Ferrum Crescent Limited

A.C.N. 097 532 137

Annual Report For the year ended 30 June 2015

Page No.

Corporate information 3

Directors' report 4

Company & Project overview 23

Corporate governance statement 37

Consolidated statement of profit or loss and other comprehensive income 47

Consolidated statement of financial position 48

Consolidated statement of cash flows 49

Consolidated statement of changes in equity 50

Notes to the consolidated financial statements 51

Directors' declaration 93

Independent auditor's report 94

Auditor's independence declaration 96

Additional ASX information 97

Additional JSE information 99

Directors: Mr. Ed Nealon Mr. Tom Revy

Mr. Klaus Borowski Mr. Grant Button

Company Secretary:

Mr. Robert Hair

Auditor:

Ernst & Young

Ernst & Young Building 11 Mounts Bay Road

Perth WA 6000 AUSTRALIA

Telephone (+61 8) 9429 2222

Facsimile (+61 8) 9429 2436

Banker:

National Australia Bank

Perth Central Business Banking Centre UB13.03, 100 St Georges Terrace Perth WA 6000 AUSTRALIA

Telephone (+61 8) 9441 9530

Facsimile Australia 1300 652 390

Lawyer:

Allen & Overy

Level 27, Exchange Plaza 2 The Esplanade

Perth WA 6000 AUSTRALIA

Telephone (+61 8) 6315 5900

Facsimile (+61 8) 6315 5999

Share Registry:

Computershare Investor Services Pty Limited Level 11, 172 St Georges Terrace

Perth WA 6000 AUSTRALIA

Telephone (+61 8) 9323 2000 or 1300 850 505 (for investors within Australia)

Facsimile (+61 8) 9323 2033

Registered and Principal Office:

Suite 6, Ground Floor South Mill Centre

9 Bowman Street South Perth WA 6151

Telephone (+61 8) 9474 2995

Facsimile (+61 8) 9474 2937 Website: www.ferrumcrescent.com Email: [email protected]

Stock Exchange Listings:

Ferrum Crescent Limited's ordinary shares are listed on the Australian Securities Exchange (ASX:FCR), and the JSE Limited (JSE:FCR), and quoted on the AIM market of the London Stock Exchange plc (AIM:FCR)

The Directors of Ferrum Crescent Limited ('Ferrum' or 'the Company') (the 'Directors') present their report for the financial year ended 30 June 2015.

Directors

The names and details of the Directors in office during the financial year and at the date of this report are set out below:

Each Director was in office for the entire reporting period unless otherwise stated.

Mr Ed Nealon (Age 65) Chairman, Non-Executive Director

Mr Nealon is a geologist with some 41 years' experience in the mining and exploration industry. After graduating in 1974, he commenced his career in South Africa with Anglo American Corporation, before moving to Australia in 1980 where he spent two years in exploration with the Rio Tinto Group. He founded his own consulting company in 1983 and has practised in most of the world's major mining centres. He holds a Masters degree in Geology and is a member of the Australasian Institute of Mining and Metallurgy. Mr Nealon was the founder of Aquarius Platinum Ltd (ASX: AQP) and is currently Non-executive chairman of both Richland Resources Ltd (AIM: RLD) and Bezant Resources plc (AIM:BZT). Mr Nealon was Non- executive director of Condoto Platinum NL (ASX: CPD) until his resignation on 21 October 2011. He has not been a director of any other listed company in the last three years. He is a member of the Company's Audit Committee, Remuneration Committee and Nominations Committee.

Mr Klaus Borowski (Age 75) Non-Executive Director

Mr Borowski is a metallurgical engineer by background, having studied in his home country of Germany. He first arrived in South Africa in 1966, where he was Technical Director of Dunsward Steel until 1979. After a short period in Europe within the steel industry, he returned to South Africa in 1982 and subsequently held several positions in the iron and steel industry in South Africa, including managing director of Krupp South Africa and as executive director of Industrial Metal Supply Co. In 1998, Mr Borowski formed Applied Metallurgical Technologies (Pty) Ltd, and, amongst other things, he was on the steering committee of Saldhana Steel (Pty) Ltd and Duferco Steel Processing. Save for Ferrum, he has not been a director of any other listed company in the last three years. Mr Borowski is chairman of the Company's Remuneration Committee and a member of the Company's Audit Committee and Nominations Committee.

Mr Grant Button (Age 53) Non-Executive Director

Mr Button is a qualified accountant and has 23 years' financial and other commercial management and transactional experience, including 21 years' experience at a senior management level in the resources industry. He has acted as an executive director, managing director, finance director, CFO and company secretary of a range of publicly listed companies. He is currently an executive director of Magnum Mining & Exploration Limited (ASX: MGU). Mr Button was non-executive chairman of Alamar Resources Limited (ASX: ALG) until his resignation on 11 April 2011 and non-executive chairman of Realm Resources Limited (ASX: RRP) until his resignation on 20 October 2011, and a director of Sylvania Platinum Limited (AIM:SLP) until his resignation on 30 April 2015. He was also a former director of the Company (then named Washington Resources Limited) until his resignation on 1 December 2008. He has not been a director of any other listed company in the last three years. Mr Button is chairman of the Company's Audit Committee and Nominations Committee and a member of the Company's Remuneration Committee.

Mr Tom Revy (Age 51) Managing Director

Mr Revy is a mining professional with over 30 years' experience specialising in operations, project development and corporate management. He has a wealth of experience in project development and planning to assist the Company as it progresses its bankable feasibility study towards construction readiness. As Development Director at Worley Parsons, Mr Revy worked extensively on the Olympic Dam expansion and undertook key studies for companies such as Anglo American and Codelco. Previously Mr Revy worked at design and construction group, GRDMinproc, working on projects such as the Fortescue Metals phase 2 expansions in Western Australia and on the US$1.8bnTenke Fungurume project in the DRC. Mr Revy is Non- executive chairman of ASX-listed Empire Resources Limited (appointed January 2010). He has not been a director of any other listed company in the last three years.

Mr Kofi Morna (Age 55) Non-Executive Director resigned 31 December 2014

Mr Morna holds a Master of Business Administration degree from the London Business School and a Bachelor of Science degree from Princeton University. He is a Non-executive director of Aquarius Platinum Limited (ASX: AQP) and an Executive director of Savannah Resources (Pty) Ltd. He has not been a director of any other listed company in the last three years.

Mr Ted Droste (Age 73) Non-Executive Director resigned 31 December 2014

Mr Droste is a chemical engineer by background, and after obtaining a BSc in Chemical Engineering in 1962 he worked at African Metals Corporation Limited (now known as Samancor) before joining Sentrachem Limited where he was promoted to the position of Research and Development Manager. Following ten years with Sentrachem, he joined the Industrial Development Corporation of South Africa ('IDC') in 1974 until taking early retirement in 2001 to start his own business. Mr Droste held a number of positions at the IDC, including that of Senior General Manager Projects Division. Mr Droste was chairman of Bay Precision and Mining (Pty) Limited until his resignation in December 2012. He consults to various companies through his investment holding company, TC Droste Investments (Pty) Ltd. He has not been a director of any other listed company in the last three years.

Mr Robert Hair (Age 62) Company Secretary

Mr Hair is a barrister by background, who has over 26 years' experience in the resources industries. He was a senior manager in the MIM Holdings Group and General Manager Commercial of ASX-listed Highlands Pacific Limited, before becoming a consultant to various companies, principally in the resources sector. He has extensive corporate, commercial and legal experience from his many years of business in Australia and in many other parts of the world. Mr Hair was formerly Managing Director of the Company and is a non-executive director of ASX-listed Carpentaria Exploration Limited (ASX:CAP).

Interests in the shares and options of the Company and related bodies corporate

As at the date of this report, the interests of the Directors in the shares and options of the Company were:

Dividends

No dividend has been paid or declared since the start of the financial year and the Directors do not recommend the payment of a dividend in respect of the financial year (2014: Nil).

Principal activities

The principal activity of the entities within the consolidated entity during the financial year was the exploration for minerals.

Review of operations and activities

Information on the operations and activities of the Group is set out in the Company and Project overview section on pages 23 to 37 of this Annual Report. The focus of the Group remains the study and, upon confirmation of economic and technical feasibility, the financing, construction and operation of the Moonlight Iron Ore Project ( the 'Moonlight Project' or 'Moonlight') in Limpopo Province, South Africa. The Company has concluded a detailed review of the Bankable Feasibility Study ('BFS') requirements for the Moonlight Iron Project. A work pathway has been announced that identifies advanced metallurgy, pilot plant construction and final product analysis as the next key components for the BFS. This work will enable final costings to be produced for the mining plan and key items such as the proposed pellet plant. A project schedule for completion of the Moonlight BFS has also been announced.

In carrying out its operations during the reporting period, the Group has incurred a loss after income tax for the period from 1 July 2014 to 30 June 2015 of $2,345,860 (2014: loss of $2,549,782). The Group had net assets of $525,523 (2014: $952,426) as set out in the Statement of Financial Position.

Significant changes in the Group's state of affairs

There have been no significant changes in the state of affairs of the consolidated entity to the date of this report that have not otherwise been disclosed elsewhere in the Annual Report.

Significant events after the balance date

There are subsequent events to report, as follows:

In May 2015, the Company entered into a Memorandum of Understanding ('MOU') with Principle Monarchy Investments (Proprietary) Limited ('PMI'), whereby PMI will pay R142m (US$12m) to acquire up to 39% of Ferrum Iron Ore (Proprietary) Limited ('FIO'). The incoming funds will be used by FIO towards financing of the BFS costs for the Moonlight Project. In return for an investment of US$12m, to be paid across three tranches, PMI will receive a total of 39% of FIO's equity.

As at the date of this report, the first payment due under the terms of the MOU had yet to be received such that the MOU was not legally binding at that point.

Furthermore, the Company is at the date of this report at an advanced stage in relation to an alternative BFS financing arrangement with another group.

Likely developments and expected results

The Group will continue to carry out its business plans, by:

• Exploring, evaluating and, if technically and economically feasible, developing the Moonlight Project in Limpopo Province, South Africa;

  
  

• Seeking strategic acquisition opportunities within the exploration and mining industry to potentially enter into advanced projects that will add value to the Group; and

  
  

• Continuing to meet its statutory commitments relating to its exploration tenements and carrying out exploration of its exploration tenements in accordance with its stated strategy, whilst carefully conserving the Group's cash reserves to be able to take advantage of potential value adding opportunities.

  
  

  There can be no guarantee either that further exploration of the Group's tenements will result in exploration success or that any potential strategic acquisition considered by the Directors to be likely to add value to the Group will become available to the Group.

  
  

  Environmental regulation and performance

  
  

  The Group's activities are subject to South African legislation relating to the protection of the environment. The Group is subject to significant environmental legal regulations in respect to its exploration and evaluation activities. There have been no known breaches of these regulations and principles.

  
  

  Indemnification and Insurance of Directors and officers

  
  

  The Group has entered into deeds of access and indemnity with the officers of the Group, indemnifying them against liability incurred, including costs and expenses in defending any legal proceedings. The indemnity applies to a liability for costs and expenses incurred by the Director or officer acting in their capacity as a director or officer.

  Except in the case of a liability for legal costs and expenses, it does not extend to a liability that is:

• owed to the Group or a related body corporate of the Group;

• for a pecuniary penalty order under section 1317G or a compensation order under section 1317H or section 1317HA of the Corporations Act 2001; or

• owed to someone other than the Group or a related body corporate of the Company where the liability did not arise out of conduct in good faith.

  Similarly, the indemnity does not extend to liability for legal costs and expenses:

• in defending proceedings in which the officer is found to have a liability described in paragraph (a), (b) or

  (c) above;

• in proceedings successfully brought by the Australian Securities and Investments Commission or a liquidator; or

• in connection with proceedings for relief under the Corporations Act 2001 in which the court denies the relief.

  During or since the financial year end, the Company has paid premiums in respect of a contract insuring all the Directors and officers. The terms of the contract prohibit the disclosure of the details of the insurance contract and premiums paid.

  
  

  
  

  Indemnification of auditors

  
  

  To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year end.

  
  

  Non-audit services

  
  

  The Group may decide to employ the auditor on assignments additional to its statutory audit duties where the auditor's expertise and experience with the Group are important.

  
  

  Details of the amounts paid or payable to the auditor, Ernst & Young, for audit and non-audit services provided during the financial year are set out below.

  
  

  2015		2014
  $	$
  Remuneration of the auditor of the Company for Group and subsidiary statutory reporting:
  -auditing or reviewing the Annual financial report	54,523	63,653
  -other assurance related services	-	-
  54,523	63,653

  
  

  
  

  Directors' meetings

  
  

  Meetings of directors held and their attendance during the financial year were as follows:

  
  

  Meetings of Board and Committees

  Board	Audit	Remuneration	Nomination
  Number of Meetings held:	5	1	-	-
  Number of Meetings attended:	5	-	-	-
  Ed Nealon
  Tom Revy	5	-	-	-
  Klaus Borowski	5	-	-	-
  Grant Button	5	1	-	-
  Kofi Morna	2	-	-	-
  Ted Droste	2	-	-	-

  
  

  Remuneration Report (audited)

  
  

  This Remuneration Report outlines the Director and executive remuneration arrangements of the Company and the consolidated entity in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purpose of this report, Key Management Personnel (KMP) of the consolidated entity are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, and includes Directors of the Company.

  The information provided in this remuneration report has been audited as required by section 308(3C) of the

  Corporations Act 2001.

  The Remuneration Report is presented under the following sections:

  
  

• Individual KMP disclosures

• Remuneration at a glance

• Board of Directors (the 'Board') oversight of remuneration

• Non-executive director remuneration arrangements

• Executive remuneration arrangements

• Directors and KMP contractual arrangements

• Equity instruments disclosures

• Loans to KMP and their related parties

• Transactions with KMP and their related parties




1. Individual key management personnel disclosures

   
   

2. Directors:

   
   

   Ed Nealon	Non-Executive Chairman	Appointed 9 March 2010
   Tom Revy	Managing Director	Appointed 19 February 2014
   Klaus Borowski	Non-Executive Director	Appointed 1 September 2010
   Kofi Morna	Non-Executive Director	Appointed 15 October 2010 Resigned 31 December 2014
   Ted Droste	Non-Executive Director	Appointed 15 October 2010 Resigned 31 December 2014
   Grant Button	Alternate Director, Non-Executive Director	Appointed 15 June 2010 and 15 October 2010 respectively

   
   

3. Executives:







Ed Aylmer Scott Huntly	BFS Study Manager Strategic Development Manager
Beverley Gardner	Financial Controller

Dave Richards Compliance Manager

Robert Hair Company Secretary




4. Remuneration at a glance




The performance of the Group depends upon the quality of its directors and executives. To prosper, the Group must attract, motivate and retain highly skilled directors and executives.




To this end, the Company embodies the following principles in its remuneration framework:




• Provide competitive rewards to attract high calibre executives;

• Link executive rewards to shareholder value; and

• Provide significant portions of executive remuneration 'at risk' through participation in incentive plans.




Remuneration Report (continued)




1. Remuneration at a glance (continued)

   
   

   Shares and options issued under incentive plans provide an incentive to stay with the Group. At this stage, shares and options issued do not have performance criteria attached. This policy is considered to be appropriate for the Group, having regard to the current state of its development.

   
   

   The Company has established a directors' and executives' salary sacrifice plan, pursuant to which individuals may elect for a nominated fixed period to sacrifice all or an agreed percentage of their salary or fees to be applied in the subscription for or on-market purchase of shares in the Company. As such shares may not be purchased or subscribed for during periods that are close periods or when individuals are in possession of inside information, the entitlement to subscribe for shares is determined by calculating the number of shares using the market price for the month concerned. The plan was established to allow for the subsequent settlement of salary or fees from 1 April 2012, and two Directors elected to participate in the plan with effect from that date. Shares listed under the plan are not subject to performance conditions. Shareholder approval for the plan and for the issue of shares under the plan was obtained on 8 August 2012.

   
   

   The Company also recognises that, at this stage in its development, it is most economical to have only a few employees and to draw, as appropriate, upon a pool of consultants selected by the Directors on the basis of their known management, geoscientific, engineering and other professional and technical expertise and experience. The Company will nevertheless seek to apply the principles described above to its Directors and executives, whether they are employees of or consultants to the Company.

   
   

2. Board oversight of remuneration

   
   

   Remuneration Committee Responsibilities

   
   

   A Remuneration Committee was established on 14 January 2010 and reconstituted on 15 October 2010 and again on 9 March 2015.

   
   

   The Committee assesses the appropriateness of the nature and amount of remuneration of Directors and senior executives on a periodic basis by reference to relevant employment market conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team.

   
   

   Remuneration Structure

   
   

   In accordance with best practice corporate governance, the structure of non-executive and executive director remuneration is separate and distinct.

   
   

3. Non-Executive Director remuneration arrangements




Objective




The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.




Structure




The Company's constitution and the ASX Listing Rules specify that the aggregate remuneration of Non- Executive Directors must be determined from time to time by shareholders of the Company in a general meeting. An amount not exceeding the amount determined is then divided between the Non-Executive Directors as agreed. The current aggregate limit of remuneration for non-executive directors is $250,000 as approved at the 2010 Annual General Meeting of Shareholders.













1. Non-Executive Director remuneration arrangements (continued)

   
   

   The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Non-Executive Directors is reviewed annually. The Board may consider advice from external consultants, as well as the fees paid to Non-Executive Directors of comparable companies, when undertaking the annual review process.

   
   

   Each Non-Executive Director receives a fee for being a Director of the Company. No additional fee is paid for participating in Board Committees.

   
   

   Non-Executive Directors are encouraged by the Board to hold shares in the Company (purchased on market and in accordance with the Company's approved policies to ensure that there is no insider trading). It is considered good governance for directors of a company to have a stake in that company. Non-Executive Directors may also participate in the Company's share and option plans as described in this report.

   
   

2. Executive remuneration arrangements

   
   

   Objective

   
   

   The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group and so as to:

   
   

5. reward executives for Group, business team and individual performance;

6. align the interests of executives with those of shareholders; and

7. ensure total remuneration is competitive by market standards.

   
   

   Structure

   
   

8. At this time, the cash component of remuneration paid to executive Directors, the Company Secretary and other senior managers is not dependent upon the satisfaction of performance conditions.

9. It is current policy that some executives be engaged by way of consultancy agreements with the Company, under which they receive a contract rate based upon the number of hours of service supplied to the Company. There is provision for yearly review and adjustment based on consumer price indices. Such remuneration is hence not dependent upon the achievement of specific performance conditions. This policy is considered to be appropriate for the Company, having regard to the current state of its development.

10. Executive Directors are encouraged by the Board to hold shares in the Company (purchased on market or in accordance with the Company's salary sacrifice share plan and in accordance with the Company's approved policies to ensure that there is no insider trading). It is considered good governance for directors of a company to have a stake in that company. The executive Directors may also participate in the Company's share and option plans as described in this report, including the salary sacrifice share plan. Refer to page 16 for details of options granted during the period.

    
    

    Performance table

    
    

    The following table details the net profit / (loss) of the Company from continuing operations after income tax, together with the basic earnings / (loss) per share since the incorporation of the parent:

    
    

    2015 $	2014 $	2013 $	2012 $	2011 $
    Net profit / (loss) from continuing operations after income tax	(2,345,860)	(2,549,782)	(1,901,288)	4,479,716	(8,141,794)
    Basic earnings / (loss) per share in cents	(0.50)	(0.75)	(0.60)	1.53	(3.32)
    Share Price in Cents	1.0	1.6	1.4	3	20

    
    

    
    

11. Directors' and KMP contractual arrangements




Mr Nealon currently provides services as Non-Executive Chairman pursuant to a contract dated 29 April 2014. Under this contract, he receives a salary of $50,000 plus statutory superannuation and reimbursement of expenses. On 1 February 2015 his contract was amended by mutual agreement to a salary of $40,000 plus statutory superannuation and reimbursement of expenses.




Mr Tom Revy was appointed as Managing Director on 19 February 2014, pursuant to an employment contract of the same date. Under the terms of that contract, he is entitled to receive a gross salary of $250,000 per annum, plus superannuation of 12%, together with reimbursement of expenses. He was also granted 2,500,000 options to acquire shares in the Company, with an exercise price of $0.08 and expiring on 19 February 2017. The options are subject to certain performance hurdles, as set out below:




12. 500,000 options will vest on completion to the Board's reasonable satisfaction of the formation of the team for the conduct of the BFS on the Moonlight Project;

13. 1,000,000 options will vest on completion to the Board's reasonable satisfaction of the BFS; and

14. 1,000,000 options will vest once the Moonlight Project has been financed to the Board's reasonable satisfaction.

The contract otherwise contains terms and conditions that are customary in employment contracts for such a position.

Mr. Klaus Borowski was appointed as a Non-Executive Director on 1 September 2010 and receives fees in relation to his services as a Non-Executive Director for the amount of $40,000 per annum. On 3 November 2010 he entered into a consultancy agreement to provide services in relation to the Company's projects. On 1 February 2015 his service contract was amended by mutual agreement to salary of $30,000 per annum.

The consultancy agreement involved the payment to a company associated with Mr. Borowski of an annual fee of $40,000 and reimbursement of expenses. Mr Borowski agreed at a Board meeting held on 23 April 2014 that his consulting fees should be discontinued until detailed feasibility study activities are accelerated following receipt by the Company of significant funding and that consulting fees should be apportioned according to time and activities undertaken by each consultant going forward. No consulting fees were paid during the year ending 30 June 2015.

Mr. Grant Button was appointed as a Non-Executive Director on 15 October 2010 and is entitled to receive fees in relation to his services as a Non-Executive Director for the amount of $40,000 per annum. On 1 February 2015 his fees were amended by mutual agreement to $30,000 per annum.

Mr. Kofi Morna was appointed as a Non-Executive Director on 15 October 2010 and was entitled to receive fees in relation to his services as a Non-Executive Director for the amount of $40,000 per annum until his resignation on 31 December 2014.

Mr. Ted Droste was appointed as a Non-Executive Director on 15 October 2010 and was entitled to receive fees in relation to his services as a Non-Executive Director of $40,000 per annum until his resignation on 31 December 2014. In addition to fees that he received as a Non-Executive Director, the Company and a company associated with Mr. Droste were parties to an agreement containing the terms and conditions pursuant to which he provided technical and commercial consulting services to the Company.

The agreement involved the payment to the Company associated with Mr. Droste of an annual fee of $90,000 and reimbursement of expenses. On 23 April 2014, Mr Droste agreed to forego any accrued but unpaid and all ongoing consulting fees until such time as the Company requires his services for the purposes of progressing the Moonlight Project. He further agreed that any further fees due under that agreement would be based on an hourly rate once feasibility study activities are accelerated. No consulting fees were paid during the year ending 30 June 2015.