MALACHITE RESOURCES LIMITED DIRECTORS' REPORT (CONTINUED)

SIGNIFICANT CHANGES IN STATE OF AFFAIRS 2015

$

Significant changes in the state of affairs of the Group during the financial year were as follows:

1. An increase in contributed equity of $492,979 (from $56,051,389 to $56,544,368) as a result of:

   
   

   Share placement issue of 107,200,000 shares @$.005 per share	536,000
   536,000
   Less: Transaction cost	(43,021)
   Net increase in share capital	492,979

   
   

   MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

   
   

   Since the end of the Financial Year the following matters have arisen that may significantly affect the operations of the Group:

   
   

   The Group successfully negotiated an extension and variation of the existing Convertible Notes. The revised key terms of the Convertible Notes are as follows:

   
   

   • Maturity Date of 5 May 2016;

   • Interest Rate of 15% per annum;

   • Conversion - at the election of Noteholders at any time;

   • Conversion Price - the lesser of $0.015 or 20% discount to the 30 Day VWAP at the time of conversion; and

   • Rollover fee - 1.75% of the issue price to be satisfied by the issue of Ordinary Shares at a 20% discount to the 30 VWAP to 5 October 2015.

   
   

   Except as described above, there has not been any matter or circumstance that has arisen since the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

   
   

   LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

   
   

   The Group's main project is the Lorena Gold Project (Lorena).

   
   

   Subject to funding, approvals and negotiations with the Receivers of BCD regarding the partly built concentrate plant, Lorena is expected to be developed in 2016 and the Group expects to generate cash flows from Lorena via an open cut mining operation in 2016. Further cash flows from the project will depend on either establishing an underground operation at Lorena, which is contingent on the discovery of additional resources at depth, or by treating third party ores.

   
   

   The other projects held by the Group are at the exploration and evaluation stage only and as such it is not possible to postulate which, if any, will proceed to development and mining operations.

   
   

   
   

   ENVIRONMENTAL REGULATIONS

   
   

   The Group's activities in the mining industry are subject to regulations and approvals including mining heritage, environmental regulation, the implications of the High Court of Australia decisions in what are generally known as the 'Mabo' and 'Wik' cases and any laws of the Commonwealth or of a State or Territory regarding native and mining titles. Approvals, although granted in most cases, are discretionary. The question of native title has yet to be determined in some parts of the Group's interests and certain mining titles may be affected by native title. The Group does not believe the Lorena Gold Project mining leases are affected by native title.

   
   

   The Group has an environmental rehabilitation policy that is applied to each tenement upon grant. The policy has been adhered to and no breaches have occurred during the period.

   
   

   MALACHITE RESOURCES LIMITED
   DIRECTORS' REPORT (CONTINUED)
   SHARE OPTIONS
   2015	2014
   Options on issue beginning of year		169,416,504	172,516,504
   Employee options issued		-	-
   Employee options expired		(27,600,000)	(3,100,000)
   Employee options exercised		-	-
   Listed options issued		-	-
   Listed options expired		(141,816,504)	-
   Listed options exercised		-	-
   Unlisted options issued		-	-
   Unlisted options expired		-	-
   Unlisted options exercised		-	-
   Options on issue end of year		-	169,416,504
   Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate or in the interest of any other registered scheme.
   Further information is given in Note 17 and 29 to the financial statements.
   INDEMNIFICATION OF OFFICERS AND AUDITORS
   Indemnification
   In accordance with the Constitution of Malachite Resources Limited each director and officer is indemnified on a full indemnity basis and to the full extent permitted by law against all losses, liabilities, costs, charges and expenses incurred by them as officers of Malachite Resources Limited or a related body corporate. The consolidated entity has not indemnified or agreed to indemnify the auditor of the consolidated entity against any liabilities incurred as auditor.
   Insurance Policies
   Since the end of or during the financial year the consolidated entity has paid premiums in respect of directors' and executive officers' liability and legal expenses insurance contracts for the year ended 30 June 2015. Such insurance contracts insure against certain liability (subject to specific exclusions) persons who are or have been directors or executive officers of the parent entity.
   Directors have not included details of the nature of the liabilities covered, or the amount of the premium paid, as such disclosure is prohibited under the terms of the insurance contract.
   PROCEEDINGS ON BEHALF OF THE COMPANY
   No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001 .
   REMUNERATION REPORT
   The remuneration report is set out under the following main headings:
   (a)	Principles used to determine the nature and amount of remuneration
   (b)	Details of remuneration
   (c)	Service agreements
   (d)	Share based compensation
   (e)	Additional information
   (f )	Other transactions of Key Management Personnel
   (g)	Equity instrument disclosures relating to Directors and Key Management Personnel
   The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001 .
   (a)	Principles used to determine the nature and amount of remuneration
   The Group's policy for determining the nature and amount of emoluments of board members and senior executives of the consolidated entity is as follows:
   The objective of the entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:
   ·	competitiveness and reasonableness
   ·	acceptability to shareholders
   ·	performance linkage / alignment of executive compensation
   ·	transparency
   ·	capital management.
   The Group has structured an executive remuneration framework that is market competitive and complimentary to the reward strategy of the organisation.

   
   

   MALACHITE RESOURCES LIMITED
   DIRECTORS' REPORT (CONTINUED)
   REMUNERATION REPORT (CONTINUED)
   (a)	Principles used to determine the nature and amount of remuneration (continued)
   Alignment to shareholders' interests:
   ·	attracts and retains well qualified and suitably experienced applicants
   ·	has the goal of economic profit as a core component of plan design
   ·	focuses on sustained growth in shareholder wealth, consisting of growth in share price, and, in the longer term, payment of dividends and delivering an adequate return on assets as well as focusing the executive on key non-financial drivers of value.
   ·	attracts and retains high calibre executives.
   Alignment to program participants' interests:
   ·	rewards capability and experience
   ·	reflects competitive reward for contribution to growth in shareholder wealth
   ·	provides a clear structure for earning rewards
   ·	provides recognition for contribution.
   The framework provides a mix of fixed and variable pay, and a blend of short (STI) and long-term (LTI) incentives. As executives gain seniority with the Group, the balance of this mix shifts to a higher proportion of 'at risk' rewards.
   The overall level of executive reward takes into account the performance of the Group over a number of years, with greater emphasis given to the current year. Recognition is given to earnings in setting executive remuneration but, as the Group is involved in mineral exploration rather than mineral mining and production, relevant experience, industry standards and the annual exploration outcomes, rather than earnings, are given greatest weight in remuneration considerations.
   Executive remuneration includes a base salary that is set with reference to the market, a short term incentive that comprises of an at risk bonus payable to reflect performance and a long term incentive that provides scope for equity participation over the longer term.
   Non-executive directors
   Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors' fees and payments are reviewed annually by the Board. The Board has also drawn on external sources of information to ensure non-executive directors' fees and payments are appropriate and in line with the market.
   Directors' fees
   The current base remuneration was last reviewed with effect from 1 January 2015.
   Non-executive directors' fees are determined within an aggregate directors' fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $300,000 per annum and was approved by shareholders at the AGM on 28 November 2014.
   (b)	Details of remuneration
   Cash remuneration packages are set at levels that are intended to attract and retain executives capable of managing and enhancing the consolidated entity's operations. Remuneration of individual non-executive Directors is determined by the Board and may be varied from time to time but always such that the aggregate (currently $139,622 per annum see table below) is within the maximum amount (currently $300,000 per annum) for which prior approval of the shareholders has been received.
   Remuneration non-executive Directors fees
   Remuneration fees received in their capacity as non-executive Directors.
   2015
   Directors	Directors fees
   Mr T Cuthbertson	60,962
   Mr J Dean	39,330
   Mr A McMillan	39,330
   139,622

   MALACHITE RESOURCES LIMITED

   
   

   DIRECTORS' REPORT (CONTINUED)

   
   

   REMUNERATION REPORT (CONTINUED)

   
   

2. Details of remuneration (continued)

Details of the nature and amount of each element of the emoluments of each of the directors and the key management personnel of Malachite Resources Limited during the year ended 30 June 2015 are set out below.

2015

Directors

Mr T Cuthbertson Mr J Dean

Mr A McMillan

Other key management personnel of the group

Mr G Hiller

2014

Directors

Mr T Cuthbertson Mr J Dean

Mr A McMillan Mr R Meares ^^

Other key management personnel of the group

Mr G Hiller

Key management personnel are the same for the Group and the Company.

There is no link between key management personnel remuneration and the share price or dividends. There is no relationship between the performance of the Group and remuneration over the past five years. All of the top paid executives are shown above.

^^ Resigned 31/12/13

The Directors have not been paid since the 1st July 2013. All Directors fees have been accrued from 1st July 2013. On 7 April 2015 it was agreed to convert some of this accrual to convertible notes (subject to shareholder approval), in the meantime they are held as a Current Liability - unsecured loan. Mr McMillan received $25,000 in cash which he then loaned immediately back to the group through an associated entity. The outstanding accrual for Directors fees is set out in the table below.

Directors fee accrual

* subject to shareholder approval

The unsecured loans are subject to the same conditions as the convertible notes set out in note 15.

MALACHITE RESOURCES LIMITED

REMUNERATION REPORT (CONTINUED)

1. Details of remuneration (continued)

   DIRECTORS' REPORT (CONTINUED)

   
   

   The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

   
   

   Fixed remuneration		At risk - STI		At risk - LTI
   2015	2014	2015	2014	2015	2014
   100%	100%	-	-	-	-
   100%	100%	-	-	-	-
   100%	100%	-	-	-	-
   -	100%	-	-	-	-
   100%	98%	-	0%	0%	2%

   Directors

   Mr T Cuthbertson Mr J Dean

   Mr A McMillan Mr R Meares ^^

   
   

   Other key management personnel of the group

   Mr G Hiller

   
   

   ^^ Resigned 31/12/13

   
   

2. Service agreements

   
   

   Remuneration for the CEO is formalised in a consultancy agreement. The agreement provides for a base rate of $1,350 per day. The agreement also provides for the provision of performance-related cash bonuses for key achievements in cost management and funding raising and participation, when eligible, in the Malachite Resources Limited Employee & Contractors Option Plan ('ECOP'). Refer note 5.

   
   

3. Share based compensation Employee Option Plan

The Company operates an Employees and Contractors Option Plan ('Plan'). The Plan is administered by the Board. Only eligible persons (and their associates) may be

invited to participate in the Plan. Eligible persons include full time employees of the Company, permanent part-time employees, qualifying contractors and persons who may be a director, alternate director or company secretary of the Company or an entity in the Group. The Plan is designed to provide long term incentives for executives to deliver shareholder value.

Options are granted under the plan for no consideration. Options granted under the Plan carry no dividend or voting rights. Each option entitles the holder to subscribe for and be allotted one ordinary fully paid share in the capital of the Company. The exercise price is determined by the Directors at the time of issuing an invitation to participate in the Plan.

All options granted to Directors have been approved by Shareholders. Benefits are payable (or vest) upon expiry of vesting periods.

All options have expired

Details of options over ordinary shares in the Company provided as remuneration to each Director and officer of Malachite Resources Limited are set out below. When excercisable, each option is convertible into one ordinary share of Malachite Resources Limited. Further information on the options is set out in note 29 to the financial statements.

^^ Resigned 31/12/13

MALACHITE RESOURCES LIMITED

REMUNERATION REPORT (CONTINUED)

1. Share based compensation (continued)

   DIRECTORS' REPORT (CONTINUED)

   
   

   The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the previous remuneration tables. The fair value at grant date is determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

   
   

   During the current or prior year there were no options exercised by the directors under the employee option plan. During the year ended 30 June 2015 no options were granted to directors.

   Non-employee options

   Options 2015	Number held 1 July 2014	Acquired during year	Expired during year	Exercised during year	Other changes	Number held 30 June 2015	Vested and exercisable
   Listed
   Directors Mr A McMillan	744,262	- (744,262)	- -	-	-

   
   

   Other key management personnel

   Mr G Hiller 166,667 - (166,667) - - - -

   
   

   Non-employee options issued as underwriting fee expired during the year.

   
   

2. Additional information

   The Group's projects are all still at the exploration and evaluation stage and as a result, it does not yet have earnings from mining. In view of that, shareholder wealth is based on the market's view of the value of discoveries made to date, the Group's potential for future discovery success, and the quality and experience of its people. This is reflected in market capitalisation, which is also influenced by factors outside the Group's control, such as commodity prices and general market behaviour.

   
   

   Accordingly, remuneration policy for key management personnel is based primarily on the extent to which the corporate exploration and evaluation objectives are met, recognising that the timeframe for exploration success commonly exceeds one year. Key performance criteria include measuring actual expenditure against budget, the quality and relevance of geological and other scientific or technical work applied, and the selection, management and performance of field staff and outside contractors, such as drilling contractors. Where a project is sufficiently advanced for it to be appropriate, achievement of resource definition goals is also given considerable emphasis, as the market generally values defined resources more than resource potential. This aspect plays a significant role in setting the long term incentive component of remuneration.

   
   

3. Other transactions of Key Management Personnel

   
   

   The Group had an opening balance of $50,000 in unsecured loans from Key Management Personnel. During the year, the Group received $225,000 in cash and $75,000 was converted from Directors fees refer Note (b) of the Remuneration Report. $50,000 of these unsecured loans have been rolled over to Convertible Notes and the remaining

   $300,000 will be rolled over to Convertible Notes subject to shareholder approval. The group also received $200,000 in convertible notes from Key Management Personnel. Total interest paid and accrued on these loans amounted to $67,267.

   
   

4. Equity instrument disclosures relating to Directors and Key Management Personnel

   
   

5. Share holdings

   The number of shares in the Company held during the financial year by each director of Malachite Resources Limited and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

   
   

   Number	Purchased / acquired	Sold	Other changes	Number
   Shares	held	during	during	held

   2015 1 July 2014 year year 30 June 2015

   
   

   Directors
   Mr T Cuthbertson	5,000,000	3,300,451	- - 8,300,451
   Mr J Dean	11,936,508	27,600,214*	- - 11,936,508
   Mr A McMillan Other key management personnel	1,488,529	2,300,451	- - 3,788,980

   Mr G Hiller 5,645,834 1,256,475 - - 6,902,309

   
   

   * 25,600,214 shares controlled when Mr Dean became a Director of Construction Equipment Finance Limited.

   MALACHITE RESOURCES LIMITED

   
   

   DIRECTORS' REPORT (CONTINUED)

   
   

   (g) Equity instrument disclosures relating to Directors and Key Management Personnel (continued)

   
   

6. Option holdings

The number of options over ordinary shares in the Company held during the financial year by directors of Malachite Resources Limited and the other key management personnel of the Group, including their personally related parties, are set out below.




Options Number Acquired Expired Exercised Other changes Number Vested and held during during year during year held exercisable

2015 1 July 2014 year 30 June 2015




Listed Directors

Mr A McMillan 744,262 - (744,262) - - - -




Other key management personnel

Mr G Hiller 166,667 - (166,667) - - - -




Unlisted Directors

Mr J Dean 3,000,000 - (3,000,000) - - - -




Other key management personnel

Mr G Hiller 15,000,000 - (15,000,000) - - - -




AUDITORS




Non-audit services




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




No amounts paid or payable to the auditor (PricewaterhouseCoopers) for non-audit services provided during the year.




Auditor's independence declaration

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is attached.




Signed in accordance with a resolution of the directors.




On behalf of the Directors










Non-Executive Chairman Sydney, 30 September 2015