-for-sale

financial assets

Accumulated Other

Common Shares Contributed Comprehensive Number Amount Surplus Loss

173,007,049 $ 375,836 $ 158,633 $ - $

(8)

Deficit (497,200) $

(5, 175)

Balance, June 30, 2011 Issued during the period Stock-based compensation Net loss

173,007,049 $ 375,836 $ 158,633 $ (8) $ (502,375) $

Re-classification adjustment for net gains and (losses) included in loss for the year

Unrealized loss on available-for-sale

373,925 49 425

(4,858)

8

Total 37,269 (5, 175)

(8)

32,086 49

425 (4,858)

8

financial assets (945) - (945)

Balance, June 30,2012 173,380,974 $ 375,885 $ 159,058 $


(945) $ (507,233) $ 26,765

Melior Resources Inc. Consolidated Statements of Cash Flows (Expressed in Thousands of Canadian Dollars)

For the years ended June 30, 2012


Operating Activities Net loss from continuing operations $ (4,587) Non-cash items included in net loss:

Stock-based compensation 425 Shares issued for non-cash consideration 49 Foreign exchange (gain) loss 165 Loss (gain) on sale of marketable securities 2,976 Gain on disposition of convertible debenture Loss on settlement with Goldman Sachs Convertible debenture interest settled in shares

Changes in non-cash working capital balances: 120

Cashflows from continuing operations (852) Cashflows from discontinued operations (1,243)

Cashflows from operating activities (2,095)

Investing Activities Acquisition of marketable securities Acquisition of investment in Asian Mineral Resources Limited (5,200) Advances to Asian Mineral Resources Limited (300) Proceeds on settlement with Goldman Sachs Proceeds on disposition of convertible debenture. Proceeds on sale of marketable securities 6,236

Cash flows from continuing operations 736 Cash flows from discontinued operations

Cash flows from investing activities 736

Financing Activities Repayment of long-term debt (8,592)

Financing cash flows from continuing operations (8,592) Financing cash flows from discontinued operations

Cash flows from financing activities (8,592)

Foreign exchange loss on cash held in foreign currency 214

Change in cash and cash equivalents during the year (9,737) Cash and cash equivalents, beginning of year 32,070

Cash and cash equivalents, end of year $ 22,333


2011

$ (5,799)

(682) (284)

(2,970) 6,241

(968)

(919)

(5,381) 1,427

{3,954)

(7,848)

1,772 9,500

847

4,271 10,264

14,535

628

11,209 20,861

$ 32,070

Melior Resources Inc. Consolidated Statements of Cash Flows (Continued) (Expressed in Thousands of Canadian Dollars)

For the years ended June 30,

Cash and cash equivalents are comprised of:

Cash and cash equivalents - continuing operations Cash and cash equivalents - discontinued operations

Cash and cash equivalents consist of the following:

Cash Short-term investments

$ $

$

$ $

$

2012

22,333 $ $

22,333 $

167 $ 22,166 $

22,333 $


2011

30,827 1,243

32,070

10,741 21,329

32,070

Melior Resources Inc. Notes to Consolidated Financial Statements Years Ended June 30,2012 and 2011 (Expressed in Thousands of Canadian Dollars)



On September 28, 2011, the Corporation changed its name to Melior Resources Inc. Effective September 29, 2011, the common shares and warrants commenced trading on the TSXV under the symbols MLR and MLR.WT.B, respectively.


On March 16, 2012, the Corporation completed the sale of all of the common stock of its wholly-owned subsidiary, Coalcorp International, AW, which was the holding company for all of Melior's off-shore subsidiaries for gross proceeds of $0.001. After cash costs of $75, the Corporation reported a net loss on disposition of $275.

2. Statement of Compliance

The Corporation prepares its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") which require publicly accountable enterprises to apply these standards effective for years beginning on or after January 1, 2011. Accordingly, these are the Corporation's first annual financial statements prepared in accordance with I FRS as issued by the IASB and have been prepared in accordance with I FRS 1, First Time Adoption of Financial Reporting Standards ("IFRS 1") as discussed in note 16.

Subject to certain transition elections and exceptions noted in note 16, the Corporation has consistently applied the accounting policies used in the preparation of its opening I FRS statement of financial position at July 1, 2010 throughout all periods presented, as if these policies had always been in effect. Note 16 discloses the impact of the transition to IFRS on the Corporation's reported financial position, financial performance and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Corporation's financial statements for the year ended June 30, 2011 prepared under Canadian Generally Accepted Accounting Principles.

The consolidated financial statements were authorized for issue by the Audit Committee on behalf of the Board of Directors of the Corporation on October 15, 2012.

These financial statements are presented in Canadian dollars.

3. Significant Accounting Policies

(a) Basis of presentation:

These consolidated financial statements have been prepared on a historical cost basis, with the exception of financial instruments classified as at fair value through profit or loss or available-for-sale, which are measured at fair value.

(b) Basis of consolidation:

These consolidated financial statements include the accounts of the Corporation and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions and balances have been eliminated.




(c) Translation of foreign currencies:

The Corporation's functional and presentation currency is the Canadian dollar. Functional currency is also determined for each of the Corporation's subsidiaries, and items included in the financial statements of the subsidiary are measured using that functional currency. The functional currency of all of Corporation's subsidiaries has also been determined to be the Canadian dollar.

Transactions in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities not denominated in the functional currency are translated at the period end rates of exchange. Foreign exchange gains and losses are recognized in the statement of operations and comprehensive loss.

(d) Financiallnstruments:

The Corporation recognizes financial assets and financial liabilities when the Corporation becomes a party to a contract.

Measurement in subsequent years depends on the classification of the financial instrument.

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

Financial assets are classified as FVTPL when acquired principally for the purpose of trading, if so designated by management (fair value option), or if they are derivative assets that are not part of an effective and designated hedging relationship. Financial assets classified as FVTPL are measured at fair value, with changes recognized in the consolidated statements of operations and comprehensive loss.

The Corporation's financial assets classified as FVTPL include cash and cash equivalents, restricted cash and the embedded derivative component (conversion feature) of the investment in Formation Metals.

ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as such by management or not classified in any of the other categories. Available-for-sale financial assets are measured at fair value with changes recognized in other comprehensive income. Upon sale or impairment, the accumulated fair value adjustments recognized in other comprehensive income are recorded in the consolidated statements of operations.

Available-for-sale financial assets include the investment in Formation Metals Inc., investment in Oracle Mining Corp and the investment in Asian Mineral Resources Limited.

iii) Loans and receivables

Loans and receivables are non-derivative financial assets that have fixed or determinable payments and are not quoted in an active market. Subsequent to initial recognition, loans and receivables are carried at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of an instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the instrument to the net carrying amount on initial recognition.

Accounts receivable are classified as loans and receivables.

-8-



(d) Financial Instruments: (Continued)

iv) Other financial liabilities

Other financial liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.

The Corporation's financial liabilities classified as other financial liabilities include accounts payable and accrued liabilities and long-term debt.

(e) Cash and cash equivalents:

Cash and cash equivalents consist of cash on hand, deposits in banks and highly liquid investments with an original maturity of ninety days or less.

(f) Income taxes:

Income taxes are determined using the assets and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred income tax assets are recognized to the extent that realization is considered probable.

(g) Stock-based compensation:

Stock options granted are settled with shares of the Corporation. The expense is determined based on the fair value of the award granted and recognized over the period when services are received, which is usually the vesting period. For awards with graded vesting, the fair value of each tranche is recognized over its respective vesting period. At the end of each reporting period, the Corporation re-assesses its estimates of the number of awards that are expected to vest and recognizes the impact of the revisions in the statement of operations and comprehensive loss.

(h) Per share information:

Basic loss per share is computed by dividing the loss for the year available to common shareholders by the weighted average number of shares outstanding during the years. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the years. Options and warrants are anti-dilutive and, therefore, have not been taken into account in the per share calculations.

-9-



Future Accounting Changes

The following accounting pronouncements have been released but have not yet been adopted by the Corporation.

(a) IFRS 9 Financial Instruments

In November 2009, the IASB issued, and subsequently revised in October 2010, IFRS 9 Financial Instruments (IFRS 9) as a first phase in its ongoing project to replace lAS 39. IFRS 9, which is to be applied retrospectively, is effective for annual periods beginning on or after January 1, 2015, with earlier application permitted.

IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in lAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in lAS 39. The standard also adds guidance on the classification and measurement of financial liabilities. Management has not yet determined the potential impact the adoption of I FRS 9 will have on the Corporation's consolidated financial statements.

(b) IFRS 13 Fair Value Measurement

On May 12,2011, the IASB issued IFRS 13 Fair Value Measurement (IFRS 13). IFRS 13, which is to be applied prospectively, is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted.

IFRS 13 defines fair value, provides a framework for measuring fair value and includes disclosure requirements for fair value measurements. IFRS 13 will be applied in cases when another IFRS requires (or permits) fair value measurement. Management has not yet determined the potential impact that the adoption of I FRS 13 will have on the Corporation's consolidated financial statements.

(c) Presentation of Financial Statements

In June 2011, the lAS made amendments to lAS 1, "Presentation of Financial Statements", which will require companies to group items presented in Other Comprehensive Income on the basis of whether they will or will not be subsequently reclassified to profit or loss. The amended version of lAS 1 is effective for the annual periods beginning on or after July 1, 2012, with earlier adoption permitted. The Corporation expects the amendment to lAS 1 to have minimal impact on the Corporation's consolidated financial statements and anticipates adopting the standard in the first quarter of fiscal 2013.

(d) Other

In May 2011, the IASB issued I FRS 10 Consolidated Financial Statements, I FRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. The Corporation does not believe the changes resulting from these new standards are relevant to its consolidated financial statements.

In June 2011, the IASB issued amendments to lAS 1 Presentation of Financial Statements and lAS 19 Employee Benefits, primarily related to accounting for defined benefit pension plans. The Corporation does not believe the changes resulting from these amendments will have an impact on its consolidated financial statements.

- 10-


4. Critical Accounting Estimates and Judgements

The preparation of these consolidated financial statements requires the Corporation to apply judgment when making estimates and assumptions that affect the reported amounts recognized in the financial statements. These estimates have a direct effect on the measurement of transactions and balances recognized in the financial statements. Actual results could differ from estimates.

In addition, the Corporation has made judgments, aside from those that involve estimates, in the process of applying the accounting policies. These judgments can have an effect on the amounts recognized in the financial statements.

(a) Share-based compensation

Management is required to make certain estimates when determining the fair value of stock options awards and the number of awards that are expected to vest. These estimates affect the amount recognized as stock-based compensation in the statement of operations. For the year ended June 30, 2012 the Corporation recognized $425 of stock-based compensation expense (2011 - $Nil).

(b) Income Taxes

The measurement of income taxes payable and deferred income tax assets and liabilities requires management to make judgments in the interpretation and application of the relevant tax laws. The actual amount of income taxes only become final upon filing and acceptance of the tax return by the relevant authorities, which occurs subsequent to the issuance of the financial statements.

5. Sale of La Francia I and II and Discontinued Operations

On May 14, 2008, the Corporation announced that it had determined that all assets not core to the objectives of its new strategic plan would be disposed of or wound down. In particular, this meant the disposition of the Caypa mine and the Cartagena port lands and associated port license. Accordingly, these businesses are classified as discontinued operations.

On June 27, 2008, the Corporation through its subsidiary, Andean Coal Corporation BVI ("Andean"), entered into a sale and purchase agreement ("SPA") with Xira, a Corporation incorporated in Panama, to sell 40% of its interest in Carbones Colombianos del Cerrejon SA ("CCC"), the holder of the mining contract at Caypa. Consideration consisted of up to $25.0 million, payable in tranches, as well as the payment of a $1.00 per tonne sales commission on all coal sold by CCC. Under the SPA, Andean transferred 40% of its shareholding in CCC to Xira in consideration for the immediate payment of $1.0 million. Subsequent payments of $7.0 million, $6.0 million and $6.0 million were required to be made 13, 22 and 25 months, respectively, from the closing date. An additional $5.0 million payment could be received by the Corporation upon the exercise of its option to dispose of the remaining 60%, and upon the satisfaction of certain conditions, to be satisfied no later than 28 months from completion or December 31, 2010.

The Corporation, Xira and former members of the Corporation's management and other parties to various claims amongst them announced that they entered into a settlement agreement dated as of January 31, 2010 (the "Settlement Agreement") to settle all matters in dispute amongst the parties. These disputes and litigation matters have been previously disclosed in full in continuous disclosure documents, including interim and annual financial statements and other shareholder communications throughout 2009 and early 2010.

As part of the Settlement Agreement, Xira agreed to pay $34.0 million payable as follows: (i) $7.0 million on February 8, 2010, (ii) $17.0 million on March 15, 2010, (iii) $8.0 million on September 15, 2010 and (iv) $2.0 million on January 31, 2011. All payments were received as scheduled.

- 11 -


5. Sale of La Francia I and II and Discontinued Operations (Continued)

The Settlement Agreement also provided that: (i) on March 15, 2010, the 40% shareholding in CCC (the owner of the Caypa Mine) held in escrow would be released to Xira and the remaining 60% shareholding in CCC held by certain of the Corporation's subsidiaries would be assigned to Xira; (ii) Andean agreed to waive its sales commission on production from the Caypa Mine and cancel any outstanding payments; (iii) Blue Pacific Assets Corp. ("Blue Pacific") agreed to terminate its royalty on production from the La Francia I Mine and cancel any outstanding royalty payments; (iv) all litigation and regulatory proceedings among the parties would be terminated; (v) all parties would release the others as part of the settlement; and (vi) the releases in favour of Xira and the former management group would be held in escrow until receipt of the final payment from Xira due on January 31, 2011. All conditions were met as of January 31, 2011.

The income from the respective discontinued operations is as follows:

Year ended June 30, 2012 La Francia I Caypa Cartagena Total

Revenue $ $ $ $ Income before income taxes 4 4 Loss on disposition, net of taxes (275) (275)

Net loss from discontinued operations (271) (271)

Basic and diluted income from discontinued operations per share $ (0.00) $ (0.00) $ (0.00) $ (0.00)

Year ended June 30, 2011 La Francia I Caypa Cartagena Total

Revenue $ $ $ $ Income before income taxes 624 624

Net income from discontinued operations 624 624

Basic and diluted loss from discontinued operations per share $ 0.00 $ 0.00 $ 0.00 $ 0.00

- 12-


5. Sale of La Francia I and II and Discontinued Operations (Continued)

The carrying values of the net assets related to the discontinued operations are as follows:

June 30, 2012

Current assets Current liabilities Long-term liabilities

Net assets (liabilities) of discontinued operations

June 30, 2011



July 1, 2010



La Francia I Caypa

$ $

$ $

La Francia I Caypa

$

$

$

$

3,937 $ (418)

3,519 $

La Francia I

8,731 $ {4,483)

4,248 $

Caypa

10,480

10,480

Cartagena Total

$ $

$ $

Cartagena Total

$ $

$ $

Cartagena

$ $

(210)

$ (210) $

3,937 (418)

3,519

Total

19,211 {4,483)

(210)

14,518

On March 16, 2012, the Corporation completed the sale of all of the common stock of its wholly owned subsidiary, Coalcorp International, AW, which was the holding company for all of the Corporation's off-shore subsidiaries. As of the closing date, the purchaser acquired, on an 'as is, where is' basis, all of the issued and outstanding shares of Coalcorp International, AW for net proceeds of $0.001 ('the Coalcorp AW Transaction'). The Corporation incurred legal and other professional expenses of $75. As a result of the Coalcorp AW Transaction, assets of discontinued operations of $3.9 million, liabilities of discontinued operations of $0.4 million and other associated liabilities of $3.0 million were removed from Melior's balance sheet as of the closing date, resulting in a net loss on disposal of $275 during the year ended June 30, 2012.

6. CNRI Settlement

On March 3, 2011 the Corporation entered into a Settlement Agreement (the "CNRI Settlement") with certain affiliates of the Goldman Sachs Group, Inc. ("Goldman Sachs"), including Colombian Natural Resources I SAS ("CNRI") and Colombian Natural Resources II SAS (together with CNRI, the "CNR Parties").

In accordance with the terms of an escrow agreement dated March 19, 2010 among Computershare, Melior, and the CNR Parties, Computershare was holding USD$8,000 in escrow in connection with the Transaction and recorded on the statement of financial position as restricted cash. Upon completion of the CNRI Settlement, a payment of USD$6,231 was released by Computershare to the CNR Parties and USD$1,769 was released to Melior. This resulted in a loss of $6,144 (USD$6,231) and was recorded in the statement of operations for the year ended June 30, 2011.

- 13-


7. Investment in Formation Metals Inc.

On May 6, 2010, the Corporation invested $8,000 in an unsecured convertible debenture in Formation Metals Inc. ("Formation"). The debenture had an initial term of 18 months with an interest rate of 12%, payable in common shares in the capital of Formation ("Formation Shares"). Interest was calculated daily and payable quarterly in Formation Shares, subject to regulatory approval at a price equal to the five-day volume weighted average trading price at the time of issue.

During fiscal 2011, the Corporation redeemed $1,000 of the debenture for 666,666 Formation Shares under the terms of the conversion rights of the underlying agreement. The Corporation also received two interest payments made under the debenture in the form of an aggregate of 429,772 Formation Shares.

During the year ended June 30, 2011, the Corporation sold an aggregate of 300,800 Formation Shares for net proceeds of $670, resulting in a gain of $286.

On March 14, 2011, the Corporation completed an agreement with Formation for the prepayment of the remaining $7,000 debenture outstanding. Following this agreement, the Corporation surrendered the debenture to Formation upon receipt of $9,333 in cash and 400,000 Formation Shares. This resulted in a gain on disposition of the debenture of $2,917.

On June 30, 2011 Melior held 1,195,638 Formation Shares, with a market value of $1,211. These shares were designated as available-for-sale marketable securities on the Corporation's statement of financial position and are presented at fair market value. The Formation Shares were sold during the current period for net proceeds of $961, resulting in a loss on sale of $607 which has been recorded in the statement of operations and comprehensive loss.

The following table summarizes the value of each debenture component and the embedded derivative component of this compound financial instrument:

Debenture component Embedded derivatives component

Total Investment in Formation Metals Inc.

8. Investment in Oracle Mining Corp.

$

$

June 30, 2012

$

$

June 30, 2011

$

$

July 1, 2010

7,310 555

7,865

On November 8, 2010, the Corporation acquired 6,000,000 common shares of Oracle Mining Corp. ("Oracle"), a company listed on the TSXV, by means of a non-brokered private placement at a subscription price of $1.25 per common share for an aggregate cost of $7,846, including transaction costs. During fiscal 2011, the Corporation sold 123,100 shares for a net realized gain of $14, and acquired a further 119,900 shares on the open market.

On June 30, 2011, the Corporation held 5,996,800 common shares of Oracle, with a market value of $7,589.

During the year ended June 30, 2012, the Corporation sold its holdings in Oracle for net proceeds of $5,309, resulting in a loss on disposition of $2,369, which has been recorded on the statement of operations and comprehensive loss.

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On June 29, 2012, the Corporation completed a strategic investment in Asian Mineral Resources Limited ("AMR") by means of a private placement whereby it purchased 47,272,727 common shares of AMR (the "AMR Shares") at $0.11 per AMR Share for total consideration of $5,200 (the "Strategic Investment").

Concurrent with the completion of the Strategic Investment, AMR and the Corporation also entered into an investor rights agreement pursuant to which AMR has granted the Corporation the right to designate one nominee to be appointed to its Board of Directors. After closing of the Strategic Investment, the Corporation owns and controls, directly and indirectly, a total of 47,272,727 AMR Shares representing approximately 13.2% of the issued and outstanding AMR Shares on an undiluted basis.

In connection with the transaction, the Corporation advanced $300 to AMR, which was repaid in full subsequent to June 30, 2012.

10. Long-term Debt

As at June 30, 2012, the principal maturities of long-term debt are as follows:

June 30, June 30, July 1, 2012 2011 2010

12% senior secured guaranteed notes, due August 31, 2011 $ $ 8,057 $ 8,530

Less: current portion (8,057)

$ $ $ 8,530

The Corporation did not make the scheduled $6.9 million interest payment on its Senior Notes due on December 31, 2009 in order to preserve its cash position while it reviewed its strategic position and did not make such payment within the 30-day cure period which ended on January 31, 2010, which then resulted in an event of default under the Note Indenture. In connection with the Sale of La Francia I and II and pursuant to the terms of the Note Indenture, the Corporation made an offer on January 28, 2010 to repurchase the outstanding Senior Notes at the required 1 02% premium (plus any accrued interest) in accordance with the terms of the Note Indenture. Concurrently with the Restricted Asset Transfer Offer, the Corporation also made an offer to repurchase all remaining outstanding Senior Notes for 1 00% of the principal amount. The outstanding interest was paid prior to closing. The face value of the bonds of $8 million reflects the fair market value.

The senior guaranteed notes, including all outstanding interest payable, were repaid in full on August 31, 2011.

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11. Share Capital

(a) Authorized


Issued

Balance, July 1, 2010 and June 30, 2011 Shares issued for services

Balance, June 30,2012


173,007,049 373,925

173,380,974

$

$

Stated value

375,836 49

375,885

During the year ended June 30, 2012, 373,925 shares were issued to one of the former Directors of the Corporation in accordance with a consulting agreement. These shares have been valued and recorded at the market price on the day of their issuance and the corresponding charge has been recorded in office and administration expenses.

(b) Warrants

The following summarizes the warrant activity for the years ended ended June 30, 2012 and 2011:

Number of Weighted Average Warrants Exercise Price



Balance, June 30,2012 61,873,890 $ 2.50

As of June 30, 2012, the following warrants were outstanding:

Number of Expiry Date Warrants

June 5, 2013 61,873,890

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Exercise Price (Cdn)

$ 2.50


11. Share Capital (Continued)

12.

(c) Stock Options

As at June 30, 2012, 17,338,097 common shares remain available for grant under the plan. Under the plan, the exercise price of each option equals the market price of the Corporation's common shares on the date of grant or the price determined by the Board of Directors, not being less than the market price, and an option's maximum term is ten years. Options are granted upon approval by the Board of Directors.

Balance, July 1, 2010 and June 30, 2011 Granted and issued during the year Cancelled/forfeited

Balance, June 30,2012


600,000 3,875,000

(1 ,085,000)

3,390,000

$ 1.13 0.17 0.43

$ 0.25

The Corporation used the Black Scholes option pricing model to estimate the fair value of the options granted using the following assumptions:

Risk-free interest rate Expected stock price annual volatility Expected life Estimated forfeiture rate Expected dividend yield Fair value cost per option

1.85% 100.0% 6 years Nil 0.0% $0.108

As at June 30, 2012, the Corporation had the following stock options outstanding and exercisable:

Weighted Average



March 27, 2014 150,000 150,000 1.74 Cdn $ 1.50 March 27, 2014 150,000 150,000 1.74 0.75 Sept. 21, 2018 3,090,000 3,090,000 6.23 0.17

3,390,000 3,390,000 5.83 Cdn $ 0.25



Salaries and benefits Share based payments Stock-based compensation

- 17-

$ $ $

2012

259 $ 49 $

220 $

2011

272


13. Income Taxes

The following table reconciles the expected tax recovery at the Canadian Federal and Provincial statutory rate of 27.25% (2011 - 30%) to the amount recognized in the statement of loss and comprehensive loss:

Loss from continuing operations, before income taxes

Expected income tax recovery Difference in tax rates between foreign jurisdictions and Canada

Non-recognition of tax assets and future tax rate reductions Foreign exchange differences, non-deductible expenses and other

Gain on sale of investment not subject to taxation Non-deductible settlement with Goldman Sachs

Deferred income tax recovery

$

$

$

2012

4,858

(1,324)

492

(53) 885

2011

$ (5,799)

$ (1,696)

152 (156)

(123)

1,823

$

Deferred income taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred income tax assets have not been recognized in respect of the following items:

Non-capital loss carry-forwards Eligible capital expenditures Capital loss carry-forwards Mineral property exploration and development Share issue costs Investment Other

2012

$ 131,084 8,470 1,459

841

945 98

$ 142 897

$

$

2011

127,731 9,107

1,434 1,630

274

140,176

At June 30, 2012 the Corporation had Canadian non-capital loss carried forwards of approximately $131 million for income tax purposes. The losses may be utilized to reduce future years taxable income earned in Canada and expire between 2023 and 2032. Deductible temporary differences and exploration expenditures do not expire under current tax legislation and can be carried forward indefinitely. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.

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14. Capital Disclosures

The Corporation's objectives, when managing capital, are to safeguard cash as well as maintain financial liquidity and flexibility in order to preserve its ability to meet financial obligations and deploy capital to grow its business. In the definition of capital, the Corporation includes, as disclosed on its statement of financial position: deficit of $507,233; capital stock, contributed surplus $375,885 and $159,058 respectively, and long-term debt, including the current portion, $Nil.

The Corporation's financial strategy is designed to maintain a flexible capital structure consistent with the objectives stated above and to respond to business growth opportunities and changes in economic conditions. In order to maintain or adjust its capital structure, the Corporation may purchase shares for cancellation pursuant to normal course issuer bids, issue new shares, repay outstanding debt, issue new debt (secured, unsecured, convertible and/or other types of debt instruments), refinance existing debt with different characteristics, acquire or dispose of assets or adjust the amount of cash and short-term investments balances. The Corporation is currently not subject to externally imposed capital requirements.


Fair Values

The investment in Formation Metals Inc. comprised a compound financial instrument. Within this investment, embedded derivatives (the conversion feature) were identified and separated ("embedded derivative component") from the host instrument. The fair value of the embedded derivative component was determined using a financial model, which considers the interdependencies among the various embedded derivatives. The fair value of the debenture component was based on the valuation date, share price of Formation at period end, share volatility, risk free interest rate, and yield.

Assets and liabilities carried at fair value must be classified using a three-level hierarchy that reflects the significance and transparency of the inputs used in making the fair value measurements. The classifications are as follows: the use of quoted market prices for identical assets or liabilities (Level 1 ), internal models using observable market information as inputs (Level 2) and internal models without observable market information as inputs (Level 3).

The Corporation's financial instruments measured at fair value include cash and cash equivalents, restricted cash, Due from Asian Mineral Resources Limited, marketable securities comprising the investment in Formation Metals, Investment in Oracle Mining, and Investment in Asian Mineral Resources Limited. These financial assets are reported at Level 1 of the fair value hierarchy. The Corporation has no financial assets and liabilities measured at fair value at Level 2 or Level 3 as at June 30, 2012, June 30, 2011, or July 1, 2010.

Risk Management

The Corporation's risk exposures and their impact on the Corporation's financial instruments are summarized below:

Credit Risk

Credit risk on financial instruments arises from the potential for counterparties to default on their obligations to the Corporation. Current credit exposure relates to the loss that would be incurred if the Corporation's counterparties were to default on their current obligations. To minimize the Corporation's exposure to credit risk, the Corporation holds all its cash and cash equivalent balances at a major Canadian financial institution with an AA rating from Standard and Poors.

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Risk Management (Continued)

Liquidity Risk

The Corporation's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities as they become due. As at June 30, 2012, the Corporation had cash and cash equivalents of $22,333 (June 30, 2011 - $30,827, July 1, 2010- $19,218) to settle current liabilities, including liabilities relating to discontinued operations, $236 (June 30, 2011 - $11,720, July 1, 2010 - $8,871 ). Most of the Corporation's financial liabilities have contractual maturities of less than 90 days and are subject to normal trade terms.

Market Risk

Market risk is the risk of loss that may arise from changes in interest rates, foreign exchange rates and commodity prices.

(a) Interest Rate Risk

Interest on the Corporation's long-term debt and cash and cash equivalents is based on both fixed and variable rates and exposes the Corporation to interest rate risk. The Corporation has not entered into any derivative agreements to mitigate this risk. The impact in the change in interest rates of 1% in either direction at June 30, 2012 would be $223 per year on the interest earned on cash and cash equivalents.

(b) Foreign Currency Risk

As at June 30, 2012, a nominal portion of the Corporation's cash and cash equivalents were held in United States dollars, accordingly, the Corporation is not exposed to material foreign exchange risk. Derivative financial instruments are not used to reduce exposure to fluctuations in foreign exchange rates.

(c) Price Risk

The Corporation's investment in the common shares of Asian Mineral Resources Limited ("Asian") is subject to fair value fluctuations. As at June 30, 2012, if the stock price of the common shares of Asian had changed by 1 0% with all other variables held constant, comprehensive loss for the year would have varied by approximately $30 and reported shareholders' equity would have varied by approximately $30.

16. Transition to IFRS

Overview

First-time adoption of I FRS

The adoption of I FRS requires the application of I FRS 1, which provides guidance for an entity's initial adoption of IFRS. IFRS 1 generally requires retrospective application of IFRS effective at the end of an entity's first annual IFRS reporting period. However, IFRS 1 also provides certain optional exemptions and mandatory exceptions to this retrospective treatment.

The Corporation has elected to apply the following optional exemptions in its preparation of its opening IFRS consolidated statement of financial position as at July 1, 2010, the Corporation's Transition Date.

To apply IFRS 2 Share-based Payments only to equity instruments that were issued after November 7, 2002 and had not vested by the Transition Date.

To apply I FRS 3 Business Combinations prospectively from the Transition Date, therefore not restating business combinations that took place prior to the Transition Date.

To elect to designate certain existing financial instruments as available-for-sale as at the Transition Date.

To elect apply lAS 21 The Effect of Changes in Foreign Exchange Rates prospectively from the Transition Date, and deem the cumulative translation differences for all foreign operations to be zero at the Transition Date.

-20-


16. Transition to IFRS (Continued)

I FRS 1 does not permit changes to estimates that have been made previously. Estimates used in the preparation of the Corporation's opening I FRS statement of financial position, and other comparative information restated to comply with I FRS, are consistent with those made previously under current Canadian GAAP.

Changes to Accounting Policies

The following summarizes the significant changes to the Corporation's accounting policies on adoption of IFRS, and the effect on the Corporation's consolidated financial statements.

Share-based Payments

In certain circumstances, IFRS requires a different measurement of share-based compensation than Canadian GAAP. In particular, IFRS requires that each tranche (that vests separately) must be treated as a separate grant and that an estimate of forfeitures be included in the determination of the expense associated with stock option grants.

Due to the nature of the Corporation's stock options, these changes in accounting policy did not have a significant impact on the Corporation's financial statements.

Financial Instruments

IFRS requires that financial instruments, except those classified as at fair value through profit and loss, be recognized net of transaction costs. Under Canadian GAAP, the Corporation's accounting policy was to expense transaction costs related to long-term debt as incurred.

The effect of applying these changes in accounting policies was a decrease in the carrying value of long-term debt and a corresponding decrease in the deficit.

Funcffonalcunency

IFRS requires that the functional currency of the Corporation and its subsidiaries be determined separately, and the process of considering factors to determine functional currency is somewhat different than Canadian GAAP.

The Corporation has determined that the functional currency under IFRS of the Corporation and all of its subsidiaries is the Canadian Dollar. Under Canadian GAAP, the functional currency of the Corporation and all of its subsidiaries was the United States Dollar. The Corporation also decided to change its presentation currency to the Canadian Dollar.

The change in the functional currency of the Corporation and all of its subsidiaries was applied retrospectively, and resulted in changes to the translation of these entities into the presentation currency. Transactions in currencies other than the Canadian Dollar are translated into Canadian Dollars using the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities not denominated in the Canadian Dollars are translated at the period end rates of exchange. Foreign exchange gains and losses are recognized in the statement of operations and comprehensive loss. Previously under Canadian GAAP, similar translation methods were used, however transactions and balances were translated into United States dollars.

-21 -



Reconciliation of Canadian GAAP to I FRS

The following provides reconciliations of shareholders' equity and the comprehensive income from Canadian GAAP to IFRS for the respective periods. The adoption of IFRS did not have a material impact on the consolidated statement of cash flows.

(thousands of United States dollars)

Shareholders' equity under Canadian GAAP Financial instruments -transaction costs

Translated to Canadian Dollar Functional Currency (thousands of Canadian dollars)

Shareholders' equity under IFRS

(thousands of United States dollars)

Comprehensive income (loss) under Canadian GAAP Financial instruments -transaction costs

Translated to Canadian Dollar Functional Currency (thousands of Canadian dollars)

Comprehensive income under IFRS

Note

a)

b)

June 30, 2011

$ 32,839 19

$ 32,858

$ 32,086

Note

a)

b)

July 1, 2010

$ 35,431 131

$ 35,562

$ 37,269

Year Ended June 30,

2011

$ (2,592) (112)

$ (2,704)

$ (5,183)

(a) The effect of the change in accounting policy to measure long-term debt net of transaction costs.

(b) The result, in thousands of Canadian dollars, of the change in functional currency to Canadian dollars, applied retrospectively.

-22-



Reconciliation of Canadian GAAP to IFRS (Continued)

The following provides a reconciliation of the consolidated statements of financial position and statements of operations and comprehensive loss from Canadian GAAP to IFRS at the respective dates. The IFRS adjustments are referenced to the explanatory notes directly above.

July 1, 2010 Translated

to CAD June 30, 2010 functional and

Canadian I FRS presentation GAAP Adjustment currency

USD ~OOOs} USD ~OOOs} USD ~OOOs} I FRS

(a) (b) Assets

Current assets Cash and cash equivalents $ 18,338 $ $ 18,338 $ 19,218 Accounts receivable 94 94 99 Prepaid expenses and deposits 98 98 103 Restricted cash 8,000 8,000 8,384 Assets of discontinued operations 18,331 18,331 19,211

44,861 44,861 47,015 Investment in Formation Metals Inc. 7,505 7,505 7,865

$ 52366 $ $ 52 366 $ 54880

Liabilities

Current liabilities Accounts payable and accrued liabilities $ 4,187 $ $ 4,187 $ 4,388 Liabilities of discontinued operations 4,278 4,278 4,483

8,465 8,465 8,871 Long-term debt 8,270 (131) 8,139 8,530 Liabilities of discontinued operations 200 200 210

16,935 (131) 16,804 17,611

Shareholders' Equity Share capital 333,375 333,375 375,836 Contributed surplus 144,856 144,856 158,633 Deficit (442,800) 131 (442,669) (497,200)

35,431 131 35,562 37,269

$ 52 366 $ $ 52 366 $ 54880

-23-




The following provides a reconciliation of the consolidated statements of financial position and statements of operations and comprehensive loss from Canadian GAAP to IFRS at the respective dates. The IFRS adjustments are referenced to the explanatory notes directly above.

June 30, 2011

Translated to CAD

June 30, 2011 functional and Canadian I FRS presentation

GAAP Adjustment currency USD iOOOs} USD iOOOs} USD iOOOs} I FRS

(a) (b) Assets

Current assets Cash and cash equivalents $ 31,569 $ $ 31,569 $ 30,827 Accounts receivable Prepaid expenses and deposits 247 247 242 Investment in Formation Metals Inc. 1,240 1,240 1,211 INvestment in Oracle Mining Corp. 7,772 7,772 7,589 Assets of discontinued operations 4,032 4,032 3,937

44,860 44,860 43,806 Investment in Formation Metals Inc.

$ 44,860 $ $ 44,860 $ 43806

Liabilities

Current liabilities Accounts payable and accrued liabilities $ 3,323 $ $ 3,323 $ 3,245 Current portion of bonds payable 8,270 (19) 8,251 8,057 Liabilities of discontinued operations 428 428 418

12,021 (19) 12,002 11,720

Shareholders' Equity Share capital 333,375 333,375 375,836 Contributed surplus 144,856 144,856 158,633 Accumulated other comprehensive loss (215) (215) (8) Deficit (445,177) 19 (445,158) (502,375)

32,839 19 32,858 32,086

$ 44 860 $ $ 44860 $ 43 806

-24-




Translated to CAD

functional and Canadian I FRS presentation

GAAP Adjustment currency Year Ended June 301 2011 USD iOOOs! USD iOOOs! USD iOOOs! I FRS

(a) (b) Administrative Expenses Office and administration $ 1,566 $ $ 1,566 $ 1,573

Loss from continuing operations before other income (expenses) and income taxes (1 ,566) (1,566) (1,573)

Other Income (Expense) Interest income 936 936 950 Interest on bonds payable (1,011) (112) (1' 123) (1,125) Foreign exchange gain (loss) 1,043 1,043 (1,110) Gain on sale of marketable securities 284 284 286 Gain on disposition of convertible

debenture 2,965 2,965 2,917 Loss on settlement with Goldman

Sachs Group (6,231) (6,231) (6,144)

(2,014) (112) (2, 126) (4,226)

Net loss from continuing operations for the year, before taxes (3,580) (112) (3,692) (5,799)

Current income taxes Future income taxes

Loss from continuing operations (3,580) (112) (3,692) (5,799) Income from discontinued operations 1,203 1,203 624

Net (loss) (2,377) (112) (2,489) (5,175)

Other comprehensive loss (215) (215) (8)

Comerehensive iloss! $ ,2,592} $ ,112} $ ,2,704} $ i51183!

-25-


17. Segmented Information

Operating Segment

18.

The Corporation's assets by geographic areas as at June 30, 2012 and 2011 are as follows:

Canada June 30, 2012 Colombia and Other Total

Total assets $ $ 27,001 $ 27,001

Canada June 30, 2011 Colombia and Other Total

Total assets $ 4,094 $ 39,712 $ 43,806

The Corporation's revenue and expenses by geographic areas for the years ended June 30, 2012 and 2011 are as follows:

Canada Year ended June 30, 2012 Colombia and Other Total

Income (expenses) $ (271) $ (4,587) $ (4,858)

Income (loss) for the year $ (271) $ (4,587) $ (4,858)

Canada Year ended June 30, 2011 Colombia and Other Total

Income (expenses) $ 624 $ (5,799) $ (5, 175)

Income (loss) for the year $ 624 $ (5,799) $ (5, 175)

Comparative Information

Certain comparative amounts have been reclassified in order to conform with current period financial statement presentation.

19. Subsequent Events

a) On October 1, 2012, Pala Investments Limited ("PIL") made an offer to purchase, for a purchase price of $0.11 per share in cash for all of the outstanding Common Shares of Melior it does not own. The Offer includes any Common shares that may become outstanding after the date of the Offer and prior to November 5, 2012 upon the exercise of options, warrants or other rights to acquire Common Shares. PIL and its affiliates owned directly or indirectly 76,195,833 Common Shares or approximately 44% of the outstanding Common Shares as that the date of the Offer.

b) Under the terms of the agreement for the sale of "the Coalcorp International AW transaction" noted in note 5, the Corporation is entitled to received, subject to certain terms and conditions, a share of net recoveries of cash, if any, that the purchaser receives as a result of winding up or re-organizing any of the Coalcorp International AW subsidiaries. Subsequent to June 30, 2012 the Company received US$460 from the purchaser of Coalcorp International AW for its share of cash recovered. The US$460 will be recognised as a gain from discontinued operations in the 1st quarter of the year end June 30, 2013.

-26-

BELRIDGE ENTERPRISES PTY LTD

SPECIAL PURPOSE FINANCIAL STATEMENTS

FOR THE HALF YEARS ENDED 31 DECEMBER 2012 & 2013

DIRECTOR’S REPORT

The director of Belridge Enterprises Pty Ltd (Company) presents his report on the Company at the end of, and

during, the financial half years ended 31 December 2012 and 31 December 2013.

DIRECTORS

The following person was director of the Company during the whole of the half years and up to the date of this

report, unless otherwise stated:

� Mark McCauley

PRINCIPAL ACTIVITIES

The principal activities of the Company during the half year 2013 were care and maintenance of the

Goondicum Project.

Significant changes in the nature of the Company’s activities that occurred during the half years were as

follows:

� The mine commenced production in September 2012 until production was suspended in June 2013

REVIEW OF OPERATIONS

The Company is the owner of the Goondicum Project, an industrial minerals project in Queensland.

Half year ended 31 December 2013

The Goondicum Project remained on care and maintenance with operations suspended for the duration of the

period. The focus of management was the restructuring of the Company to access the additional capital

required to upgrade and restart the project


During the period the Company completed refurbishment works to the projects processing plant,

recommissioned the plant and commenced production.

SIGNIFICANT CHANGES IN STATE OF EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL HALF YEAR

Significant changes in the state of affairs of the Company subsequent to the end of the half year were as

follows:

Melior transaction

On 31 March 2014 the shareholders of the Company entered into a Share Purchase Agreement (SPA) with

Melior Resources Inc.(Melior), a Canadian incorporated Company listed on the Toronto stock exchange

(TSXV:MLR). Under the terms of the SPA, if the conditions precedent are satisfied, Melior will acquire 100% of

the shares issued of the Company and in return the shareholders of the Company will be issued 38.1M shares

in Melior. The shareholders in the Company will be entitled to be issued a further 38.1M shares if agreed

performance targets are met. Melior has announced that it will invest up to US$15M into the Company to re-

start operations.

Pipeline

In February 2012 the Company entered into a Pipeline Transfer Agreement (PTA) with SunWater Limited, a

Government Owned Corporation, to acquire the pipeline supplying water to the mine. On March 3 2014,

having satisfied the conditions precedent of the PTA, the Company and SunWater settled the agreement. The

Company has lodged the executed transfer notices for the easements along the pipeline, which were

transferred to the Company under the PTA, with the Queensland Titles Office. As of the date of this report,

the Company is still waiting on confirmation of the registration of two of the easements transferred. Based on

the processing times for the easements for which confirmation of registration has been received, the Company

expects the registration of the remaining two easements to be confirmed by the end of April 2014. The

Company is not exposed to any contingent liability whilst the easements remain unregistered but the

registrations are a prerequisite for the release of the mortgage held by SunWater.

ENVIRONMENTAL REGULATION

The Company’s mining & development activities are conducted in accordance with environmental regulations

under both Commonwealth and State legislation.

To the best of the director's knowledge, the Company has adequate systems in place to ensure compliance

with the requirements of all environmental legislation described above and are not aware of any material

breach of those requirements during the half year and up to the date of the director's report.

INFORMATION ON DIRECTORS

Name: Mark McCauley

Qualifications: B.Eng, MBA

Special responsibilities: Managing Director

INDEMNIFICATION OF OFFICERS AND AUDITORS

No indemnities have been given or insurance premiums paid, during or since the end of the half year, for any

person who is, or has been an officer or auditor of the Company.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court for leave to bring proceedings on behalf of the Company, or to intervene in

any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the

Company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court.

ROUNDING OF AMOUNTS

Amounts in the director’s report have been rounded off to the nearest thousand dollars.

This report is made in accordance with a resolution of the director.

Mark McCauley

Director

Brisbane

17 April 2014


STATEMENT OF COMPREHENSIVE INCOME


Dec-13 Dec-12

Note $'000 $'000

Sales 4 8 3,174

Cost of Sales 6 (8) (5,830)

Gross Margin - (2,656)

General and administrative expense (995) (263)

Depreciation and amortisation expense (322) (15)

Impairment of property, plant and equipment - -

Interest Income 68 115

Interest Expense (399) (475)

Foreign currency translation differences 5 14 -

Gain on conversion of convertible note 5

1,047 -

Gain on debt forgiven 5

36,075 -

Profit/(loss) on disposal of property, plant and

equipment - -

Profit/(loss) before income tax

35,488 (3,294)

Income tax 8 - -

Profit/(loss) for the year

35,488 (3,294)

Other comprehensive income - -

Total other comprehensive income for the year - -

Total comprehensive Profit/(loss) attributable to

owners of Belridge Enterprises Pty Ltd

35,488 (3,294)

Earnings (Loss) per share

Basic 35.48 (3.29)

Fully diluted 34.55 (3.29)


STATEMENT OF FINANCIAL POSITION


Dec-13 Jun-13 Dec-12

Note $'000 $'000 $'000

ASSETS

Current assets

Cash and cash equivalents 443 119 1,156

Trade and other receivables 7 251 3,104 1,451

Inventories 69 87 1,703

Tax Receivable 8 - 2,566 -

Other current assets 134 99 232

Total current assets 897 5,975 4,542

Non-current assets

Held-to-maturity investments 9 1,111 1,111 1,111

Property, plant and equipment 10 4,471 4,571 22,008

Intangible assets 11 988 459 1,783

Total non-current assets 6,570 6,141 24,902

Total assets 7,467 12,116 29,444

LIABILITIES

Current liabilities

Trade and other payables 12 954 3,689 3,160

Borrowings 13 63 36,595 30,372

Total current liabilities 1,017 40,284 33,532

Non-current liabilities -

Borrowings 13 120 144 189

Provisions 865 865 724

Other liabilities 350 1,000 1,000

Total non-current liabilities 1,335 2,009 1,913

Total liabilities 2,352 42,293 35,445

Net assets 5,115 (30,177) (6,001)

EQUITY

Contributed equity 14 1,027 1,223 1,223

Retained earnings 4,088 (31,400) (7,224)

Total equity 5,115 (30,177) (6,001)

The above Statements of Financial Position should be read in conjunction with the accompanying

notes.


STATEMENT OF CASH FLOWS


Dec-13 Dec-12

Note $'000 $'000

Cash flows from operating activities

Cash receipts from customers 2,812 2,601

Cash paid to suppliers and employees (4,005) (4,205)

Interest received 68 115

Interest paid (399) (475)

Research and development rebate received 2,572

Net cash inflow/(outflow) from operating

activities 1,048 (1,964)

Cash flows from investing activities

Purchase of property, plant and equipment (214) (6,043)

Purchase of other financial assets (536) (285)

Proceeds from sale of property, plant and

equipment - 836

Net cash inflow/(outflow) from investing

activities (750) (5,492)

Cash flows from financing activities

Proceeds from borrowings 1,800 6,324

Repayment of borrowings (1,788)

Net cash inflow/(outflow) from financing

activities 12 6,324

Net increase in cash and cash equivalents 310 (1,132)

Net foreign exchange differences 14

Cash and cash equivalents at beginning of period 119 2,288

Cash and cash equivalents at end of period 443 1,156

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


STATEMENT OF CHANGES IN EQUITY


Contributed

equity

Convertible

Note

Retained

earnings Total

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

At 1 July 2012 1,000 223 - 3,930 - 2,707

Total comprehensive income for the year

Loss for the year - - - 3,294 - 3,294

Other comprehensive income - - - -

Total comprehensive income for the year - 7,224 - 6,001

Equity component of convertible note - - - -

Shares issued - - - -

At 31 December 2012 1,000 223 - 7,224 - 6,001

At 30 June 2013 1,000 223 - 31,400 - 30,177


Profit for the year - - 35,488 35,488

Other comprehensive income - - - -

Total comprehensive income for the year 35,488 35,488

Conversion of convertible note - - 223 - - 223

Shares issued 27 - - 27

At 31 December 2013 1,027 - 4,088 5,115

The above Statements of Changes in Equity should be read in conjunction with the accompanying

notes.


NOTES TO THE FINANCIAL STATEMENTS


1. CORPORATE INFORMATION

The financial statements of Belridge Enterprises Pty Ltd for the years ended 30 June 2011, 30 June 2012 and 30

June 2013 were authorised for issue in accordance with a resolution of the director on 17 April 2014.

The financial statements are presented in Australian dollars.

The address of the registered office and principal place of business is:

Registered Office

C/- Merrotts

Level 6, 241 Adelaide Street

Brisbane Qld 4000

Principle place of business


Brisbane Qld 4000

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial statements are special purpose financial statements which have been prepared by management

to satisfy the needs of the members and the member’s requirements in relation to the proposed transaction

with Melior Inc.

The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the

International Accounting Standards Board.

The financial statements, except for the cash flow information, have been prepared on an accruals basis are on

based on historical costs, modified, where applicable by the measurement at fair value of selected non-current

assets, financial assets and financial liabilities.

The following significant accounting policies have been adopted in the preparation and presentation of the

financial statements:

(b) Foreign Currency Translation

The functional and presentation currency of the Company is Australian dollars (A$).

Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the

date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at

the rate of exchange ruling at the end of the reporting period. Foreign exchange gains and losses resulting




from settling foreign currency transactions, as well as from restating foreign currency denominated monetary

assets and liabilities, are recognised in profit or loss.

(c) Revenue Recognition

Revenue is recognised at the fair value of consideration received or receivable. Amounts disclosed as revenue

are net of returns, trade allowances and duties and taxes paid. The following specific recognition criteria must

also be met before revenue is recognised:

Sale of Goods

Revenue from sale of minerals is recognised when the significant risks and rewards of ownership have passed

to the buyer and can be reliably measured. Risks and rewards are considered passed to buyer when goods

have been delivered to the customer.

Interest

Revenue is recognised as interest accrues using the effective interest method. The effective interest method

uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts over

the expected life of the financial asset.

(d) Income Tax

The income tax expense for the period is the tax payable on the current period's taxable income based on the

national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities

attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts

in the financial statements, and to unused tax losses.

(e) Impairment of Assets

At the end of each reporting period the Company assesses whether there is any indication that individual

assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment

losses are recognised in profit or loss where the asset's carrying value exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of

assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset.

Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is

determined for the cash-generating unit to which the asset belongs.

(f) Cash and Cash Equivalents

For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and at

bank, deposits held at call with financial institutions, other short term, highly liquid investments with

maturities of three months or less, that are readily convertible to known amounts of cash and which are

subject to an insignificant risk of changes in value and bank overdrafts.




(g) Trade Receivables

Trade receivables are recognised at original invoice amounts less an allowance for uncollectible amounts and

have repayment terms between 30 and 90 days. Collectability of trade receivables is assessed on an ongoing

basis. Debts which are known to be uncollectible are written off. An allowance is made for doubtful debts

where there is objective evidence that the Company will not be able to collect all amounts due according to

the original terms. Objective evidence of impairment includes financial difficulties of the debtor. On

confirmation that the trade receivable will not be collectible the gross carrying value of the asset is written off

against the associated provision.

(h) Inventories

Raw Materials, Work in Progress and Finished Goods

Inventories are stated at the lower of cost and net realisable value. Cost comprises all direct materials, direct

labour and an appropriate portion of variable and fixed overheads. Fixed overheads are allocated on the basis

of normal operating capacity. Costs are assigned to inventories using the weighted average basis. Net

realisable value is the estimated selling price in the ordinary course of business, less the estimated selling cost

of completion and selling expenses.

(i) Investments and Other Financial Assets

All investments and other financial assets are initially stated at cost, being the fair value of consideration given

plus acquisition costs. Purchases and sales of investments are recognised on trade date which is the date on

which the Company commits to purchase or sell the asset. Accounting policies for each category of

investments and other financial assets subsequent to initial recognition are set out below.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and

fixed maturities that the Company has the positive intention and ability to hold-to-maturity and are measured

at amortised cost subsequent to initial recognition using the effective interest method. If the Company were to

sell other than an insignificant amount of held-to-maturity investments, the whole category is then reclassified

as available-for-sale.

Loans and receivables

Non-current loans and receivables include loans due from related parties repayable within 366 days of the end

of the reporting period.

Impairment losses are measured as the difference between the investment's carrying amount and the present

value of the estimated future cash flows, excluding future credit losses that have not been incurred. The cash

flows are discounted at the investment's original effective interest rate. Impairment losses are recognised in

profit or loss.




(j) Fair Values

Fair values may be used for financial asset and liability measurement and well as for sundry disclosures.

Fair values for financial instruments traded in active markets are based on quoted market prices at the end of

the reporting period. The quoted market price for financial assets is the current bid price and the quoted

market price.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate

their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is

estimated by discounting the future contractual cash flows at the current market interest rate that is available

to the Company for similar financial instruments.

(k) Property, Plant and Equipment

Plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to the

location and condition necessary for it to be capable of operating in the manner intended by management,

less depreciation and any impairment.

Depreciation on assets is calculated on a straight-line basis over the estimated useful life, or in the case of

leasehold improvements and certain leased plant and equipment, the shorter lease term, as follows:

� Plant & Equipment 5-20 Years

� Vehicles 3 - 5 years

� Furniture, fittings and equipment 3 - 5 years

The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each

reporting period.

Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the

asset's carrying amount and are included in profit or loss in the year that the item is derecognised.

(l) Leases

Leases of property, plant and equipment where the Company has substantially all the risks and rewards of

ownership are classified as finance leases and capitalised at inception of the lease at the fair value of the

leased property, or if lower, at the present value of the minimum lease payments. Lease payments are

apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate

of interest on the remaining balance of the liability. Finance charges are charged to profit or loss over the lease

period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each

period.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease

term.

(m) Intangible Assets

Research and Development

Research costs are expensed as incurred. Development expenditure incurred on an individual project is

capitalised if the product or service is technically feasible, adequate resources are available to complete the

project, it is probable that future economic benefits will be generated and expenditure attributable to the




project can be measured reliably. Expenditure capitalised comprises costs of materials, services, direct labour

and an appropriate portion of overheads. Other development costs are expensed when they are incurred.

Capitalised development expenditure is stated at cost less accumulated amortisation and any impairment

losses and amortised over the period of expected future sales from the related projects which vary from 3 - 5

years. The carrying value of development costs is reviewed annually when the asset is not yet available for use,

or when events or circumstances indicate that the carrying value may be impaired.

(n) Trade and Other Payables

Trade and other payables represent liabilities for goods and services provided to the Company prior to the

year end and which are unpaid. These amounts are unsecured and have 30-60 day payment terms. They are

recognised initially at fair value and subsequently measured at amortised cost using the effective interest

method.

(o) Borrowings

All loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are

subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and

the redemption amount is recognised in profit or loss over the period of the loans and borrowings using the

effective interest method. Fees paid for establishing loan facilities are recognised as transaction costs if it is

probable that some or all of the facility will be drawn down, and deferred until the draw down occurs. If it is

not probable that the facility will be drawn down, fees are capitalised as prepayments for liquidity services and

amortised over the period to which the facility relates.

Borrowings are derecognised from the statement of financial position when the obligation specified in the

contract has been discharged, cancelled or expires. The difference between the carrying amount of the

borrowing derecognised and the consideration paid is recognised in profit or loss as other income or finance

costs.

Where the terms of a borrowing are renegotiated and the Company issues equity instruments to a creditor to

extinguish all or part of a borrowing, the equity instruments issued as part of the debt for equity swap are

measured at the fair value of the equity instruments issued, unless the fair value cannot be measured reliably,

in which case, they are measured at the fair value of the debt extinguished. The difference between the

carrying amount of the debt extinguished and the fair value of the equity instruments issued is recognised as a

gain or loss in profit or loss.

The fair value of a liability portion of a convertible note is determined using a market rate of interest for an

equivalent non-convertible note and stated on an amortised cost basis until conversion or maturity of the

notes. The remainder of the proceeds is allocated to the conversion option and is shown as equity. Issue costs

are apportioned between the liability and equity components based on the allocation of proceeds to the

liability and equity components when the instruments are first recognised.

All borrowings are classified as current liabilities unless the Company has an unconditional right to defer

settlement of the liability for at least 12 months after the end of the reporting period.

(p) Other Liabilities

Other liabilities comprise non-current amounts due to related parties that do not bear interest and are

repayable within 366 days of the end of the reporting period. As these are non-interest bearing, fair value at

initial recognition requires an adjustment to discount these loans using a market-rate of interest for a similar

instrument with a similar credit rating (the Company's incremental borrowing rate). The discount is credited to

profit or loss immediately and amortised using the effective interest method.




(q) Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the Company

has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of

economic resources will be required to settle the obligation and the amount can be reliably estimated. For

service warranties, the likelihood than an outflow will be required to settle the obligation is determined by

considering the class of obligations as a whole. Provisions are not recognised for future operating losses.

Where the effect of the time value of money is material, provisions are determined by discounting the

expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of

money and, where appropriate, the risks specific to the liability.

(r) Employee Benefit Provisions

Wages and Salaries, Annual Leave and Sick Leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave

expected to be settled within 12 months of the end of the reporting period are recognised in other liabilities in

respect of employees' services rendered up to the end of the reporting period and are measured at amounts

expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised

when leave is taken and measured at the actual rates paid or payable.

Long Service Leave

Liabilities for long service leave are recognised as part of the provision for employee benefits and measured as

the present value of expected future payments to be made in respect of services provided by employees to the

end of the reporting period using the projected unit credit method. Consideration is given to expected future

salaries and wages levels, experience of employee departures and periods of service. Expected future

payments are discounted using national government bond rates at the end of the reporting period with terms

to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Regardless of when settlement is expected to occur, liabilities for long service leave are presented as current

liabilities in the statement of financial position if the entity does not have an unconditional right to defer

settlement for at least 12 months after the end of the reporting period.

(s) GST

Revenues, expenses are recognised net of GST except where GST incurred on a purchase of goods and services

is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of

acquisition of the asset or as part of the expense item.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable

from, or payable to, the taxation authority is included as part of receivables or payables in the statement of

financial position.

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows

arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority

are classified as operating cash flows.

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

taxation authority.




(t) Rounding of Amounts

Amounts have been rounded to the nearest thousand dollars ($'000) unless otherwise stated.

3. ACCOUNTING ESTIMATES AND JUDGEMENTS

Critical Judgements, estimates & assumptions

Going Concern

In June 2013 operations of the Company were suspended due to prices for the Company's products falling

below the cost of production, which could only be materially reduced by upgrading the Company's plant

processing capacity.

The owners of the Company agreed to support the Company whilst Management investigated options to fund

the works required to increase the Company's plant capacity and restart production.

In December 2013 the shareholders agreed to forgive loans to the value of $36,074,721 provided to the

Company by associated companies of the shareholders. In March 2014 the Company entered into a

conditional agreement with Melior to acquire 100% of the Company. Melior has also provided the Company

with a secured loan of CAD$500,000 for working capital until the Melior agreement becomes unconditional.

Due to the ongoing support pledged by shareholders and the advanced state of the Melior transaction,

management considers the Company to be a going concern and will be able to pay it debts as when they arise.

Further information is contained in the Subsequent Events note.

4. REVENUE

Dec-13 Dec-12

$'000 $'000

Gross Sales 8 3,401

Commissions - (164)

Discounts Allowed - (63)

Sales of Goods 8 3,174

Interest 68 115

Total Revenue 76 3,289




5. OTHER INCOME

Dec-13 Dec-12

$'000 $'000

Foreign exchange gains 14 -

Gain on conversion of convertible note 1,047 -

Gain on debt forgiven 36,075 -

37,136 -

On 31 December 2013 Sashimi Investments Pty Ltd and the Company agreed to convert the loan to equity at a

conversion rate of 2.63% which resulted in Sashimi Investments Pty Ltd being issued on 31 December 2013

with 26,975 ordinary shares and the Company recording a gain of $1,046,641 on the conversion.

On 31 December 2013 the Company entered into deeds which released the Company from all obligations to

repay the outstanding debt owing on the related party loans. The gain of $36,074,721 reflects the balance of

the loans forgiven.

6. EXPENSES

Dec-13 Dec-12

$'000 $'000

Profit(loss) before income tax includes the following specific expenses:

Cost of Sales

Shipping & port handling - 155

Haulage 1 614

Royalties - 193

Movements in inventory 8 (1,677)

Labour & contractors - 1,947

Repairs & maintenance - 971

Consumables - 1,153

Hire of equipment - 588

Other site costs - 358

General & Administrative attributable to

inventory - 29

Depreciation & amortisation attributable to

inventory - 1,499

Other costs of sales - -

9 5,830




7. TRADE AND OTHER RECEIVABLES (CURRENT)


$'000 $'000 $'000

Trade receivables 177 1,666 29

Deposits -

SunWater 1,250 1,250

Deposits -

Ergon 50 50 50

GST Receivable 24 138 123

251 3,104 1,452

The Ergon deposit is the current portion ($49,500) of the term deposit which supports the bank guarantee

issued to Ergon. The guarantee issued to Ergon reduces every 12 months and the term deposit reduces

accordingly.

The SunWater deposit ($1,250,000) was received in the period ending 31 December 2013.

8. INCOME TAX EXPENSE


$'000 $'000 $'000

Current tax expense

Current tax expense -

-

-

Unrecognised deferred tax assets on unused tax losses

The balance of unused tax losses as reflected in the tax returns lodged by the Company are as follows:

Unused tax losses -

18,088,479

13,700,416

Potential benefit at 30% (2012: 30$,

2011: 30%) -

5,426,544

4,110,125

During the period the Company and related entities of the shareholders entered into a Deed of Debt

Forgiveness. The effect of this debt forgiveness was to reduce the unused tax losses to nil. The balance of the

debt forgiveness reduced the tax carrying value of the Company’s depreciable assets.

TAX RECEIVABLE Dec-13 Jun-13 Dec-12

$'000 $'000 $'000

Research and development tax rebate - 2,566 -

The research and development tax rebate as at 30 June 2013 was subsequently received in December 2013.




9. HELD-TO-MATURITY INVESTMENTS.


$'000 $'000 $'000

Term Deposits - Ergon 248 248 248

Term Deposits - State of Queensland 863 863 863

1,111 1,111 1,111

Term Deposits relate to the non-current portion of the term deposits provided as surety for guarantees issued

to suppliers.

The term deposits all have terms in excess of 10 years.

10. PROPERTY, PLANT AND EQUIPMENT


$'000 $'000 $'000

Leasehold improvements

At cost 9 9 4

Accumulated impairment (6) (6) -

Accumulated amortisation (2) (1) (1)

1 2 3

Furniture & Office Equipment

At cost 101 101 101

Accumulated impairment (54) (54) (34)

Accumulated depreciation (43) (42) (36)

4 5 31

Mining Lease & Port Infrastructure

At cost 9,450 9,235 8,762

Accumulated impairment (7,666) (7,666) (6,390)

Accumulated depreciation (1,291) (1,276) (1,197)

493 293 1,175

Plant and equipment

At cost 62,337 62,337 61,356


Accumulated depreciation (13,217) (12,951) (11,892)

3,852 4,118 20,799

Leased plant and equipment

At cost 212 212 -

Accumulated impairment - - -

Accumulated amortisation (91) (59) -

121 153 -




Total plant and equipment 3,973 4,271 20,799

Total non-current property, plant and

equipment 4,471 4,571 22,008

Reconciliations

Reconciliations of the carrying amounts of each class of property, plant & equipment at the beginning and end

of the current and previous financial year are set out below:


$'000 $'000 $'000

Total Leasehold Improvements

Carrying amount at beginning of financial

year 2 - -

Additions - 9 4

Disposals -

Depreciation (1) (1) (1)

Impairment - (6)

Carrying amount at end of financial year 1 2 3

- - -



year 5 28 28

Additions - 10 9

Disposals -


Impairment (21)

Carrying amount at end of financial year 4 5 31

- - -



year 293 577 577

Additions 215 1,150 677

Disposals - -


Impairment - (1,276) -

Carrying amount at end of financial year 493 293 1,175

- -




Total Plant & Equipment


year 4,119 17,604 17,604

Additions 61 6,436 4,518

Disposals (61) (732) -

Depreciation (267) (2,588) (1,323)

Impairment - (16,602) -

Carrying amount at end of financial year 3,852 4,118 20,799

- - -

Total Leased Plant & Equipment


year 153 - -

Additions - 212 -

Disposals - - -

Depreciation (32) (59) -

Impairment - -

Carrying amount at end of financial year 121 153 -

Impairment

The Company was acquired in May 2009 by the current owners from an Administrator under a Deed of

Company Arrangement, which involved the debts of the Company to being forgiven at that point in time. In

2009, an impairment charge of $35.1M was recognised, but due to the debt forgiveness that occurred at the

same time the result was a retained profit being carried forward into 2010 ($1,907,135).

A further impairment charge was recorded in June 2013 of $17.9M which reflected the valuation of the

Company based on the marketing program delivered to potential investors by the Company. Subsequent to 31

December 2013, the Company entered in a share sale agreement with Melior which valued the Company at

$5M without debt.

11. INTANGIBLE ASSETS


$'000 $'000 $'000

Development costs

At cost 24,577 24,041 23,311


Accumulated amortisation (1,774) (1,767) (1,718)

988 459 1,783




Reconciliations


$'000 $'000 $'000

Development costs

Carrying amount at beginning of year 459 1,604 1,604

Acquisitions 536 1,071 285

Amortisation recognised (7) (211) (106)

Impairment recognised - (2,005) -

Carrying amount at end of year 988 459 1,783

Impairment


Company Arrangement, which involved the debts of the Company to being forgiven at that point in time. In

2009, an impairment charge of $19.8M was recognised, but due to the debt forgiveness that occurred at the

same time the result was a retained profit being carried forward into 2010 ($1,907,135).

A further impairment charge was recorded in June 2013 of $2.0M which reflected the valuation of the

Company based on the marketing program delivered to potential investors by the Company. Subsequent to 31

December 2013, the Company entered in a share sale agreement with Melior which valued the Company at

$5M without debt.

12. TRADE AND OTHER PAYABLES


$'000 $'000 $'000

Trade payables 406

2,722

1,905

Employee Benefits 84

260

420

Royalties Payable 436

508

193

Other payables 28

199

642

954

3,689

3,160

The average credit period on trade and other payables (excluding GST payable) is two months. No interest is

payable on outstanding payables during this period.




13. BORROWINGS


$'000 $'000 $'000

CURRENT

Secured

Lease liabilities

56 56 -

Total secured current borrowings

56 56 -

Unsecured

Convertible Note

7 832 810

Loans from related parties

- 35,707 29,562


7 36,539 30,372

Total current borrowings

63 36,595 30,372

- - 0 -

NON-CURRENT

Secured

Lease liabilities

120 144 189

Total secured non-current borrowings

120 144 189

Total non-current borrowings

120 144 189

14. CONTRIBUTED EQUITY

Dec-13 Dec-13 Jun-13 Jun-13 Dec-12 Dec-12

Shares $'000 Shares $'000 Shares $'000

Share capital

Fully paid 1,000,100 1,000 1,000,100 1,000 1,000,100 1,000

Shares issued

during the period 26,975 27 - - - -

Other equity

securities

Value of equity

component on

convertible notes

- 223 223

Total contributed

equity

1,027 1,223 1,223

In Dec 2013 the convertible note outstanding was converted to equity. The equity component converted of

the convertible note de-recognised was $222,661 and 26,975 shares were issued on conversion.




15. RELATED PARTY TRANSACTIONS

Transactions with related parties

The following transactions occurred with related parties:


$'000 $'000 $'000

Current receivables (loans from related parties)

Belmont Park Investments Pty Ltd

80 - -

Panorama Ridge Pty Ltd

80 - -

Interest expense

Associates

7

739

463

Current payables (loans from related parties)

Associates

7

36,539

30,365

Details of Related Party Loans

Related Party Security Interest Term

Belmont Park Investments Pty Ltd Unsecured Non-interest bearing No term

Panorama Ridge Pty Ltd Unsecured Non-interest bearing No term

Belmont Park Investments Pty Ltd Unsecured Interest at 10% 2 yr. term

Sashimi Investments Pty Ltd Unsecured Interest at 7.5% 4 yr. term

Balances Outstanding


$ $ $

36,539

Belmont Park Investments Pty Ltd - 14,575 11,075

Panorama Ridge Pty Ltd - 14,525 11,025

Belmont Park Investments Pty Ltd - 6,607 7,462

Sashimi Investments Pty Ltd 7 832 803

36,537 36,539 30,365




In December 2013 the convertible note outstanding was converted to equity. The equity component of the

convertible note de-recognised was $222,661 and 26,975 shares were issued on conversion.

In December 2013 the Company entered into deeds which released the Company from all obligations to repay

the outstanding debt owing on the related party loans from Belmont Park Investments Pty Ltd and Panorama

Ridge Pty Ltd. The balance of the loans forgiven was $36,074,721.

16. SUBSEQUENT EVENTS

Melior transaction

On 31 March 2014 the shareholders of the Company entered into a Share Purchase Agreement (SPA) with

Melior Resources Inc., a Canadian incorporated Company listed on the Toronto stock exchange (TSXV:MLR).

Under the terms of the SPA, if the conditions precedents are satisfied, Melior will acquire 100% of the shares

issued of the Company and in return the shareholders of the Company will be issued 38.1M shares in Melior.

The shareholders in the Company will be entitled to be issued a further 38.1M shares if agreed performance

targets are met. Melior has announced that it will invest up to US$15M into the Company to re-start

operations.

Pipeline

In February 2012 the Company entered into a Pipeline Transfer Agreement (PTA) with SunWater Limited, a


having satisfied the conditions precedent of the PTA, the Company and SunWater settled the agreement. The

Company has lodged the executed transfer notices for the easements along the pipeline, which were




expects the registration of the remaining two easements to be confirmed by the end of April 2014. The


registrations are a prerequisite for the release of the mortgage held by SunWater.

17. CONTINGENCIES

For the years ended 31 December 2012 and 31 December 2013, the Company had no contingent assets or

liabilities, other than those already disclosed.




DIRECTORS DECLARATION

The director of Belridge Enterprises Pty Ltd declares that:

1. The half year financial statements and notes, as set out above:

(a) comply with International Accounting Standards; and

(b) give a true and fair view of the financial position as at 31 December 2012 and 31 December 2013 and

of the performance for the half years ended on those dates of the Company.

2. In the director’s opinion, there are reasonable grounds to believe that the Company will be able to pay its

debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Director.

Mark McCauley

Director

Dated: 17 April 2014

Level6, Brisbane Club Tower 241 Adelaide Street Brisbane Old 4000 Australia

GPO Box 565 Brisbane Qld 4001 Australia

Phone: 61 (07) 3233 0600

Fax: 61 (07) 3233 0601

Email: [email protected]

Web: www.merrotts.com.au

Accounting

Audit & Assurance -Statutory -Internal - Government

Business -Services -Audit - Restructuring

Corporate Services

Estate Planning

Forensic Accounting

Litigation Support

Recruitment -Executive - Accounting

Superannuation -Administration - Planning

Taxation

errotts Chartered Accountants & Business Advisers

INDEPENDENT AUDITOR'S REVIEW REPORT

To the members of Belridge Enterprises Pty Ltd

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Bel ridge Enterprises Pty Ltd, which comprises the statement of financia l position as at 31 December 2012 and 31 December 2013, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-years ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the director's declaration.

Director's Responsibility for the Half-Year Financial Report

The director of Belridge Enterprises Pty Ltd is responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with International Accounting Standards and for such internal control as the director determines is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year f inancial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not giving a true and fair view of Belridge Enterprises Pty Ltd the financial position as at 31 December 2012 and 31 December 2013 and its performance for the half-year ended on that date. As the auditor of Belridge Enterprises Pty Ltd, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

GMN lntemaoooalra an associatM ol legally andependent accountulg Mns

Liability limited by a scheme approved under Professional Standards Legislation

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Belridge Enterprises Pty Ltd does not:

- give a true and fair view of Bel ridge Enterprises Pty Ltd financial position as at 31 December 2012 and 31 December 2013 and of its performance for the half-year ended on that date.

Emphasis of matter

31 December 2012

Without further modification to our opinion, we draw attention to the fact that the company has not recognised any deferred tax asset on the unused tax losses as subsequent to 30 June 2013 related entities of the shareholders entered into a Deed of Debt Forgiveness. The effect of this debt forgiveness was to reduce the unused tax losses to nil. The balance of the debt forgiveness reduced the tax carrying value of the company's depreciable assets as at 31 December 2013.

31 December 2013 Without further modification to our opinion, we draw attention to:

• the fact that there is the potential that Belridge Enterprises Pty Ltd will not be able to continue as a going concern without the ongoing support of the shareholders. Due to the ongoing support pledged by shareholders and the advanced state of the Melior transaction, management considers the Company to be a going concern and will be able to pay it debts as when they arise.

• the fact that in February 2012 the company entered into a Pipeline Transfer Agreement (PTA) with SunWater Limited, a Government Owned Corporation, to acquire the pipeline supplying water to the mine. On March 3 2014, having satisfied the conditions precedent of the PTA, the company and SunWater settled the agreement. The company has lodged the executed transfer notices for the easements along the pipeline, which were transferred to the company under the PTA, with the Queensland Titles Office. As of the date of this report, the company is still waiting on confirmation of the registration of two of the easements transferred. Based on the processing times for the easements for which confirmation of registration has been received, the company expects the registration of the remaining two easements to be confirmed by the end of April 2014. Management of the company believe that the company is not exposed to any contingent liability whilst the easements remain unregistered but the registrations are a prerequisite for final completion of the release of the mortgage held by Sun Water.

• the fact that the impairment charge recorded in June 2013 reflected the valuation of the Company based on the marketing program delivered to potential investors by the Company. Subsequent to 30 June 2013, the Company entered in a share sale agreement with Melior which valued the Company at $SM without debt. As a result of this valuation the impairment charge was recognised in 2013.

Merrotts Chartered Accountants

Partner

Brisbane 17 April 2014


SPECIAL PURPOSE FINANCIAL STATEMENTS

FOR THE YEARS ENDED 30 JUNE 2011, 2012 & 2013

DIRECTOR'S REPORT

The director of Belridge Enterprises Pty Ltd (Company) presents their report on the Company at the end of,

and during, the financial years ended 30 June 2011, 2012 and 2013.

DIRECTORS

The following persons were directors of the Company during the whole of the financial years and up to the

date of this report, unless otherwise stated:

• Mark McCauley

PRINCIPAL ACTIVITIES

The principal activities of the Company during the financial year 2013 was mining and processing for the production of ilmenite and apatite.

Significant changes ln the nature of the Company's activities that occurred during the year were as follows:

• The mine commenced production in September 2012 until production was suspended In June 2013

• During 2012 the Company was completing construction and refurbishment of the mine plant,

equipment and infrastructure

• During 2011 the Company was completing feasibility work on the mine

REVIEW OF OPERATIONS

The Company is the owner of the Goondicum Project, an Industrial minerals project In Queensland.

Year ended 30 June 2013

Refurbishment was largely completed by July 2012 and the Company commenced commissioning in August

2012 wlth the first product, being produced in September 2012. Between September 2012 and June 2013 the

Company produced over 46,000MT of ilmenite and 3,000MT of apatite which generated revenues crf $9.6M.

Following a steep decline in the market for ilmenite, management determined that for the project to remain

economically viable an Increase in the projects processing capacity was required and operations were duly

suspended on 10 June 2013 so <~n upgrade program could be pursued.


In October 2011 the Company commenced the redevelopment crf the project which primarily involved the

refurbishment of the existing wet concentrator plant and the construction of a new feed preparation plant.

Employees at the Company Increased during the year from 3 to 37 with the majority of the new employees

engaged In the refurbishment work.


During the year the Company continued to assess the project and develop a plan to recommence the project .

Expenditure by the Company was driven by costs associated with caring and maintaining the Goondicom

Project and consultants engaged to assist in the redevelopment planning.

SIGNIFICANT CHANGES IN STATE OF EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Significant changes in the state of affai rs of the Company subsequent to the end of the f inancial year were as

follows:

Melior transact ion

On 31 M arch 2014 the shareholders of the Company entered Into a Share Purchase Agreement (SPA) with

Melior Resources Inc. (Melior), a Canadian incorporated Company listed on the Toronto stock exchange (TSXV:

MLR). Under the terms of the SPA, if the conditions precedent are satisfied, Melior will .:~cquire 100% of the

shares issued of the Company and in return the shareholders of the Company will be issued 38.1M shares ln

Melior. Th e shareholders in the Company will be entitled to be issued a further 38.1M shares if agreed

performance targets are met. Mellor has announced that it will invest up to US$ 15M into the Company tore·

start operations.

Pipeline

In February 2012 the Company entered into a Pipeline Transfer Agreemen t (PTA) with SunWater Limited, a


having satisfied the conditions precedent of the PTA, the Company and Sun Water settled the agreement. The

Company has lodged the executed transfer notices for the easements along the pipeline, wh ich were




expects the registration of the remaining two easements to be conf irmed by the end of April2014. The


registrations are a prerequisite for the release of the mortg.:~ge held by SunWater.

ENVIRONM ENTAL REGULATION

The Company's mining & development activities are conducted in accordance with environmental regulat ions

under both Commonwealth and State legislation.

To the best of the director's knowledge, the Company hils adequate systems in place to ensure compliance

with the requirements of all environmental legislation described above and are not aware of any material

breach of those requirements during the financial year and up to the date of the director's report.

INFORMATION ON DIRECTORS

Name:

Qualifications:

Special responsibilities :

Mark M cCauley

B.Eng, MBA

Managing Director

INDEMNIFICATION OF OFFICERS AND AUDITORS

No Indemnities have been given or Insurance premiums paid, during or since the end of the financial year, for

any person who Is, or has been an officer or auditor of the Company.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court for leave to bring proceedings on behalf of the Company, or to Intervene in

any proceedings to which the Company Is a party, for the purpose of taking responsibility on behalf of the

Company for all or part of th ose proceedings .

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court.

ROUNDING OF AMOUNTS

Amounts in the director's report have been rounded off to the nearest thousand dollars.

This report is made in accordance with a resolution of t he director.

Mark McCauley

Director

Brisban e

17 April 2014


STATEMENT OF COMPREHENSIVE INCOME


2013 2012 2011

Note $'000 $'000 $'000

Sales 1

9,606 - -

Cost of Sales 6 (18,532) - -

Gross Margin (8,926) - -

General and administrative expense (689) (1,683) (744)

Depreciation and amortisation expense

28 (833) (682)

Impairment of property, plant and equipment (19,911) - -

Interest Income 6

140

63

50

Interest Expense (811) (61) -

Foreign currency translation differences 5

62

11 -

Profit/(loss) on disposal of property, plant and

equipment 5

71 (1) -

Loss before income tax (30,036) (2,504) (1,376)

Research and development tax rebate

2,566 -

217

Loss for the year (27,470) (2,504) (1,159)

Other comprehensive income

- - -

Total other comprehensive income for the year - - -

Total comprehensive loss attributable to owners of

Belridge Enterprises Pty Ltd (27,470) (2,504) (1,159)

Loss per share (27.47) (2.50) (1.16)

ASSETS

Current assets Cash and cash equivalents Trade and other receivables Inventories Tax Receivable

Other current assets

Total current assets

Non-current assets Held-to-maturity investments


STATEMENT OF FINANCIAL POSITION

FOR THE YEARS ENDED 30 JUNE 2013,Z012 & 2011

2013 Note $ '000

9 119 10 3,104 11 87 12 2,566 13 99

5,975

15 1,111 Property, plant and equipment 16 4,571 Intangible assets 17 459 Other non-current assets 14

Total non-current assets 6,141

Total assets 12,116

LIABILITIES Current liab ilities Trade and other payables 18 3,689 Borrowings 19 36,595

Total current liabilities 40,284

Non-current llabllltles Borrowings 19 144 Provisions 20 865 Other liabilities 22 1,000 Total non-current liabilities 2,009

Total liabilities 42,293

Net assets (30,177)

EQUITY Contributed equity 23 1,223 Retained earnings I31A00)

Total equity (30,177)

2012 $'000

2,288 498

512

3,298

2,411 18,209

1,604 100

22,324

25.622

2,118 24,237

26,355

724 1.250 1,974

28,329

(2,707)

1,223 {3,930)

(2,707)

The above Statements of Finoncfal Position should be read in conjunction with the accompanying

notes.

2011 $'000

14 52

10

76

1,065 3,274

80 100

4,519

4,595

19 4,279

4,298

723

723 5,021

(426)

1,000 (1,426)

(426)

BELRiDGE ENTERPRISES PTY LTD

STATEMENT OF CASH FLOWS

FORTH E YEARS ENDED 30 JUNE 2013,2012 & 2011

2013 2012 2011

Note $'000 $'000 $'000

Cash flows from operating activities

Cash receipts from customers 9,941 13 (51)

Cash piild to suppliers and employees (15,847) (1,891) (726}

Interest received 140 63 50

Interest paid (811) (61)

Income taxes paid 611

Net cash Inflow/( outflow) from operating activities (6,577) (1,876) (116)

Cash flows from investing activities

Purchase of property, plant and equipment (10,080) (15,713) (39)

Purchase of other financial assets 1,088 (330)

Proceeds from sale of property, plant and equipment 836

Net cash lnflow/(outflow) from investing activities (8,156) (16,043) (39]

Cash flows from financing activities

Proceeds from borrowings 12,502 19,959 100

Capital component of convertible note 223

Net cash lnflow/(outflow) from financing activities 12,502 20,182 100

Net increase in cash and ca5h equivalents {2,231) 2,263 (55)

Net foreign exchange differences 62 11

Cash and cash equivalent5 at beginning of period 2,288 14 69

Cash and cash equivalents at end of period 119 2,288 14

The above Statements of Cosh Flows should be reod in conjunction with the accompanying notes.

BELRIDGE ENTERPRISES PTV LTD

STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED 30 JUNE 2013,2012 & 2011

Contributed Convertible equity Note

$'000 $'000

At 1 July 2010 1,000

Total comprehensive Income for the year Loss for the year

Other compreh ensive income

Total comprehensive income for the year Equity component of convertible note

At 30 June 2011 1,000

Total comprehensive Income for the year

Profit for the year

Other comprehensive income

Total comprehensive Income for the year Equity component of convertible note 223

At 30 June 2012 1,000 223


Profit for the year Other comprehensive income

Total comprehensive Income for the year Equity component of convertible note

At 30 June 2013 1,000 223

Retained earnings Total

$'000 $'000

(267) 733

(1,159) (1,159)

(1,426) (426)

(1,426) (426)

(2,504) (2,504)

(2,504) (2,504)

223

(3,930) (2,707)

(27,470) (27,4 70)

(27,470) (27,470)

(31,400) (30,177)

The obove Statements of Changes in Equity should b~ read in conjunction with the accompanying notes.

BELRIDGE ENTERPRISES PTY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2012 & 2011

1. CORPORATE INFORMATION

The financial statements of Belridge Enterprises Pty Ltd for the year ended 30 June 2011, 2012 and 2013 were authorised for issue In accordance with a resolution of the director on 17 April 2014.

The financial statements are presented In Australian dollars.

The address of the registered office and principal place of business is:

Registered Office

C/· Merrotts


Brisbane Qld 4000

Principle place of business

Level19, 241 Adelaide Street

Brisbane Qld 4000

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial statements are special purpose financial statements which have been prepared by management to satisfy the needs of the members and the member's requirements In relation to the proposed transaction with Melior Inc.

The financial statements also comply with International Financial Reporting Standards (I FRS) as Issued by the International Accounting Standards Board,

The financial statements, except for the cash f low information, have been prepared on an accruals basis are on based on historical costs, modified, where applicable by the measurement at fair value of selected non-current assets, financial assets an d financfal liabllttfes.

The following significant accounting policies have been adopted in the preparation and presentation of the financial statements:

(b) Foreign Currency Translation

The functional and presentation currency of the Company is Australian dollars (A$}.

BELRIDGE ENTERPRISES PlY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2012 & 2011

Foreign currency transactions are t ranslated Into the functional cu rrency using the exchange rates ruling at the date of t he transaction. Monetary assets and liabili t ies denominated in foreign cu rrencies are retranslated at the rate of exchange ruling at the end of the reporting period. Foreign exchange gains and losses resulting from settling foreign currency transactions, as well as from restating foreign currency denominated monetary assets and liabilities, are recognised in profit or loss.

(c) Revenue Recognition

Revenue is recognised at the fair value of consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. The following specific recogn ition criteria must also be met before revenue Is recognised:

Sale of Goods

Revenue from sale of minerals Is recognised when the significant risks and rewards of ownership have passed to the buyer and can be reliably measured . Risks and rewards are considered passed to buyer when goods have been delivered to the customer.

Interest

Revenue Is recognised as interest accrues using the effective interest method. The effective interest method uses the effective interest rate which is the rate that exact ly discounts the estimated future cash receipts over the expected life of the financial asset.

(d) Income Tax

The income tax expense for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

(e) Impairment of Assets

At the end of each reporting period the Company assesses whether there is any Indication that Individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in profit or loss where the asset's carrying value exceeds its recoverable amount. Recoverable amount Is the higher of an asset 's fair value less costs to sell and value in use. For the purpose of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Where It is not possible to estimate recoverable amount for an Individual asset, recoverable amount Is determined for the cash-generating unit to which the asset belongs.

(f) Cash and Cash Equivalents

For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and at bank, deposits held at call with financial institutions, other short term, hiehly liquid investments with


maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an Insignificant risk of changes in value and bank overdrafts.

(g) Trade Receivables

Trade receivables are recognised at original Invoice amounts less an allowance for uncollectible amounts and have repayment terms between 30 and 90 days. CollectabHity of trade receivables Is assessed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance is made for doubtful debts where there is objective evidence that the Company will not be <1ble to collect all amounts due according to the original terms. Objective evidence of impairment Includes financial difficulties of the debtor. On confirmation that the trade receivable will not be collectible the gross carrying value of the asset is written off against t he associated provision.

(h) Inventories

Raw Materials, Work In Progress and Finished Goods

Inventories are stated at the lower of cost and net realisable value. Cost comprises all direct materials, direct labour and an appropriate portion of variable and fixed overheads. Fixed overheads are allocated on the basis of normal operating capacity. Costs are assigned to inventories using the weighted <we rage basis. Net realisable value is the estimated selling price In the ordinary course of business, less the estimated selling cost of complet ion and selling expenses.

(i) Investments and Other Financial Assets

All investments and other f inancial assets are Initially stated at cost, being t he fair value of consideration given plus acquisition costs. Pu rchases and sales of Investm ents are recognised on trade date which Is the date on which the Company commits to purchase or sell the asset. Accounting policies for each category of investments and other financial assets subsequent to initial recognition are set out below.

Held-to-maturity Investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company has the posit ive intention and ability to hold-to-maturit y and are measured at amortised cost subsequent to Initial recognition using the effective Interest method. If the Company were to sell other than an Insigni ficant amount of held-to-maturity investments, the whole category is then reclassified as available-for-sale.

Loans and receivables

Non-current loans and receivables include loans due from related parties repayable within 366 days of the end of the reporting period.

Impairment losses are measured as the difference between the Investment's carrying amount and the present value of the estimated future cash flows, eKcluding future credit losses that have not been incurred. The cash flows are discounted at the investment's original effective interest rate. Impairment losses are recognised in profit or loss.

BELRIDGE ENTERPRISES PlY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30JUNE 2013,2012 & 2011

(j) Fair Values

Fair values may be used for financial asset and liability measurement and well as for sundry disclosu res.

Fair values for financial instrumen ts traded in active markets are based on quoted market prices at th e end of the reporting period. The quoted market price for financial assets Is the current bid price and the quoted market price.

The carrying va lue less impairment provision of trade receivables and payables are assumed to approximate thei r fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.

lk) Property, Plant and Equipment

Plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating In the manner intended by management, less depreciat ion and any impairment.

Depreciation on assets is calculated on a straight-l ine basis over the estimated useful life, or In the case of leasehold improvements and certain leased plant and equipment, the shorter lease term, as follows:

• Plant & Equipment • Vehicles • Furniture, fittings and equipment

5-20 Years 3 - 5 years 3- S years

The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each report ing period.

Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset's carrying amount and are Included in profit or loss in the year that the item is derecognised.

(I) Leases

Leases of property. plant and equipment where the Company ha s substantially all the risks and rewards of ownership are classified as finance leases and capitalised at inception of the lease at the fair value of the leased property, or if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liabi lity. Fin ance charges are charged to profi t or toss over the lease period so as to produce a constant periodic ra te of interest on the remaining balance of the liability for each period.

Capitalised leased assets are depreciated over t he shorter of the estimated useful life of the asset or the lease term.

(m) Intangible Assets

Research and Development

Research costs are expensed as incurred. Development exp enditure incurred on an individual project is capitalised if the product or service is technically feasible, adequ ate resources are available to complete the project, it is probable that future economic benefits will be generated and expenditure attributable to the


project can be measured rel iably. Expenditure capitalised comprises costs of materials, services, direct labour and an appropriate portion of overheads. Other development costs are expensed when they are incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and any impairment losses and amortised over the period of expected future sales from the related projects which vary from 3- 5 years. The carrying value of developm ent costs is reviewed annually whe n the asset is not yet available for us e, or when events or circumstances Indicate that the carrying value may be impaired.

(n) Trade and Other Payables

Trade and other payables represent liabilities for goods and services provided to the Company prior to the year end and which are unpaid. These amovnts are unsecured and have 30-60 day payment terms. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(o) Borrowings

All loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Borrow ings are subsequently measured at amortised cost. Any difference between the proceeds (net of t ransaction costs) and the redemption amount is recognised in profit or loss over the period ofthe loans and borrowings using the effective interest method. Fees paid for establishing loan facilities are recogn ised as t ransaction costs if It Is probable that some or all of the facility will be drawn down, and deferred until the draw down occurs. If it is not probable that the facility will be drawn down, fees are capitalised as prepayments for liqvidity services an d amortised over the period to which the facility relates.

Borrowings are derecognised from the statement of f inancial position when the obligation specified in the contract has been discharged, cancelled or expires. The difference between the carrying amount of the borrowing derecognised and the considerat ion paid is recognised in profit or loss as other income or finance costs.

Where the terms of a borrowing are renegotiated and the Company issues equity instruments to a creditor to extinguish all or p;ut of a borrowing, the equity instruments issued as part of the debt for equity swap are measured at the fa ir value of the equity instruments issued, unless the fair value cannot be measured reliably, in which case, they are measured at the fair value of the debt extinguished. The difference between the carrying amount of the debt extinguished and the fair value of the equity Instruments issued is recognised as a gain or loss in profit or loss.

The fair value of a li<~ bili ty portion of a convertible note is determined using a market rate of interest for an equivalent non-convertible note and stated on an amortised cost basis until conversion or maturity of the notes. The remJinder of the proceeds is allocated to the conversion option and is shown as equity. Issue costs <~reapportioned between the liability and equity components based on the allocation of proceeds to the liability and eq uity components when the instruments are fi rst recognised.

All borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

(p) Other Liabilities

Other liabilities comprise non-current amounts due to related parties that do not bear interest and are repayable within 366 days of the end of the reporting period. As these are non-interest bearing, fair value at initi al recognition requires an adjustment to discount these loans using a market-rate of int erest for a similar instrument with a similar credit rating (the Company's incremental borrowing rate). The discount is credited to profit or loss immediately and amortised using the effective Interest method.


(q) Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount can be reliably estimated. For service warranties, the likelihood than an outflow will be required to settle the obligation is determined by considering the class of obligations as a whole. Provisions are not recognised for future operating losses.

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

(r) Employee Benefit Provisions

Wages and Salaries, Annuaf Leave and Sick leave

liabilities for wages and sa laries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the end of the reporting period are recognised in other liabilities in respect of employees' services rendered up to the end of the reporting period and are measured at amounts expected to be paid when the liabilities are settled. liabilities for non-accumulating sick leave are recognised when leave is taken and measured at the actual rates paid or payable.

Long Service Leave

Liabilities for long service leave are recognised as part of the provision for employee benefits and measured as the presen t villue of expected future payments to be made in respect of services provided by employees to the end of the reporting period using the projected unit credit method. Consideration is given to expected future salaries and wages levels, experience of employee departures and periods of service. Expected future payments are discounted usins national governmen t bond rates at the end of the reporting period with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows,

Regardless of when settlement is expected to occur, liabilities for long service leave are presented as current liabilit ies in the statement of financial position if the entity does not have an unconditional right to defer settlemen t for at least 12 months after the end of the reporting period.

(s) GST

Revenues, expenses are recognised net of GST except wh ere GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item.

Receivables and payt~bles are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority Is included as part of receivables or payables in the statement of financial position .

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activi ties, which is recoverable from, or payable to, t he taxation authority are classified as operating cash flows.

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

BELRIDGE ENTERPRISES PTV LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2012 & 2011

(t) Rounding of Amounts

Amounts have been rounded to the nearest thousand dollars ($'000) unless otherwise stated.

3. ACCOUNTING ESTIMATES AND JUDGEMENTS

Critical Judgements, estimates & assumptions

Impairment & debt forgiveness


COmpany Arrangement, which involved the debts of the Company being forgiven at that point in time. In

2009, an impairment charge of $54.9M was recognised, but due to the debt forgiveness, a retained profit was

carried forward into 2010. A further operating loss In 2010 resulted in a retained loss of $266,802 being

brought forward Into 2011.

A further impairment has been made in the 2013 year and is detailed in note 18.

Further information is contained In the Subsequent Events note.

Going Concern

In June 2013 operations of the Company were suspended due to prices for the Company's products falling

below the cost of production, which could only be materially reduced by upgrading the Company's plant

processing capacity.

The shareholders of th e Company agreed to support the Company whilst Management investigated options to

fund the works required to Increase the Company's plant capacity and restart production.

In December 2013 the shareholders agreed to forgive loans to the value of $36,074,721 provided to the

Company by associated companies of the shareholders. In March 2014 the Company entered into a

conditional agreement with Melior to acquire 100% of the Company. Melior has also provided the Company

with a secured loan of CAD$500,000 for working capital until the Melior agreement becomes unconditional.

Due to the ongoing support pledged by shareholders and the advanced state of the Mellor transaction,

management considers the Company to be a going concem and will be able to pay it debts as when they arise.


Previously prepared special purpose accounts

These financial statements have been prepared in accordance with International Financial Reporting Standards

{I FRS) for the purpose of the Melior sales agreement.

These accounts have been prepared In accordance with the disclosure and measurement requirements of IFRS

and are significantly different to the special purpose accounts previously prepared for taxation and other

potential purposes.


4. REVENUE

2013 $'000

Gross Sales 10,775 Commissions (411) Discounts Allowed (758)

Sales of Goods 9,606

Interest 140

Total Revenue 9,746

s. OTHER INCOME

2013

$'000

Net gain on disposal of property, plant and equipment 71

Foreign exchange gains 62

133

6. EXPENSES

2013

$'000

Profit( loss) before income tax Includes the following specific expenses:

Cost of Sales Shipping & port handling

Haulage

Royalties

Labour & contractors

Repairs & maintenance

Consumables

Hire of equipment

Other site costs

General & Administrative attributable to Inventory

Depreciation & amortisation attributable to Inventory

Other costs of sales

800 1,605

645

4,278

2,769

2,755

1,948

642 83

2,998

9

18,532

2012 2011 $'000 $'000

63 so

63 so

2012 2011

$'000 $'000

{1)

11

10

2012 2011

$'000 $'000

BELRIDGE ENTERPRISES PTY lTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2012 & 2011

7. INCOME TAX EXPENSE

Current tax expense

Current tax expense

Unrecognised deferred tax assets on unused tax losses

2013

$'000

2012 $'000

2011

$'000

The balance of unused lax losses as reflected in the tax returns lodged by th e Company are as fo llows:

Unused tax losses 18,088,479 13,700,416 8,840,928

Potential benefit at 30% (2012 : 30%,

2011: 30%} 5,426,544 4,110,125 2,652,278

The Company has not recognised any deferred tax asset on the unused tax losses as subsequent to 30 June

2013 related entities of the shareholders entered Into a Deed of Debt Forgiveness. The effect of this debt

forgiveness was to reduce t he unused tax losses t o nil. The balance of t he debt forgiveness reduced the tax

carrying value of the Company's depreciable assets.

8. AUDITORS' REMUNERATION

Remuneration for the auditor for:

Audit services

For the audit of financia l statements

For the review of t he financial stat ements

2013

$'000

15

7

22

2012 $'000

14

7

21

2011 $'000

14

14


9. CASH AND CASH EQUIVALENTS

Cash at bank and In hand

Reconcl1lation of Cash

2013

$'000

119

119

2012

$'000

2,288

2,288

2011

$'000

14

14

The above figures are reconciled to the cash at the end of the financial year as shown In the statement of cash flows as follows:

2013 2012 2011

$'000 $'000 $'000

Balances as above 119 2,288 14

Balances per statement of cash flows 119 2,288 14

10. TRADE AND OTHER RECEIVABLES (CURRENT)

2013 2012 2011

$'000 $'000 $'000

Trade receivables 1,666

Deposits-Sun Water 1,250

Deposits-Ergon so so 50

GST Receivable 138 448 2

3,104 498 52

Th e Sun Water deposit ($1,250,000) was reclassified as current in 2013 as the terms of the bank guarantee,

which the deposit supports, were renegotiated. This deposit was received in full subsequent to 30 June 2013.

The Ergon deposit is the current portion ($49,500) of the term deposit which support s the bank guarantee

issued to Ergon. The guarantee issued to Ergon reduces every 12 months and the term deposit reduces

accordingly.


Age analysis of trade receivables that are past due but not impaired at the end of the reporting periods:

2013

Total Amount Impaired Amount not Impaired

$'000 $'000 $'000

Not past due 1,630 1,630

Past due [30] days 36 36

Total 1,666 1,666

2012

Total Amount Impaired Amount not Impaired

$'000 $'000 $'000

Not past due

Pas t due [30) days

Total

2011

Total Amount Impaired Amount not impaired

$'000 $'000 $'000

Not past due

Past due [30] days

Total

Payment terms on receivables past due but not considered impaired have not been re-negotiated . The Company has been in direct contact with the relevant customers and are reasonably satisfied that payment will be received in full.

11. INVENTORIES

Raw Materials

Finished goods

-at net realisable value

2013

$'000

79

8

87

2012

$'000

2011

$'000

BELRIDGE ENTER PRISES PTY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2012 & 2011

12. TAX RECEIVABLE

Research and development tax rebate

2013 $'000

2,565

2012

$'000

2011

$'000

The research and development tax rebate as at 30 June 2013 was subsequently received in December 2013.

13. OTHER CURRENT ASSETS

Prepayments and deposits paid to suppliers

Tenure bond

14. RECEIVABLES (NON-CURRENT)

loans receivable other receivables

2013 $'000

89 10

99

2013 $'000

The loan receivable of $100,000 was offset in 2013 by way of services rendered.

2012

$'000

502 10

512

Z012

$'000

100

100

2011

$'000

10

10

2011

$'000

100

100


Fair values

The fair value and carrying amounts of non-current receivables for the Company are as follows:

2013 2012 2011

Carrying Fair Carrying Fair Carrying Fair amount value amount value amount value

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

Other receivables 100 100 100 100

100 100 100 100

15. HELD~TO~MATURlTY INVESTMENTS

2013 2012 2011

$'000 $'000 $'000

Term Deposits~ Sun Water 1,250

Term Deposits - Ergon 248 298 348

Term Deposits - State of Queensland 863 863 717

1,111 2,411 1,065

Term Deposits relate to the non-current portion of the term deposits provided as surety for guarantees issued to suppliers.

The Su nWater deposit was reclassified as cu rrent In 2013 as the terms of the bank guarantee, which the deposit supports, were renegotiated.

The Ergon deposit is the non-current portion of the term deposit which supports t he bank guarantee issued to Ergon. The guarantee Issued to Ergon reduces every 12 months and the term deposit red uces accordingly.

The term deposits all h;lVe terms in excess of 10 years.

16. PROPERTY, PLANT AND EQUIPMENT

Leasehold improvements

At cost

Accumulated impairment

Accumulated amortisation

2013 $'000

9

(6)

(1) 2

2012 $'000

2011 $'000



At cost 101 92 61

Accumulated impairment (54) (34) (35)

Accumulated depreciation (42) (30} (25)

5 28 1


At cost 9,235 8,086 8,086


Accumulated depreciation (1,276J (1,119) (1,065)

293 577 631

Plant and equipment

At cost 62,337 56,838 41,158

Accumulated Impairment (45,268) (28,665) (28,666)

Accumulated depreciation (12,951) (10,569) ~9.850)

4,118 17,604 2,642

Leased plant onci equipment

At cost 212

Accumulated im pairment

Accumulated amortisation (59)

153

Total plant and equipmen t 4,271 17,604 2,642

Total non-current property, plant and

equipment 4,571 18,209 3,274

Reconciliations

Reconciliations of the carrying amounts of each class of property, plant & equipment at the beginning and end of the current and previous financial year are set out below:

Total Leaseholci Improvements Carrying amoun t at beginning of financial

year

Additions

Disposals

Depreciation

Impairmen t

Carrying amount at end of financial year

2013

$'000

9

(1) (6)

2

2012

$'000

2011

$'000


Furniture & Office Equipment Carrying amount at beginning of financial year

Additions

Disposals

Depreciation

Impairment


Mining Lease & Port Infrastructure Carrying amount at beginning of financial year

Additions

Dispos als

Depreciation

Impairment


Total Plant & Equipment Carrying amount at beginning of financial year

Additions

Disposals

Depreciation

Impairment


Total Leased Plant & Equipment Carrying amount at beginning of f inancial year

Additions

Disposals

Depreciation

Impairment

Carrying amount at end of fin ancial year

Impairment

28 10

(12)

(21)

5

577

1,150

(158) (1,276)

293

17,604

6,436

(732)

(2,588)

(16,602)

4,118

212

{59)

153

4,571

1

31

(4)

28

631

(54)

577

2,642

15,682

(1) (719)

17,604

18,209

3

(1)

(1)

1

672

10

(51)

631

3,242

65

(36)

(629)

2,642

3,274

The Company was acquired in May 2009 by the current own ers from an Admin istrator under a Deed of Company Arrangement, which involved the debts of the Company being forgiven at that point In time. In 2009, an impairment charge of $35.1M was recognised, but due to t he debt forgiveness that occurred at the same time the result was a retained profit being carried forward into 2010 ($1,907,135).

The impairment charge recorded In June 2013 reflected the valuation of the Company based on the marketing program delivered to potential investors by the Company. Subsequent to 30 June 2013, the Com pany entered


in a share sale agreement with Melior which valued the Company at $5M without debt. As a result of this valuation the impairment charge of $17,906,565 was recognised in 2013.

Further Information is contained in the Subsequent Events note.

17. INTANGIBLE ASSETS

2013 2012 2011

$'000 $'000 $'000

Development costs

At cost 24,041 23,026 21,446

Accumulated impairment (21,81 5) (19,810) (19,810)

Accumulated amortisation (1,767) !1,612) !1,55 6)

459 1,604

Reconciliations

2013 2012 2011

$'000 $'000 $'000

Development costs

Carrying amount at beginning of year 1,604 80

Acquisit ions 1,071 1,580

Amortisation recognised (211) (56)

Impairmen t recognised (2,005)

Carrying amount at end of year 459 1,604

Impairment

The Company was acquired in May 2009 by the current owners from an Administrator under a Deed of Company Arrangement, which involved the debts of the Company to being forgiven at that point In time. In 2009, an impairment charge of $19.8M was recognised, but due to the debt forgiveness that occurred at the same time the result was a retained profit being carried forward into 2010 ($1,907,135).

80

80

80

The impa irment charge recorded In June 2013 reflected the valuation of the Company based on the marketing program delivered to potential investors by the Company. Subsequent to 30 June 2013, the Company entered in a share sale agreement with Melior which valued the Company at $SM without debt. As a result of this valuation the impairment charge of $2,004,541 was reco~;n ised in 2013.

Further Information is contained In the Subsequent Events note.


18. TRADE AND OTHER PAY ABLES

Trade payables

Employee Benefits

Royalties Payable

Other payables

2013

$'000

2,722

260

508

199

3,689

2012

$'000

1,903

215

2,118

2011

$'000

19

19

The average credit period on trade and other payables (excluding GST payable} is two months. No interest Is payable on outstanding payables during this period.

19. BORROWINGS

CURRENT

Secured

Lease liabilities


Unsecured

Convertible Note

Loans from related parties


Total current borrowings

NON-CURRENT

Secured

Lease liabilities

Total secured non-current borrowings

Total non-current borrowings

2013 $'000

56

56

832

35,707

36,539

36,595

144

144

144

2012

$'000

788

23,449

24,237

24,237

2011

$'000

4,279

4,279

4,279

BELRIDGE ENTERPRISES PlY lTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2012 & 2011

Convertible Note The Company issued a convertible notes on 28/05/2012 for $1,000,000 which is convertible into 111,121 ordinary shares at the option of the holder or repayable on 28/05/2016. The effective Interest rate applied to the liability component is 7 .5%. The value of the conversion rights have been reflected as equity (refer not e 21).

Subsequent to 30 June 2013 Sashimi Investments Pty Ltd and the Company agreed to convert the loan to equity at a conversion rate of 2.63% which resulted In Sashimi Investments Pty ltd being issued on 31 December 2013 with 26,975 ordinary shares and the Company recording a gain of $1,046,641 on the conversion .

Related Party Loans Subsequent to 2013 the Company entered into deeds whlch released the Company from all obligations to repay the outstanding debt owing on the related party loans from Belmont Park Investments Pty Ltd and Panorama Ridge Pty Ltd. The balance of the loans forgiven was $36,074, 721 (June 30 2013: 35, 707,075).

Further information relating to related party borrowings is set out in note 26.

Fair Valve The carrying amounts and fair values of borrowings at the end of the reporting period are:

2013 2012 2011

Carrying Fair Carrying Fair Carrying Fair Amount Value Amount Value Amount Value

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

Recognised Jn the statement of financial position

Convertible notes 832 832 788 788

Related party 35,707 35,707 23,449 23,449 4,279 4,279

Lease liabilities 200 200

Total 35,739 36,739 24,237 24,237 4, 279 4,279


20. PROVISIONS

CURRENT

NON-CURRENT

Long service leave

Rehabilitat ion of Mining Area Provision

Long service leave

2013

$'000

2

863

865

2012 $'000

7

717

724

2011

$'000

6

717

723

Long term employee benefi ts comprise amounts payable for long service leave which are not vested at the end of the reporting period and the amount and timing of payments to be made when leave is taken is uncertain. Refer to accounting policy l (r) for more details.

21. OTHER FINANCIAL LIABILITIES

Financial guarantees- SunWater

Financial guarantees· Ergon

Financial guarantees -State of Queensland

2013

$'000

1,250

298

863

2,411

2012

$'000

1,250

348

863

2,461

Subsequent to 30 June 2013, the Sun W ater guarantee was returned to the Company and replaced by a

personal guara ntee by the Company's Managing Director.

2011

$'000

398 717

1,115

In November 2012 the Company entered into a General Security Deed and mortgages over the Company's mining leases 80044 and 80075 in favour of SunWater Limited to secure all ob ligations of the Company under the Pipeline Transfer Agreement (PTA) between SunWater Limited and the Company. The PTA was settled subsequent to 30 June 2013 and the mortgages will be release pending the confirmation of the registration of

the pipeline easements with the Queensland Tit les Office.


22. OTHER LIABILITIES

Mining lease compensation payable

Total Other liabilities

2013 $ '000

_hOQ_Q_ 1,000

2012 $'000

1,250

1,2SO

2011 $'000

Mining lease compensat ion payable relates to the monies payable to the landowner for Mining Lease 80044 under the terms of the com pensation agreement. The f inal payment Is due July 2014 .


23. CONTRIBUTED EQUITY

2013 Shares

2013

$'000

2012

Shares

2012

$'000

2011

Shares 2011 $'000

Share capital

Fully paid

Other equity securities

1,000,100

Value of equity component on convertible notes

Total contributed equity

Ordinary shares

1,000

223

1,223

1,000,100 1,000 1,000,100 1,000

223

1,223 1,000

Ordinary shareholders are ent itled to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one vote on a show of hands or by poll.

Co1111ertlble Note Equity Component This equity component relates to the value of conversion rights relating to the convertible notes included in current borrowings (refer note 19).

Subsequent Conversion Subsequent to 30 June 2013 Sashimi Investments Pty Ltd and the Company agreed to convert the loan to equity at a conversion rate of 2.63% which resulted II'\ Sashimllnvestments Pty Ltd being issued Or\ 31 December 2013 with 26,975 ordinary shares and the Company recording a gain of $1,046,641 on the conversion.

Capital Risk Management The Company considers its capital to comprise its ordinary share capital and accumulated retained earnings/losses.

In managing Its capital, the Company's primary objective is to ensure its continued ability to provide a consistent return for its owners through a combination of capital growth and distributions. In order to achieve this objective, the Company seeks to maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the Company to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy, new share issues, or the reduction of debt, the Company considers not only its short-term position but also its long-term operational and strategic obj ectives.

24. FINANCIAL RISK MANAGEMENT

(a} General objectives, policies and processes

In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks Is presented throughout these financial statements.

BELRIDGE ENTERPRISES PTY LTD NOTES TO THE FINANCIAl STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2012 & 2011

There have been no substantive changes in the Company's exposure to f inancial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

The Company's financial Instruments consist mainly of deposits w ith banks, held to term maturities, accounts receivable and payable, financial leases, convertible notes and related party borrowings.

The totals for each category of financial instruments, measured in accordance with lAS 39 as detailed in the accounting policies to these financial statements are as follows:

Note 2013 2012 lOll $'000 $'000 $'000

Fin ancla I Assets 119 2,288

3,104 498 14 51

Cash and cash equivalents Trade and other receivables Held-to-maturity investments 1,111 2,411 1,065

Total financial assets 4,334 5,197 1,130

Financial liabilities 2,118 19 Trade and other payables

Lease liabilities Convertible Notes Related Party Loans

3,689 200 832

35,707 781

23,450 4,279

Total financial liabilities 40,428 26,349 4,298

Management has overall responsibility for the determination of the Company's risk management objectives and policies and, whilst retain ing ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective Imp lementation of the objectives and policies to the Company's finance function. The Company's' risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the Company where such impacts may be material. Management receives monthly reports from the Company Financial Controller through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of management Is to set polices that seek to reduce risk as far as possible without unduly affecting the Company's competitiveness and f lexibility. Further details regarding these policies are set out below.

(b) Credit Risk Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligat ion, resulting in the Company incurring a financial loss. Credit risk arises from cash and cash equivalents (e.g. deposits and investments held with banks and financial institutions), favourable derivative contracts (derivative assets), loans and receivables, guarantees given on behalf of others and loans and commitments granted but not drawn down at the end of the reporting period.

Credit risk arising from large sales values to single customers Is mitigated through the use of letters of credit, prepayments and agency agreements.


To mitigate the credit risk associated wlth balances of cash and cash equivalents and deposits held with banks and financial institutions, the Management of Directors have established a policy that these can only be held with AAA rated entitles.

The maximum exposure of the Company to credit risk at the end of the reporting period for cash and cash equivalents, loans and receivables Is their carrying amount disclosed in the statement of financial position. In addition, the maximum exposure of the Company to credit r is k from other financial Instruments is as follows:

Included in loans and receivables is a significant customer, located in China, accounts for 99% of trade receivables at 30 June 2013 (2012: O'Y., 2011 : 0%).

(c) Liquidity risk liquidity risk is the risk that the Company may encounter difficulties raising funds to meet commitments associ ated with financial instruments, e.g. borrowing repayments. It is the policy of the Director that treasury maintains adequate committed credit facilities.

Financing arrangements The following financing facilities were available to the Company at the end of t he reporting period:

Maturity Analysis· 2013

Financial Liabilities Carrying Contractual

< 6 mths 6-12 mths 1-3 years > 3 years Amount Cash flows

$'000 $'000 $'000 $'000 $'000 $'000 Trade Creditors 3,689 3,689 3,689 Finance leas e liabilities 200 200 28 28 144 Convertible notes 832 832 832

Related Party Loans 35,707 35,707 35,707

40,428 4()A28 40,256 28 144

Financial Assets Carrying Contractual


$'000 $'000 $'000 $'000 $'000 $'000 Trade debtors 119 119 119 Held to Maturity 1,111 1,111 1,111

1,230 1,230 119 1,111

BELRIOG E ENTERPRISES PTY l TO NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2012 & 2011

Maturity Analysis- 2012

Financial liabilities Carrying Contractual

< 6 mths 6-12 mths 1·3 years > 3 years Amount Cash flows

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

Trade Creditors 2,118 2,118 2,118 Finance lease liabilities

Convertible notes 781 781 781


26,349 26,349 26,349



$'000 $'000 $'000 $'000 $'000 $'000 Trade debtors 498 498 498 Held to Maturity 2,411 2,411 2,411

2,909 2,909 498 2,411

Maturity Analysis· 2011

Financial Liabilities Carrying Contractual


$'000 $'000 $'000 $'000 $'000 $'000 Trade Creditors 19 19 19

Finance lease liabilities

Convertible notes


4,298 4,298 4,298


< 6 mths 6- 12 mths 1-3 years > 3 years Amount Cash flows

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

Trade debtors 51 51 51 Held to Maturity 1,065 1,065 1,065

1,116 1,116 51 1,065

{d) Market Risk

Market risk arises from the use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes In interest rates (interest rate risk), foreign exchange rates {currency risk) or other market factors (other price risk}.

(i) Interest rate risk

Exposure to Interest rate risk arises on financia l assets and financial liabilities recognised at the end of the reporting period, whereby a futu re change in Interest rates will affect future cash flows or the fai r va lue of fixed rate financial instruments. The Company is also exposed to earnings volatility on floating rate


instruments. The financial instruments that expose the Company to Interest rate risk are limited to borrowings, cash and cash eq uivalents.

Interest rate risk is managed using a mix of fixed and floating rate debt. At 30 June 2013, approximately 95% of the Company debt is fixed. It Is the policy of the Company to keep between 65% and 100% of the debt on fixed interest rates.

The Company also manages interest rate risk by ensuring that, whenever possible, payables are paid within any pre-agreed credit terms.

The Company monitors its interest rate exposure continuously. The Company also considers on a continuous basis to alternatives financing opportunities, hedging positions and renewal of existing positions.

Sensitivity Analysis The following table illustrates sensitivities to the Company's exposures to changes In interest rates. The table Indicates the Impact of how profit values at the end of the reporting period would have been affected by changes in t he releva nt risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of the other variables.

Year Ended 30 June 2013

+/- 2% interest rates


+/· 2% interest rates


+/- 2% interest rates

(ii) Currency Risk

+I·

+I·

+I-

Profit/Equity

$'000

22

48

21

The Company's policy is, where possible, to allow Company entitles to settle liabilities denominated in their functional currency (AUD) with the cash generated from t heir own operations in that currency. Where Company entities have liabilities denominated in a currency other than their functional currency (and have Insufficient reserves of that currency to settle them} cash already denominated in that currency will, where possible, be transferred from elsewhere within the Company. The Company also uses forward currency contracts to manage foreign currency risk.

In order to monitor the continuing effectiveness of this policy, management receives a monthly forecast, analysed by the major currencies held by the Company, of liabilities due for settlement and expected cash reserves.

The Company's exposure to foreign currency risk is as follows:

USD Cash at bank USD Trade receivables

Net Exposure

2013 $'000

1 1,534

1,535

2012

$'000 120

120

2011 $'000


(e) Fair value The fa ir values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying amounts as presented in the statements of financial position. Fair value Is the amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length t ransaction.

Fair value may be based on information that is estimated or subject to judgement, where changes in assumptions may have a material impact on the amounts estimated. Where possible, valuation Information used to calculate fair value is extracted from the market, with more reliable information available from markets t hat are actively t raded.

2013 2012 2011 Carrying Fair CarryJng Fair Carrying Fair amount Value amount Value amount Value

Financial Asset!;

Cash and cash equivalents 119 119 2,288 2,288 14 14

Trade and other receivables 3,104 3,104 498 498 51 51

Held to Maturity 1,111 1,111 2,411 2.411 1,065 1,065

Total financial assets 4,334 4,334 5.197 5,197 1.130 1,130

Financial Assets

Trade and other payables 3,689 3,689 2,118 2,118 19 19

Lease liability 200 200

Convertible note 832 832 781 781

Related party loans 35,707 35,707 23,450 23,450 4,279 4,279

Total financial liabilities 40.428 40,428 26,349 26,349 4,298 4, 298




25. CASHFLOW INFORMATION

2013 2012 2011

$'000 $'000 $'000

Reconciliation of profit after income tax

to net cash flow from operating activities

Loss for the year (27,470 ) (2,504 ) (1,159 )

Depreciation and amortisation 3,028 834 682

Impairment loss 19,911

- (increase)/decrease in trade debtors (855 ) (2,305 ) (33 )

- (increase)/decrease in inventories (87 ) - -

- increase/(decrease) in trade creditors 1,314 2,100 -

-increase/(decrease) in current tax liability (2,566 ) - 394

- increase/(decrease) in other provisions 148 - -

Net cash flow from operating activities (6,577 ) (1,875 ) (116 )

- - -

Non-cash financing and investing activities

Acquisition of plant and equipment by

means of finance leases 212 - -

Convertible notes previously recognised as

a liability converted to equity - - -

26. RELATED PARTY TRANSACTIONS

Transactions with related parties

The following transactions occurred with related parties:

2013 2012 2011

$ $ $

Interest expense

Associates

739

57 -

Non-current payables (loans from related

parties)

Associates

36,539

24,237

4,279

Associates refers to companies controlled by the Company’s shareholders.


Details of Related Party Loans

Related Party Security Belmont Park Investments Pty Ltd Unsecured

Panorama Ridge Pty Ltd Unsecured

Belmont Park Investments Pty Ltd Unsecured

Sashimi Investments Pty Ltd Unsecured


Panorama Ridge Pty Ltd


Sashimi Investments Pty Ltd

Interest

Non-Interest bearing

Non-Interest bearing

Interest at 10%

Interest at 7.5%

Term No t erm

No term

2 yr. term

4 yr. term

2013

$


2012

$

14,575 9,100

14,525 9,050

6,607 5,299

832 788

36,539 24,237

2011

$

2,164

2,115

4,279

Subsequent to 30 June 2013 Sashimi Investments Pty Ltd and the Company agreed to convert the loan to equity at a conversion rate of 2.63% which resulted In Sashimi Investments Pty Ltd being issued on 31 December 2013 with 26,975 ordinary shares and the Company recording a gain of $1,046,641 on the conversion.

Subsequent to 2013 the Company entered into deeds which released the Company from all obligations to repay the outstanding debt owing on the related party loans from Belmont Park Investments Pty Ltd and Panorama Ridge Pty Ltd. The balance of the loans forgiven was $36,074,721 (June 30 2013: 35,707,075).

27. CONTINGENCIES

For the years ended 30 June 2011, 2012 and 2013, the Company had no contingent assets or liabilities, other than those already disclosed.


28. COMMITMENTS

Finance lease · non-cancellable

Payable:

Within one year

Later than one year but not later than 5 years

Total future minimum lease payments

Total future finance charges

Lease liabilities

Lease liabilities are represented In the financial statements as follows:

Current (note 19)

Non·current (note 19)

56

144

200

200

56

144

200

The Company leases various types of plant and equipment with a carrying value of $153,075 by way of finance leases expiring within 3 years. The Company has the option to acquire the plant and equipment on expiry of the leases at their agreed fair va lue at expiry. There are no contingent rentals as part of finance lease arrangements and no restrictions on the ability of the Company from borrowing further funds or paying dividends.

29. SUBSEQUENT EVENTS

Debt forgiveness and conversion of convertible note On 31 December 2013 the Company entered into deeds which released the Company from all obligations to repay the outst anding debt owing on the related party loans and agreed to convert the outstanding convertible note to equity. The value of the loans forgiven at 31 December 2013 was $36.074M (30 June 2013: $35 .707M). The convertible note was converted to equity at the rate of 2.63% and 26,975 ordinary shares were issued.

Melior transaction On 31 March 2014 the shareholders of the Company entered into a Share Purchase Agreement (SPA) with Melior Resources Inc., (Mellor), a Canadian incorporated Company listed on the Toronto stock exchange (TSXV:MLR). Under the terms of the SPA, if the conditions precedents are sat isfied, Melior will acquire 100% of t he sha res issued of the Company and in return the shareholders of the Company will be issued 38.1M shares in Melior. The shareholders in the Company will be entitled to be issued a further 38.1M shares If agreed performance targets are met. Mellor has announced that it will invest up to US$ 15M into the Company to re·stsrt operations.

Pipeline In February 2012 the Company entered into a Pipeline Transfer Agreement {PTA) with SunWater Limited, a Government Owned Corporation, to acquire the pipeline supplying water to the mine. On March 3 2014, having satisfied the conditions precedent of the PTA, the Company and SunWater settled the agreem ent. The Company has lodged the executed transfer notices for the easements along the pipeline, which were


transferred to the Company under the PTA, with the Queensland Titles Office. As of the date of this report, the Company is still waiting on confirmation of the registration of two of the easements transferred. Based on the processing times for the easements for which confirmation of registration has been received, the Company expects the registration of the remaining two easements to be confirmed by the end of Apt ll 2014. The Company Is not exposed to any contingent liability whilst the easements remain unregistered but the registrations are a prerequisite for the release of the mortgage held by Sun Water.

BELRIDGE ENTERPRISES PTY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2013, 2.012 & 2011

DIRECTORS DECLARATION

The director of Belridge Enterprises Pty Ltd declares that:

1. The financial statements and notes, as set out above:

(a) comply with International Accounting Standards; and

(b) give a true and fair view of the financial position as at 30 June 2011, 30 June 2012 and 30 June 2013 and of the performance for the years ended on those dates of the Company.

2. In the director's opinion, there are reasonable grounds to believe that the Company will be able to pay Its debts as and when they become due and payable.

This declaration Is made in accordance with a resolution of the Director.

Mark McCauley

Director

Dated: 17 April 2014

Level6, Brisbane Club Tower 241 Adelaide Street Brisbane Old 4000 Australia

GPO Box 565 Brisbane Qld 40 01 Australia

Phone: 61 (07) 3233 0600

Fax: 61 (07) 3233 0601

Email: [email protected]

Web: www.merrolts.com.au

A ccounting

A udit & Assurance • Statutory · Internal - Government

Business -Services - Audit - Restructuring

Corporate Services

Estate Planning

Forens ic Accounting

Litigation Support

Recruitment ·Executive · Accounting

Superannuat ion - Administration -Planning

Taxation

INDEPENDENT AUDITOR'S REPORT

errotts Chartered Accountants & Business Advisers

To the members of Belridge Enterprises Pty Ltd

Report on the Financial Report

We have audited the accompanying financial report, being a special purpose financial report of Belridge Enterprises Pty Ltd, which comprises the statement of financial position as at 30 June 2011, 30 June 2012 and 30June 2013, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the yea rs then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the director's declaration.

Director's Responsibility for the Financial Report

The director of the company is responsible for the preparation and fair presentation of the financial report that gives a true and fair view in accordance with the International Accounting Standards and for such internal control as the directors determines is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state that the financial statements comply with International Financial Reporting Standards (IFRS).

Auditor's Responsibility

Our responsibility is to express an opinion on the financial report based on our audit.

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

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

reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

GMN lnternatiollsl is f'n 8330ciation nf legally lrulef1t~ndenl aooounling fltms

Liability limited by a scheme approved under Professional Standards Legislation

Basis for Qualified Opinion

30 June 2011

We were appointed as auditors of the company on 3 March 2014 to undertake audits for the periods

ended 30 June 2011, 30 June 2012 and 30 June 2013. We were unable to obtain sufficient evidence

to support the opening balances for the period relating to 30 June 2011 as presented in the financial

report, thus we qualify on the opening balances and the effect on profit for the period ended 30

June 2011 as a result.

Qualified Opinion

In our opinion, except for the possible effects of the matter described in the Basis for Qualified

Opinion paragraph, the financial report presents fairly, in all material respects, the financial position

of Bel ridge Enterprises Pty Ltd as at 30 June 2011, 30 June 2012 and 30 June 2013 and its financial

performance for the years then ended is in accordance with the accounting policies described in

Note 1 to the financial statements.

Emphasis of Matter

30June 2011

Without further modification to our opinion, we draw attention to the fact that the company has not

recognised any deferred tax asset on the unused tax losses as subsequent to 30 June 2013 related

entities of the shareholders entered into a Deed of Debt Forgiveness. The effect of this debt

forgiveness, which was executed 31/12/2013, was to reduce the unused tax losses to nil. The

balance of the debt forgiveness reduced the tax carrying value of the company's depreciable assets.

30 June 2012

Without further modification to our opinion, we draw attention to the fact that the company has not

recognised any deferred tax asset on the unused tax losses as subsequent to 30 June 2013 related

entities of the shareholders entered into a Deed of Debt Forgiveness. The effect of this debt

forgiveness, which was executed 31/12/2013, was to reduce the unused tax losses to nil. The balance of the debt forgiveness reduced the tax carrying value of the company's depreciable assets.

30 June 2013

Without further modification to our opinion, we draw attention to:

• the fact that there is the potential that Belridge Enterprises Pty Ltd will not be able to continue as a going co nee rn without the ongoing support of the share hoI de rs. Due to the ongoing support pledged by shareholders and the advanced state of the Melior transaction, management considers the Company to be a going concern and will be able to pay it debts as when they arise.

• the fact that the company has not recognised any deferred tax asset on the unused tax losses as subsequent to 30 June 2013 related entities of the shareholders entered into a Deed of Debt Forgiveness. The effect of this debt forgiveness, which was executed 31/12/2013, was to reduce the unused tax losses to nil. The balance of the debt forgiveness reduced the tax carrying value ofthe company's depreciable assets.

• the fact that in February 2012 the company entered into a Pipeline Transfer Agreement (PTA} with SunWater Limited, a Government Owned Corporation, to acquire the pipeline supplying water to the mine. On March 3 2014, having satisfied the conditions precedent of the PTA, the company and SunWater settled the agreement. The company has lodged the executed transfer notices for the easements along the pipeline, which were transferred to the company under the PTA, with the Queensland Titles Office. As ofthe date of this report, the company is still waiting on confirmation of the registration of two of the easements transferred. Based on the processing times for the easements for which confirmation of registration has been received, the company expects the registration of the remaining two easements to be confirmed by the end of April 2014. Management of the company believe that the company Is not exposed to any

contingent liability whilst the easements remain unregistered but the registrations are a prerequisite for final completion of the release of the mortgage held by SunWater.

• the fact that the impairment charge recorded in June 2013 reflected the valuation of the Company based on the marketing program delivered to potential investors by the Company. Subsequent to 30 June 2013, the Company entered in a share sale agreement with Melior which valued the Company at $SM without debt. As a result of this valuation the impairment charge was recognised in 2013.

Basis of Accounting

Without modifying our opinion, we draw attention to Note 1 of the financial report, which describes the basis of accounting. The financial report has been prepared by management to satisfy the needs ofthe members and the member's requirements in relation to the proposed transaction with Melior Inc. As a result, the financial report may not be suitable for another purpose.

Merrotts Chartered Accountants

Partner

Brisbane

23 April 2014

SCHEDULE “B” - MANAGEMENT DISCUSSION & ANALYSIS

Management’s and Discussion Analysis


Three and six months endedDecember 31, 2013

- 1 -

MELIOR RESOURCES INC.(“Melior” or the “Corporation”)

Management’s Discussion and Analysis of Financial Condition and Results of OperationsFor The Three and Six Months Ended December 31, 2013

(All amounts, except per share amounts and where specified, are in thousands of Canadian Dollars)

Information contained in this management discussion document is given as of February 21,2014 unless otherwise indicated. All amounts are in Canadian dollars unless otherwisenoted.

This Management’s Discussion and Analysis (“MD&A”) should be read in conjunctionwith the unaudited Condensed Interim Consolidated Financial Statements andaccompanying notes of the Corporation for the three and six month period endedDecember 31, 2013, and the audited consolidated financial statements and accompanyingnotes and related MD&A of the Corporation for the fiscal year ended June 30, 2013.

Forward Looking Information

This MD&A contains certain forward-looking statements. Forward-looking statementsgenerally can be identified by the use of statements that include words such as “believe”,“expect”, “anticipate”, “intend”, “plan”, “estimate”, “may”, “will” or other similar wordsor phrases suggesting future outcomes or other expectations, beliefs, estimates, plans,objectives, assumptions, projections, intentions or statements about future events orperformance. Similarly, statements contained in, but not limited to, the sections“Overview of the Corporation’s Business”, “Outlook”, “Results of DiscontinuedOperations”, “Liquidity and Capital Resources”, “Commitments and Contingencies” and“Changes in Accounting Policies” of this MD&A, including those with respect toexpectations concerning assets, prices, foreign exchange rates, earnings, marketconditions, capital expenditures, risks, availability of regulatory approvals, corporateobjectives and plans or goals, are or may be forward-looking statements. Forward-lookingstatements involve significant risks and uncertainties, should not be read as guarantees offuture performance or results, and will not necessarily be accurate indications of whetheror not such results will be achieved. A number of factors could cause actual results to differmaterially from the results discussed in the forward-looking statements including, but notlimited to, the factors discussed under “Risk Factors”. Although the forward-lookingstatements contained in this MD&A are based upon what management of the Corporationbelieves are reasonable assumptions, the Corporation cannot assure readers that actualresults will be consistent with these forward-looking statements. Investors and othersshould carefully consider risk factors including, without limitation, those set out under theheading “Risk Factors”, and not place undue reliance on forward-looking statements.Forward-looking statements are made as of the date of this MD&A and the Corporationassumes no obligation to update or revise any forward looking statements to reflect newevents or circumstances, except as required by law.

- 2 -

Forward-looking statements in this MD&A include, but are not limited to, statements withrespect to:

the implementation of the Corporation’s business strategy; and

the development of the Corporation’s potential investment opportunities.

Overview of the Corporation’s Business

The Corporation’s strategy, which is set out in more detail in its Investment Policy, whichhas been filed on SEDAR and is also available on the Corporation’s website, is intended tocapitalize on the Board’s and management’s expertise and enable the Corporation to investand aid growth in projects in the mining, metallurgical and mineral industries.

The strategy calls for strategic investments in resource based opportunities offering capitalappreciation potential, in particular, debt or equity participation in investee companies,with projects nearing maturity. Melior believes it can add value through activeinvolvement from not only a financial standpoint, but also by the contribution of guidanceand additional mining and corporate finance expertise. Melior may make initialinvestments of debt, equity or a combination thereof in public or private companiesthrough a variety of financial instruments including, but not limited to, private placements,participation in initial public offerings, convertible loans, loans with equity bonusprovisions or purchase options and the like. In most cases, one or more nominees of theCorporation will join the board of directors of the investee company.

Discontinued Operations

On March 16, 2012, the Corporation completed the sale of all of the common stock of itswholly owned subsidiary, Coalcorp International AVV, which was the holding companyfor numerous off-shore subsidiaries. As of the closing date, the purchaser acquired, on an‘as is, where is’ basis, all of the issued and outstanding shares of Coalcorp InternationalAVV for nominal net proceeds of one dollar (the “Coalcorp AVV Transaction”). As aresult of the Coalcorp AVV Transaction, assets of discontinued operations of $3.6 million,liabilities of discontinued operations of $0.4 million and other associated liabilities of$3.0 million were removed from Melior’s balance sheet as of the closing, resulting in a netloss on disposal of $275 during the year ended June 30, 2012. Under the agreement for theCoalcorp AVV Transaction, the Corporation is entitled to receive, subject to certain termsand conditions, a share of net recoveries of cash, if any, that the purchaser receives as aresult of winding up or re-organizing any of the Coalcorp International AVV subsidiaries.During the year ended June 30, 2013 the Corporation received $1,141 from the purchaserof Coalcorp International AVV for its share of cash recovered. The receipts wererecognised as a gain from discontinued operations.

- 3 -


On June 25, 2012, Melior entered into a subscription agreement (as amended on June 29,2012) with Asian Mineral Resources Limited (“AMR”), pursuant to which the Corporationacquired 47,272,727 common shares in the capital of AMR. The investment is recorded atfair value. AMR used the proceeds to fund capital expenditures to bring its Ban PhucNickel Project into commercial production. The Ban Phuc nickel mine was officiallyopened on June 29, 2013.

Outlook

The Corporation continues to evaluate its options including, but not limited to, continuingto explore investment opportunities, a corporate reorganization or other strategic options.

Selected Financial Information

Years ending June 30,

IFRS in CDN$

($ thousands) 2013 2012 2011

Revenue from continuing operations - - -

Loss from continuing operations ( 857 ) (4,587) (5,799)

Earnings (loss) from discontinued operations 1,141 (271) 624

Net income (loss) for year 284 (4,858) (5,175)

Basic (loss) earnings per share ($)(1):

Continuing operations (0.00) (0.03) (0.03)

Discontinued operations 0.01 0.00 0.00

Total assets 24,377 27,001 43,806

Total long and short term obligations 165 236 11,720

1. Basic and dilutive loss per share is calculated by dividing the net loss by the weighted average

number of shares in issue during the year. As a result of consolidated net losses the potential

effect of exercising stock options and, as applicable, warrants has not been included in the

calculation of loss per share because to do so would be anti-dilutive.

- 4 -

Three months ended

December 31

Six months ended

December 31

($ thousands) 2013 2012 2013 2012

Revenue from continuing operations - - - -

Loss from continuing operations (491) (355) (855) (567)

Income from discontinued operations - 397 - 860

Net (loss) income for period (491) 42 (855) 293

Basic (loss) income per share ($):

Continuing operations (0.003) (0.002) (0.005) (0.003)

Discontinued operations - 0.002 - 0.005

Results of Operations for the three and six months ended December 31, 2013compared to the three and six months ended December 31, 2012

The Corporation reported a loss from continuing operations of $491 and $855 for the threeand six months ended December 31, 2013 respectively (2012 - loss of $355 and $567,respectively).

The differences between the operating and financial results of the Corporation for the threeand six months ended December 31, 2013 and the operating and financial results of theCorporation for three and six months ended December 31, 2012 are principally due to:

The loss from continuing operations of $491 and $855 for the three and six monthsended December 31, 2013 (2012 – loss of $355 and $567 respectively) increasedprimarily due to the increase in costs to investigate and evaluate strategicinvestment opportunities, which are included in the office and administrationexpenses;Interest income of $73 and $147 for the three and six months ended December 31,2013 (2012 – income of $61 and 130 respectively) increased due to higher interestrates; andThere was no income from discontinued operations for the three and six monthsended December 31, 2013 (2012 – gain $397 and $860 respectively) as there wereno cash distributions of the Corporation's share of cash recovered from the windingdown of the Coalcorp International AVV subsidiaries, from the purchaser.

Significant transactions that financially impacted the Corporation during the six monthsended December 31, 2013 were:

- 5 -

Office and administrative expenses of $1,006 (2012 - $692) which include theprofessional costs incurred to investigate and evaluate strategic investmentopportunities.

Administrative Expenses

Office and administrative expenses were $569 and $1,006 for the three and six monthsended December 31, 2013, respectively (2012 - $422 and $692). Office and administrativeexpenses relate primarily to consulting, professional and administration expenses for thecontinuing operations of the Corporation and evaluation of new investment opportunities.

Other Income and Expense

Interest income earned on cash and investments during the three and six months endedDecember 31, 2013 amounted to $73 and $147, respectively (2012 - $61 and $130) andrelated primarily to the interest earned on the Corporation’s cash and cash equivalentbalances.

Total interest expense incurred during the three and six months ended December 31, 2013amounted to $nil and $nil, respectively (2012 - $nil and $nil) as the Corporation has nofinancial debt.

Foreign Exchange Gains/Losses

Foreign currency exchange rates affected the Corporation’s monetary assets and liabilitiesdenominated in currencies other than Canadian dollars. During the current fiscal year, theCorporation recorded a net foreign exchange gain of $5 for the three months endedDecember 31, 2013 and a gain of $4 for the six months ended December 31, 2013, ascompared to a gain of $6 and loss of $5 for the corresponding periods in 2012.

Results of Continuing Operations

As a result of the factors discussed above, the Corporation recorded losses from continuingoperations of $491 or $0.003 per share for the three months ended December 31, 2013 ascompared to loss from continuing operations of $355 or $0.002 per share for the threemonths ended December 31, 2012. Losses from continuing operations were $855 or$0.005 per share for the six months ended December 31, 2013 as compared to $567 or$0.003 per share during the six months ended December 31, 2012.

Results of Discontinued Operations

As a result of the Coalcorp AVV Transaction, the Corporation is entitled to receive, subjectto certain terms and conditions, a share of the net recoveries of cash that the purchaserreceives as a result of winding up or re-organizing any of Coalcorp International AVVsubsidiaries.

- 6 -

The Corporation recorded net income from discontinued operations of $nil in the threemonths ended December 31, 2013 (2012 – income of $397). The Corporation recordedincome from discontinued operations of $nil for the six months ended December 31, 2013(2012 - $860).

Net Profit/Loss

Taking into account both continuing and discontinuing operations, the Corporationrecorded a net loss of $491 or $0.003 per share (2012 – income of $42 or $0.00 per share)in the three month period ended December 31, 2013. The Corporation recorded a net lossof $855 or $0.005 per share for the six months ended December 31, 2013 (2012 – netincome of $293 or $0.002 per share).

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Summary of Quarterly Results(Fiscal year ended)

YE 2014 YE 2013 YE 2012

IFRS in millions of CDN$

Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3

Financial

($millions except per share)

Revenue from continuing operations - - - - - - - -

(Loss) / earnings from continuing operations (0.5) (0.4) (0.1) (0.1) (0.4) (0.2) (0.3) (0.5)

Net (loss) / income (0.5) (0.4) (0.1) 0.1 0.0 0.3 (0.3) (0.8)

(Loss)/earnings per share from continuing operations (0.003) (0.002) (0.001) (0.00) (0.002) (0.001) (0.001) (0.001)

Net (loss)/income per share (note1) (0.003) (0.002) (0.001) 0.001 0.0 0.001 (0.001) (0.003)

Cash (used in)/ provided by continuing operations (0.4) (0.2) (0.2) (0.3) (0.5) (0.2) 6.1 (0.6)

Capital expenditures - - - - - - - -

Cash and cash equivalents net of short-term debt 21.9 22.4 22.7 22.8 23.1 22.6 22.1 28.0

Note 1: Basic and dilutive loss per share is calculated by dividing the net loss by the weighted average number of shares in issue duringthe year. As a result of consolidated net losses the potential effect of exercising stock options and warrants has not beenincluded in the calculation of loss per share because to do so would be anti-dilutive.

Liquidity and Capital Resources

The continuing operations cash and cash equivalents balance as at December 31, 2013 was$ 22.3 million, compared to $22.9 million as at June 30, 2013.

The decrease in cash balances as at December 31, 2013 as compared to June 30, 2013 is theresult of payment of office and administrative expenses of $737 which includesprofessional fees pursuing investment opportunities and interest income of $147.

Melior believes that it has sufficient capital to meet its obligations as they come due and tocover continuing corporate costs estimated at approximately $850 per annum andadditional professional fees to pursue investment opportunities. Future investments will befunded from the Corporation’s current cash position. Additional funding may be requiredin the future, depending on the scale of prospective investment opportunities Meliorpursues.

Financial Instruments and Risk Management

The Corporation has classified its cash, cash equivalents, receivables and loans atamortized cost. Payables and accrued liabilities are classified as other financial liabilities,which are measured at amortized cost.

- 8 -

The carrying value of cash and equivalents, deposits, receivables, accounts payable andaccrued liabilities reflected in the consolidated statement of financial position approximatefair value because of the short term nature of these instruments.

The Corporation’s risk exposures and the impact on the Corporation’s financialinstruments are summarized below:

Credit Risk Management

The Corporation’s main credit risk arises from its cash and cash equivalents deposits withbanks. All of the Corporation’s cash and cash equivalents are with one major Canadianchartered bank, from which management believes the risk of loss to be remote. TheCorporation limits its counterparty credit risk on its deposits by dealing only with financialinstitutions with AA or above credit ratings.

Liquidity Risk Management

The Corporation manages liquidity risk by maintaining adequate cash balances in order tomeet liabilities as they come due. As at December 31, 2013, the Corporation had cash andcash equivalents of $22.3 million (December 31, 2012 - $23.1 million) to settle liabilitiesof $423 (December 31, 2012 - $362). None of the Corporation’s financial liabilities orcommitments are interest bearing.

Foreign Currency Risk Management

Cash and cash equivalents are comprised of cash at banks and on hand, and short termmoney market instruments with an original maturity of three months or less. As atDecember 31, 2013, approximately 1% of the Corporation’s cash and cash equivalentswere held in United States dollars. Accordingly, management believes that theCorporation is not exposed to material foreign exchange risk. The rate published by theBank of Canada at the close of business on December 31, 2013 was US$0.94 per Canadiandollar. The Corporation does not use derivative instruments to reduce its exposure toforeign currency risk.

Interest Rate Risk Management

The Corporation has cash balances that earn interest subject to fluctuations in the primerate. The Corporation’s current policy is to invest excess cash in investment-grade savingaccounts issued by banking institutions. The Corporation periodically monitors theinvestments it makes and is satisfied with the credit ratings of its banks. Managementbelieves the interest rate risk is remote as investments have maturities of three months orless and the Corporation currently does not carry interest bearing debt at floating rates.

- 9 -

Capital Risk Management

The Corporation defines capital as total shareholders’ equity including share capital, otherreserves and deficit. The Corporation manages its capital to ensure that adequate funds areavailable to settle its liabilities as they arise and reviews and evaluates investmentopportunities that are achievable within existing resources.

The Corporation is not subject to any externally imposed capital requirements including bya regulator or lending institution.

Commitments and Contingencies

All of the Corporation’s obligations in the aggregate amount of $423 as at December 31,2013 are current and due within the year. The Corporation has sufficient cash resources tomeet its current commitments

Debt

The Corporation did not have any debt outstanding as at December 31, 2013.

Off Balance Sheet Arrangements

The Corporation has no off-balance sheet arrangements.


Pala Investments Holding Limited (“Pala”) is a significant shareholder of AMR and ownseither directly or indirectly 94,528,199 or approximately 54.52% of the common shares ofMelior. As such, AMR is a “related party” of the Corporation for the purposes ofMultilateral Instrument 61-101 – Protection of Minority Security Holders in SpecialTransactions (“MI 61-101”) and the AMR investment constituted a “related partytransaction” within the meaning of MI 61-101. Further details with respect to the AMRshare purchase transaction can be found in Melior’s current annual information form.

Risk Factors

The Corporation is exposed to a number of risks and uncertainties. Such risks couldmaterially affect the Corporation’s future results and could cause actual events to differmaterially from those described in forward-looking statements relating to the Corporation.The risks described herein, or in documents incorporated by reference herein, may not bethe only risks facing the Corporation. Additional risks not currently known or not currentlyconsidered to be material may also have an adverse impact on the Corporation’s business.

Investment Risk

The success of the Corporation’s investment strategy will depend, in part, on its ability to:

- 10 -

• identify suitable investments;

• negotiate the purchase of such investments on terms acceptable to it;

• complete the investments within expected time frames; and

• capitalize on such investments.

The Corporation may not be able to identify appropriate investments or to acquire anysuitable investments that it identifies. Moreover, competition may reduce the number ofinvestment opportunities available to the Corporation and may lead to unfavourable termsas part of any investment, including high purchase prices.

Additional Capital Requirements

Melior has limited funds with which to develop and maintain its asset portfolio. Thepursuit of the Corporation’s business strategy may require substantial additional financing.Failure to obtain sufficient financing could result in a delay or abandonment of theCorporation’s business strategy. Additional financing may not be available when neededor, if available, the terms of such financing might not be favourable to the Corporation andmight involve substantial dilution to existing shareholders. Failure to raise capital whenneeded would have a material adverse effect on the Corporation’s ability to pursue itsbusiness strategy, and accordingly could negatively impact the Corporation’s business,financial condition and results of operations.

Diversification Risk

Melior is primarily engaged in making strategic investments in mining, metallurgical ormineral opportunities and the consequent concentration in those businesses may result in ahigher degree of volatility and price fluctuation than other investments that have betterindustry diversification. Melior will not enjoy the possible benefits associated with a morediversified asset portfolio. Moreover, even while Melior’s intention is towardsdiversifying its investments in the resource sector, its value is closely tied to its investmentsand any adverse change in these investments would have a significant impact on Melior’svalue. There can be no assurance that Melior’s investment activities will be profitable.There can be no assurance that Melior will be able to generate sufficient activity to beprofitable in the future and Melior’s limited operating history providing advisory servicesin the mining, metallurgical and mineral sectors makes an evaluation of its prospectsdifficult. Future results of operations may fluctuate significantly based upon numerousfactors including economic conditions, activities of competitors, commodity prices and theability of Melior to develop and maintain a diversified asset portfolio.

- 11 -

Economic Conditions

Unfavourable economic and equity market conditions, such as recessions, interest ratechanges or international currency fluctuations, may adversely impact Melior’s investmentactivities and, in the case of any loans Melior may make, the returns generated by thoseloans. A negative impact on the value of Melior’s portfolio or the returns thereon wouldlikely have a negative impact on the market price of the Common Shares and Warrants.Unfavourable economic and market conditions could also decrease Melior’s net income,reduce demand for its services, and limit access to capital markets.

Marketability and Underlying Securities

The value of the Common Shares and Warrants will vary according to the value of thesecurities in which Melior invests, which will depend, in part, upon the performance of theissuers of such securities. Fluctuations in the market values of such securities may occurfor a number of reasons beyond the control of Melior including economic conditions,investor sentiment, global events and prices for base and precious metals. There is noassurance that an adequate market will exist for securities acquired by Melior. Certaininvestments made by Melior, including those securities listed on an exchange and notsubject to resale restrictions, may be relatively illiquid and may decline in price if asignificant number of such securities are offered for sale. In the case of equity investmentsin private issuers, there would be no public market and a risk that one may never develop.

Risks Associated with Investments in Resource IssuersIn general, Melior’s business is to make investments (debt, equity or a combination ofboth) in mining, metallurgical or mineral resource issuers. The business activities ofresources issuers are typically speculative and may be adversely affected by sector specificrisk factors, outside the control of the resource issuer, which may ultimately have animpact on Melior’s investments in these businesses. Risks associated with the resourcesector include, without limitation, the following:

the business of exploring minerals involves a high degree of risk. Many of the risksassociated with exploration are beyond control of resource issuers. Many of theresource issuers that Melior invests in may not hold, discover or successfullyexploit commercial quantities of minerals and/or may not have a history of earningsor payment of dividends;the marketability of natural resources which may be acquired or discovered by aresource issuer will be affected by numerous factors beyond the control of suchresource issuer. These factors include market fluctuations in the price of metals,metal concentrates, and minerals, the proximity and capacity of natural resourcemarkets and processing equipment, government regulations, including regulationsrelating to prices, taxes, royalties, land tenure, land use, importing and exporting ofmaterials and environmental protection. The exact effect of these factors cannot beaccurately predicted, but any one, or a combination of, these factors could result ina resource issuer not producing an adequate return for shareholders;

- 12 -

a resource issuer may become subject to liability for pollution, cave-ins or otherhazards against which a resource issuer cannot insure or against which it may electnot to insure. Such liabilities may have a material, adverse effect on such resourceissuer’s financial position and on the value of the securities of such resource issuerheld as part of Melior’s investment portfolio;a resource issuer’s operations are subject to government legislation, policies andcontrols relating to prospecting, land use, trade, environmental protection, taxation,rates of exchange, return of capital and labour relations. A resource issuer’sproperty interests may be located in foreign jurisdictions, and its explorationoperations in such jurisdictions may be affected in varying degrees by the extent ofpolitical and economic stability, and by changes in regulations or shifts in politicalor economic conditions that are beyond the control of the resource issuer. Suchfactors may adversely affect the resource issuer’s business and/or its propertyholdings. Although a resource issuer’s exploration activities may be carried out inaccordance with all applicable rules and regulations at any point in time, noassurance can be given that new rules and regulations will not be enacted or thatexisting rules and regulations will not be applied in a manner that could limit orcurtail production or development of the resource issuer’s operations.Amendments to current laws and regulations governing the operations of a resourceissuer or more stringent enforcement of such laws and regulations could have asubstantial adverse impact on the financial results of the resource issuer; anda resource issuer’s operations may be subject to environmental regulations enactedby government agencies from time to time. A breach of such legislation may resultin the imposition on the resource issuer of fines and penalties. In addition, certaintypes of operations require the submission and approval of environmental impactassessments. Environmental legislation is evolving in a manner which has lead tostricter standards and enforcement and greater fines and penalties fornon-compliance. The cost of compliance with government regulations may reducethe profitability of a resource issuer’s operations.

Competition

Melior operates in the extremely competitive financial services industry and competes witha large number of companies that provide equity, debt and/or mezzanine financing. Manyof Melior’s competitors have greater financial, technical and other resources than Melior.These competitors may be able to respond more quickly and successfully to new orchanging opportunities.

Realization of Benefits from Investments

There is a risk that some or all of the expected benefits of investments may fail tomaterialize, or may not occur within the time periods anticipated by management of theCorporation. The realization of such benefits may be affected by a number of factors, manyof which are beyond the control of the Corporation. The failure to realize some or all of theexpected benefits of such investments could have a material adverse effect on the business,financial condition and results of operations of the Corporation.

- 13 -

Attraction and Retention of Personnel

The Board may experience delays in hiring, or be unable to hire or retain, experienced andqualified new management for the Corporation within the timeframes necessary or uponterms acceptable to the Corporation. The competition for qualified personnel in the miningand metallurgical industry is intense and there can be no assurance that the Corporationwill be able to attract and retain the personnel necessary for the implementation of itsbusiness strategy.

Reliance on Key Personnel

Melior is dependent upon the personal efforts, performance and commitment of itsmanagement and the Board, who are responsible for the future development of Melior’sbusiness. To carry out its investment activities, Melior will be relying upon the businessjudgment, expertise and integrity of Melior’s management and the Board. To the extentthat the services of any member of management or the Board became unavailable for anyreason, a disruption to the operations of Melior could result and may delay theimplementation of the Corporation’s business strategy.


Melior’s directors and officers may serve as directors or officers of other companies in thesame business as Melior, natural resource companies or companies providing services toMelior, or they may have significant shareholdings in other resource companies. To theextent that such companies participate in transactions in which Melior participates, thedirectors of Melior may have a conflict of interest in negotiating and concluding terms tothe extent of such participation. Furthermore, part of Melior’s investment strategy is toplace at least one Melior nominee on the board of directors of its investee companies.Confidentiality and judiciary conflict issues may arise and any director may be recusedfrom participating in or voting at a Board meeting. If a conflict of interest arises at a Boardmeeting, any director who has a conflict will abstain from voting in connection with thetransaction in accordance with the Business Corporations Act (British Columbia).

Foreign Currency Risk

The Corporation’s functional currency is the Canadian Dollar; however, future majorinvestments may be transacted in US dollars or other foreign currencies. Accordingly, theCorporation is subject to the risks inherent in exchange rate fluctuations.

Credit Risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its paymentobligations. The Corporation is subject to credit risk primarily attributable to its cash andshort-term investments.

- 14 -

Outstanding Share Data

As at February 21, 2014, the Corporation has 173,380,974 common shares outstanding,which are listed on the TSX Venture Exchange under the symbol “MLR”. TheCorporation also has 2,010,000 stock options (each exercisable for one common share)outstanding which, if exercised, would result in proceeds of approximately $628,200.

Additional Information

Additional information relating to the Corporation, including the Corporation’s annualinformation form for the year ended June 30, 2013, is available for viewing on SEDAR atwww.sedar.com and on the Corporation’s web site at www.meliorresources.com. TheCorporation cautions that information contained on, or accessible through, these websitesis current only as at the date of such information.

Management’s Discussion and AnalysisConsolidated Financial Statements

MELIOR RESOURCES INC.(FORMERLY COALCORP MINING INC.)

Year endedJune 30, 2013

1


Management’s Discussion and Analysis of Financial Condition and Results of OperationsFor The Year Ended June 30, 2013


Information contained in this Management’s Discussion and Analysis (“MD&A”) is given as ofSeptember 11, 2013 unless otherwise indicated. All amounts are in Canadian dollars unlessotherwise noted.

This MD&A should be read in conjunction with the audited financial statements and accompanyingnotes of the Corporation for the fiscal year ended June 30, 2013 and the audited financialstatements and accompanying notes and related MD&A of the Corporation for the fiscal year endedJune 30, 2012.

IFRS replaced Canadian GAAP for publicly accountable enterprises, including the Corporation,effective for interim and annual financial statements relating to fiscal years beginning on or afterJanuary 1, 2011. Accordingly, the accompanying financial statements for the year ended June 30,2013 have been prepared in accordance with accounting policies consistent with IFRS. Thetransition to IFRS required a restatement of the Corporation’s fiscal 2011 financial informationfrom its original Canadian GAAP basis to ensure that the fiscal 2011 comparative informationpresented in the financial statements and this MD&A reflect accounting policies consistent withIFRS.

Financial information for periods prior to July 1, 2010 has not been restated for the changes inaccounting policies resulting from the adoption of IFRS, however the financial position as at July 1,2010 has. For the purposes of this MD&A, the term “Canadian GAAP” refers to Canadiangenerally accepted accounting principles before the adoption of IFRS.


This MD&A contains certain forward-looking statements. Forward-looking statements generallycan be identified by the use of statements that include words such as “believe”, “expect”,“anticipate”, “intend”, “plan”, “estimate”, “may”, “will” or other similar words or phrasessuggesting future outcomes or other expectations, beliefs, estimates, plans, objectives,assumptions, projections, intentions or statements about future events or performance. Similarly,statements contained in, but not limited to, the sections “Overview of the Corporation’s Business”,“Outlook”, “Results of Discontinued Operations”, “Liquidity and Capital Resources”, and“Commitments and Contingencies” of this MD&A, including those with respect to expectationsconcerning assets, prices, foreign exchange rates, earnings, market conditions, capitalexpenditures, risks, availability of regulatory approvals, corporate objectives and plans or goals,are or may be forward-looking statements. Forward-looking statements involve significant risksand uncertainties, should not be read as guarantees of future performance or results, and will notnecessarily be accurate indications of whether or not such results will be achieved. A number offactors could cause actual results to differ materially from the results discussed in theforward-looking statements including, but not limited to, the factors discussed under “Risk

2

Factors”. Although the forward-looking statements contained in this MD&A are based upon whatmanagement of the Corporation believes are reasonable assumptions, the Corporation cannotassure readers that actual results will be consistent with these forward-looking statements.Investors and others should carefully consider risk factors including, without limitation, those setout under the heading “Risk Factors”, and not place undue reliance on forward-looking statements.Forward-looking statements are made as of the date of this MD&A and the Corporation assumes noobligation to update or revise any forward looking statements to reflect new events orcircumstances, except as required by law.

Forward-looking statements in this MD&A include, but are not limited to, statements with respectto:

the implementation of the Corporation’s business strategy; and

the development of the Corporation’s potential investment opportunities.


On March 31, 2011, the Corporation announced it had developed and adopted a revised businessstrategy, intended to capitalize on the Board’s and management’s expertise and enable theCorporation to invest and aid growth in projects in the mining, metallurgical and mineral industries,in connection with its graduation to the TSX Venture Exchange.

The strategy calls for strategic investments in resource based opportunities offering capitalappreciation potential, in particular, debt or equity participation in investee companies, withprojects nearing maturity. Melior believes it can add value through active involvement from notonly a financial standpoint, but also by the contribution of guidance and additional mining andcorporate finance expertise. Melior may make initial investments of debt, equity or a combinationthereof in public or private companies through a variety of financial instruments including, but notlimited to, private placements, participation in initial public offerings, convertible loans, loans withequity bonus provisions or purchase options and the like. In most cases, one or more nominees ofthe Corporation will join the board of directors of the investee company.


On March 16, 2012, the Corporation completed the sale of all of the common stock of its whollyowned subsidiary, Coalcorp International AVV, which was the holding company for numerousoff-shore subsidiaries. As of the closing date, the purchaser acquired, on an ‘as is, where is’ basis,all of the issued and outstanding shares of Coalcorp International AVV for nominal net proceeds ofone dollar (the “Coalcorp AVV Transaction”). As a result of the Coalcorp AVV Transaction,assets of discontinued operations of $3.6 million, liabilities of discontinued operations of $0.4million and other associated liabilities of $3.0 million were removed from Melior’s balance sheetas of the closing, resulting in a net loss on disposal of $275 during the year ended June 30, 2012.Under the agreement for the Coalcorp AVV Transaction, the Corporation is entitled to receive,subject to certain terms and conditions, a share of net recoveries of cash, if any, that the purchaserreceives as a result of winding up or re-organizing any of the Coalcorp International AVVsubsidiaries. During the year ended June 30, 2013 the Corporation received $1,141 from thepurchaser of Coalcorp International AVV for its share of cash recovered. The receipts wererecognised as a gain from discontinued operations.

3

Changes to Board of Directors and Officers

On October 2, 2012, the Corporation announced the appointment of Mr. Thomas Masney, CA asthe Chief Financial Officer on the resignation of Mr. Rishi Tibriwal.

On February 14, 2013, Mr. Charles Entrekin, Mr. Evgenij Iorich, Mr. Remo Mancini and Mr.Muneeb Yusuf were elected as directors of Melior at the annual and special meeting of theshareholders.


On June 25, 2012, Melior entered into a subscription agreement (as amended on June 29, 2012)with Asian Mineral Resources Limited (“AMR”), pursuant to which the Corporation acquired47,272,727 common shares in the capital of AMR. The investment is recorded at fair value. AMRused the proceeds to fund capital expenditures to bring its Ban Phuc Nickel Project into commercialproduction. The Ban Phuc nickel mine was officially opened on June 29, 2013.

Letter of Intent with Firestone Ventures Inc.

On May 16, 2012, Melior announced that its Board had commenced a review of strategicalternatives with the objective of enhancing shareholder value. On July 5, 2013 the Corporationannounced that it had entered into a letter of intent in connection with a proposed transactionpursuant to which Melior would acquire all of the issued and outstanding common shares ofFirestone Ventures Inc. (“Firestone”) in consideration for the issuance to Firestone shareholders ofone Melior common share for each 2.895 Firestone common shares held. The proposed transactionwas subject to a number of conditions, including confirmatory due diligence by Melior and thenegotiation of mutually satisfactory definitive acquisition documentation. Melior also announcedthat Melior had agreed to provide Firestone with a bridge loan of up to $500,000. On August 30,2013, Melior announced that it had terminated the bridge loan, under which no amounts had beenadvanced, and that it no longer intended to proceed with its proposed acquisition of Firestone.

Outlook

The Corporation continues to evaluate its options including, but not limited to, continuing toexplore investment opportunities, a corporate reorganization or other strategic options.

4



IFRS in CDN$

($ thousands) 2013 2012 2011


(Loss) from continuing operations ( 857 ) (4,587) (5,799)

Earnings (loss) from discontinued operations 1,141 (271) 624

Net income (loss) for year 284 (4,858) (5,175)

Basic earnings (loss) per share ($)(1):Continuing operations (0.00) (0.03) (0.03)Discontinued operations 0.01 0.00 0.00

Total assets 24,377 27,001 43,806Total long and short term obligations 165 236 11,720

1. Basic and dilutive loss per share is calculated by dividing the net loss by the weighted average number of shares inissue during the year. As a result of consolidated net losses the potential effect of exercising stock options and, asapplicable, warrants has not been included in the calculation of loss per share because to do so would beanti-dilutive.

Results of continuing operations for the three months ended June 30, 2013 compared to thethree months ended June 30, 2012

The Corporation reported a loss from continuing operations of $140 for the three months endedJune 30, 2013 as compared to a loss of $218 during the three months ended June 30, 2012.

The decrease in net loss from continuing operations of $78 is principally due to lower professionalfees relating to actual and potential acquisitions and higher investment income.

Results of continuing operations for the year ended June 30, 2013 compared to the yearended June 30, 2012

The Corporation reported a loss from continuing operations of $857 for the year ended June 30,2013 as compared to a loss of $4,587 during the year ended June 30, 2012.

The decrease in net loss from continuing operations of $3,712 is principally due to the:

Decrease on the net loss of $2,976 on the disposal of marketable securities of Oracle MiningCorp. and Formation Metals Inc. during the year ended June 30, 2012 to nil during the yearended June 30, 2013;Decrease in share-based compensation from $425 during the year ended June 30, 2012 to nilduring the year ended June 30, 2013;Decrease in interest expense on the Corporation’s 12% senior secured guaranteed notes dueAugust 31, 2011 (the “Senior Notes”) from $191 during the year ended June 30, 2012 to nilduring the year ended June 30, 2013 as the Senior Notes matured on August 31, 2011;Decrease in the foreign exchange gain by $132 from $139 during the year ended June 30, 2012to $7 during the year ended June 30, 2013, as only a small amount of cash and cash equivalentswere held in foreign currency during the year ended June 30, 2013.

5

Increase in interest income of $80 from $210 during the year ended June 30, 2012 to $290during the year ended June 30, 2013. The Corporation only earned interest income on its cashbalances during the years ended June 30, 2012 and 2013 and higher rates of interest during theyear ended June 30, 2013 resulted in the increase in interest income;Decrease in office and administrative expenses of $190 from $1,344 during the year endedJune 30, 2012 to $1,154 during the year ended June 30, 2013 as a result of the reduced activitiesof the Corporation.

General and Administrative Expenses

General and administrative expenses were $233 and $1,154 for the three months and year endedJune 30, 2013, respectively (2012 - $280 and $1,344). General and administrative expenses relateprimarily to consulting, professional and administration expenses for the continuing operations ofthe Corporation and the evaluation of new investment opportunities and have decreased ascompared to the corresponding period in the prior year as a result of the decreased activities of theCorporation.

Interest Income and Expense

Interest income earned during the three months and year ended June 30, 2013 amounted to $83 and$290, respectively (2012 - $68 and $210) and related to the interest earned on the Corporation’scash and cash equivalent balances. Increases in the amount of interest earned on cash balanceswere the reason for the increase in the amount of interest earned during the periods.

Total interest expense incurred during the three months and year ended June 30, 2013 amounted tonil and nil, respectively (2012 - $nil and $191). The decrease in the interest expense is due to theSenior Notes having matured on August 31, 2011.


Foreign currency exchange rates affected the Corporation’s monetary assets and liabilitiesdenominated in currencies other than Canadian dollars. The Corporation recorded a net foreignexchange gain of $6 for the three months ended June 30, 2013 and a gain of $7 for the year thenended, as compared to a gain of $1 and $139 for the corresponding periods in 2012. The change inthe foreign exchange gain from 2012 to 2013 was a result of the movement of a significant amountof US dollar denominated cash balances of the Corporation to Canadian dollars. At June 30, 2013,the Corporation holds only a nominal amount of cash denominated in US dollars and has nosignificant foreign currency denominated liabilities.

Share Based Compensation

The Corporation did not grant stock options during the twelve months ended June 30, 2013. TheCorporation granted 3,090,000 stock options to the directors and officers of the Corporation inSeptember 2011. All of these options were granted under the Corporation’s stock option plan,vested immediately and are exercisable for a period of 7 years from the date of the grant.

The Corporation recorded share based compensation of $425 using the Black Scholes optionpricing model to estimate the fair value of the options granted and used the following assumptions:

Risk-free interest rate 1.85%Expected stock price annual volatility 100.0%

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Expected life 7 yearsEstimated forfeiture rate NilExpected dividend yield 0.0%Fair value cost per option $0.108


As a result of the factors discussed above, the Corporation recorded losses from continuingoperations of $140 or $0.001 per share for the three months ended June 30, 2013 as compared tolosses from continuing operations of $218 or $0.001 per share for the three months ended June 30,2012. Losses from continuing operations were $857 or $0.00 per share for the year ended June 30,2013 as compared to $4,587 or $0.03 per share during the year ended June 30, 2012.


On March 16, 2012, the Corporation completed the sale of all of the common stock of its whollyowned subsidiary, Coalcorp International AVV for nominal net proceeds of one dollar. As a resultof the Coalcorp AVV Transaction, assets of discontinued operations of $3.6 million, liabilities ofdiscontinued operations of $0.4 million and other associated liabilities of $3.0 million wereremoved from Melior’s balance sheet, resulting in a net loss on disposal of $275 during the yearended June 30, 2012.

The Corporation is entitled to receive, subject to certain terms and conditions, a share of netrecoveries of cash, if any, that the purchaser of Coalcorp International AVV receives as a result ofwinding up or re-organizing any of the Coalcorp International AVV subsidiaries. The Corporationreceived $463 on August 2, 2012, a further $397 on December 12, 2012 and a further $281 onMarch 11, 2013 for its share of cash recovered and $1,141 has been recognised as income fromdiscontinued operations in the twelve months ended June 30, 2013.

Net Profit/Loss

Taking into account both continuing and discontinuing operations, the Corporation recorded a net

loss of $140 or $0.001 per share in the three month period ended June 30, 2013 (2012 – loss of $218

or $0.001 per share). The Corporation recorded a net income of $284 or $0.002 per share for the

year ended June 30, 2013 (2012 – loss of $4,858 or $0.03 per share).

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Summary of Quarterly Results

Year End 2013 Year End 2012

IFRS in millions of Canadian dollars

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Financial



Earnings from continuing operations (0.1) (0.1) (0.4) (0.2) (0.3) (0.5) (4.2) 0.4

Net earnings/(loss) (0.1) 0.1 (0.0) 0.3 (0.3) (0.8) (4.2) 0.4

Earnings/(loss) per share from continuing operations (0.001) (0.000) (0.002) (0.001) (0.001) (0.001) (0.02) 0.002

Net earnings/(loss) per share (1) (0.001) 0.001 0.000 0.001 (0.001) (0.003) (0.03) 0.002

Cash (used in) provided by continuing operations (0.2) (0.3) (0.2) (0.2) 6.1 (0.6) (0.6) (4.2)



(1) Basic and dilutive loss per share is calculated by dividing the net loss by the weighted average number of shares in issueduring the year. As a result of consolidated net losses the potential effect of exercising stock options and, as applicable,warrants has not been included in the calculation of loss per share because to do so would be anti-dilutive.


The continuing operations cash and cash equivalents balance as at June 30, 2013 was $22.9 million,compared to $22.3 million as at June 30, 2012.

The $0.6 million increase in cash balances as at June 30, 2013 as compared to June 30, 2012 is theresult of payment of office and administrative expenses of $1,154, interest income of $290, therepayment of an advance of $300 from AMR and cash receipts from discontinued operations of$1,141.

Melior believes that it has sufficient capital to meet its obligations as they come due and to covercontinuing corporate costs estimated at approximately $0.9 million per annum. Future investmentswill be funded from the Corporation’s current cash position. Additional funding may be required inthe future, depending on the scale of prospective investment opportunities Melior pursues.


The Corporation has classified its cash, cash equivalents and receivables as loans and receivables,which are measured at amortized cost. Payables and accrued liabilities are classified as otherfinancial liabilities, which are measured at amortized cost.

The carrying value of cash and equivalents, deposits, receivables, accounts payable and accruedliabilities reflected in the consolidated statement of financial position approximate fair valuebecause of the short term nature of these instruments.

The Corporation’s risk exposures and the impact on the Corporation’s financial instruments aresummarized below:

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The Corporation’s main credit risk arises from its cash and cash equivalents deposits with banks.All of the Corporation’s cash and cash equivalents are with one major Canadian chartered bank,from which management believes the risk of loss to be remote. The Corporation limits itscounterparty credit risk on its deposits by dealing only with financial institutions with AA or abovecredit ratings.


The Corporation manages liquidity risk by maintaining adequate cash balances in order to meetliabilities as they come due. As at June 30, 2013, the Corporation had cash and cash equivalents of$22.9 million (June 30, 2012 - $22.3 million) to settle liabilities of $0.2 million (June 30, 2012 -$0.2 million). None of the Corporation’s financial liabilities or commitments are interest bearing.


Cash and cash equivalents are comprised of cash at banks and on hand, and short term moneymarket instruments with an original maturity of three months or less. As at June 30, 2013, only anominal portion of the Corporation’s cash and cash equivalents were held in United States dollars.Accordingly, management believes that the Corporation is not exposed to material foreignexchange risk. The rate published by the Bank of Canada at the close of business on June 30, 2013was US$0.9508 per Canadian dollar. The Corporation does not use derivative instruments toreduce its exposure to foreign currency risk.


The Corporation has cash balances that earn interest subject to fluctuations in the prime rate. TheCorporation’s current policy is to invest excess cash in investment-grade deposit certificates issuedby its banking institutions. The Corporation periodically monitors the investments it makes and issatisfied with the credit ratings of its banks. Management believes the interest rate risk is remote asinvestments have maturities of three months or less and the Corporation currently does not carryinterest bearing debt at floating rates.


The Corporation defines capital as total shareholders’ equity including share capital, other reservesand deficit. The Corporation manages its capital to ensure that adequate funds are available tosettle its liabilities as they arise and reviews and evaluates investment opportunities that areachievable within existing resources.

The Corporation is not subject to any externally imposed capital requirements including by aregulator or lending institution.


All of the Corporation’s obligations in the aggregate amount of $0.2 million, as at June 30, 2013 arecurrent and due within the year. The Corporation has sufficient cash resources to meet its currentcommitments

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Debt

Throughout the year ended June 30, 2011, US$8.27 million principal amount of Senior Notes wereoutstanding. The Senior Notes matured on August 31, 2011, for which a final payment of US$8.4million in respect of principal and interest was made.

The Corporation did not have any debt outstanding as at June 30, 2013.




Pala Investments Holding Limited (“Pala”) is a significant shareholder of AMR and owns eitherdirectly or indirectly 94,528,199 or approximately 54.52% of the common shares of Melior. Assuch, AMR is a “related party” of the Corporation for the purposes of Multilateral Instrument61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) and theAMR investment constituted a “related party transaction” within the meaning of MI 61-101.Further details with respect to the AMR share purchase transaction can be found in Melior’s currentannual information form.

Risk Factors

The Corporation is exposed to a number of risks and uncertainties. Such risks could materiallyaffect the Corporation’s future results and could cause actual events to differ materially from thosedescribed in forward-looking statements relating to the Corporation. The risks described herein, orin documents incorporated by reference herein, may not be the only risks facing the Corporation.Additional risks not currently known or not currently considered to be material may also have anadverse impact on the Corporation’s business.

Investment Risk






The Corporation may not be able to identify appropriate investments or acquire any suitableinvestments that it identifies. Moreover, competition may reduce the number of investmentopportunities available to the Corporation and may lead to unfavourable terms as part of anyinvestment, including high purchase prices.

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Melior has limited funds with which to develop and maintain its asset portfolio. The pursuit of theCorporation’s business strategy may require substantial additional financing. Failure to obtainsufficient financing could result in a delay or abandonment of the Corporation’s business strategy.Additional financing may not be available when needed or, if available, the terms of such financingmight not be favourable to the Corporation and might involve substantial dilution to existingshareholders. Failure to raise capital when needed would have a material adverse effect on theCorporation’s ability to pursue its business strategy, and accordingly could negatively impact theCorporation’s business, financial condition and results of operations.


Melior is primarily engaged in making strategic investments in mining, metallurgical or mineralopportunities and the consequent concentration in those businesses may result in a higher degree ofvolatility and price fluctuation than other investments that have better industry diversification.Melior will not enjoy the possible benefits associated with a more diversified asset portfolio.Moreover, even while Melior’s intention is towards diversifying its investments in the resourcesector, its value is closely tied to its investments and any adverse change in these investmentswould have a significant impact on Melior’s value. There can be no assurance that Melior’sinvestment activities will be profitable. There can be no assurance that Melior will be able togenerate sufficient activity to be profitable in the future and Melior’s limited operating historyproviding advisory services in the mining, metallurgical and mineral sectors makes an evaluationof its prospects difficult. Future results of operations may fluctuate significantly based uponnumerous factors including economic conditions, activities of competitors, commodity prices andthe ability of Melior to develop and maintain a diversified asset portfolio.

Economic Conditions

Unfavourable economic and equity market conditions, such as recessions, interest rate changes orinternational currency fluctuations, may adversely impact Melior’s investment activities and, in thecase of any loans Melior may make, the returns generated by those loans. A negative impact on thevalue of Melior’s portfolio or the returns thereon would likely have a negative impact on the marketprice of the Corporation’s common shares. Unfavourable economic and market conditions couldalso decrease Melior’s net income, reduce demand for its services, and limit access to capitalmarkets.


The value of the Corporation’s common shares will vary according to the value of the securities in

which Melior invests, which will depend, in part, upon the performance of the issuers of such

securities. Fluctuations in the market values of such securities may occur for a number of reasons

beyond the control of Melior including economic conditions, investor sentiment, global events and

prices for base and precious metals. There is no assurance that an adequate market will exist for

securities acquired by Melior. Certain investments made by Melior, including those securities

listed on an exchange and not subject to resale restrictions, may be relatively illiquid and may

decline in price if a significant number of such securities are offered for sale. In the case of equity

investments in private issuers, there would be no public market and a risk that one may never

develop.

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Risks Associated with Investments in Resource Issuers

In general, Melior’s business is to make investments (debt, equity or a combination of both) inmining, metallurgical or mineral resource issuers. The business activities of resources issuers aretypically speculative and may be adversely affected by sector specific risk factors, outside thecontrol of the resource issuer, which may ultimately have an impact on Melior’s investments inthese businesses. Risks associated with the resource sector include, without limitation, thefollowing:

the business of exploring minerals involves a high degree of risk. Many of the risksassociated with exploration are beyond control of resource issuers. Many of the resourceissuers that Melior invests in may not hold, discover or successfully exploit commercialquantities of minerals and/or may not have a history of earnings or payment of dividends;

the marketability of natural resources which may be acquired or discovered by a resourceissuer will be affected by numerous factors beyond the control of such resource issuer.These factors include market fluctuations in the price of metals, metal concentrates, andminerals, the proximity and capacity of natural resource markets and processingequipment, government regulations including regulations relating to prices, taxes,royalties, land tenure, land use, importing and exporting of materials and environmentalprotection. The exact effect of these factors cannot be accurately predicted, but any one, ora combination, of these factors could result in a resource issuer not producing an adequatereturn for shareholders;

a resource issuer may become subject to liability for pollution, cave-ins or other hazardsagainst which a resource issuer cannot insure, or against which it may elect not to insure.Such liabilities may have a material, adverse effect on such resource issuer’s financialposition and on the value of the securities of such resource issuer held as part of Melior’sinvestment portfolio;

a resource issuer’s operations are subject to government legislation, policies and controlsrelating to prospecting, land use, trade, environmental protection, taxation, rates ofexchange, return of capital and labour relations. A resource issuer’s property interests maybe located in foreign jurisdictions; its exploration operations in such jurisdictions may beaffected in varying degrees by the extent of political and economic stability and by changesin regulations or shifts in political or economic conditions that are beyond the control of theresource issuer. Such factors may adversely affect the resource issuer’s business and/or itsproperty holdings. Although a resource issuer’s exploration activities may be carried outin accordance with all applicable rules and regulations at any point in time, no assurancecan be given that new rules and regulations will not be enacted or that existing rules andregulations will not be applied in a manner that could limit or curtail production ordevelopment of the resource issuer’s operations. Amendments to current laws andregulations governing the operations of a resource issuer or more stringent enforcement ofsuch laws and regulations could have a substantial adverse impact on the financial resultsof the resource issuer; and

a resource issuer’s operations may be subject to environmental regulations enacted bygovernment agencies from time to time. A breach of such legislation may result in theimposition on the resource issuer of fines and penalties. In addition, certain types ofoperations require the submission and approval of environmental impact assessments.Environmental legislation is evolving in a manner which has lead to stricter standards and

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enforcement and greater fines and penalties for non-compliance. The cost of compliancewith government regulations may reduce the profitability of a resource issuer’s operations.

Competition

Melior operates in the extremely competitive financial services industry and competes with a largenumber of companies that provide equity, debt and/or mezzanine financing. Many of Melior’scompetitors have greater financial, technical and other resources than Melior. These competitorsmay be able to respond more quickly and successfully to new or changing opportunities.


There is a risk that some or all of the expected benefits of investments may fail to materialize, ormay not occur within the time periods anticipated by management of the Corporation. Therealization of such benefits may be affected by a number of factors, many of which are beyond thecontrol of the Corporation. The failure to realize some or all of the expected benefits of suchinvestments could have a material adverse effect on the business, financial condition and results ofoperations of the Corporation.


The Board may experience delays in hiring, or be unable to hire or retain, experienced and qualifiednew management for the Corporation within the timeframes necessary or upon terms acceptable tothe Corporation. The competition for qualified personnel in the mining and metallurgical industryis intense and there can be no assurance that the Corporation will be able to attract and retain thepersonnel necessary for the implementation of its business strategy.


Melior is dependent upon the personal efforts, performance and commitment of its managementand the Board, who are responsible for the future development of Melior’s business. To carry outits investment activities, Melior will be relying upon the business judgment, expertise and integrityof Melior’s management and the Board. To the extent that the services of any member ofmanagement or the Board became unavailable for any reason, a disruption to the operations ofMelior could result and may delay the implementation of the Corporation’s business strategy.


Melior’s directors and officers may serve as directors or officers of other companies in the samebusiness as Melior, natural resource companies or companies providing services to Melior, or theymay have significant shareholdings in natural resource companies. To the extent that suchcompanies participate in transactions in which Melior participates, the directors of Melior mayhave a conflict of interest in negotiating and concluding terms to the extent of such participation.Furthermore, part of Melior’s investment strategy is to place at least one Melior nominee on theboard of directors of its investee companies. Confidentiality and judiciary conflict issues may ariseand any director may be recused from participating in or voting at a Board meeting. If a conflict ofinterest arises at a Board meeting, any director who has a conflict will abstain from voting inconnection with the transaction in accordance with the Business Corporations Act (BritishColumbia).

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The Corporation’s functional currency is the Canadian Dollar; however, future major investmentsmay be transacted in US dollars or other foreign currencies. Accordingly, the Corporation issubject to the risks inherent in exchange rate fluctuations.

Credit Risk



As at September 11, 2013, the Corporation has 173,380,974 common shares outstanding, which arelisted on the TSX Venture Exchange under the symbol “MLR”. The Corporation also has2,010,000 stock options (each exercisable for one common share) outstanding which, if exercised,would result in proceeds of approximately $828,200.


Additional information relating to the Corporation, including the Corporation’s current annualinformation form, is available for viewing on SEDAR at www.sedar.com and on the Corporation’sweb site at www.meliorresources.com. The Corporation cautions that information contained on, oraccessible through, these websites is current only as at the date of such information.

Management and Discussion AnalysisConsolidated Financial Statements



1


Management’s Discussion and Analysis of Financial Condition and Results of OperationsFor The Year Ended June 30, 2012


Information contained in this discussion is given as of October 16, 2012 unless otherwise indicated.All amounts are in Canadian dollars unless otherwise noted.

This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with theaudited consolidated financial statements and accompanying notes of the Corporation for the fiscalyear ended June 30, 2012 and the audited consolidated financial statements and accompanyingnotes and related MD&A of the Corporation for the fiscal year ended June 30, 2011.

IFRS replaced Canadian GAAP for publicly accountable enterprises, including the Corporation,effective for interim and annual financial statements relating to fiscal years beginning on or afterJanuary 1, 2011. Accordingly, the accompanying financial statements for the year ended June 30,2012 have been prepared in accordance with accounting policies consistent with IFRS. Thetransition to IFRS required a restatement of the Corporation’s fiscal 2011 financial informationfrom its original Canadian GAAP basis to ensure that the fiscal 2011 comparative informationpresented in the financial statements and this MD&A reflect accounting policies consistent withIFRS.

Financial information for periods prior to July 1, 2010 has not been restated for the changes inaccounting policies resulting from the adoption of IFRS, however the financial position as at July 1,2010 has. For the purposes of this MD&A, the term “Canadian GAAP” refers to Canadiangenerally accepted accounting principles for the Corporation before the adoption of IFRS.

Readers of this MD&A should refer to “Changes in Accounting Policies” below, and Note 16 of theaccompanying consolidated financial statements, for a discussion of IFRS and its impact on theCorporation’s financial statements.


This MD&A contains certain forward-looking statements. Forward-looking statements generallycan be identified by the use of statements that include words such as “believe”, “expect”,“anticipate”, “intend”, “plan”, “estimate”, “may”, “will” or other similar words or phrasessuggesting future outcomes or other expectations, beliefs, estimates, plans, objectives,assumptions, projections, intentions or statements about future events or performance. Similarly,statements contained in, but not limited to, the sections “Overview of the Corporation’s Business”,“Outlook”, “Results of Discontinued Operations”, “Liquidity and Capital Resources”,“Commitments and Contingencies” and “Changes in Accounting Policies” of this MD&A,including those with respect to expectations concerning assets, prices, foreign exchange rates,earnings, market conditions, capital expenditures, risks, availability of regulatory approvals,corporate objectives and plans or goals, are or may be forward-looking statements.Forward-looking statements involve significant risks and uncertainties, should not be read asguarantees of future performance or results, and will not necessarily be accurate indications of

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whether or not such results will be achieved. A number of factors could cause actual results to differmaterially from the results discussed in the forward-looking statements including, but not limitedto, the factors discussed under “Risk Factors”. Although the forward-looking statements containedin this MD&A are based upon what management of the Corporation believes are reasonableassumptions, the Corporation cannot assure readers that actual results will be consistent with theseforward-looking statements. Investors and others should carefully consider risk factors including,without limitation, those set out under the heading “Risk Factors”, and not place undue reliance onforward-looking statements. Forward-looking statements are made as of the date of this MD&Aand the Corporation assumes no obligation to update or revise any forward looking statements toreflect new events or circumstances, except as required by law.

Forward-looking statements in this MD&A include, but are not limited to, statements with respectto:

the implementation of the Corporation’s business strategy;

the development of the Corporation’s potential investment opportunities; and

the take-over bid made by 0947446 B.C. Ltd., a wholly-owned subsidiary of PalaInvestments Limited (“PIL”).


Melior’s business today is the result of a restructuring and refocus that has taken place over the lastfew years. Until March 2010, the Corporation was a coal producing mining entity operating inColombia, South America. Although the coal properties were of merit, the logistics to move coalfrom the mine site to a port, and subsequently to coal vessels for the customer base were neverconsummated. This caused the Corporation to deplete its cash holdings at a very substantial rate.To avoid illiquidity and potentially the need for creditor protection, the Corporation sold its coalproperties and liquidated its debt such that today it holds cash and no direct operating assets.

On March 31, 2011, the Corporation announced it had developed and adopted a revised businessstrategy, intended to capitalize on the Board’s and management’s expertise and enable theCorporation to invest and aid growth in projects in the mining, metallurgical and mineral industries,in connection with its graduation to the TSXV.

The strategy calls for strategic investments in resource based opportunities offering capitalappreciation potential, in particular, debt or equity participation in investee companies, withprojects nearing maturity. Melior believes it can add value through active involvement from notonly a financial standpoint, but also by the contribution of guidance and additional mining andcorporate finance expertise. Melior may make initial investments of debt, equity or a combinationthereof in public or private companies through a variety of financial instruments including, but notlimited to, private placements, participation in initial public offerings, convertible loans, loans withequity bonus provisions or purchase options and the like. In most cases, one or more nominees ofthe Corporation will join the board of directors of the investee company.


On March 16, 2012, the Corporation completed the sale of all of the common stock of its whollyowned subsidiary, Coalcorp International AVV, which was the holding company for numerousoff-shore subsidiaries. As of the closing date, the purchaser acquired, on an ‘as is, where is’ basis,

3

all of the issued and outstanding shares of Coalcorp International AVV for nominal net proceeds ofone dollar (the “Coalcorp AVV Transaction”). As a result of the Coalcorp AVV Transaction,assets of discontinued operations of $3.6 million, liabilities of discontinued operations of $0.4million and other associated liabilities of $3.0 million were removed from Melior’s balance sheetas of the closing, resulting in a net loss on disposal of $275 during the year ended June 30, 2012.Under the agreement for the Coalcorp AVV Transaction, the Corporation is entitled to receive,subject to certain terms and conditions, a share of net recoveries of cash, if any, that the purchaserreceives as a result of winding up or re-organizing any of the Coalcorp International AVVsubsidiaries. Subsequent to June 30, 2012, the Corporation received US$460 from the purchaser ofCoalcorp International AVV for its share of cash recovered. The US$460 will be recognised as again from discontinued operations in the first quarter of the fiscal year 2012-2013.

Senior Notes

In connection with the Transaction (as defined below), the majority of the Corporation’s 12%Senior Secured Guaranteed Notes due August 31, 2011 (the “Senior Notes”) were purchased bythe Corporation. The Senior Notes were not all tendered to the Corporation and US$8.27 millionprincipal amount of Senior Notes remained outstanding.

On August 31, 2011, the outstanding Senior Notes matured and the Corporation made a finalpayment of US$8.4 million in respect of the principle plus accrued interest.


On August 17, 2011 the Corporation announced the appointment of Dr. Charles Entrekin asChairman and CEO upon the resignation of Mr. Richard Lister and on September 8, 2011, theCorporation announced the appointment of Mr. Daniel Dumas to the Board of Directors.

On December 1, 2011, the Corporation announced the appointment of Mr Rishi Tibriwal, CA, asthe Chief Financial Officer. On October 2, 2012, the Corporation announced the appointment ofMr Thomas Masney, CA as the Chief Financial Officer on the resignation of Mr Rishi Tibriwal.

Listing Upgrade and Reclassification

Effective at market open on April 1, 2011, the Common Shares and the Corporation’s warrants(“Warrants”) began trading on Tier 1 of the TSXV and the Corporation was reclassified as an“Investment Issuer”.

In connection therewith, Melior adopted an Investment Policy which provides guidelines andcriteria for all of Melior’s investment activities. The Investment Policy is attached as Schedule “A”to the Corporation’s news release issued and filed under Melior’s profile on SEDAR on March 31,2011.


On June 25, 2012, Melior entered into a subscription agreement (as amended on June 29, 2012, the“AMR Subscription Agreement”) with Asian Mineral Resources Limited (“AMR”), pursuant towhich the Corporation acquired 47,272,727 common shares in the capital of AMR (“AMRShares”) at $0.11 per AMR Share for an aggregate purchase price of $5,200,000 (the “AMRInvestment”). On closing of the AMR Investment, Melior owned 13.2% of the outstanding AMRShares on an undiluted basis. AMR intends to use the proceeds to fund capital expenditures to

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bring its Ban Phuc Nickel Project into commercial production, which it expects to occur by June2013.

Outlook

On May 16, 2012, Melior announced that its Board had commenced a review of strategicalternatives with the objective of enhancing shareholder value. The Corporation is currentlyevaluating its options including, but not limited to, continuing to explore investment opportunities,a corporate reorganization, a return of capital to shareholders or other strategic options.

On October 1, 2012, 0947446 B.C. Ltd., a wholly-owned subsidiary of PIL, made an offer topurchase (the “Offer”), for a purchase price of $0.11 per share in cash, all of the outstandingcommon shares in the capital of Melior (“Common Shares”) it does not own. The Offer includesany Common Shares that may become outstanding after the date of the Offer and prior toNovember 5, 2012 upon the exercise of options, Warrants or other rights to acquire CommonShares. PIL and its affiliates owned, directly or indirectly, 76,195,833 Common Shares orapproximately 44% of the outstanding Common Shares as that the date of the Offer. Further detailsof the Offer are currently available in the takeover bid circular dated October 1, 2012, which hasbeen circulated to all shareholders and filed on SEDAR at www.sedar.com and will be available inthe Corporation’s circular which will be circulated to all shareholders and filed on SEDAR atwww.sedar.com.

Melior formed a Special Committee of its Board, consisting of Robert Dietrich, to review andevaluate the Offer. The Special Committee is in the process of reviewing and evaluating the Offerwith its financial and legal advisors and will communicate further with shareholders in accordancewith applicable securities laws. The Special Committee retained Bennett Jones LLP as its legaladvisor and Crosbie & Company Inc. to provide a formal valuation.



IFRS in CDN$

Canadian GAAP

in US$

($ thousands) 2012 2011 2010


Loss from continuing operations (4,587) (5,799) (7,280)

Earnings (loss) from discontinued operations (271) 624 (18,087)Net Loss (4,858) (5,175) (25,367)

Basic earnings (loss) per share ($):Continuing operations (0.03) (0.03) (0.04)Discontinued operations 0.00 0.00 (0.11)

Total assets 27,001 43,806 52,366Total long and short term obligations 236 11,720 16,935

1. Basic and dilutive loss per share is calculated by dividing the net loss by the weighted average number of shares inissue during the year. As a result of consolidated net losses the potential effect of exercising stock options andWarrants has not been included in the calculation of loss per share because to do so would be anti-dilutive.

2. For fiscal 2012 and 2011, the Corporation changed its presentation currency to the Canadian Dollar. Fiscal 2010information has been prepared under Canadian GAAP and is presented in United States dollars. Refer to “Changesin Accounting Policies” below, and to Note 16 of the accompanying consolidated financial statements, for adiscussion of IFRS and its impact on the Corporation’s financial statements.

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Results of continuing operations for the three months ended June 30, 2012 compared to thethree months ended June 30, 2011

The Corporation reported a loss from continuing operations of $218 for the three months endedJune 30, 2012 as compared to a loss of $180 during the three months ended June 30, 2011.

The increase in net loss from continuing operations of $38 is principally due to slightly higheroffice and administrative expenses.

Results of continuing operations for the year ended June 30, 2012 compared to the yearended June 30, 2011

The Corporation reported a loss from continuing operations of $4,587 for the year ended June 30,2012 as compared to a loss of $5,799 during the year ended June 30, 2011.

The decrease in net loss from continuing operations of $1,212 is principally due to the:

Decrease in the loss on the settlement with Goldman Sachs from $6,144 during the year endedJune 30, 2011 to nil during the year ended June 30, 2012 (see further discussion below);Decrease in interest expense on bonds from $1,125 during 2011 to $191 during the year endedJune 30, 2012 as the bonds were redeemed on August 31, 2011;Net loss of $2,976 on the disposal of marketable securities of Oracle Mining Corp. andFormation Metals Inc. (“Formation”) during the year ended June 30, 2012 as compared to thenet gain of $272 during the year ended June 30, 2011 together with a gain on disposal of theconvertible debenture issued to the Corporation by Formation (the “Formation Debenture”)of $2,917;Decrease in interest income of $740 from $950 during the year ended June 30, 2011 to $210 inthe year ended June 30, 2012. Interest income during 2011 comprised primarily of the intereston the Formation Debenture and on cash balances of the Corporation. As the FormationDebenture was redeemed during the year ended June 30, 2012, the Corporation only earnedinterest income on its cash balances during the year ended June 30, 2012;Increase in share based compensation to $425 during the year ended June 30, 2012 [2011 –Nil]; andDecrease in office and administrative expenses of $229 from $1,573 during 2011 to $1,344 inthe year ended June 30, 2012 as a result of the reduced activities of the Corporation.

Settlement with Goldman Sachs

On March 3, 2011, the Corporation entered into a Settlement Agreement (the “CNRI Settlement”)with certain affiliates of the Goldman Sachs Group, Inc. (“Goldman Sachs”), includingColombian Natural Resources I SAS (“CNRI”) and Colombian Natural Resources II SAS(together with CNRI, the “CNR Parties”). Pursuant to the CNRI Settlement, the Corporation andthe CNRI Parties irrevocably released and discharged each other from any and all claims, includingthose raised by CNRI in the Notices of Claim filed on November 3, 2010 and December 30, 2010arising out of the Transaction.

In accordance with the terms of an escrow agreement dated March 19, 2010, Computershare TrustCompany of Canada (“Computershare”), Melior and the CNR Parties, Computershare washolding US$8,000 in escrow which was previously recorded on the balance sheet as restricted cash.Upon completion of the CNRI Settlement, a payment of $6,144 (US$6,231) was released by

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Computershare to the CNR Parties and $1,792 (US$1,769) was released to Melior, resulting in anet loss on settlement of $6,144.


General and Administrative expenses were $280 and $1,344 for the three months and year endedJune 30, 2012, respectively [2011 - $164 and $1,573]. General and administrative expenses relateprimarily to consulting, professional and administration expenses for the continuing operations ofthe Corporation and the evaluation of new investment opportunities and have decreased ascompared to the corresponding period in the prior year as a result of the decreased activities of theCorporation.

Interest Income and Expense

Interest income earned during the three months and year ended June 30, 2012 amounted to $68 and$210, respectively [2011 - $24 and $950] and related primarily to the interest earned on theCorporation’s cash and cash equivalent balances. Interest income earned during the three monthsand year ended June 30, 2011 related primarily to the Corporation’s investment in the FormationDebenture, which was redeemed in March 2011.

Total interest expense incurred during the three months and year ended June 30, 2012 amounted tonil and $191, respectively [2011 - $272 and $1,125]. The decrease in the interest expense isprimarily due to the repurchase of the Senior Notes on August 31, 2011.


Foreign currency exchange rates affected the Corporation’s monetary assets and liabilitiesdenominated in currencies other than Canadian dollars. During the year ended June 30, 2012, theCorporation recorded a net foreign exchange gain of $1 for the three months ended June 30, 2012and a gain of $139 for the year then ended, as compared to a loss of $218 and $1,110 for thecorresponding periods in 2011. The change in the foreign exchange gain/loss from 2011 to 2012was a result of the movement of the exchange rates for the Canadian dollar against the US dollarduring 2011 and the significant US dollar denominated cash balances of the Corporation held atthat time. At June 30, 2012, the Corporation holds only a nominal amount of cash denominated inUS dollars and has no significant foreign currency denominated liabilities.

Share Based Compensation

The Corporation granted 3,090,000 stock options to the directors and officers of the Corporation inSeptember 2011. All of these options were granted under the Corporation’s stock option plan,vested immediately and are exercisable for a period of 7 years from the date of the grant.

The Corporation recorded share based compensation of $425 using the Black Scholes optionpricing model to estimate the fair value of the options granted and used the following assumptions:

Risk-free interest rate 1.85%Expected stock price annual volatility 100.0%Expected life 7 yearsEstimated forfeiture rate NilExpected dividend yield 0.0%Fair value cost per option $0.108

7

Loss on Sale of Marketable Securities


Pursuant to a subscription agreement dated May 6, 2010, Melior agreed to purchase a $8.0 millionunsecured convertible debenture from Formation, the net proceeds of which were required byFormation to progress its Idaho cobalt development property to a financeable stage. The Debenturehad an initial term of 18 months with an interest rate of 12%, payable in common shares in thecapital of Formation (“Formation Shares”).

On December 22, 2010, the Corporation redeemed $1.0 million of the Debenture for 666,666Formation Shares.

On March 14, 2011, the Corporation entered into an agreement with Formation for the prepaymentof the Debenture, which had a principal amount of $7.0 million outstanding. Pursuant to thisagreement, the Corporation surrendered the Debenture to Formation upon receipt of $9.3 million incash and 400,000 Formation Shares, resulting in a net gain on disposition of the Debenture of$2,917.

Two interest payments were made under the Debenture for which the Corporation received anaggregate of 429,772 Formation Shares.

The Corporation sold an aggregate of 300,800 Formation Shares, during the fiscal year ended June30, 2011, for net cash proceeds of $670 resulting in a gain of $286. After the sale, the Corporationheld 1,195,638 Formation Shares, with a market value of $1,211 on June 30, 2011.

During the year ended June, 2012, the Corporation sold its remaining position in Formation forproceeds of approximately $961, resulting in a loss of $607.

Investment in Oracle Mining Corp. (formerly Gold Hawk Resources Inc.)

On November 8, 2010, the Corporation acquired 6,000,000 common shares of Oracle Mining Corp.(“Oracle Shares”) by means of a non-brokered private placement at a subscription price of $1.25per share for an aggregate cost of $7,846, including transaction costs. During fiscal 2011, theCorporation sold 123,100 Oracle Shares for a net realized gain of $14, and acquired a further119,900 Oracle Shares on the open market. As a result, on June 30, 2011, the Corporation held5,996,800 Oracle Shares, with a market value of $7,589.

During the year ended June 30, 2012, the Corporation sold its Oracle Shares for net proceeds of$5,309, resulting in a loss on disposition of $2,369, which has been recorded on the statement ofoperations.


As a result of the factors discussed above, the Corporation recorded losses from continuingoperations of $218 or $0.00 per share for the three months ended June 30, 2012 as compared tolosses from continuing operations of $180 or $0.00 per share for the three months ended June 30,2011. Losses from continuing operations were $4,587 or $0.03 per share for the year ended June30, 2012 as compared to $5,799 or $0.03 per share during the year ended June 30, 2011.

8


On March 19, 2010, certain of the Corporation’s wholly-owned subsidiaries completed the sale ofthe La Francia mine and related infrastructure assets (the “La Francia I Assets”) and all of theissued and outstanding shares (the “Adromi Shares”) of Adromi Capital Corp. (“Adromi”), theholder of the La Francia II Mine, to GS Power Holdings LLC (the “Purchaser”), a subsidiary ofthe Goldman Sachs Group, Inc. (collectively, the “Transaction”).

As a result of the Transaction, expenses from discontinued operations primarily compriseprofessional and consulting fees related to the continuing wind down of the Colombian operationsand foreign exchange gains or losses arising from the movement of the Colombian peso and USdollar balances held in these discontinued operations.

In connection with the Coalcorp AVV Transaction, the Corporation incurred legal and otherprofessional expenses of $76. As a result of the Coalcorp AVV Transaction, assets of discontinuedoperations of $3.6 million (including cash balance of $1.2 million), liabilities of discontinuedoperations of $0.4 million and other associated liabilities of $3.0 million were removed fromMelior’s balance sheet as of the closing date, resulting in a net loss on disposal of $275 during thethree month period ended March 31, 2012.

Net Profit/Loss

Taking into account both continuing and discontinuing operations, the Corporation recorded a net

loss of $218 or $0.00 per share in the three month period ended June 30, 2012 [2011 – loss of $180

or $0.00 per share]. The Corporation recorded a net loss of $4,858 or $0.03 per share for the year

ended June 30, 2012 [2011 – loss of $5,175 or $0.03 per share].


2012 2011

IFRS in millions of Canadian dollars

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Financial



Earnings from continuing operations (0.3) (0.5) (4.2) 0.4 (0.2) (5.6) 0.0 0.0

Net earnings/(loss) (0.3) (0.8) (4.2) 0.4 (0.2) (4.9) 0.00 0.08

Earnings/(loss) per share from continuing operations (0.01) (0.01) (0.02) 0.01 (0.00) (0.03) 0.00 0.00

Net earnings/(loss) per share (Note 1) (0.00) (0.01) (0.03) 0.01 (0.0) (0.03) 0.00 0.00

Cash (used in) provided by continuing operations 6.1 (0.6) (0.6) (4.20) (0.1) 11.6 (7.2) (0.0)



Note 1: Basic and dilutive loss per share is calculated by dividing the net loss by the weighted average number of shares in issueduring the year. As a result of consolidated net losses the potential effect of exercising stock options and Warrants has notbeen included in the calculation of loss per share because to do so would be anti-dilutive.

9


The continuing operations cash and cash equivalents balance as at June 30, 2012 was $22.3 million,compared to $30.8 million as at June 30, 2011.

The decrease in cash balances as at June 30, 2012 as compared to June 30, 2011 is the result ofpayment of office and administrative expenses of $1.3 million, the final payment of $8.6 million inrespect of the matured Secured Notes and the purchase of AMR Shares for $5.2 million, offset bythe proceeds on the sale of the Formation Shares and the Oracle Shares of $6.2 million.

Melior believes that it has sufficient capital to meet its obligations as they come due and to covercontinuing corporate costs estimated at approximately $0.9 million per annum. Future investmentswill be funded from the Corporation’s current cash position. Additional funding may be required inthe future, depending on the scale of prospective investment opportunities Melior pursues.


The Corporation has classified its cash, cash equivalents and receivables as loans and receivables,which are measured at amortized cost. Payables and accrued liabilities are classified as otherfinancial liabilities, which are measured at amortized cost.

The carrying value of cash and equivalents, deposits, receivables, accounts payable and accruedliabilities reflected in the consolidated statement of financial position approximate fair valuebecause of the short term nature of these instruments.

The Corporation’s risk exposures and the impact on the Corporation’s financial instruments aresummarized below:


The Corporation’s main credit risk arises from its cash and cash equivalents deposits with banks.All of the Corporation’s cash and cash equivalents are with one major Canadian chartered bank,from which management believes the risk of loss to be remote. The Corporation limits itscounterparty credit risk on its deposits by dealing only with financial institutions with AA or abovecredit ratings.


The Corporation manages liquidity risk by maintaining adequate cash balances in order to meetliabilities as they come due. As at June 30, 2012, the Corporation had cash and cash equivalents of$22.3 million (June 30, 2011 - $30.8 million) to settle liabilities of $0.2 million (June 30, 2011 -$11.7 million). None of the Corporation’s financial liabilities or commitments are interest bearing.


Cash and cash equivalents are comprised of cash at banks and on hand, and short term moneymarket instruments with an original maturity of three months or less. As at June 30, 2012, only anominal portion of the Corporation’s cash and cash equivalents were held in United States dollars.Accordingly, management believes that the Corporation is not exposed to material foreignexchange risk. The rate published by the Bank of Canada at the close of business on June 30, 2012

10

was US$0.981 per Canadian dollar. The Corporation does not use derivative instruments to reduceits exposure to foreign currency risk.


The Corporation has cash balances that earn interest subject to fluctuations in the prime rate. TheCorporation’s current policy is to invest excess cash in investment-grade deposit certificates issuedby its banking institutions. The Corporation periodically monitors the investments it makes and issatisfied with the credit ratings of its banks. Management believes the interest rate risk is remote asinvestments have maturities of three months or less and the Corporation currently does not carryinterest bearing debt at floating rates.


The Corporation defines capital as total shareholders’ equity including share capital, other reservesand deficit. The Corporation manages its capital to ensure that adequate funds are available tosettle its liabilities as they arise and reviews and evaluates investment opportunities that areachievable within existing resources.

The Corporation is not subject to any externally imposed capital requirements including by aregulator or lending institution.


All of the Corporation’s obligations in the aggregate amount of $0.2 million, as at June 30, 2012 arecurrent and due within the year. The Corporation has sufficient cash resources to meet its currentcommitments

Debt

Throughout the year ended June 30, 2011, US$8.27 million principal amount of Senior Notes wereoutstanding. See “Senior Notes” above. The Senior Notes matured on August 31, 2011, for whicha final payment of US$8.4 million in respect of principal and interest was made.

The Corporation did not have any debt outstanding as at June 30, 2012.




An opportunity to invest in AMR was brought to the attention of the Board by Greg Radke, therepresentative of Pala Investments Holdings Limited (“Pala”) on the Board. A Special Committeeof independent directors comprising Charles Entrekin, Robert Dietrich and Daniel Dumas wasformed to examine and evaluate this investment opportunity.

As part of the Special Committee’s due diligence process, discussions were held with the team thatsupported Pala during its evaluation of the Pala investment in AMR. Melior gained access to theindependent and internal due diligence documentation prepared prior to Pala’s investment in AMR.In addition, independent transaction advice was received from Salman Partners, who were retained

11

for this purpose. After several discussions and meetings, the Special Committee determined that aninvestment in AMR would be an attractive investment that met the Corporation’s investmentcriteria and, on June 18, 2012, the Special Committee approved an investment of up to $5.2 millionin AMR Shares to be issued from treasury. The Special Committee recommended the investmentfor approval to the Board and Board approval was received on June 21, 2012.

Pala is a significant shareholder of AMR. At the date of the AMR Investment, Pala owned157,814,933 AMR Shares (representing 43.7% of the outstanding AMR Shares, on an undilutedbasis after giving effect to the AMR Investment) plus 54,166,667 common share purchase warrantsof AMR (which if exercised, would bring its ownership interest to 51% of the outstanding AMRShares on a partially diluted basis after giving effect to the AMR Investment). As such, AMR is a“related party” of the Corporation for the purposes of Multilateral Instrument 61-101 – Protectionof Minority Security Holders in Special Transactions (“MI 61-101”) and the AMR Investmentconstituted a “related party transaction” within the meaning of MI 61-101. Melior was exemptfrom the requirement to obtain a formal valuation and minority shareholder approval as neither thefair market value of the subject matter of, nor the fair market value of the consideration for, theAMR Investment, insofar as it involved interested parties, exceeded 25% of the Melior’s marketcapitalization.

See “Investment in Asian Mineral Resources Limited” for further details of the AMR Investment.

Risk Factors

The Corporation is exposed to a number of risks and uncertainties. Such risks could materiallyaffect the Corporation’s future results and could cause actual events to differ materially from thosedescribed in forward-looking statements relating to the Corporation. The risks described herein, orin documents incorporated by reference herein, may not be the only risks facing the Corporation.Additional risks not currently known or not currently considered to be material may also have anadverse impact on the Corporation’s business.

Investment Risk






The Corporation may not be able to identify appropriate investments or to acquire any suitableinvestments that it identifies. Moreover, competition may reduce the number of investmentopportunities available to the Corporation and may lead to unfavourable terms as part of anyinvestment, including high purchase prices.


Melior has limited funds with which to develop and maintain its asset portfolio. The pursuit of theCorporation’s business strategy may require substantial additional financing. Failure to obtain

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sufficient financing could result in a delay or abandonment of the Corporation’s business strategy.Additional financing may not be available when needed or, if available, the terms of such financingmight not be favourable to the Corporation and might involve substantial dilution to existingshareholders. Failure to raise capital when needed would have a material adverse effect on theCorporation’s ability to pursue its business strategy, and accordingly could negatively impact theCorporation’s business, financial condition and results of operations.


Melior is primarily engaged in making strategic investments in mining, metallurgical or mineralopportunities and the consequent concentration in those businesses may result in a higher degree ofvolatility and price fluctuation than other investments that have better industry diversification.Melior will not enjoy the possible benefits associated with a more diversified asset portfolio.Moreover, even while Melior’s intention is towards diversifying its investments in the resourcesector, its value is closely tied to its investments and any adverse change in these investmentswould have a significant impact on Melior’s value. There can be no assurance that Melior’sinvestment activities will be profitable. There can be no assurance that Melior will be able togenerate sufficient activity to be profitable in the future and Melior’s limited operating historyproviding advisory services in the mining, metallurgical and mineral sectors makes an evaluationof its prospects difficult. Future results of operations may fluctuate significantly based uponnumerous factors including economic conditions, activities of competitors, commodity prices andthe ability of Melior to develop and maintain a diversified asset portfolio.

Economic Conditions

Unfavourable economic and equity market conditions, such as recessions, interest rate changes orinternational currency fluctuations, may adversely impact Melior’s investment activities and, in thecase of any loans Melior may make, the returns generated by those loans. A negative impact on thevalue of Melior’s portfolio or the returns thereon would likely have a negative impact on the marketprice of the Common Shares and Warrants. Unfavourable economic and market conditions couldalso decrease Melior’s net income, reduce demand for its services, and limit access to capitalmarkets.


The value of the Common Shares and Warrants will vary according to the value of the securities in

which Melior invests, which will depend, in part, upon the performance of the issuers of such

securities. Fluctuations in the market values of such securities may occur for a number of reasons

beyond the control of Melior including economic conditions, investor sentiment, global events and

prices for base and precious metals. There is no assurance that an adequate market will exist for

securities acquired by Melior. Certain investments made by Melior, including those securities

listed on an exchange and not subject to resale restrictions, may be relatively illiquid and may

decline in price if a significant number of such securities are offered for sale. In the case of equity

investments in private issuers, there would be no public market and a risk that one may never

develop.

13


In general, Melior’s business is to make investments (debt, equity or a combination of both) inmining, metallurgical or mineral resource issuers. The business activities of resources issuers aretypically speculative and may be adversely affected by sector specific risk factors, outside thecontrol of the resource issuer, which may ultimately have an impact on Melior’s investments inthese businesses. Risks associated with the resource sector include, without limitation, thefollowing:


the marketability of natural resources which may be acquired or discovered by a resourceissuer will be affected by numerous factors beyond the control of such resource issuer.These factors include market fluctuations in the price of metals, metal concentrates, andminerals, the proximity and capacity of natural resource markets and processingequipment, government regulations, including regulations relating to prices, taxes,royalties, land tenure, land use, importing and exporting of materials and environmentalprotection. The exact effect of these factors cannot be accurately predicted, but any one, ora combination of, these factors could result in a resource issuer not producing an adequatereturn for shareholders;

a resource issuer may become subject to liability for pollution, cave-ins or other hazardsagainst which a resource issuer cannot insure or against which it may elect not to insure.Such liabilities may have a material, adverse effect on such resource issuer’s financialposition and on the value of the securities of such resource issuer held as part of Melior’sinvestment portfolio;

a resource issuer’s operations are subject to government legislation, policies and controlsrelating to prospecting, land use, trade, environmental protection, taxation, rates ofexchange, return of capital and labour relations. A resource issuer’s property interests maybe located in foreign jurisdictions, and its exploration operations in such jurisdictions maybe affected in varying degrees by the extent of political and economic stability, and bychanges in regulations or shifts in political or economic conditions that are beyond thecontrol of the resource issuer. Such factors may adversely affect the resource issuer’sbusiness and/or its property holdings. Although a resource issuer’s exploration activitiesmay be carried out in accordance with all applicable rules and regulations at any point intime, no assurance can be given that new rules and regulations will not be enacted or thatexisting rules and regulations will not be applied in a manner that could limit or curtailproduction or development of the resource issuer’s operations. Amendments to currentlaws and regulations governing the operations of a resource issuer or more stringentenforcement of such laws and regulations could have a substantial adverse impact on thefinancial results of the resource issuer; and

a resource issuer’s operations may be subject to environmental regulations enacted bygovernment agencies from time to time. A breach of such legislation may result in theimposition on the resource issuer of fines and penalties. In addition, certain types ofoperations require the submission and approval of environmental impact assessments.Environmental legislation is evolving in a manner which has lead to stricter standards and

14

enforcement and greater fines and penalties for non-compliance. The cost of compliancewith government regulations may reduce the profitability of a resource issuer’s operations.

Competition

Melior operates in the extremely competitive financial services industry and competes with a largenumber of companies that provide equity, debt and/or mezzanine financing. Many of Melior’scompetitors have greater financial, technical and other resources than Melior. These competitorsmay be able to respond more quickly and successfully to new or changing opportunities.


There is a risk that some or all of the expected benefits of investments may fail to materialize, ormay not occur within the time periods anticipated by management of the Corporation. Therealization of such benefits may be affected by a number of factors, many of which are beyond thecontrol of the Corporation. The failure to realize some or all of the expected benefits of suchinvestments could have a material adverse effect on the business, financial condition and results ofoperations of the Corporation.


The Board may experience delays in hiring, or be unable to hire or retain, experienced and qualifiednew management for the Corporation within the timeframes necessary or upon terms acceptable tothe Corporation. The competition for qualified personnel in the mining and metallurgical industryis intense and there can be no assurance that the Corporation will be able to attract and retain thepersonnel necessary for the implementation of its business strategy.


Melior is dependent upon the personal efforts, performance and commitment of its managementand the Board, who are responsible for the future development of Melior’s business. To carry outits investment activities, Melior will be relying upon the business judgment, expertise and integrityof Melior’s management and the Board. To the extent that the services of any member ofmanagement or the Board became unavailable for any reason, a disruption to the operations ofMelior could result and may delay the implementation of the Corporation’s business strategy.


Melior’s directors and officers may serve as directors or officers of other companies in the samebusiness as Melior, natural resource companies or companies providing services to Melior, or theymay have significant shareholdings in other resource companies. To the extent that suchcompanies participate in transactions in which Melior participates, the directors of Melior mayhave a conflict of interest in negotiating and concluding terms to the extent of such participation.Furthermore, part of Melior’s investment strategy is to place at least one Melior nominee on theboard of directors of its investee companies. Confidentiality and judiciary conflict issues may ariseand any director may be recused from participating in or voting at a Board meeting. If a conflict ofinterest arises at a Board meeting, any director who has a conflict will abstain from voting inconnection with the transaction in accordance with the Business Corporations Act (BritishColumbia).

15


The Corporation’s functional currency is the Canadian Dollar; however, future major investmentsmay be transacted in US dollars or other foreign currencies. Accordingly, the Corporation issubject to the risks inherent in exchange rate fluctuations.

Credit Risk


Settled Contingencies

See “Settlement with Goldman Sachs” for details of the CNRI Settlement.

Please refer to the Corporation’s annual information form for the year ended June 30, 2012 for adescription of other settled contingencies.

Changes in Accounting Policies:

International Financial Reporting Standards

IFRS replaced the existing Canadian GAAP for the Corporation, effective for its fiscal 2012interim and annual financial statements. Accordingly, the Corporation has applied accountingpolicies consistent with IFRS beginning with its interim financial statements for the quarter endedSeptember 30, 2011.

The adoption of IFRS resulted in changes to the Corporation’s accounting policies. The accountingpolicies described in note 3 to the accompanying consolidated financial statements have beenapplied consistently to all periods presented. They also have been applied in the preparation of anopening IFRS balance sheet as at July 1, 2010.

The impact of the transition from Canadian GAAP to IFRS is explained in detail in note 16 to theaccompanying consolidated financial statements.

The changes in accounting policy have not been applied to any information within this MD&A forperiods prior to July 1, 2010.

First-time adoption of IFRS

The first-time adoption of IFRS generally requires retrospective application of the resultingchanges in accounting policies.

Subject to certain optional exemptions and mandatory exceptions, the Corporation has applied thechanges in accounting policies resulting from the adoption of IFRS retrospectively in thepreparation of its opening IFRS statement of financial position as at January 1, 2010, theCorporation’s “Transition Date”.

16

The Corporation has elected to apply the following optional exemptions in the preparation of itsopening IFRS consolidated statement of financial position as at July 1, 2010, the Corporation’sTransition Date.

To apply IFRS 2 Share-based Payments only to equity instruments that were issued afterNovember 7, 2002 and had not vested by the Transition Date.

To apply IFRS 3 Business Combinations prospectively from the Transition Date, therefore notrestating business combinations that took place prior to the Transition Date.

To elect to designate certain existing financial instruments as available-for-sale as at theTransition Date.

To elect apply IAS 21 The Effect of Changes in Foreign Exchange Rates prospectively from

the Transition Date, and deem the cumulative translation differences for all foreign operations

to be zero at the Transition Date.

Changes in accounting policy resulting from the adoption of IFRS

The adoption of IFRS resulted in changes to the Corporation’s accounting policies, and has resultedin changes to the recognition and measurement of transactions and balances. The impact ofadopting IFRS on the Corporation’s financial statements is described in detail in note 16 to theaccompanying consolidated financial statements.

The following summarizes the significant changes to the Corporation’s accounting policies onadoption of IFRS.


In certain circumstances, IFRS requires a different measurement of share-based compensation thanCanadian GAAP. In particular, IFRS requires that each tranche (that vests separately) must betreated as a separate grant and that an estimate of forfeitures be included in the determination of theexpense associated with stock option grants.

Due to the nature of the Corporation’s stock options, these changes in accounting policy did not

have a significant impact on the Corporation’s financial statements.

Financial Instruments

IFRS requires that financial instruments, except those classified at fair value through profit andloss, be recognized net of transaction costs. Under Canadian GAAP, the Corporation’s accountingpolicy was to expense transaction costs related to long-term debt as incurred.

The effect of applying these changes in accounting policies was a decrease in the carrying value oflong-term debt at July 1, 2010 and a corresponding decrease in the deficit.

Functional currency

IFRS requires that the functional currency of the Corporation and its subsidiaries be determinedseparately, and the process of considering factors to determine functional currency is somewhatdifferent than under Canadian GAAP.

17

The Corporation has determined that the functional currency under IFRS of the Corporation and allof its subsidiaries should the Canadian Dollar. Under Canadian GAAP, the functional currency ofthe Corporation and all of its subsidiaries was the US Dollar. The Corporation also decided tochange its presentation currency to the Canadian Dollar.

The change in the functional currency of the Corporation and all of its subsidiaries was appliedretrospectively and resulted in changes to the translation of these entities into the presentationcurrency. Transactions in currencies other than the Canadian Dollar are translated into CanadianDollars using the exchange rates prevailing at the dates of the transaction. Monetary assets andliabilities not denominated in Canadian Dollars are translated at the period end rates of exchange.Foreign exchange gains and losses are recognized in the statement of operations. Previously, underCanadian GAAP, similar translation methods were used, however transactions and balances weretranslated into, and presented in, US dollars.

Reconciliation of Canadian GAAP to IFRS

Note 16 to the accompanying consolidated financial statements contains a reconciliation ofprevious Canadian GAAP financial information to such information adjusted for IFRS, along withfurther explanation.


As at October 16, 2012, the Corporation has the following securities outstanding:

TSXV Number Shares Exercise Expiry Proceeds ifSymbol Outstanding Issuable on Price Date Exercised

Exercise $ $

Common shares MLR 173,380,974 - - - -Warrants MLR.WT.B 61,873,890 61,873,890 2.50 June 5, 2013 154,684,725

The Corporation has 3,390,000 stock options outstanding which, if exercised, would result inproceeds of approximately $862,800.


Additional information relating to the Corporation, including the Corporation’s annual informationform for the year ended June 30, 2012, is available for viewing on SEDAR at www.sedar.com andon the Corporation’s web site at www.meliorresources.com. The Corporation cautions thatinformation contained on, or accessible through, these websites is current only as at the date of suchinformation.

Management and Discussion AnalysisConsolidated Financial Statements

(In US dollars)



MELIOR RESOURCES INC.(the Corporation )

OperationsFor the Year Ended June 30, 2011

Information contained in this discussion is given as of October 28, 2011 unless otherwiseindicated. All amounts are in US dollars unless otherwise noted.

MD&Awith the audited consolidated financial statements and accompanying notes of theCorporation for the fiscal year ended June 30, 2011, and the audited consolidated financialstatements and accompanying notes and related MD&A of the Corporation for the fiscal

prepared in accordance with Canadian generally accepted accounting principlesGAAP


The MD&A contains certain forward-looking statements. Forward-looking statementsgenerally can be identified by

or phrases suggesting future outcomes or other expectations, beliefs, estimates, plans,objectives, assumptions, projections, intentions or statements about future events orperformance. Similarly, statements contained in, but not limited to, the sections

DiscontinuedCommitments and Expenditures

expectations concerning assets, prices, foreign exchange rates, earnings, marketconditions, capital expenditures, risks, availability of regulatory approvals, corporateobjectives and plans or goals, are or may be forward-looking statements. Forward-lookingstatements involve significant risks and uncertainties, should not be read as guarantees offuture performance or results, and will not necessarily be accurate indications of whetheror not such results will be achieved. A number of factors could cause actual results to differmaterially from the results discussed in the forward-looking statements including, but notlimiforward-looking statements contained in this MD&A are based upon what management ofthe Corporation believes are reasonable assumptions, the Corporation cannot assurereaders that actual results will be consistent with these forward-looking statements.Investors and others should carefully consider risk factors including, without limitation,

forward-looking statements. Forward-looking statements are made as of the date of thisMD&A and the Corporation assumes no obligation to update or revise any forward lookingstatements to reflect new events or circumstances, except as required by law.

Forward-looking statements in this MD&A include, but are not limited to, statements withrespect to:

intended will capitalize on the board of directors (the Boardexpertise and enable the Corporation to invest and aid growth in projects in themining, metallurgical and mineral industries; and

On September 29, 2011 the Corporation changed its name to Melior Resources Inc. and thecommon shares and warrants commenced trading on the TSX Venture

TSXV ) under the symbol MLR and MLR.WT.B, respectively.

Melior today is the result of a restructuring that took place over the last twoyears. Until March 2010, the Corporation was a coal producing mining entity operating inColombia, South America. Although the coal properties were of merit, the logistics tomove coal from the mine site to a port, and subsequently to coal vessels for the customerbase were never consummated. This caused the Corporation to deplete its cash holdings ata very substantial rate. To avoid illiquidity and potentially the need for creditor protection,the Corporation sold its coal properties and liquidated its debt such that today it holds cashand no direct operating assets.

Melior plans to make strategic investments in resource based opportunities offering capitalappreciation potential. In particular, it will seek debt or equity participation in investeecompanies with projects nearing maturity. Melior believes it can add value through activeinvolvement from not only a financial standpoint, but also by the contribution of guidanceand additional mining and corporate finance expertise. Initial investments of debt, equityor a combination thereof may be made in public or private companies through a variety offinancial instruments including, but not limited to, private placements, participation ininitial public offerings, convertible loans, loans with equity bonus provisions or purchaseoptions and the like. In most cases, a nominee of the Corporation will join the board ofdirectors of the investee company.

Over the last year, the Corporation has used a portion of its available cash to invest in twoFormation .,

formerly Gold Hawk Resources Inc. Oracle of the Debenture (asdefined herein), the Corporation realized a net return from all Formation related revenuestreams of approximately 48% as at June 30, 2011.

Sale of Assets Transaction

On March 19, 2010, certain of the Corporation -owned subsidiaries completed theLa Francia I Assets

Adromi SharesAdromi S Power Holdings LLC (the

PurchaserTransaction

Senior Notes

Pursuant to the terms of a Note IndentureSenior Secured Guaranteed Notes due August 31, 2011

Senior Notessale of the La Francia I Assets to purchase the outstanding Senior Notes at the required102% premium (plus any accrued interest) in accordance with the terms of the Note

Restricted Asset Transfer OfferAsset Transfer Offer, the Corporation also agreed to purchase all remaining outstandingSenior Notes for 100% of the principal amount (plus any accrued interest) (theRemaining Notes OfferNote Offers

The Note Offers were completed upon the closing of the Transaction. Of the proceeds,$93.2 million, which represented the net available cash from the sale of the La Francia IAssets, was applied to repurchase the Senior Notes that tendered to the Restricted AssetTransfer Offer and $15.8 million was applied to repurchase the Senior Notes that tenderedto the Remaining Notes Offer. The outstanding interest on the Senior Notes was paid priorto closing of the Transaction. The Senior Notes were not all tendered to the Note Offersand $8.27 million of Senior Notes remained outstanding.

On August 31, 2011, the outstanding Senior Notes matured and the Corporation made afinal payment of $8.4 million in respect of the aggregate principle amount of $8.27 millionplus accrued interest.


Pursuant to a subscription agreement dated May 6, 2010, Melior agreed to purchase aDebenture

net proceeds of which were required by Formation to develop its Idaho cobalt developmentproperty to a financeable stage. The Debenture had an initial term of 18 months with an

FormationShares

On December 22, 2010, the Corporation redeemed Cdn$1.0 million of the Debenture for666,666 Formation Shares.

During the fiscal year, Formation brought the Idaho cobaltdevelopment property to a stage where significant financing for the ultimate plantconstruction could occur. On March 14, 2011, the Corporation announced that it had

completed an agreement with Formation for the prepayment of the Debenture, which had aprincipal amount of Cdn$7.0 million outstanding. Pursuant to this agreement, theCorporation surrendered the Debenture to Formation upon receipt of Cdn$9.3 million incash and 400,000 Formation Shares. This resulted in a gain on disposition of $3.0 million.

During the fiscal year ending June 30, 2011, two interest payments were made under theDebenture for which the Corporation received an aggregate of 429,772 Formation Shares.

The Corporation sold an aggregate of 300,800 Formation Shares, during the fiscal yearending June 30, 2011, for net cash proceeds of Cdn$670,236 resulting in a gain ofapproximately $270,000.

As at June 30, 2011 Melior held 1,195,638 Formation Shares, representing approximately1.3% of the outstanding Formation Shares. The Formation Shares were accounted for onthe balance sheet at their fair market value of $1.2 million and resulted in a loss of$309,000 that is recorded in the accumulated other comprehensive loss.

Subsequent to the fiscal year end, the Corporation sold its remaining position in Formationfor proceeds of approximately Cdn$935,000.

Investment in Oracle Mining Corp. (formerly Gold Hawk Resources Inc.)

During the fiscal year ending June 30, 2011, the Corporation made an investment inOracle. Pursuant to its subscription agreement with Oracle, on November 8, 2010 Melior

Oracle Sharesof Cdn$1.25 per Oracle Share for an aggregate purchase price of Cdn$7.5 million. Duringthe year, the Corporation sold an aggregate of 3,200 Oracle Shares. As a result, theCorporation held approximately 19.1% of the issued and outstanding Oracle Shares as atJune 30, 2011.

The fair market value of the Oracle Shares increased from their acquisition date resulting inan unrealized gain as at June 30, 2011 of $94,000, which was recorded on the balance sheetas accumulated other comprehensive loss.

Subsequent to the fiscal year end, the Corporation sold its remaining Oracle Shares forproceeds of approximately Cdn$5.3 million.

Settlement of Outstanding Litigation

Xira Settlement

XiraCorpor

Minutes of Settlementthe terms of the Minutes of Settlement, among other things, Xira agreed to pay $34 millionto the Corporation payable in tranches. Under the terms of the Settlement Agreement, Xira

agreed to pay $34 million payable as follows: (i) $7 million on February 8, 2010; (ii) $17million on March 15, 2010; (iii) $8 million on September 15, 2010; and (iv) $2 million onJanuary 31, 2011. The Corporation received all such payments.

CNRI Settlement

In connection with the Transaction and in accordance with the terms of an escrowagreement dated March 19, 2010 among Computershare Trust Corporation of Canada

Computershare the Corporation, and C.I. Columbian Natural Resources I SASCNRI CNRI

Parties , $8.0 million was deposited in escrow with Computershare.

The Corporation announced on November 3, 2010 that had received a Notice of Claimfrom CNRI with respect to alleged losses in the amount of $37.4 million. The claims forindemnification related to alleged losses resulting, supposedly, from certain locomotivesnot being in good working order, additional import VAT and legal expenses.

On December 30, 2010, the Corporation announced that it had received a second Notice ofClaim from CNRI with respect to alleged losses in the amount of $1.1 million. The claimsfor indemnification related to alleged losses to CNRI resulting from the failure to obtaintitle to one-third of certain real property to be used for the development of a rail spur,supposedly due to the failure of a subsidiary of the Corporation, Compania Carbones delCesar CDCsuch real property, and legal expenses.

The Corporation announced on March 21, 2011 that it had entered into a settlement andmutual release (the Settlement Agreement with certain affiliates of the Goldman SachsGroup, Inc. including CNRI. Pursuant to the terms of the Settlement Agreement, the partiesirrevocably released and discharged each other from any and all claims arising out of orrelating to the Transaction, including those raised by CNRI in the Notices of Claim.

In addition to the release and discharge described above, pursuant to the terms of theSettlement Agreement, $6.2 million of the $8 million in escrow was released byComputershare to the CNRI Parties and the balance of $1.8 million was released to Melior.As a result of the settlement, a loss was recorded in the statement of operations of $6.2million for the year ending June 30, 2011. The Corporation also reversed the accruedcontingent liability of $1.1 million which is recorded as a gain in discontinued operations.


On March 24, 2011, the Corporation announced the appointment of Robert Dietrich to theBoard. Mr. Dietrich, is currently a financial consultant. Previously he was the ExecutiveVice President, Finance and Chief Financial Officer of Timminco Limited (TIM-TSX), aproducer of silicon metal for the chemical and aluminum industries and solar grade siliconfor the solar industry. Mr. Dietrich brings deep financial and accounting experience to theBoard. He is a graduate of Queen's University (B. Comm), a Chartered Accountant and has

held senior financial management positions in Canadian-based public companies over thepast 20 years. Mr Dietrich began his career with Ernst & Young LLP in Toronto where heserved in both the Audit and Corporate Finance practices. Mr. Dietrich has also served onvarious national committees of Financial Executives International (FEI) Canada.

Subsequent to the year end the Corporation announced the appointment of Mr. DanielDumas to the Board of Directors and the appointment of Dr. Entrekin as Chairman andInterim CEO upon the resignation of Mr. Richard Lister.

Mr. Dumas is currently Chief Executive Officer of Dumas Contracting Ltd. a full-serviceunderground mining contractor providing services throughout Canada, Central and SouthAmerica and West Africa. He established Dumas Contracting Ltd. in 1994 and has sincelead the company to become a specialized international mining contractor. He has a strongdiversified background in mining operations, finance and business development and isinvolved with many publically listed mining companies. Mr. Dumas holds a Bachelor ofScience and a Master of Science in Mining Engineering from New Mexico Tech andpresently possesses Professional Engineering Licenses in Ontario and several otherProvinces.

Listing Upgrade and Reclassification

On March 31, 2011, the Corporation announced the completion of its migration to the

warrants began trading on Tier 1 of the TSXV and the Corporation was reclassified as an

In conjunction therewith, Melior adopted an Investment Policy which provides guidelines

Outlook

The Corporation held the following assets as at June 30, 2011:

unrestricted net cash of $31.6 million;

1,195,638 Formation Shares; and

5,996,800 Oracle Shares.

Subsequent to the year end, the Corporation sold all of its Oracle Shares and FormationShares and currently holds unrestricted net cash of approximately $28.8 million.

Melior plans to make strategic investments in developing resource based opportunitiesoffering capital appreciation potential. In particular, it will seek debt or equityparticipation in investee companies, with projects nearing maturity. Melior believes it canadd value through active involvement from not only a financial standpoint, but also by thecontribution of guidance and additional mining and corporate finance expertise. Initialinvestments of debt, equity or a combination thereof may be made in public or private

companies through a variety of financial instruments including, but not limited to privateplacements, participation in initial public offerings, convertible loans, loans with equitybonus provisions or purchase options and the like. In most cases, a nominee of theCorporation will join the board of directors of the investee company.


Year Ended

June 30

($ thousands) 2011 2010 2009

Revenue fromcontinuing operations

0 0 0

Loss from continuingoperations

(3,580) (7,280) (37,163)

Earnings (loss) fromdiscontinued operations

1,203 (18,087) (188,981)

Net Loss (2,377) (25,367) (226,144)

Basic earnings (loss) pershare ($):

Continuing operations (0.02) (0.04) (0.21)

Discontinued operations 0.01 (0.11) (1.10)

($ thousands)

Total assets 44,860 52,366 273,998

Total long and shortterm obligations

12,022 16,935 209,303

Basic and dilutive loss per share is calculated by dividing the net loss by the weighted average number of shares in issue during the year. As a result ofconsolidated net losses the potential effect of exercising stock options and warrants has not been included in the calculation of loss per share because to doso would be anti-dilutive.

Results of Operations ending June 30, 2011 compared to June 30, 2010

The differences between the operating and financial results of the Corporation for the fiscalyear ended June 30, 2011 and the operating and financial results of the Corporation forfiscal year ended June 30, 2010 are principally due to the Transaction, the CNRISettlement and the prepayment of the Debenture.

Significant transactions that financially impacted the Corporation during the fiscal yearending June 30, 2011 were:

The surrender of the Debenture that resulted in a gain of $3.0 million and the sale ofthe Formation Shares.The CNRI Settlement and the subsequent release of funds from escrow thatresulted in a loss of $6.2 million.

The Corporation reported an operating loss from continuing operations before otherincome (expenses) for the fiscal year ended June 30, 2011 of $1.6 million compared to aloss of $6.7 million for the fiscal year ended June 30, 2010. Taking into account other

was approximately $3.6 million for the fiscal year ended June 30, 2011, compared to a lossof $7.3 million in the corresponding period in 2010.

The operating losses from continuing operations for the fiscal year ending June 30, 2011was significantly impacted by the CNRI Settlement that resulted in a $6.2 million loss butwas offset by the gain on disposition of the Debenture of $3.0 million.

was $2.4 million, takinginto account gains from discontinued operations, compared to a loss of $25.4 million in thecorresponding period in 2010.


General and Administrative expenses were $1.6 million and $6.7 million for the fiscal yearended June 30, 2011 and 2010, respectively. Costs for the fiscal year ending June 30, 2011related primarily to consulting, professional and administration expenses for thecontinuing operations of the Corporation and the evaluation of new investmentopportunities. General and Administrative expenses for the fiscal year ending June 30,2010 were significantly higher compared to fiscal 2011 due to the costs involved in

Other Income and Expenses

Interest income earned on cash and investments during the fiscal year ended June 30, 2011amounted to $936,000 and related primarily to the interest earned from the investment inFormation. Interest income of $20,000 earned during the fiscal year ended June 30, 2010related to interest earned on cash and restricted cash balances.

Total interest expense incurred during the fiscal year ended June 30, 2011 amounted to$1.0 million, compared to $13.3 million for the same period in 2010. The difference isprimarily due to the repurchase of the Senior Notes at the conclusion of the Transaction,which reduced interest bearing debt by $106 million.

Included in other income (expenses) for the fiscal year ended June 30, 2011 was the gainon disposition of the Debenture of $3.0 million and the loss as a result of the CNRISettlement of $6.2 million, both of which are discussed above.


The Corporations foreign currency exchange rate affected its monetary assets andliabilities denominated in currencies other than US dollars. For the fiscal year ended June30, 2011, the net foreign exchange gain amounted to $1.0 million, compared to a loss of$1.7 million in the same period in 2010. The change in the foreign exchange gain/loss from2010 to 2011 was a result of the decreased volatility in the Colombian peso, the Euro andthe Canadian dollar exchange rates to the US dollar during fiscal 2011, the decreasedeconomic activity from fiscal 2010 to fiscal 2011, and a reduction in foreign operations.


As a result of the factors discussed above, the Corporation recorded losses from continuingoperations of $3.6 million or $0.02 per share for the fiscal year ended June 30, 2011compared with a loss from continuing operations of $7.3 million or $0.04 per share for thefiscal year ended June 30, 2010.


As a result of the Transaction, expenses from discontinued operations have beensignificantly reduced. The Corporation recorded net income from discontinued operationsof $1.2 million in the fiscal year ended June 30, 2011. This compares to losses of $18.1million for the fiscal year ended June 30, 2010.

The amounts realized during the fiscal year ending June 30, 2011 relate mainly to the

million of accrued contingent liabilities as a result of the CNRI Settlement. The amountsalso include foreign exchange gains offset by professional and consulting fees related tothe continuing wind down of the Colombian operations. During the fiscal year ended June30, 2011, as part of CDCa Colombian subsidiary of the Corporation, entered into voluntary liquidation. Theliquidation process is anticipated to take upwards of one year to finalize. The repatriationof any residual net assets will not occur until completion of the liquidation process.

Net Profit/Loss

Taking into account both continuing and discontinuing operations, the Corporationrecorded a net loss of $2.4 million or $0.01 per share in the fiscal year ending June 30,2011, compared with a net loss of $25.4 million or $0.15 per share in the fiscal year endingJune 30, 2010.


2011 2010

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Financial


Revenue from continuing operations $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $ 12.7 $ 3.5

Earnings from continuing operations 0.0 0.0 0.0 0.0 0.0 0.0 (20.3) (14.5)

Net earnings/(loss) 0.73 (2.9) 0.00 0.08 (2.2) 6.8 (20.0) (14.0)

Earnings/(loss) per share from continuing operations (0.00) (0.02) 0.00 0.00 (0.04) 0.06 (0.12) (0.08)

Net earnings/(loss) per share (0.0) (0.02) 0.00 0.00 (0.15) 0.04 (0.12) (0.08)

Cash (used in) provided by continuing operations (0.1) 11.6 (7.2) (0.0) (7.5) 3.3 (11.3) (13.2)

Capital expenditures 0.00 0.00 0.00 (0.0) (0.0) (0.0) (0.0) (0.0)

Cash and cash equivalents net of short-term debt 23.3 24.09 10.7 17.0 18.3 9.9 (125.1) (119.5)

The quarterly figures for Q3 and Q4 2010 and Q1, Q2, Q3 and Q4 2011 reflect results as reportable subsequent to the Transaction. The figures withrespect to prior quarters have not been restated. Basic and dilutive loss per share is calculated by dividing the net loss by the weighted average numberof shares in issue during the year. As a result of consolidated net losses the potential effect of exercising stock options and warrants has not been includedin the calculation of loss per share because to do so would be anti-dilutive.


Following closing of the Transaction, receipt of the payments under the Minutes ofSettlement, prepayment of the Debenture and the receipt of $1.8 million pursuant to theCNRI Settlement, d. See

The cash and cash equivalents balance as at June 30, 2011 was $31.6 million, compared to$18.3 million as at June 30, 2010.

Melior believes that it has sufficient capital to meet thcover continuing corporate costs estimated at $1.1 million per annum. Future investments

required in the future, depending on the scale of prospective investment opportunitiesMelior pursues.

Other Investing Activities

During the 2011 fiscal year, the Corporation completed an agreement with Formationregarding the prepayment of the Debenture. At the time of the prepayment, Cdn$7 millionof the original Cdn$8 million investment was outstanding under the Debenture. Meliorsurrendered the Debenture to Formation upon receipt of Cdn$9.3 million in cash and400,000 Formation Shares.

The surrender of the Debenture resulted in a realized gain of $3.0 million. Additionally,during the fiscal year ending June 30, 2011, Melior sold an aggregate of 300,800

Formation Shares for net proceeds of approximately Cdn$673,000 resulting in a gain onsale of marketable securities of $270,000.

As at June 30, 2011, the Corporation held 1,195,638 Formation Shares.

Subsequent to the year end, the Corporation sold the remainder of its Formation Shares fornet proceeds of Cdn$927,000.

During the fiscal year ending June 30, 2011, the Corporation purchased 6,000,000 OracleShares at a price of Cdn$1.25 per Oracle Share for an aggregate purchase price of Cdn$7.5million and sold an aggregate of 3,200 Oracle Shares. The fair market value of the OracleShares increased from the date of acquisition to June 30, 2011 resulting in an unrealizedgain of $94,000, which is recorded on the balance sheet as accumulated othercomprehensive income.

Subsequent to the year end, the Corporation sold the remainder of its Oracle Shares for netproceeds of Cdn$5.3 million.

In addition, as at June 30, 2011, short term investments of $21.7 million were held inhighly liquid short term investments with reputable Canadian financial institutions.

Financing Activities

In the fiscal year ending June 30, 2011, interest expense was incurred in the amount of $1million as compared to interest expense of $13.3 million in the fiscal year 2010. Thedecrease in interest expense is primarily related to the decrease of $106 million inoutstanding Senior Notes pursuant to the Note Offers.

In connection with the Transaction, and previously included in restricted cash, $8.0 millionwas held by Computershare in escrow to cover indemnities provided to the purchaser.Pursuant to the CNRI Settlement, Computershare released $6.2 million, of the $8 millionheld in escrow, to the CNR Parties and $1.8 million was released to the Corporation.

In the fiscal year ending June 30, 2010, Coalcorp International AVV, a subsidiary of theCorporation, purchased $35.2 million LIBOR loans held by CDC. Coalcorp InternationalAVV used $35.5 million of restricted cash to purchase these loans; the balance of $300,000was transferred to cash.

Commitments and Expenditures

All of in the aggregate amount of $12 million as at June 30,2011 are current and due within the year. The Senior Notes matured on August 31, 2011 forwhich a final payment of $8.4 million in respect of principal and interest was made.

The Corporation has sufficient cash resources to meet its current commitments.

Debt

Pursuant to the terms of the Note Indenture, the Corporation was required to use the netavailable cash from the sale of the La Francia I Assets to purchase the outstanding SeniorNotes. Not all of the Senior Notes were tendered to the Note Offers and $8.27 millionremained outstanding. See had anobligation to pay $168,572 of interest on August 31, 2011 in relation to the outstandingSenior Notes, which was paid.

Cash and Short Term Investments

As at June 30, 2011, the Corporation had a cash position of $31.6 million, along with

balances predominantly in a major Canadian financial institution with an AA- rating from-backed securities.


During the fiscal year ended June 30, 2011, the Corporation did not have any transactionsinvolving related parties. The Company incurred production royalties of $568,000 to Blue

Blue Pacificroyalties were reversed out of expenses as a result of the Settlement Agreement.

Pursuant to the Minutes of Settlement it was agreed that Blue Pacific would terminate itsroyalty on production from the La Francia mine and cancel any royalty paymentsoutstanding. All outstanding royalty amounts were reversed out of expenses as a result ofthe Settlement Agreement which is reflected in the financial statements as at June 30, 2010.

Risk Factors

The Corporation is exposed to a number of risks and uncertainties. Such risks couldo differ

materially from those described in forward-looking statements relating to the Corporation.The risks described herein, or in documents incorporated by reference herein, may not bethe only risks facing the Corporation. Additional risks not currently known or not currently

Early Stage of Development

currently has a limited number of investments and, as a consequence, Melior maynot enjoy the possible benefits associated with a more diversified asset portfolio. There

assurance that Melior will be able to generate sufficient activity to be profitable in the

metallurgical and mineral sectors makes an evaluation of its prospects difficult. Futureresults of operations may fluctuate significantly based upon numerous factors, includingeconomic conditions, activities of competitors, commodity prices and the ability of Meliorto develop and maintain a diversified asset portfolio. Melior has limited funds with whichto develop and maintain its asset portfolio.

Investment Risk

ents on terms acceptable to it;

The Corporation may not be able to identify appropriate investments or to acquire anysuitable investments that it identifies. Moreover, competition may reduce the number ofinvestment opportunities available to the Corporation and may lead to unfavourable termsas part of any investment, including high purchase prices.


The pursuit of thefinancing. Failure to obtain sufficient financing could result in a delay or abandonment of

needed or, if available, the terms of such financing might not be favourable to theCorporation and might involve substantial dilution to existing shareholders. Failure to

tobusiness, financial condition and results of operations.


Melior is primarily engaged in making strategic investments in mining, metallurgical ormineral opportunities and the consequent concentration in those businesses may result in ahigher degree of volatility and price fluctuation than other investments that have better

s diversifyingits investments in the resource sector, its value is closely tied to its investments and any

Economic Conditions

Unfavourable economic and equity market conditions, such as recessions, interest rate

activities and in the case of any loans Melior may make, the returns generated by thoseloans. A negative impact on thelikely have a negative impact on the market price of the Common Shares and Warrants.

reduce demand for its services, and limit access to capital markets.


The value of the Common Shares and Warrants will vary according to the value of thesecurities in which Melior invests, which will depend, in part, upon the performance of theissuers of such securities. Fluctuations in the market values of such securities may occurfor a number of reasons beyond the control of Melior including economic conditions,investor sentiment, global events and prices for base and precious metals. There is noassurance that an adequate market will exist for securities acquired by Melior. Certaininvestments made by Melior, including those securities listed on an exchange and notsubject to resale restrictions, may be relatively illiquid and may decline in price if asignificant number of such securities are offered for sale. In the case of equity investmentsin private issuers, there would be no public market and a risk that one may never develop.


both) in mining, metallurgical or mineral resource issuers. The business activities ofresources issuers are typically speculative and may be adversely affected by sector specificrisk factors, outside the control of the resource issuer, which may ultimately have an

sector include, without limitation, the following:


the marketability of natural resources which may be acquired or discovered by a resourceissuer will be affected by numerous factors beyond the control of such resource issuer.These factors include market fluctuations in the price of metals, metal concentrates, andminerals, the proximity and capacity of natural resource markets and processingequipment, government regulations, including regulations relating to prices, taxes,royalties, land tenure, land use, importing and exporting of materials and environmentalprotection. The exact effect of these factors cannot be accurately predicted, but any one, ora combination of, these factors could result in a resource issuer not receiving an adequatereturn for shareholders;

a resource issuer may become subject to liability for pollution, cave-ins or other hazardsagainst which a resource issuer cannot insure or against which it may elect not to insure.

Such liabilities may hav

investment portfolio;

es and controlsrelating to prospecting, land use, trade, environmental protection, taxation, rates of

be located in foreign jurisdictions, and its exploration operations in such jurisdictions maybe affected in varying degrees by the extent of political and economic stability, and bychanges in regulations or shifts in political or economic conditions that are beyond thecontrol of the resource issuer. Such factobusiness and/or itmay be carried out in accordance with all applicable rules and regulations at any point intime, no assurance can be given that new rules and regulations will not be enacted or thatexisting rules and regulations will not be applied in a manner that could limit or curtail

laws and regulations governing the operations of a resource issuer or more stringentenforcement of such laws and regulations could have a substantial adverse impact on thefinancial results of the resource issuer; and

ironmental regulations enacted bygovernment agencies from time to time. A breach of such legislation may result in theimposition on the resource issuer of fines and penalties. In addition, certain types ofoperations require the submission and approval of environmental impact assessments.Environmental legislation is evolving in a manner which has lead to stricter standards andenforcement and greater fines and penalties for non-compliance. The cost of compliancewith government regulations may reduce

Competition

Melior will be operating in the extremely competitive financial services industry and willbe competing with a large number of companies that provide equity, debt and/ormezzanine financingother resources than Melior. These competitors may be able to respond more quickly andsuccessfully to new or changing opportunities.


There is a risk that some or all of the expected benefits of investments may fail tomaterialize, or may not occur within the time periods anticipated by management of theCorporation. The realization of such benefits may be affected by a number of factors, manyof which are beyond the control of the Corporation. The failure to realize some or all of theexpected benefits of such investments could have a material adverse effect on the business,financial condition and results of operations of the Corporation.


The Board may experience delays in hiring, or be unable to hire or retain, experienced andqualified new management for the Corporation within the timeframes necessary or upon

terms acceptable to the Corporation. The competition for qualified personnel in the miningand metallurgical industry is intense and there can be no assurance that the Corporationwill be able to attract and retain the personnel necessary for the implementation of itsbusiness strategy.


Melior is dependent upon the personal efforts, performance and commitment of its

business. To carry out its investment activities, Melior will be relying upon the business

the services of any member of management or the Board became unavailable for anyreason, a disruption to the operations of Melior could result and may delay the


same business as Melior, natural resource companies or companies providing services toMelior, or they may have significant shareholdings in other resource companies. To theextent that such companies participate in transactions in which Melior participates, thedirectors of Melior may have a conflict of interest in negotiating and concluding termsrespecting the extent of such participation. If a conflict of interest arises at a Boardmeeting, any director who has a conflict will abstain from voting in connection with thetransaction in accordance with the BCBCA. In accordance with applicable laws, thedirectors of Melior are required to act honestly, in good faith and in the best interests of

nominee on the board of directors of the investee company. Confidentiality and judiciaryconflict issues may arise and any director may be recused from participating or voting at aBoard meeting.


ncy is the US Dollar and major investments aretransacted in this currency. The Corporation funds certain administrative expenses in theColumbian Peso using primarily US currency converted from its US dollar bank accountsheld in Canada. Accordingly, the Corporation is subject to the risks inherent in exchangerate fluctuations.

Credit Risk

obligations. The Corporation is subject to credit risk primarily attributable to its cash,short-term investments, and accounts receivable.

Indemnities Provided to Directors and Officers

The Corporation has agreed to indemnify each of its directors and officers in respect ofcertain liabilities or expenses which such directors and officers may incur as a result ofacting as a director or officer of the Corporation or its related corporate entities. Theindemnity agreements include an indemnification for all costs, charges, expenses, losses,damages, fees (including any legal, professional or advisory fees or disbursements),liabilities and amounts paid to settle or dispose of any civil, criminal or administrativeproceeding. Certain of the claims noted under the heading

certain former and current directors and officers of the Corporation. The Corporationbelieves it carries sufficient Directors and Officers insurance to cover any potential claimsfor indemnity.

Settled Contingencies

occurred during the 2011 fiscal year.

As a result of the CNRI Settlement, a loss was recorded in the statement of operations of$6.2 million for the period ending June 30, 2011. The Corporation also reversed theaccrued contingent liability of $1.1 million which is recorded as a gain in its discontinuedoperations.

annual information form and the MD&A for the fiscalyear ended June 30, 2010 for a description of other settled contingencies .

Changes in Accounting Policies:

1) The CICA issued three new accounting standards in January 2009: Section 1582,Business Combinations Section 1582 Consolidated FinancialStatements Section 1601 Non-Controlling Interest Section1602 standards will be effective for fiscal years beginning on or afterJanuary 1, 2011. The Corporation is in the process of evaluating the requirements of thenew standards.

Section 1582 replaces Section 1581, Business Combinations and establishes standards foraccounting for a business combination. It provides the Canadian equivalent to

IFRS Business Combinations. Thesection applies prospectively to business combinations for which the acquisition date is onor after the beginning of the first annual reporting period beginning on or after January 1,2011. Sections 1601 and 1602 together replace Section 1600, Consolidated FinancialStatements. Section 1601 establishes standards for the preparation of consolidatedfinancial statements. Section 1601 applies to interim and annual consolidated financialstatements relating to fiscal years beginning on or after January 1, 2011. Section 1602establishes standards for accounting for a non-controlling interest in a subsidiary in

consolidated financial statements subsequent to a business combination. It is equivalent tothe corresponding provisions of International Accounting Standards 27, Consolidated andSeparate Financial Statements, and applies to interim and annual consolidated financialstatements relating to fiscal years beginning on or after January 1, 2011.

2) In August 2009, the CICA issued certain amendments to Section 3251, Equity. Theamendments apply to entities that have adopted Section 1602. The amendments requireseparate presentation on the statements of operations and comprehensive income ofincome attributable to owners of the Corporation and those attributable to non-controllinginterests. The amendments also require that non-controlling interests be presentedseparately as a component of equity. As the Corporation has not adopted Section 1602,which is not mandatory until the year beginning January 1, 2011, the amendments are notapplicable to the Corporation in the interim and there is no impact to the financialstatements for the period ended June 30, 2011.

3) AcSBthe strategy of replacing Canadian GAAP with IFRS for Canadian enterprises with publicaccountability. On February 13, 2008, the AcSB confirmed that publicly accountable,profit oriented enterprises will be required to report under IFRS for interim and annualfinancial statements for periods commencing on or after January 1, 2011. Accordingly, theCorporation will be required to have prepared, in time for its fiscal 2012 first quarter filing,comparative financial statements in accordance with IFRS. This will be an ongoing processas the International Accounting Standards Board and the AcSB continue to issue newstandards and recommendations. The Corporation is in the process of evaluating thepotential impact of IFRS on its financial statements. The impact of the conversion on the

below.

International Financial Reporting Standards

The Canadian Accounting Standards Board has confirmed that IFRS will replace CanadianGAAP for publicly accountable enterprises, including the Corporation, effective for fiscalyears beginning on or after January 1, 2011.

Accordingly, the Corporation will apply accounting policies consistent with IFRSbeginning with its interim financial statements for the quarter ended September 30, 2011.

ents will includecomparative fiscal 2011 financial statements, adjusted to reflect any changes in accountingpolicies resulting from the adoption of IFRS.

IFRS Transition Plan

During Q4 fiscal 2011, the Corporation has been working with its external advisors tocomplete its detailed analysis of the relevant IFRS requirements and identified the areaswhere accounting policy changes are required, and those for which accounting policyalternatives are available. The team has also been working to complete its assessment ofthe first-time adoption requirements and alternatives.

will continue during Q1 fiscal 2012, after which the Corporation will finalize itsdetermination of changes to accounting policies under IFRS and the resulting impact on theopening IFRS balance sheet (as at July 1, 2010).

The table below summarizes the expected timing of activities related to our transition toIFRS.

Identification of key areas for which changes to accounting policiesmay be required

Complete

Detailed analysis of all relevant IFRS requirements andidentification of areas requiring accounting policy changes or thosewith accounting policy alternatives

In progress, tocomplete during Q1fiscal 2012

Assessment of first-time adoption (IFRS 1) requirements andalternatives.

In progress, to completeduring Q1 fiscal 2012

Final determination of changes to accounting policies and choices tobe made with respect to first-time adoption alternatives

Q1 2012

Resolution of the accounting policy change implications oninformation technology, business processes and contractualarrangements

In progress, to completeduring Q1 fiscal 2012

Management and employee education and training Throughout thetransition process

Quantification of the financial statement impact of changes inaccounting policies

Q1fiscal 2012

Preparation of pro forma Q1 fiscal 2012 financial statementsconsistent with IFRS presentation and disclosure requirements

Q1 fiscal 2012

Impact of Adopting IFRS on the Organization

The Board and Audit Committee are being regularly updated on the progress of the IFRSimplementation plan and with information regarding the potential for changes tosignificant accounting policies. As part of the implementation plan, our employees andadvisors that are involved in the preparation of financial statements are receiving trainingon the relevant aspects of IFRS and the potential for changes to accounting policies.

As part of its analysis of potential changes to significant accounting policies, theimplementation team is assessing what changes may be required to its accounting systemsand business processes. To date, the changes to systems and processes that have beenidentified are minimal.

The team is also assessing whether any contractual arrangements may impacted bypotential changes to accounting policies.

First-time Adoption of IFRS

The adoption of IFRS requires the application of IFRS 1 First-time Adoption ofInternational Financial Reporting Standards IFRS 1 s guidance for an

IFRS effective as of the end of first annual IFRS reporting period. However,IFRS 1 also provides certain optional exemptions and mandatory exceptions to thisretrospective treatment.

The Corporation has identified the following optional exemptions that it expects to apply inthe preparation of an opening IFRS statement of financial position as at July 1, 2010, the

Transition Date

To apply IFRS 2 Share-based Payments only to equity instruments that were issuedafter November 7, 2002 and had not vested by the Transition Date.

To apply IFRS 3 Business Combinations prospectively from the Transition Date,therefore the Corporation will not restate business combinations that took place priorto the Transition Date.

To apply IAS 23 Borrowing Costs prospectively from the Transition Date. IAS 23requires the capitalization of borrowing costs directly attributable to the acquisition,production or construction of certain assets.

To not reassess whether arrangements contain a lease under IFRS where the samedetermination that would be made under IFRIC 4 Determining whether anArrangement Contains a Lease ( IFRIC 4 ) was made previously in accordancewith Canadian GAAP.

To apply the transitional provisions of IFRIC 4 to leases to which the samedetermination as IFRIC 4 was not made previously in accordance with CanadianGAAP. Therefore, the determination of whether these arrangements contain a leaseis based on the circumstances existing at the Transition Date.

As the analysis of its accounting policies under IFRS continues, the Corporation maydecide to elect to apply these, or other, optional exemptions contained in IFRS 1.

IFRS 1 does not permit changes to estimates that have been made previously. Accordingly,estimates used in the preparation of our opening IFRS statement of financial position as atthe Transition Date will be consistent with those made under current Canadian GAAP.

The adoption of IFRS is expected to result in changes to significant accounting policies,which may have a significant impact on the recognition and measurement of transactionsa

not yet completed its detailed analysis of IFRS requirements, included below are highlightsof the areas that have been identified as having the most potential for a change tosignificant accounting policies.

This is not intended to be a complete list of areas where the adoption of IFRS will require achange in accounting policies, but to provide a summary of the analysis performed to date.As the IFRS implementation plan continues, the Corporation will make a finaldetermination of changes to its accounting policies that will result from adopting IFRS, andmay identify other changes that will have an impact on the financial statements.

Foreign Currencies

IFRS requires that the functional currency of the Corporation and its subsidiaries bedetermined separately, and the process of considering factors to determine functionalcurrency are somewhat different than current Canadian GAAP. A change in the functionalcurrency of the Corporation or one of its subsidiaries would result in changes to the methodused to translate these entities into the presentation currency, and would have an impact onthe reported values of non-monetary assets and liabilities. TheCorporation has not completed its assessment of functional currencies under IFRS.

Warrants

Under IFRS, warrants that have an exercise price in a currency other than the functionalcurrency are classified as a liability, due to the fact that the amount of cash to be received inthe functional currency for shares of the Corporation is variable. Under Canadian GAAP,warrants are classified as equity, irrespective of the currency of the exercise price. Whetheror not this will have a significadependent on the determination of functional currencies under IFRS.


The accounting treatment under IFRS for the assets and liabilities of discontinuedoperations is similar to Canadian GAAP, however there are some differences that may

discontinued operations under IFRS is limited to a separate major line of business orgeographical area; Canadian GAAP does not include this limitation. The Corporation is inthe process of determining whether any accounting policy changes for its discontinuedoperations would have a significant impact on its financial statements.


In certain circumstances, IFRS requires a different measurement of share-basedcompensation than current Canadian GAAP. In particular, a change may be required to themeasurement and timing of recognizing the expense associated with grants under theCorpora stock option plan. The Corporation is assessing the impact of the change onthe measurement of compensation expense associated with the stock option plan.

Accounting for Income Taxes

While accounting for income taxes is similar under IFRS and Canadian GAAP, in certaincircumstances there are differences in the measurement of future tax assets and future taxliabilities. The Corporation is in the process of determining whether any changes in itsaccounting policies related to income taxes will have a significant effect on its financialstatements.

Subsequent Disclosures

Further disclosures of the IFRS transition process are expected as follows:

the interim financial statements for the three months ending September 30, 2011, whichwill include notes disclosing transitional information and disclosure of new accountingpolicies under IFRS. The interim financial statements for the three months endingSeptember 30, 2011 will also include fiscal 2011 financial statements for the

date IFRS statement of financial position (as at July 1, 2010).


On February 8, 2011, the 24,642,862 warrants then listed on NEX under the symbolCCJ.WT.H expired unexercised.

On August 17, 2011, the 19,878,577 warrants then listed on the TSXV under the symbolCCJ.WT.K expired unexercised.

As at October 28, 2011, the Corporation has the following securities outstanding:TSXV Number Shares Exercise Expiry Proceeds if

Symbol Outstanding Issuable on Price Date ExercisedExercise Cdn$ Cdn$

Common shares MLR.V 173,380,974 - - - -Warrants MLR.WT.B 61,873,890 61,873,890 2.50 June 5, 2013 154,684,725

On September 23, 2011, the Corporation issued 3,875,000 options to certain directors, aconsultant and executive officers of the Corporation with an exercise price of Cdn$0.17.The options vest on the date of the grant and expire seven years from the date of grant.

On September 30, 2011, the Corporation issued 373,925 shares pursuant to a sharecompensation agreement.

The Corporation has 4,475,000 stock options outstanding which, if exercised, would resultin proceeds of approximately Cdn$1,334,000.


Additional information relating to the Corporation, inclu annualinformation form for the year ended June 30, 2011, is available for viewing on SEDAR at

cautions that information contained on, or accessible through, these websites is currentonly as at the date of such information.

BELRIDGE ENTERPRISES PTY LTDMANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE AND SIX MONTHS ENDEDDECEMBER 31, 2013

BELRIDGE ENTERPRISES PTY LTDManagement’s Discussion & AnalysisThree and Six Months Ended December 31, 2013Dated April 17, 2014

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Introduction

The following management’s discussion and analysis (“MD&A”) of the financial condition and results ofthe operations of Belridge Enterprises Pty Ltd (the “Company” or “Belridge”) constitutes management’sreview of the factors that affected the Company’s financial and operating performance for the three andsix months ended December 31 2013. This MD&A has been prepared in compliance with therequirements of National Instrument 51- 102 – Continuous Disclosure Obligations. This discussion shouldbe read in conjunction with the unaudited financial statements of the Company for the half years endedDecember 31, 2012 & 2013 together with the notes thereto. Results are reported in Australian dollars,unless otherwise noted. In the opinion of management, all adjustments (which consist only of normalrecurring adjustments) considered necessary for a fair presentation have been included. The results forhalf years ended December 31, 2012 & 2013 are not necessarily indicative of the results that may beexpected for any future period. Information contained herein is presented as at April 17, 2014 unlessotherwise indicated.

The financial statements for the half years ended December 31, 2012 & 2013 have been prepared usingaccounting policies consistent with IFRS.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors,considers the materiality of information. Information is considered material if: (i) such information results in,or would reasonably be expected to result in, a significant change in the market price or value ofBelridge’s common shares; or (ii) there is a substantial likelihood that a reasonable investor wouldconsider it important in making an investment decision; or (iii) it would significantly alter the total mix ofinformation available to investors. Management, in conjunction with the Board of Directors, evaluatesmateriality with reference to all relevant circumstances, including potential market sensitivity.

Caution Regarding Forward-Looking Statements

This MD&A contains certain forward-looking information and forward-looking statements, as defined inapplicable securities laws (collectively referred to herein as “forward-looking statements”). Thesestatements relate to future events or the Company’s future performance. All statements other thanstatements of historical fact are forward-looking statements. Often, but not always, forward-lookingstatements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”,“scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or“believes”, or variations of, or the negatives of, such words and phrases, or state that certain actions,events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved.Forward-looking statements involve known and unknown risks, uncertainties and other factors that maycause actual results to differ materially from those anticipated in such forward-looking statements. Theforward-looking statements in this MD&A speak only as of the date of this MD&A or as of the datespecified in such statement.

Inherent in forward-looking statements are risks, uncertainties and other factors beyond Belridge’s abilityto predict or control. Please also make reference to those risk factors referenced in the “Risks andUncertainties” section below. Readers are cautioned that the above chart does not contain an exhaustivelist of the factors or assumptions that may affect the forward-looking statements, and that theassumptions underlying such statements may prove to be incorrect. Actual results and developments arelikely to differ, and may differ materially, from those expressed or implied by the forward-lookingstatements contained in this MD&A.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that maycause Belridge’s actual results, performance or achievements to be materially different from any of itsfuture results, performance or achievements expressed or implied by forward-looking statements. Allforward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should


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not place undue reliance on forward-looking statements. The Company undertakes no obligation toupdate publicly or otherwise revise any forward-looking statements whether as a result of new informationor future events or otherwise, except as may be required by law. If the Company does update one ormore forward-looking statements, no inference should be drawn that it will make additional updates withrespect to those or other forward-looking statements, unless required by law.

Description of Business

Belridge was incorporated under the laws of the State of Queensland, Australia on November 5, 1992 asMonto Resources Pty Ltd. Belridge changed its name to Belridge Enterprises Pty Ltd on May 13, 2009following a period of administration. Belridge’s head office is located at Level 19, 241 Adelaide Street,Brisbane, Queensland, 4000. Belridge’s registered office is located C/o 'Merrotts' Level 6, 241 AdelaideStreet, Brisbane, Queensland, 4000. Belridge is a privately owned company.


Overall Performance


The Goondicum Project remained on care and maintenance with operations suspended for the durationof the period. The focus of management was the restructuring of the Company to access the additionalcapital required to upgrade and restart the project.

Goondicum Project

The Goondicum Project is a fully permitted ilmenite mine located in Central Queensland, Australia, 30kmdue east of the township of Monto. The project is currently on care and maintenance. The GoondicumProject is located within the Goondicum crater, a topographic feature roughly circular and 6 km indiameter containing significant ilmenite, apatite (phosphate rock), titano-magnetite and feldsparmineralization. The Goondicum Project comprises a mining lease (ML80044) which covers approximately20 percent of the Goondicum crater and exploration leases covering the remainder of the crater.

Off-Balance-Sheet Arrangements

As of the date of this filing, the Company does not have any off-balance-sheet arrangements that have, orare reasonably likely to have, a current or future effect on the results of operations or financial condition ofthe Company, including, and without limitation, such considerations as liquidity and capital resources.

Proposed Transactions

On 31 March 2014 the shareholders of the Company entered into a Share Purchase Agreement (SPA)with Melior Resources Inc. (Melior), a Canadian incorporated Company listed on the Toronto stockexchange (TSXV: MLR). Under the terms of the SPA, if the conditions precedent are satisfied, Melior willacquire 100% of the shares issued of the Company and in return the shareholders of the Company will beissued 38.1M shares in Melior. The shareholders in the Company will be entitled to be issued a further38.1M shares if agreed performance targets are met. Melior has announced that it will invest up toUS$15M into the Company to restart operations.


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Selected Quarterly Financial Information

A summary of selected information for each of the eight most recent quarters is as follows:

Three Months Ended

TotalRevenue

(AUD$’000)

Gain (Loss)

Total(AUD$’000)

Per Share(AUD$)

2013-December 31 - 36,048 35.10

2013-September 30 8 (560) (0.56)

2013-June 30 3,557 (20,808) (20.81)

2013-March 31 2,875 (3,368) (3.37)

2012-December 31 3,174 (1,311) (1.31)

2012-September 30 - (1,984) (1.98)

2012- June 30 - (759) (0.76)

2012- March 31 - (718) (0.72)

Discussion of Operations

Six months ended December 31, 2013 compared with six months ended December 31, 2012

Belridge’s net income totaled $35,488,000 for the six months ended December 31, 2013, with a basicincome per share of $35.48 (fully diluted $34.55). This compares with a net loss of $3,294,000 with basicand diluted loss per share of $3.29 for the six months ended December 31, 2012. The increase of$32,194,000 in net income from a net loss was principally because:

For the six months ended December 31, 2013, a gain on debt forgiven of $36,075,000 wasrecorded due to the forgiveness of all related party loans. There was no forgiveness for the sixmonths ended December 31, 2012.

For the six months ended December 31, 2013, a gain on conversion of convertible note of$1,047,000 was recorded due to the conversion of the convertible note to common shares of theCompany. There was no conversion for the six months ended December 31, 2012.

For the six months December 31, 2012, the Company produced and sold product which resultedin a gross margin loss of $2,656,000. The Company produce minimal product for the six monthsended December 31, 2013.

For the six months December 31, 2013, general and administrative expenses increased by$732,000. The decrease is primarily attributable to the transition from production to care andmaintenance.

For the six months ended December 31, 2013, depreciation and amortization expense increasedby $307,000.The increase was attributable to depreciation and amortization expenses related tothe mine being allocated to cost of sales in fiscal which did not occur in fiscal 2014 with thecessation of production. Gross depreciation and amortization expenses decreased in for 6months ended December 31, 2013 due to the impairment recognized in June 2013.

All other expenses related to general working capital purposes.

Liquidity and Financial Position

The Company is primarily focused on the development of the Goondicum Project and after ten months ofoperation, production at the mine was suspended to complete a capacity upgrade plan with the objectiveof restarting operation after key process improvements and plant upgrades have been made. There is no


P a g e | 5

assurance that equity capital or loans will be available to the Company in the amounts or at the timesdesired or on terms that are acceptable to the Company, if at all. See “Risks and Uncertainties” below.

Cash provided by operating activities was $1,048,000 for the six months December 31, 2013 compared to$1,964,000 used in operating activities in the six months December 31, 2012. Operating activities wereaffected by cash receipts from customers of $2,812,000 less cash paid to suppliers and employees of$4,005,000 and net interest payments of $331,000 (2012 – $2,601,000, $4,205,000, and $360,000,respectively). As well in the six months December 31, 2013, the Company received a research anddevelopment rebate of $2,572,000 versus none in the comparable period.

Cash used in investing activities was $750,000 for the six months December 31, 2013 compared to$5,492,000 used in the six months December 31, 2012. The cash used primarily represents thepayments for the purchase of property plant and equipment and purchase of other financial assets. Forthe six months December 31, 2012 the company received $836,000 from the sale of property plant andequipment (nil in 2013).

Proceeds from borrowing were $1,800,000 for the six months December 31, 2013 compared to$6,324,000 in the six months December 31, 2012. In addition the Company repaid $1,788,000 ofborrowings in the six months December 31, 2013.

At December 31, 2013, Belridge had $443,000 in cash and cash equivalents (June 30, 2013 - $119,000).

The Company has negative gross margins and therefore must utilize funds obtained from the equityfinancing and other financing transactions to maintain its capacity to meet ongoing development andoperating activities.

As of December 31, 2013 the Company had 1,027,075 ordinary shares issued and outstanding.

As of December 31, 2013, and to the date of this MD&A, the cash resources of Belridge are held with theNational Australia Bank Limited.

The Company's financial instruments consist mainly of deposits with banks, held to term maturities,accounts receivable and payable, financial leases, convertible notes and related party borrowings.

The Company’s use of cash at present occurs, and in the future will occur, principally in two areas,namely, funding of its general and administrative expenditures and funding of its investment activities.Those investing activities include the cash components of the cost of the upgrade and re startup of theGoondicum Project. For fiscal 2014, the Company’s expected operating expenses are estimated toaverage $145,000 per month for recurring operating costs, after interest income is taken into account,excluding future tax considerations. The Company also plans to incur a minimum of approximatelyAUD$25,000 on its property interests over the remainder of fiscal 2014. Management may reassess itsplanned expenditures based on the Company’s working capital resources, the scope work required toadvance exploration on its projects and the overall condition of the financial markets.

Assuming that management is successful in upgrade and re startup of the Goondicum Project inAustralia, future work plans to develop the deposit will depend upon the Company's assessment of priorresults, the condition of the Company financially and the then prevailing economic climate in general.

Change in Accounting Policies

The Company’s significant accounting policies are presented in Note 2 of the financial statements for thehalf years ended December 31, 2012 & 2013.


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IFRS 13 - Fair Value Measurements (“IFRS 13”) defines fair value, sets out in a single IFRS frameworkfor measuring fair value and requires disclosures about fair value measurements. The IFRS 13 applies toIFRSs that require or permit fair value measurements or disclosures about fair value measurements (andmeasurements, such as fair value less costs to sell, based on fair value or disclosures about thosemeasurements), except in specified circumstances. At July 1, 2013, the Company adopted thispronouncement and there was no material impact on the Company’s financial statements given the assetand liability mix of the Company to which fair value applies.

Recent Accounting Pronouncements

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periodsbeginning January 1, 2014 or later periods. The following have not yet been adopted and are beingevaluated to determine their impact on the Company.

(i) IFRS 9 – Financial instruments (“IFRS 9”) was issued by the IASB in October 2010 and willreplace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 uses a singleapproach to determine whether a financial asset is measured at amortized cost or fair value, replacing themultiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financialinstruments in the context of its business model and the contractual cash flow characteristics of thefinancial assets. Most of the requirements in IAS 39 for classification and measurement of financialliabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairmentmethod to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annualperiods beginning on or after January 1, 2018. Earlier adoption is permitted.

(ii) IAS 32 Financial Instruments: Presentation (“IAS 32”) was amended by the IASB in December2011 to clarify certain aspects of the requirements on offsetting. The amendments focus on the criterionthat an entity currently has a legally enforceable right to set off the recognized amounts and the criterionthat an entity intends either to settle on a net basis, or to realize the asset and settle the liabilitysimultaneously. The amendments to IAS 32 are effective for annual periods beginning on or after January1, 2014. Earlier adoption is permitted.

Critical Accounting Estimates

The preparation of the financial statements requires management to make certain estimates, judgmentsand assumptions that affect the reported amounts of assets and liabilities at the date of the financialstatements and reported amounts of expenses during the reporting period. Actual outcomes could differfrom these estimates. The financial statements include estimates that, by their nature, are uncertain. Theimpacts of such estimates are pervasive throughout the financial statements, and may require accountingadjustments based on future occurrences. Revisions to accounting estimates are recognized in the periodin which the estimate is revised and future periods if the revision affects both current and future periods.These estimates are based on historical experience, current and future economic conditions and otherfactors, including expectations of future events that are believed to be reasonable under thecircumstances.

Going Concern

In June 2013 operations of the Company were suspended due to prices for the Company's productsfalling below the cost of production, which could only be materially reduced by upgrading the Company'splant processing capacity.

The shareholders of the Company agreed to support the Company whilst Management investigatedoptions to fund the works required to increase the Company's plant capacity and restart production.


P a g e | 7

In December 2013 the shareholders agreed to forgive loans to the value of $36,074,721 provided to theCompany by associated companies of the shareholders. In March 2014 the Company entered into aconditional agreement with Melior to acquire 100% of the Company. Melior has also provided theCompany with a secured loan of CAD$500,000 for working capital until the Melior agreement becomesunconditional.

Due to the ongoing support pledged by shareholders and the advanced state of the Melior transaction,management considers the Company to be a going concern and will be able to pay its debts as whenthey arise. Further information is contained in the Subsequent Events note.


The Company considers its capital to comprise its ordinary share capital and accumulated retainedearnings/losses.

In managing its capital, the Company’s primary objective is to ensure its continued ability to provide aconsistent return for its owners through a combination of capital growth and distributions. In order toachieve this objective, the Company seeks to maintain a gearing ratio that balances risks and returns atan acceptable level and also to maintain a sufficient funding base to enable the Company to meet itsworking capital and strategic investment needs. In making decisions to adjust its capital structure toachieve these aims, either through altering its dividend policy, new share issues, or the reduction of debt,the Company considers not only its short-term position but also its long-term operational and strategicobjectives.

Financial Risk Management

(a) General objectives, policies and processes

In common with all other businesses, the Company is exposed to risks that arise from its use of financialinstruments. This note describes the Company’s objectives, policies and processes for managing thoserisks and the methods used to measure them. Further quantitative information in respect of these risks ispresented throughout the financial statements.

There have been no substantive changes in the Company’s exposure to financial instrument risks, itsobjectives, policies and processes for managing those risks or the methods used to measure them fromprevious periods unless otherwise stated in this note.


The totals for each category of financial instruments, measured in accordance with IAS 39 as detailed inthe accounting policies to the financial statements are as follows:

Financial AssetsDecember 31, 2013

(AUD$’000)June 30, 2013

(AUD$’000)

Cash and cash equivalents 443 119

Trade and other receivables 251 3,104

Held-to-maturity investments 1,111 1,111

1,805 4,334


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Management has overall responsibility for the determination of the Company’s risk managementobjectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authorityfor designing and operating processes that ensure the effective implementation of the objectives andpolicies to the Company’s finance function. The Company’s' risk management policies and objectives aretherefore designed to minimise the potential impacts of these risks on the results of the Company wheresuch impacts may be material. Management receives monthly reports from the Company FinancialController through which it reviews the effectiveness of the processes put in place and theappropriateness of the objectives and policies it sets.

The overall objective of management is to set polices that seek to reduce risk as far as possible withoutunduly affecting the Company’s competitiveness and flexibility. Further details regarding these policiesare set out below.

(b) Credit Risk

Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation,resulting in the Company incurring a financial loss. Credit risk arises from cash and cash equivalents (e.g.deposits and investments held with banks and financial institutions), favourable derivative contracts(derivative assets), loans and receivables, guarantees given on behalf of others and loans andcommitments granted but not drawn down at the end of the reporting period. Credit risk arising from largesales values to single customers is mitigated through the use of letters of credit, prepayments and agencyagreements.

To mitigate the credit risk associated with balances of cash and cash equivalents and deposits held withbanks and financial institutions, the Management of Directors have established a policy that these canonly be held with AAA rated entities.

The maximum exposure of the Company to credit risk at the end of the reporting period for cash and cashequivalents, loans and receivables is their carrying amount disclosed in the statement of financial position.In addition, the maximum exposure of the Company to credit risk from other financial instruments is asfollows:

At 31 December 2013, there was no significant customers in trade receivables included in loans andreceivables (30 June 2013: significant customer, located in China, accounted for 99% of tradereceivables).

(c) Liquidity risk

Liquidity risk is the risk that the Company may encounter difficulties raising funds to meet commitmentsassociated with financial instruments, e.g. borrowing repayments. It is the policy of the Director thattreasury maintains adequate committed credit facilities.

Financial LiabilitiesDecember 31, 2013

(AUD$’000)June 30, 2013

(AUD$’000)

Trade and other payables 954 3,689

Lease liabilities 176 200

Convertible Notes - 832

Related Party Loans - 35,707

1,130 40,428


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Financing arrangements

The following financing facilities were available to the Company at the end of the reporting period:

Maturity Analysis – 31 December 2013

Maturity Analysis – 30 June 2013

(d) Market Risk

Financial Liabilities

CarryingAmount

(AUD$’000)

ContractualCash flows(AUD$’000)

< 6 mths(AUD$’000)

6–12mths

(AUD$’000)

1-3 years(AUD$’000)

> 3 years(AUD$’000)

Trade creditors 954 954 954 - - -

Finance lease liabilities 176 176 56 - 120 -

1,130 1,130 1,010 - 120 -

Financial Assets

CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade debtors 17 17 17 - - -

Other debtors 74 74 74

Related Party Receivable 160 160 160

Held to Maturity 1,111 1,111 - - - 1,111

1,362 1,362 251 - - 1,111


CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade creditors 3,689 3,689 3,689 - - -

Finance lease liabilities 200 200 28 28 144 -

Convertible notes 832 832 832 - - -

Related Party Loans 35,707 35,707 35,707 - - -

40,428 40,428 40,256 28 144 -

Financial Assets

CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade debtors 119 119 119 - - -

Held to Maturity 1,111 1,111 - - - 1,111

1,230 1,230 119 - - 1,111


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Market risk arises from the use of interest bearing, tradable and foreign currency financial instruments. Itis the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors(other price risk).


Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end ofthe reporting period, whereby a future change in interest rates will affect future cash flows or the fair valueof fixed rate financial instruments. The Company is also exposed to earnings volatility on floating rateinstruments. The financial instruments that expose the Company to interest rate risk are limited toborrowings, cash and cash equivalents.

Interest rate risk is managed using a mix of fixed and floating rate debt. At 31 December 2013,approximately 100% (30 June 2013 - approximately 95%) of the Company debt is fixed. It is the policy ofthe Company to keep between 65% and 100% of the debt on fixed interest rates.

The Company also manages interest rate risk by ensuring that, whenever possible, payables are paidwithin any pre-agreed credit terms.

The Company monitors its interest rate exposure continuously. The Company also considers on acontinuous basis to alternatives financing opportunities, hedging positions and renewal of existingpositions.

Sensitivity Analysis

The following table illustrates sensitivities to the Company's exposures to changes in interest rates. Thetable indicates the impact of how profit values at the end of the reporting period would have been affectedby changes in the relevant risk variable that management considers to be reasonably possible. Thesesensitivities assume that the movement in a particular variable is independent of the other variables.

(ii) Currency Risk

The Company’s policy is, where possible, to allow Company entities to settle liabilities denominated intheir functional currency (AUD) with the cash generated from their own operations in that currency. WhereCompany entities have liabilities denominated in a currency other than their functional currency (and haveinsufficient reserves of that currency to settle them) cash already denominated in that currency will, wherepossible, be transferred from elsewhere within the Company. The Company also uses forward currencycontracts to manage foreign currency risk.

In order to monitor the continuing effectiveness of this policy, management receives a monthly forecast,analysed by the major currencies held by the Company, of liabilities due for settlement and expectedcash reserves.

The Company’s exposure to foreign currency risk is as follows:

Profit/Equity

Six months ended December 31,

2013(AUD$’000)

2012(AUD$’000)

+/- 2% interest rates 3 4


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(e) Fair value

The fair values of financial assets and financial liabilities are presented in the following table and can becompared to their carrying amounts as presented in the statements of financial position. Fair value is theamount at which an asset could be exchanged, or a liability settled, between knowledgeable, willingparties in an arm's length transaction.

Fair value may be based on information that is estimated or subject to judgement, where changes inassumptions may have a material impact on the amounts estimated. Where possible, valuationinformation used to calculate fair value is extracted from the market, with more reliable informationavailable from markets that are actively traded.

Balances OutstandingDecember 31, 2013

(AUD$’000)June 30, 2013

(AUD$’000)

USD Cash at bank 11 1

USD Trade receivables - 1,534

Net Exposure 11 1,535

Financial Assets

December 31, 2013(AUD$’000)

June 30, 2013(AUD$’000)

CarryingAmount

Fair Value CarryingAmount

Fair Value

Cash and cash equivalents 443 443 119 119

Trade and other receivables 251 251 3,104 3,104

Held-to-maturity investments 1,111 1,111 1,111 1,111

1,805 1,805 4,334 4,334


December 31, 2013(AUD$’000)

June 30, 2013(AUD$’000)

CarryingAmount

Fair Value CarryingAmount

Fair Value

Trade and other payables 954 954 3,689 3,689

Lease liabilities 176 176 200 200

Convertible Notes - - 832 832

Related Party Loans - - 35,707 35,707

1,130 1,130 40,428 40,428


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Transactions with related parties:

Details of related party loans

In December 2013 the convertible note outstanding was converted to equity. The equity component of theconvertible note de-recognised was $222,661 and 26,975 shares were issued on conversion.

In December 2013 the Company entered into deeds which released the Company from all obligations torepay the outstanding debt owing on the related party loans from Belmont Park Investments Pty Ltd andPanorama Ridge Pty Ltd. The balance of the loans forgiven was $36,074,721.

December31, 2013

(AUD$’000)

June 30,2013

(AUD$’000)

December31, 2012

(AUD$’000)

Current receivables (loans from related parties)

Belmont Park Investments Pty Ltd 80 - -

Panorama Ridge Pty Ltd 80 - -

Interest expense

Associates 7 739 463

Non-current payables (loans from related parties)

Associates 7 36,539 30,365






Balances OutstandingDecember 31, 2013

(AUD$’000)June 30, 2013

(AUD$’000)

Belmont Park Investments Pty Ltd - 14,575

Panorama Ridge Pty Ltd - 14,525

Belmont Park Investments Pty Ltd - 6,607

Sashimi Investments Pty Ltd 7 832

7 36,539


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Share Capital

As of the date of this MD&A, the Company had 1,027,075 issued and outstanding common shares.

Subsequent Events

Melior transaction

On 31 March 2014 the shareholders of the Company entered into a Share Purchase Agreement (SPA)with Melior Resources Inc., (Melior), a Canadian incorporated Company listed on the Toronto stockexchange (TSXV:MLR). Under the terms of the SPA, if the conditions precedents are satisfied, Melior willacquire 100% of the shares issued of the Company and in return the shareholders of the Company will beissued 38.1M shares in Melior. The shareholders in the Company will be entitled to be issued a further38.1M shares if agreed performance targets are met. Melior has announced that it will invest up toUS$15M into the Company to re-start operations.

Pipeline

In February 2012 the Company entered into a Pipeline Transfer Agreement (PTA) with SunWater Limited,a Government Owned Corporation, to acquire the pipeline supplying water to the mine. On March 3 2014,having satisfied the conditions precedent of the PTA, the Company and SunWater settled the agreement.The Company has lodged the executed transfer notices for the easements along the pipeline, which weretransferred to the Company under the PTA, with the Queensland Titles Office. As of the date of this report,the Company is still waiting on confirmation of the registration of two of the easements transferred. Basedon the processing times for the easements for which confirmation of registration has been received, theCompany expects the registration of the remaining two easements to be confirmed by the end of April2014. The Company is not exposed to any contingent liability whilst the easements remain unregisteredbut the registrations are a prerequisite for the release of the mortgage held by SunWater.

Risks and Uncertainties

The Company’s financial condition, results of operation and business are subject to certain risks, certainof which are described below (and elsewhere in this MD&A):

Additional Funding RequirementsThe Company is reliant upon additional equity financing in order to continue its business and operations,because it is in the business of minerals extraction and processing and at present does not derive anyincome from its mineral assets. There is no guarantee that future sources of funding will be available tothe Company. If the Company is not able to raise additional equity funding in the future, it will be unableto carry out its business.

Commodity Price VolatilityThe price of various commodities that the Company is exploring for can fluctuate drastically, and isbeyond the Company’s control. The Company is specifically concerned with the prices of ilmenite andapatite. While the Company would benefit from an increase in the value of ilmenite and apatite, adecrease in the value of ilmenite and apatite could also adversely affect it.

Country RiskThe Company could be at risk regarding any political developments in the country in which it operates. Atpresent the Company is only active in Australia.


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Environmental Regulation and LiabilityThe Company’s activities are subject to laws and regulations controlling not only minerals extraction andprocessing themselves but also the possible effects of such activities upon the environment.Environmental legislation may change and make the mining and processing of ore uneconomic or resultin significant environmental or reclamation costs. Environmental legislation provides for restrictions andprohibitions on spills, releases or emissions of various substances produced in association with certainmineral exploitation activities, such as seepage from tailings disposal areas that could result inenvironmental pollution. A breach of environmental legislation may result in the imposition of fines andpenalties or the suspension or closure of operations. In addition, certain types of operations require thesubmission of environmental impact statements and approval thereof by government authorities.Environmental legislation is evolving in a manner that may mean stricter standards and enforcement,increased fines and penalties for non-compliance, more stringent environmental assessments ofproposed projects and a heightened degree of responsibility for companies and their directors, officersand employees. Permits from a variety of regulatory authorities are required for many aspects of mineralexploitation activities, including closure and reclamation. Future environmental legislation could causeadditional expense, capital expenditures, restrictions, liabilities and delays in the development of theCompany’s properties, the extent of which cannot be predicted. In the context of environmental permits,including the approval of closure and reclamation plans, the Company must comply with standards andlaws and regulations that may entail costs and delays, depending on the nature of the activity to bepermitted and how stringently the regulations are implemented by the permitting authority. The Companydoes not maintain environmental liability insurance.

Regulations, Permits and Aboriginal Title & AccessThe Company’s activities are subject to a wide variety of laws and regulations governing health andworker safety, employment standards, waste disposal, protection of the environment, protection of historicand archaeological sites, mine development and protection of endangered and protected species,aboriginal title and access and other matters. The Company is required to have a wide variety of permitsfrom governmental and regulatory authorities to carry out its activities. These permits relate to virtuallyevery aspect of the Company’s exploration and exploitation activities. Changes in these laws andregulations or changes in their enforcement or interpretation could result in changes in legal requirementsor in the terms of the Company’s permits that could have a significant adverse impact on the Company’sexisting or future operations or projects. Obtaining permits can be a complex, time-consuming process.There is some uncertainty associated with native title in Australia and this may impact on the Company’sfuture plans. There can be no assurance that the Company will be able to obtain the necessary permitson acceptable terms, in a timely manner or at all. The costs and delays associated with obtaining permitsand complying with these permits and applicable laws and regulations could stop or materially delay orrestrict the Company from continuing or proceeding with existing or future operations or projects. Anyfailure to comply with permits and applicable laws and regulations, even if inadvertent, could result in theinterruption or closure of operations or material fines, penalties or other liabilities.

Dependence on Key PersonnelThe Company’s future success and growth depends in part upon the experience of a number of keymanagement personnel. If, for any reason, any one or more of such key personnel do not continue to beactive in the Company’s management, the operations and business prospects of the Company could beadversely affected.

Conflicts of InterestCertain of the proposed directors of the Company are also directors, officers or shareholders of othercompanies. Such associations may give rise to conflicts of interest from time to time. The directors of theCompany will be required by law to act honestly and in good faith with a view to the best interests of theCompany and to disclose any interest which they may have in any project or opportunity of the Company.If a conflict arises at a meeting of the board of directors, any director in a conflict will disclose his interestand abstain from voting on such matter. In determining whether or not the Company will participate in any


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project or opportunity, the director will primarily consider the degree of risk to which the Company may beexposed and its financial position at that time.

BELRIDGE ENTERPRISES PTY LTDMANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEARS ENDEDJUNE 30, 2011, 2012 & 2013

BELRIDGE ENTERPRISES PTY LTDManagement’s Discussion & AnalysisYears Ended June 30, 2011, 2012 & 2013Dated April 17, 2014

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Introduction

The following management’s discussion and analysis (“MD&A”) of the financial condition and results ofthe operations of Belridge Enterprises Pty Ltd (the “Company” or “Belridge”) constitutes management’sreview of the factors that affected the Company’s financial and operating performance for the yearsended June 30, 2011, 2012 & 2013. This MD&A has been prepared in compliance with the requirementsof National Instrument 51- 102 – Continuous Disclosure Obligations. This discussion should be read inconjunction with the audited annual financial statements of the Company for the years ended June 30,2011, 2012 & 2013 together with the notes thereto. Results are reported in Australian dollars, unlessotherwise noted. In the opinion of management, all adjustments (which consist only of normal recurringadjustments) considered necessary for a fair presentation have been included. The results for the yearended June 30, 2011, 2012 & 2013 are not necessarily indicative of the results that may be expected forany future period. Information contained herein is presented as at April 17, 2014 unless otherwiseindicated.

The financial statements for the years ended June 30, 2011, 2012 & 2013, have been prepared usingaccounting policies consistent with IFRS.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors,considers the materiality of information. Information is considered material if: (i) such information results in,or would reasonably be expected to result in, a significant change in the market price or value ofBelridge’s common shares; or (ii) there is a substantial likelihood that a reasonable investor wouldconsider it important in making an investment decision; or (iii) it would significantly alter the total mix ofinformation available to investors. Management, in conjunction with the Board of Directors, evaluatesmateriality with reference to all relevant circumstances, including potential market sensitivity.

Caution Regarding Forward-Looking Statements

This MD&A contains certain forward-looking information and forward-looking statements, as defined inapplicable securities laws (collectively referred to herein as “forward-looking statements”). Thesestatements relate to future events or the Company’s future performance. All statements other thanstatements of historical fact are forward-looking statements. Often, but not always, forward-lookingstatements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”,“scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or“believes”, or variations of, or the negatives of, such words and phrases, or state that certain actions,events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved.Forward-looking statements involve known and unknown risks, uncertainties and other factors that maycause actual results to differ materially from those anticipated in such forward-looking statements. Theforward-looking statements in this MD&A speak only as of the date of this MD&A or as of the datespecified in such statement.

Inherent in forward-looking statements are risks, uncertainties and other factors beyond Belridge’s abilityto predict or control. Please also make reference to those risk factors referenced in the “Risks andUncertainties” section below. Readers are cautioned that the above chart does not contain an exhaustivelist of the factors or assumptions that may affect the forward-looking statements, and that theassumptions underlying such statements may prove to be incorrect. Actual results and developments arelikely to differ, and may differ materially, from those expressed or implied by the forward-lookingstatements contained in this MD&A.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that maycause Belridge’s actual results, performance or achievements to be materially different from any of itsfuture results, performance or achievements expressed or implied by forward-looking statements. Allforward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should


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not place undue reliance on forward-looking statements. The Company undertakes no obligation toupdate publicly or otherwise revise any forward-looking statements whether as a result of new informationor future events or otherwise, except as may be required by law. If the Company does update one ormore forward-looking statements, no inference should be drawn that it will make additional updates withrespect to those or other forward-looking statements, unless required by law.

Description of Business

Belridge was incorporated under the laws of the State of Queensland, Australia on November 5, 1992 asMonto Resources Pty Ltd. Belridge changed its name to Belridge Enterprises Pty Ltd on May 13, 2009following a period of administration. Belridge’s head office is located at Level 19, 241 Adelaide Street,Brisbane, Queensland, 4000. Belridge’s registered office is located C/o 'Merrotts' Level 6, 241 AdelaideStreet, Brisbane, Queensland, 4000. Belridge is a privately owned company.


Overall Performance


Refurbishment was largely completed by July 2012 and the Company commenced commissioning inAugust 2012 with the first product, being produced in September 2012. Between September 2012 andJune 2013 the Company produced over 46,000MT of ilmenite and 3,000MT of apatite which generatedrevenues of $9.6M.

Following a steep decline in the market for ilmenite, management determined that for the project toremain economically viable an increase in the projects processing capacity was required and operationswere duly suspended on 10 June 2013 so an upgrade program could be pursued.


In October 2011 the Company commenced the redevelopment of the project which primarily involved therefurbishment of the existing wet concentrator plant and the construction of a new feed preparation plant.Employees at the Company increased during the year from 3 to 37 with the majority of the newemployees engaged in the refurbishment work.


During the year the Company continued to assess the project and develop a plan to recommence theproject. Expenditure by the Company was driven by costs associated with caring and maintaining theGoondicum Project and consultants engaged to assist in the redevelopment planning.

Goondicum Project

The Goondicum Project is a fully permitted ilmenite mine located in Central Queensland, Australia, 30kmdue east of the township of Monto. The project is currently on care and maintenance. The GoondicumProject is located within the Goondicum crater, a topographic feature roughly circular and 6 km indiameter containing significant ilmenite, apatite (phosphate rock), titano-magnetite and feldsparmineralization. The Goondicum Project comprises a mining lease (ML80044) which covers approximately20 percent of the Goondicum crater and exploration leases covering the remainder of the crater.


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Off-Balance-Sheet Arrangements

As of the date of this filing, the Company does not have any off-balance-sheet arrangements that have, orare reasonably likely to have, a current or future effect on the results of operations or financial condition ofthe Company, including, and without limitation, such considerations as liquidity and capital resources.

Proposed Transactions

On 31 March 2014 the shareholders of the Company entered into a Share Purchase Agreement (SPA)with Melior Resources Inc. (Melior), a Canadian incorporated Company listed on the Toronto stockexchange (TSXV: MLR). Under the terms of the SPA, if the conditions precedent are satisfied, Melior willacquire 100% of the shares issued of the Company and in return the shareholders of the Company will beissued 38.1M shares in Melior. The shareholders in the Company will be entitled to be issued a further38.1M shares if agreed performance targets are met. Melior has announced that it will invest up toUS$15M into the Company to restart operations.

Selected Annual Financial Information

Years EndedJune 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

Revenue 9,606 - -

Net loss (27,470) (2,504) (1,159)

Basic and diluted loss per share (27.47) (2.50) (1.16)

Total assets 12,116 25,622 4,595

Total long-term financial liabilities 2,009 1,974 723


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Selected Quarterly Financial Information

A summary of selected information for each of the eight most recent quarters is as follows:

Three Months Ended

TotalRevenue

(AUD$’000)

Loss

Total(AUD$’000)

Per Share(AUD$)

2013-June 30 3,557 (20,808) (20.81)

2013-March 31 2,875 (3,368) (3.37)

2012-December 31 3,174 (1,311) (1.31)

2012-September 30 - (1,984) (1.98)

2012- June 30 - (759) (0.76)

2012- March 31 - (718) (0.72)

2011-December 31 - (667) (0.67)

2011-September 30 - (359) (0.36)

Discussion of Operations

Year ended June 30, 2013 compared with year ended June 30, 2012

Belridge’s net loss totaled $27,470,000 for the year ended June 30, 2013, with a basic and diluted lossper share of $27.47. This compares with a net loss of $2,504,000 with basic and diluted loss per share of$2.50 for the year ended June 30, 2012. The increase of $24,966,000 in net loss was principally because:

For the year ended June 30, 2013, an impairment charge of $19,911,000 was recorded to reflecta revaluation of property plant and equipment. There was no impairment charge for the yearended June 30, 2012.

For the year June 30, 2013, the Company produced and sold product which resulted in a grossmargin loss of $8,926,000. The Company did not produce or sell product for the year ended June,30, 2012.

For the year June 30, 2013, general and administrative expenses decreased by $994,000. Thedecrease is primarily attributable to an increase in the resources assigned to production activitiesas cost of sales or to capitalised projects (the pipeline).

For the year ended June 30, 2013, interest expense increased by $750,000. The increase isattributable to the increase in loans from related parties and a convertible note.

For the year ended June 30, 2013, depreciation and amortization expense decreased by$805,000. The decrease was attributable to the depreciation and amortization expense allocatedto cost of sales in fiscal 2013 as the majority of the depreciation and amortization expense isrelated to the mine and was reallocated when production restarted in 2013.


Year ended June 30, 2012 compared with year ended June 30, 2011

Belridge’s net loss totaled $2,504,000 for the year ended June 30, 2012, with a basic and diluted loss pershare of $2.50. This compares with a net loss of $1,159,000 with basic and fully diluted loss per share of$1.16 for the year ended June 30, 2011. The increase of $1,345,000 in net loss was principally because:


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For the year June 30, 2012, general and administrative expenses increased by $939,000. Thedecrease is primarily attributable to tenure and legal costs associated with the application for therenewal of the mining lease and the pipeline infrastructure leases.

For the year ended June 30, 2012, depreciation and amortization expense increased by $151,000.The increase was the result of capital expenditures on mobile plant & equipment (including lightvehicles).


Year ended June 30, 2011 compared with year ended June 30, 2010 (unaudited)

Belridge’s net loss totaled $1,159,000 for the year ended June 30, 2011, with a basic and diluted loss pershare of $1.16. This compares with a net loss of $2,174,000 with basic and fully diluted loss per share of$2.17 for the year ended June 30, 2010. The decrease of $1,015,000 in net loss was principally because:

For the year June 30, 2011, general and administrative expenses decreased by $1,202,000. Thedecrease is primarily attributable to the completion of design and feasibility studies in fiscal 2010.

For the year ended June 30, 2011, depreciation and amortization expense increased by $60,000.The increase was attributable to capital expenditure on fixed plant ($535,000 was spent onacquiring equipment for the new Feed Preparation Plant area).


Liquidity and Financial Position

The Company is primarily focused on the development of the Goondicum Project and after ten months ofoperation, production at the mine was suspended to complete a capacity upgrade plan with the objectiveof restarting operation after key process improvements and plant upgrades have been made. There is noassurance that equity capital or loans will be available to the Company in the amounts or at the timesdesired or on terms that are acceptable to the Company, if at all. See “Risks and Uncertainties” below.

Cash used in operating activities was $6,577,000 for the year ended June 30, 2013 compared to$1,876,000 in the year ended June 30, 2012 and $116,000 in the year ended June 30, 2011. Operatingactivities were affected by cash receipts from customers of $9,941,000 less cash paid to suppliers andemployees of $15,847,000 and net interest payments of $671,000 (2012 – $13,000, $1,891,000, and netinterest receipts of $2,000, respectively; 2011 – $(51,000), $726,000, and net interest receipts of $50,000,respectively).

Cash used in investing activities was $8,156,000 for the year ended June 30, 2013 compared to$16,043,000 used in the year ended June 30, 2012 and $39,000 used in the year ended June 30, 2011.The cash provided in all three years primarily represents the payments for the purchase of property plantand equipment and purchase of other financial assets. For the year ended June 30, 2013 the companyreceived $836,000 from the sale of property plant and equipment (nil in 2012 and 2011).

Proceeds from borrowing was $12,502,000 for the year ended June 30, 2013 compared to $19,959,000in the year ended June 30, 2012 and $100,000 in the year ended June 30, 2011. In addition the Companyreceived $233,000 from the capital component of a convertible note (on a $1,000,000 convertible note)for the year ended June 30, 2013. The cash provided in all three years is a result of the net proceedsfrom the related party shareholder loans.

At June 30, 2013, Belridge had $119,000 in cash and cash equivalents (June 30, 2012 - $2,288,000,June 30, 2011 - $14,000).


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The Company has negative gross margins and therefore must utilize funds obtained from the equityfinancing and other financing transactions to maintain its capacity to meet ongoing development andoperating activities.

As of June 30, 2013 the Company had 1,000,100 ordinary shares issued and outstanding and convertiblenotes which were converted on December 31, 2013 into 26,975 ordinary shares.

As of June 30, 2013, and to the date of this MD&A, the cash resources of Belridge are held with theNational Australia Bank Limited.


The Company’s use of cash at present occurs, and in the future will occur, principally in two areas,namely, funding of its general and administrative expenditures and funding of its investment activities.Those investing activities include the cash components of the cost of the upgrade and re startup of theGoondicum Project. For fiscal 2014, the Company’s expected operating expenses are estimated toaverage $145,000 per month for recurring operating costs (this excludes depreciation and amortizationbut includes the cost of the Melior transaction, audit, tax advice etc which is no-ongoing), after interestincome is taken into account, excluding future tax considerations. The Company also plans to incur aminimum of approximately AUD$25,000 on its property interests over the next 12 months. Managementmay reassess its planned expenditures based on the Company’s working capital resources, the scopework required to advance exploration on its projects and the overall condition of the financial markets.

Assuming that management is successful in upgrade and re startup of the Goondicum Project inAustralia, future work plans to develop the deposit will depend upon the Company's assessment of priorresults, the condition of the Company financially and the then prevailing economic climate in general.

Change in Accounting Policies

The Company’s significant accounting policies are presented in Note 2 of the financial statements for theyears ended June 30, 2011, 2012 & 2013.

There were no changes in accounting policies during the years ended June 30, 2011, 2012 & 2013.

Recent Accounting Pronouncements

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periodsbeginning January 1, 2013 or later periods. The following have not yet been adopted and are beingevaluated to determine their impact on the Company.

(i) IFRS 9 – Financial instruments (“IFRS 9”) was issued by the IASB in October 2010 and willreplace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 uses a singleapproach to determine whether a financial asset is measured at amortized cost or fair value, replacing themultiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financialinstruments in the context of its business model and the contractual cash flow characteristics of thefinancial assets. Most of the requirements in IAS 39 for classification and measurement of financialliabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairmentmethod to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annualperiods beginning on or after January 1, 2018. Earlier adoption is permitted.

(ii) IAS 32 Financial Instruments: Presentation (“IAS 32”) was amended by the IASB in December2011 to clarify certain aspects of the requirements on offsetting. The amendments focus on the criterion


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that an entity currently has a legally enforceable right to set off the recognized amounts and the criterionthat an entity intends either to settle on a net basis, or to realize the asset and settle the liabilitysimultaneously. The amendments to IAS 32 are effective for annual periods beginning on or after January1, 2014. Earlier adoption is permitted.

(iii) IFRS 13 - Fair Value Measurements (“IFRS 13”) defines fair value, sets out in a single IFRSframework for measuring fair value and requires disclosures about fair value measurements. The IFRS 13applies to IFRSs that require or permit fair value measurements or disclosures about fair valuemeasurements (and measurements, such as fair value less costs to sell, based on fair value ordisclosures about those measurements), except in specified circumstances. IFRS 13 is to be applied forannual periods beginning on or after January 1, 2013. Earlier adoption is permitted.

Critical Accounting Estimates

The preparation of the financial statements requires management to make certain estimates, judgmentsand assumptions that affect the reported amounts of assets and liabilities at the date of the financialstatements and reported amounts of expenses during the reporting period. Actual outcomes could differfrom these estimates. The financial statements include estimates that, by their nature, are uncertain. Theimpacts of such estimates are pervasive throughout the financial statements, and may require accountingadjustments based on future occurrences. Revisions to accounting estimates are recognized in the periodin which the estimate is revised and future periods if the revision affects both current and future periods.These estimates are based on historical experience, current and future economic conditions and otherfactors, including expectations of future events that are believed to be reasonable under thecircumstances.

Impairment & debt forgiveness

The Company was acquired in May 2009 by the current owners from an Administrator under a Deed ofCompany Arrangement, which involved the debts of the Company being forgiven at that point in time. In2009, an impairment charge of $54.9M was recognised, but due to the debt forgiveness, a retained profitwas carried forward into 2010. A further operating loss in 2010 resulted in a retained loss of $266,802being brought forward into 2011.

A further impairment has been made in the 2013 year and is detailed in note 17 of the financialstatements.


Going Concern

In June 2013 operations of the Company were suspended due to prices for the Company's productsfalling below the cost of production, which could only be materially reduced by upgrading the Company'splant processing capacity.

The shareholders of the Company agreed to support the Company whilst Management investigatedoptions to fund the works required to increase the Company's plant capacity and restart production.In December 2013 the shareholders agreed to forgive loans to the value of $36,074,721 provided to theCompany by associated companies of the shareholders. In March 2014 the Company entered into aconditional agreement with Melior to acquire 100% of the Company. Melior has also provided theCompany with a secured loan of CAD$500,000 for working capital until the Melior agreement becomesunconditional.


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Due to the ongoing support pledged by shareholders and the advanced state of the Melior transaction,management considers the Company to be a going concern and will be able to pay its debts as whenthey arise. Further information is contained in the Subsequent Events note.

Previously prepared special purpose accounts

These financial statements have been prepared in accordance with International Financial ReportingStandards (IFRS) for the purpose of the Melior sales agreement.These accounts have been prepared in accordance with the disclosure and measurement requirementsof IFRS and are significantly different to the special purpose accounts previously prepared for taxationand other potential purposes.


The Company considers its capital to comprise its ordinary share capital and accumulated retainedearnings/losses.

In managing its capital, the Company’s primary objective is to ensure its continued ability to provide aconsistent return for its owners through a combination of capital growth and distributions. In order toachieve this objective, the Company seeks to maintain a gearing ratio that balances risks and returns atan acceptable level and also to maintain a sufficient funding base to enable the Company to meet itsworking capital and strategic investment needs. In making decisions to adjust its capital structure toachieve these aims, either through altering its dividend policy, new share issues, or the reduction of debt,the Company considers not only its short-term position but also its long-term operational and strategicobjectives.

Financial Risk Management

(a) General objectives, policies and processes

In common with all other businesses, the Company is exposed to risks that arise from its use of financialinstruments. This note describes the Company’s objectives, policies and processes for managing thoserisks and the methods used to measure them. Further quantitative information in respect of these risks ispresented throughout the financial statements.

There have been no substantive changes in the Company’s exposure to financial instrument risks, itsobjectives, policies and processes for managing those risks or the methods used to measure them fromprevious periods unless otherwise stated in this note.


The totals for each category of financial instruments, measured in accordance with IAS 39 as detailed inthe accounting policies to the financial statements are as follows:


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Management has overall responsibility for the determination of the Company’s risk managementobjectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authorityfor designing and operating processes that ensure the effective implementation of the objectives andpolicies to the Company’s finance function. The Company’s' risk management policies and objectives aretherefore designed to minimize the potential impacts of these risks on the results of the Company wheresuch impacts may be material. Management receives monthly reports from the Company FinancialController through which it reviews the effectiveness of the processes put in place and theappropriateness of the objectives and policies it sets.

The overall objective of management is to set polices that seek to reduce risk as far as possible withoutunduly affecting the Company’s competitiveness and flexibility. Further details regarding these policiesare set out below.

(b) Credit Risk

Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation,resulting in the Company incurring a financial loss. Credit risk arises from cash and cash equivalents (e.g.deposits and investments held with banks and financial institutions), favourable derivative contracts(derivative assets), loans and receivables, guarantees given on behalf of others and loans andcommitments granted but not drawn down at the end of the reporting period. Credit risk arising from largesales values to single customers is mitigated through the use of letters of credit, prepayments and agencyagreements.

To mitigate the credit risk associated with balances of cash and cash equivalents and deposits held withbanks and financial institutions, the Management of Directors have established a policy that these canonly be held with AAA rated entities.

The maximum exposure of the Company to credit risk at the end of the reporting period for cash and cashequivalents, loans and receivables is their carrying amount disclosed in the statement of financial position.In addition, the maximum exposure of the Company to credit risk from other financial instruments is asfollows:

Financial Assets

As at June 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

Cash and cash equivalents 119 2,288 14

Trade and other receivables 3,104 498 51

Held-to-maturity investments 1,111 2,411 1,065

4,334 5,197 1,130


As at June 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

Trade and other payables 3,689 2,118 19

Lease liabilities 200 - -

Convertible Notes 832 781 -


40,428 26,349 4,498


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Included in loans and receivables is a significant customer, located in China, accounts for 99% of tradereceivables at 30 June 2013 (2012: 0%, 2011: 0%).

(c) Liquidity risk

Liquidity risk is the risk that the Company may encounter difficulties raising funds to meet commitmentsassociated with financial instruments, e.g. borrowing repayments. It is the policy of the Director thattreasury maintains adequate committed credit facilities.

Financing arrangements

The following financing facilities were available to the Company at the end of the reporting period:

Maturity Analysis - 2013



CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade creditors 3,689 3,689 3,689 - - -

Finance lease liabilities 200 200 28 28 144 -



40,428 40,428 40,256 28 144 -

Financial Assets

CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade debtors 119 119 119 - - -

Held to Maturity 1,111 1,111 - - - 1,111

1,230 1,230 119 - - 1,111


CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade creditors 2,118 2,118 2,118 - - -

Finance lease liabilities - - - - - -



26,349 26,349 26,349 - - -


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(d) Market Risk

Market risk arises from the use of interest bearing, tradable and foreign currency financial instruments. Itis the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors(other price risk).


Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end ofthe reporting period, whereby a future change in interest rates will affect future cash flows or the fair valueof fixed rate financial instruments. The Company is also exposed to earnings volatility on floating rateinstruments. The financial instruments that expose the Company to interest rate risk are limited toborrowings, cash and cash equivalents.

Interest rate risk is managed using a mix of fixed and floating rate debt. At 30 June 2013, approximately95% of the Company debt is fixed. It is the policy of the Company to keep between 65% and 100% of thedebt on fixed interest rates.

Financial Assets

CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade debtors 498 498 498 - - -

Held to Maturity 2,411 2,411 - - - 2,411

2,909 2,909 498 - - 2,411


CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade creditors 19 19 19 - - -

Finance lease liabilities - - - - - -

Convertible notes - - - - - -


4,298 4,298 4,298 - - -

Financial Assets

CarryingAmount

(AUD$’000)


< 6 mths(AUD$’000)

6–12mths

(AUD$’000)1-3 years(AUD$’000)


Trade debtors 51 51 51 - - -

Held to Maturity 1,065 1,065 - - - 1,065

1,116 1,116 51 - - 1,065


P a g e | 13

The Company also manages interest rate risk by ensuring that, whenever possible, payables are paidwithin any pre-agreed credit terms.

The Company monitors its interest rate exposure continuously. The Company also considers on acontinuous basis to alternatives financing opportunities, hedging positions and renewal of existingpositions.

Sensitivity Analysis

The following table illustrates sensitivities to the Company's exposures to changes in interest rates. Thetable indicates the impact of how profit values at the end of the reporting period would have been affectedby changes in the relevant risk variable that management considers to be reasonably possible. Thesesensitivities assume that the movement in a particular variable is independent of the other variables.

(ii) Currency Risk

The Company’s policy is, where possible, to allow Company entities to settle liabilities denominated intheir functional currency (AUD) with the cash generated from their own operations in that currency. WhereCompany entities have liabilities denominated in a currency other than their functional currency (and haveinsufficient reserves of that currency to settle them) cash already denominated in that currency will, wherepossible, be transferred from elsewhere within the Company. The Company also uses forward currencycontracts to manage foreign currency risk.

In order to monitor the continuing effectiveness of this policy, management receives a monthly forecast,analysed by the major currencies held by the Company, of liabilities due for settlement and expectedcash reserves.

The Company’s exposure to foreign currency risk is as follows:

(e) Fair value

The fair values of financial assets and financial liabilities are presented in the following table and can becompared to their carrying amounts as presented in the statements of financial position. Fair value is theamount at which an asset could be exchanged, or a liability settled, between knowledgeable, willingparties in an arm's length transaction.

Fair value may be based on information that is estimated or subject to judgement, where changes inassumptions may have a material impact on the amounts estimated. Where possible, valuation

Profit/Equity

As at June 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

+/- 2% interest rates 22 48 21


As at June 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

USD Cash at bank 1 120 -

USD Trade receivables 1,534 - -

Net Exposure 1,535 120 -


P a g e | 14

information used to calculate fair value is extracted from the market, with more reliable informationavailable from markets that are actively traded.


Transactions with related parties:

Financial Assets

As at June 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

CarryingAmount

FairValue

CarryingAmount

FairValue

CarryingAmount

FairValue

Cash and cash equivalents 119 119 2,288 2,288 14 14

Trade and other receivables 3,104 3,104 498 498 51 51

Held-to-maturity investments 1,111 1,111 2,411 2,411 1,065 1,065

4,334 4,334 5,197 5,197 1,130 1,130


As at June 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

CarryingAmount

FairValue

CarryingAmount

FairValue

CarryingAmount

FairValue

Trade and other payables 3,689 3,689 2,118 2,118 19 19

Lease liabilities 200 200 - - - -

Convertible Notes 832 832 781 781 - -

Related Party Loans 35,707 35,707 23,450 23,450 4,279 4,279

40,428 40,428 26,349 26,349 4,498 4,498

Years Ended June 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

Interest expense

Associates 739 57 -

Non-current payables (loans from related parties)

Associates 36,539 24,237 4,279


P a g e | 15

Details of related party loans

Subsequent to 30 June 2013 Sashimi Investments Pty Ltd and the Company agreed to convert the loanto equity at a conversion rate of 2.63% which resulted in Sashimi Investments Pty Ltd being issued on 31December 2013 with 26,975 ordinary shares and the Company recording a gain of $1,046,641 on theconversion.

Subsequent to 2013 the Company entered into deeds which released the Company from all obligations torepay the outstanding debt owing on the related party loans from Belmont Park Investments Pty Ltd andPanorama Ridge Pty Ltd. The balance of the loans forgiven was $36,074,721 (June 30 2013: 35,707,075).

Share Capital

As of the date of this MD&A, the Company had 1,027,075 issued and outstanding common shares.

Subsequent Events

Debt forgiveness and conversion of convertible note

On 31 December 2013 the Company entered into deeds which released the Company from all obligationsto repay the outstanding debt owing on the related party loans and agreed to convert the outstandingconvertible note to equity. The value of the loans forgiven at 31 December 2013 was $36.074M (30 June2013: $35.707M). The convertible note was converted to equity at the rate of 2.63% and 26,975 ordinaryshares were issued.

Melior transaction

On 31 March 2014 the shareholders of the Company entered into a Share Purchase Agreement (SPA)with Melior Resources Inc., (Melior), a Canadian incorporated Company listed on the Toronto stockexchange (TSXV:MLR). Under the terms of the SPA, if the conditions precedents are satisfied, Melior willacquire 100% of the shares issued of the Company and in return the shareholders of the Company will beissued 38.1M shares in Melior. The shareholders in the Company will be entitled to be issued a further







As at June 30,

2013(AUD$’000)

2012(AUD$’000)

2011(AUD$’000)

Belmont Park Investments Pty Ltd 14,575 9,100 2,164

Panorama Ridge Pty Ltd 14,525 9,050 2,115

Belmont Park Investments Pty Ltd 6,607 5,299 -

Sashimi Investments Pty Ltd 832 788 -

36,539 24,237 4,279


P a g e | 16

38.1M shares if agreed performance targets are met. Melior has announced that it will invest up toUS$15M into the Company to re-start operations.

Pipeline

In February 2012 the Company entered into a Pipeline Transfer Agreement (PTA) with SunWater Limited,a Government Owned Corporation, to acquire the pipeline supplying water to the mine. On March 3 2014,having satisfied the conditions precedent of the PTA, the Company and SunWater settled the agreement.The Company has lodged the executed transfer notices for the easements along the pipeline, which weretransferred to the Company under the PTA, with the Queensland Titles Office. As of the date of this report,the Company is still waiting on confirmation of the registration of two of the easements transferred. Basedon the processing times for the easements for which confirmation of registration has been received, theCompany expects the registration of the remaining two easements to be confirmed by the end of April2014. The Company is not exposed to any contingent liability whilst the easements remain unregisteredbut the registrations are a prerequisite for the release of the mortgage held by SunWater.

Risks and Uncertainties

The Company’s financial condition, results of operation and business are subject to certain risks, certainof which are described below (and elsewhere in this MD&A):

Additional Funding RequirementsThe Company is reliant upon additional equity financing in order to continue its business and operations,because it is in the business of minerals extraction and processing and at present does not derive anyincome from its mineral assets. There is no guarantee that future sources of funding will be available tothe Company. If the Company is not able to raise additional equity funding in the future, it will be unableto carry out its business.

Commodity Price VolatilityThe price of various commodities that the Company is exploring for can fluctuate drastically, and isbeyond the Company’s control. The Company is specifically concerned with the prices of ilmenite andapatite. While the Company would benefit from an increase in the value of ilmenite and apatite, adecrease in the value of ilmenite and apatite could also adversely affect it.

Country RiskThe Company could be at risk regarding any political developments in the country in which it operates. Atpresent the Company is only active in Australia.

Environmental Regulation and LiabilityThe Company’s activities are subject to laws and regulations controlling not only minerals extraction andprocessing themselves but also the possible effects of such activities upon the environment.Environmental legislation may change and make the mining and processing of ore uneconomic or resultin significant environmental or reclamation costs. Environmental legislation provides for restrictions andprohibitions on spills, releases or emissions of various substances produced in association with certainmineral exploitation activities, such as seepage from tailings disposal areas that could result inenvironmental pollution. A breach of environmental legislation may result in the imposition of fines andpenalties or the suspension or closure of operations. In addition, certain types of operations require thesubmission of environmental impact statements and approval thereof by government authorities.Environmental legislation is evolving in a manner that may mean stricter standards and enforcement,increased fines and penalties for non-compliance, more stringent environmental assessments ofproposed projects and a heightened degree of responsibility for companies and their directors, officersand employees. Permits from a variety of regulatory authorities are required for many aspects of mineralexploitation activities, including closure and reclamation. Future environmental legislation could cause


P a g e | 17

additional expense, capital expenditures, restrictions, liabilities and delays in the development of theCompany’s properties, the extent of which cannot be predicted. In the context of environmental permits,including the approval of closure and reclamation plans, the Company must comply with standards andlaws and regulations that may entail costs and delays, depending on the nature of the activity to bepermitted and how stringently the regulations are implemented by the permitting authority. The Companydoes not maintain environmental liability insurance.

Regulations, Permits and Aboriginal Title & AccessThe Company’s activities are subject to a wide variety of laws and regulations governing health andworker safety, employment standards, waste disposal, protection of the environment, protection of historicand archaeological sites, mine development and protection of endangered and protected species,aboriginal title and access and other matters. The Company is required to have a wide variety of permitsfrom governmental and regulatory authorities to carry out its activities. These permits relate to virtuallyevery aspect of the Company’s exploration and exploitation activities. Changes in these laws andregulations or changes in their enforcement or interpretation could result in changes in legal requirementsor in the terms of the Company’s permits that could have a significant adverse impact on the Company’sexisting or future operations or projects. Obtaining permits can be a complex, time-consuming process.There is some uncertainty associated with native title in Australia and this may impact on the Company’sfuture plans. There can be no assurance that the Company will be able to obtain the necessary permitson acceptable terms, in a timely manner or at all. The costs and delays associated with obtaining permitsand complying with these permits and applicable laws and regulations could stop or materially delay orrestrict the Company from continuing or proceeding with existing or future operations or projects. Anyfailure to comply with permits and applicable laws and regulations, even if inadvertent, could result in theinterruption or closure of operations or material fines, penalties or other liabilities.

Dependence on Key PersonnelThe Company’s future success and growth depends in part upon the experience of a number of keymanagement personnel. If, for any reason, any one or more of such key personnel do not continue to beactive in the Company’s management, the operations and business prospects of the Company could beadversely affected.

Conflicts of InterestCertain of the proposed directors of the Company are also directors, officers or shareholders of othercompanies. Such associations may give rise to conflicts of interest from time to time. The directors of theCompany will be required by law to act honestly and in good faith with a view to the best interests of theCompany and to disclose any interest which they may have in any project or opportunity of the Company.If a conflict arises at a meeting of the board of directors, any director in a conflict will disclose his interestand abstain from voting on such matter. In determining whether or not the Company will participate in anyproject or opportunity, the director will primarily consider the degree of risk to which the Company may beexposed and its financial position at that time.

SCHEDULE “C” - PRO-FORMA FINANCIAL STATEMENTS


Unaudited Pro Forma Consolidated Financial Statements

(Expressed in Canadian Dollars)

December 31, 2013

See accompanying notes to the unaudited pro-forma consolidated financial statements.

Melior Resources Inc.Pro Forma Consolidated Statement of Financial PositionAs at December 31, 2013

(Unaudited ‐ Expressed in Canadian Dollars)


Belridge Enterprises Pty

LtdNote Ref.

Pro Forma Adjustments

Pro Forma Consolidated

$ $ $ $

Assets

Current assets

Cash and cash equivalents 22,287,345 420,713 3(a) (1,586,000) 21,122,058

Short-term investments - 47,005 - 47,005

Trade and other receivables 53,983 190,947 - 244,930

Inventories - 65,581 - 65,581

Other current assets 20,911 127,987 - 148,898

22,362,239 852,233 (1,586,000) 21,628,472

Trade and other receivables - - - -

Long-term investments - 1,055,443 - 1,055,443

Investment in Asian Mineral Resources Limited 1,654,545 - - 1,654,545

Property, plant and equipment - 4,244,706 - 4,244,706

Intangibles - 938,504 - 938,504

Unallocated purchase price - - 140,754 140,754

24,016,784 7,090,886 (1,445,246) 29,662,424

Liabilities

Current liabilities

Trade and other payables 422,911 906,323 - 1,329,234

Obligations under finance leases - 59,433 - 59,433

422,911 965,756 - 1,388,667

Non-Current liabilities

Obligations under finance leases - 113,787 - 113,787

Decommissioning liabilities - 821,380 - 821,380

Derivative liability - - 3(a) 1,380,000 1,380,000

Other payables - 332,360 - 332,360

422,911 2,233,283 1,380,000 4,036,194

Equity (Deficiency)

Share capital 375,885,018 975,310 3(a) 3,618,357

3(b) (975,310) 379,503,375

Contributed surplus 159,057,516 - 3(b) 159,057,516

Accumulated other comprehensive loss (3,545,455) (454,249) 3(b) 454,249 (3,545,455)

(Accumulated losses) retained earnings (507,803,206) 4,336,542 3(a) (1,586,000)

3(b) (4,336,542) (509,389,206)

23,593,873 4,857,603 (2,825,246) 25,626,230

24,016,784 7,090,886 (1,445,246) 29,662,424


Melior Resources Inc.Pro Forma Consolidated Statement of Loss and Comprehensive LossFor the Six Months Ended December 31, 2013




LtdNote Ref.



$ $ $ $

Sales - 7,713 - 7,713

- 7,713 - 7,713

Cost of sales

Cost of sales - (8,555) - (8,555)

- (8,555) - (8,555)

Gross margin - (842) - (842)

General and administrative (1,005,640) (956,387) - (1,962,027)

Depreciation and amortisation expenses - (309,791) - (309,791)

Interest income 147,277 65,368 - 212,645

Interest expense - (383,920) - (383,920)

Foreign exchange gain (loss) 3,750 13,913 - 17,663

Gain on conversion of convertible note - 1,007,288 - 1,007,288

Gain on debt settlement - 34,718,311 - 34,718,311

Acquisition costs - - 3(a) (1,586,000) (1,586,000)

Net income (loss) (854,613) 34,153,940 (1,586,000) 31,713,327

Weighted average number of common shares outstanding

- basic and diluted (note 4) 173,380,974 1,000,246 3(a) 38,087,971

3(b) (1,000,246) 211,468,945

Basic and diluted income (loss) per share (0.00) 34.15 0.15

Other comprehensive loss

Unrealized loss on available-for-sale financial assets (236,363) - - (236,363)

Foreign currency translation - (454,249) - (454,249)

Comprehensive income (loss) (1,090,976) 33,699,691 (1,586,000) 31,022,715


Melior Resources Inc.Pro Forma Consolidated Statement of Loss and Comprehensive LossFor the Year Ended June 30, 2013




LtdNote Ref.



$ $ $ $

Sales - 9,905,543 - 9,905,543

- 9,905,543 - 9,905,543

Cost of sales

Cost of sales - (19,111,133) - (19,111,133)

- (19,111,133) - (19,111,133)

Gross margin - (9,205,590) - (9,205,590)

General and administrative (1,154,052) (710,497) - (1,864,549)

Depreciation and amortisation expenses - 29,315 - 29,315

Interest income 290,121 144,477 - 434,598

Interest expense - (836,243) - (836,243)

Foreign exchange gain (loss) 6,568 64,022 - 70,590

Gain (loss) on disposal of property, plant and equipment - 73,399 - 73,399

Impairment of property, plant and equipment - (20,532,334) - (20,532,334)

Acquisition costs - - 3(a) (1,586,000) (1,586,000)

Loss before income taxes (857,363) (30,973,451) (1,586,000) (33,416,814)

Income taxes recoverable - 2,645,649 - 2,645,649

Net loss from continuing operations (857,363) (28,327,802) (1,586,000) (30,771,165)

Income from discontinued operations 1,141,125 - - 1,141,125

Net loss 283,762 (28,327,802) (1,586,000) (29,630,040)

Weighted average number of common shares outstanding

- basic and diluted (note 4) 173,380,974 1,000,100 3(a) 38,087,971

3(b) (1,000,100) 211,468,945

Basic and diluted income (loss) per share 0.00 (28.32) (0.14)

Other comprehensive loss

Unrealized loss on available-for-sale financial assets (2,836,363) - - (2,836,363)

Comprehensive loss (2,552,601) (28,327,802) (1,586,000) (32,466,403)

Melior Resources Inc. Notes to the Pro Forma Consolidated Financial Statements December 31, 2013 (Expressed in Canadian dollars) (Unaudited)

1. Basis of presentation The accompanying unaudited pro forma consolidated statement of financial position and statements of loss and comprehensive loss of Melior Resources Inc. (“Melior”) have been prepared by management to reflect the acquisition of Belridge Enterprises Pty Ltd (“Belridge”) by Melior after giving effect to the proposed acquisition (the “Acquisition”) as described in Note 2. The unaudited pro forma consolidated statement of financial position and statements of loss and comprehensive loss have been prepared in accordance with International Financial Reporting Standards (“IFRS”), using accounting policies and practices consistent with those used in the preparation of Melior’s and Belridge’s recent financial statements prepared under IFRS. In the opinion of management, the unaudited pro forma consolidated financial statements include all adjustments necessary for fair presentation. Certain significant estimates have been made by management in the preparation of these pro forma consolidated financial statements, in particular, the determination of the fair value of Belridge’s assets and liabilities acquired and the fair value of the share consideration given by Melior, as well as the fair value of the costs associated with the Acquisition. The unaudited pro forma consolidated statement of financial position and statements of loss and comprehensive loss have been compiled from and include: Unaudited pro forma consolidated statement of financial position as at December 31, 2013 combining: The unaudited statement of financial position of Melior as at December 31, 2013. The unaudited statement of financial position of Belridge as at December 31, 2013 which has been

translated to Canadian dollars at December 31, 2013 exchange rate of $AUD1 = $CDN0.9496. Unaudited pro forma consolidated statement of loss and comprehensive loss for the six month period ended December 31, 2013 combining: The unaudited statement of loss and comprehensive loss of Melior for the six month period ended

December 31, 2013. The unaudited statement of loss and comprehensive loss of Belridge for the six month period ended

December 31, 2013 which has been translated to Canadian dollars using the average exchange for the period of $AUD1 = $CDN0.9624.

Unaudited pro forma consolidated statement of loss and comprehensive loss for the year ended June 30, 2013 combining: The audited statement of loss and comprehensive loss of Melior for the year ended June 30, 2013. The audited statement of loss and comprehensive loss of Belridge for the year ended June 30, 2013

which has been translated to Canadian dollars using the average exchange for the year of $AUD1 = $CDN1.0312.

BELRIDGE ENTERPRISES PTY LTD Notes to Pro Forma Consolidated Financial Statements December 31, 2013 (Expressed in Canadian Dollars) (Unaudited)

1. Basis of presentation (continued) The unaudited pro forma consolidated statement of financial position and pro forma consolidated statements of loss and comprehensive loss have been prepared as if the transaction had occurred as of December 31, 2013 for the purposes of the pro forma consolidated statement of financial position, July 1, 2012 for purposes of the pro forma consolidated statements of loss and comprehensive loss for the year ended June 30, 2013 and July 1, 2013 for purposes of the pro forma consolidated statements of loss and comprehensive loss for the six months ended December 31, 2013. The unaudited pro forma consolidated statement of financial position and statements of loss and comprehensive loss have been prepared for illustration purposes only and may not be indicative of the combined results or financial position had the Acquisition been in effect at the date indicated. 2. Acquisition agreement On March 31, 2014, Melior entered into a share sale and purchase agreement (the “Share Purchase Agreement”) with Belridge. Pursuant to the Share Purchase Agreement, Melior intends to acquire all of the issued and outstanding shares of Belridge in exchange for the issuance of 38,087,971 common shares of Melior, subject to adjustments, if any, as mutually agreed upon based on due diligence. There is also a residual earn-out payment of up to an additional 38,087,971 common shares due on achievement of certain predetermined share price levels significantly in excess of Melior’s current share price. Upon completion of the Acquisition, existing Melior and Belridge shareholders will own approximately 82% and 18% of the combined company, respectively, on a basic shares outstanding basis. 3. Pro forma assumptions and adjustments (a) Purchase price and allocation

Estimated consideration paid:

Issuance of common shares $ 3,618,357

Residual earn-out payment 1,380,000

Total consideration paid $ 4,998,357 The 38,087,971 common shares have an assigned value of $0.095 per share based on the December 31, 2013 closing price of Melior common shares. The following purchase price allocation is preliminary and is based on management's best estimates of the fair values of the assets acquired and liabilities assumed after taking into consideration all relevant information available to date. Melior is still in the process of finalizing the valuation of assets acquired and liabilities assumed and therefore the allocation of the purchase price could vary significantly from the amounts used in these unaudited pro forma consolidated financial statements.


3. Pro forma assumptions and adjustments (continued) The following table summarizes the preliminary allocation of the purchase price of $4,998,357 to the identifiable assets and liabilities of Belridge:

Cash and cash equivalents $ 420,713

Short-term investments 47,005

Trade and other receivables 190,947

Inventories 65,581

Other current assets 127,987

Long-term investments 1,055,443

Property, plant and equipment 4,244,706

Intangibles 938,504

Trade and other payables (906,323)

Obligations under finance leases (173,220)

Other payables (332,360)

Decommissioning liabilities (821,380)

Unallocated purchase price 140,754

$ 4,998,357 As part of the acquisition, acquisition costs are estimated to be $1,586,000. (b) Book values of Belridge’s share capital and deficit are eliminated on the Acquisition. 4. Pro forma share capital (a) The following table summarizes the pro-forma share capital:

Note Number Amount

Melior common shares issued and outstanding December 31, 2013 173,380,974 375,885,018$ Belridge common shares issued and outstanding December 31, 2013 1,027,075 975,310 Issuance of common shares pursuant to the Acquisition 3(a) 38,087,971 3,618,357 Elimination of Belridge common shares pursuant to the Acquisition 3(b) (1,027,075) (975,310)

211,468,945 379,503,375$


4. Pro forma share capital (continued) (b) Pro forma weighted average number of shares outstanding:

Year Ended June 30, 2013

Melior weighted average number of common shares issued and outstanding 173,380,974 Issuance of common shares pursuant to the Acquisition 38,087,971

211,468,945

Six Months Ended December 31, 2013

Melior weighted average number of common shares issued and outstanding 173,380,974 Issuance of common shares pursuant to the Acquisition 38,087,971

211,468,945

Documents

MELIOR RESOURCES INC. FILING STATEMENT IN RESPECT OF … · MELIOR RESOURCES INC. SUMMARY OF FILING STATEMENT (as at May 15, 2014 except as otherwise indicated) The following is a