INDOPHIL RESOURCES NL 
By indophil resources nl
acn 076 318 173
Quarterly Report
For the three months ending 31 December 2013
Fax: +613 8620 5888
Indophil Services International Pty LtdLevel 3, 107 Aguirre Street
Legaspi Village
Makati City 1229
The Philippines
Tel: +632 752 1440
Fax: +632 752 1146
www.indophil.com
The restructure of SMI is complete, with a new plan and significantly reduced expenditure. All indications point to Glencore Xstrata seeking to divest its majority interest in the Tampakan Copper-Gold Project. • With Indophil holding a strategic pre-emptive right over Glencore Xstrata's interest, Indophil has a considerable 'say' in any Tampakan divestment process. • Indophil and its in-country alliance partners remain optimistic that the pathways for the development of Tampakan will be cleared and value for the shareholders will be restored - talks continue. • SMI Share Certificate: A Supreme Court date set for 9 December 2013 in Australia has been rescheduled to 14 April 2014. • While the provincial ban on open pit mining remains, there are positive signs . . . • And Indophil's share price continues to imply a market value of just under $200M - a near $20M discount to cash backing.Last quarter, Indophil advised the market of plans to restructure SMI in line with new goals. This restructure is now complete, and to date:
• A substantial reduction in project expenditure has been achieved, with the budget for 2014 of less than US$10M.
• The remaining approvals to development are now the focus of Philippine Government attention via a specially-formed inter-agency working group.
Since April 2013, there has been considerable uncertainty over the future ownership of Tampakan, fuelled by the possibility that Glencore Xstrata may be forced to divest its stake in Tampakan as
part of the Chinese Government's MOFCOM conditions in order to secure the approval of Glencore's merger with Xstrata.
Glencore Xstrata has advised Indophil of its preference to pursue divestment of its interest in Tampakan.
Indophil has advised Glencore Xstrata that it is focused on restoring value to the Tampakan investment. We will work
with Glencore Xstrata to assist in meeting objectives for the project, and Indophil remains focused on doing what it can to ensure the project license conditions are not compromised in this process.
Richard Laufmann
CEO & MD
30 January 2014
Following Glencore's acquisition of Xstrata in mid-2013, it has directed Sagittarius Mines Inc. (SMI - the project's operating arm) to develop a Revised Work Plan and related budget, significantly reducing SMI's project activities and its workforce.
Effective from 1 September 2013, approximately 1,000 employees and contractors were made redundant by SMI, and planned 2013 expenditure went from a full-year budget of US$54 million to an actual 2013 expenditure of US$33 million, which
saw a massive readjustment in activities and objectives.
The plan for 2014 will now see total expenditure of less than US$10 million, with 60 employees and 60 contractors engaged. The focus of activities on the ground will be on maintaining local community support and clarifying with the Philippine Government the process and timeline for the remaining approvals required for the Tampakan Project to secure investor commitment to proceed to development.
As reported in the last Indophil Quarterly Report, SMI requested that the Philippine Government's Mining Industry Coordinating Council (MICC) create a specialist Inter-Agency Working
Group (IAWG) to play a lead role in resolving the key issues and challenges facing advancement of the Tampakan Project. These issues include resolution of the South Cotabato Provincial Government's open pit mining ban which the Philippine Government deems contrary to national law.
The IAWG has since been formed, and has met on several occasions to discuss these issues. On 8 November 2013, SMI briefed the IAWG members on the project's development history as well as the background and details on each of the issues.
SMI proposed that the IAWG include in its recommendations to the MICC the establishment of a more permanent inter- agency group with the mandate to resolve each of the issues that requires the inputs from multiple national government departments and agencies, the resolution of which would contribute strategically to the ongoing development of the Tampakan Project.
SMI has been advised that the IAWG reported back to the MICC in early January this year, with a series of recommendations and a related timeline. SMI awaits the formal correspondence from the MICC on the details of these recommendations.
The IAWG is comprised of the Department of Environment and Natural Resources (DENR) and Department of Trade and Industry (DTI) as co-chairs, with the Departments of the Interior and Local Government, Agrarian Reform, National Defence,
the Office of the Solicitor General, the National Commission on Indigenous Peoples and the Union of Local Authorities of the Philippines holding working group seats.
Indophil is of the view that this process can deliver outcomes once the Philippine Government displays:
• a genuine and internationally-competitive commitment to minerals development; and
• as owner of the Tampakan deposit on behalf of the people of the Philippines, firm direction for project development.
Glencore Xstrata has informed Indophil of its preference to divest its stake in Tampakan. This is consistent with Glencore's preference to not develop greenfield projects, and its publicly announced plan to sell its interests in the Las Bambas copper project in Peru and the Frieda River copper-gold project in PNG. To date, no formal divestment process has commenced in respect of Glencore Xstrata's interest in Tampakan, although discussions have been ongoing. These include informal discussions with Indophil which holds a pre-emptive right over Glencore Xstrata's interest in the Tampakan Project.
Indophil remains committed to maximising value either
by development of Tampakan, 100% ownership of SMI or divestment. Indophil has advised Glencore Xstrata that Indophil has an up-to-date data room, and Indophil remains ready to assist in the divestment process so that value can be restored for all stakeholders, particularly Indophil shareholders.
In line with this, and conscious of the value of Indophil's pre- emptive right, the Company is sole-funding work programs at Tampakan. These include progressing the Environmental Impact Study for the offsite infrastructure (pipeline, power line, filter plant and port).
Supreme Court Update
Xstrata Queensland (now Glencore Queensland - part of Glencore-Xstrata since 2 May 2013) exercised an option to acquire a 62.5% interest in SMI from Indophil in 2007. SMI is the holder of the FTAA in which the Tampakan copper-gold deposit is located.
Following this acquisition, Indophil applied to the Philippine Government's Bureau of Internal Revenue (BIR) for a capital gains tax exemption on the transfer of shares under the terms of the Tax Treaty between the Republic of the Philippines and Australia. Indophil applied for the tax ruling to facilitate the registration of Xstrata Queensland as the legal owner of those shares in the share register of SMI. Indophil is still awaiting the outcome of this exemption application from the BIR.
On 19 June 2013, Xstrata Queensland/Glencore Queensland issued proceedings in the Supreme Court of Queensland to become registered as the legal owner of a 62.5% share in SMI that it acquired from Indophil in 2007. The original Supreme Court hearing date was set for 9 December 2013, but has been
rescheduled to commence 14 April 2014. Indophil has lodged its defence, and the Court process is continuing.
The Tampakan copper and gold deposit, discovered in 1992, is one of the largest-known undeveloped copper-gold deposits in the world. Tampakan is a 2.94 billion tonne mineral resource at
0.51% copper when measured at a 0.2% copper cut-off grade.
It is estimated to contain 15 million tonnes of copper and almost
18 million ounces of gold, with potential for growth.
The Tampakan Mine Project Feasibility Study, completed in April
2010, outlines a proposed mining operation that involves:
• An initial 17 year life-of-mine, with potential for extension;
• A start-up mining and milling capacity of 66 million tonnes per annum;
• Annual production of 450,000 tonnes copper and of
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435,000 ounces gold over the first five years of operation;
• An average life-of-mine copper production rate of 375,000 tonnes per year;
• An average life-of-mine gold production rate of 360,000 ounces per year; and
• A development cost of US$5.9 billion, including the provision of US$900 million for a power station.
Indophil, through its shareholding in SMI, holds a strategic 37.5% stake in the Tampakan Project while Glencore Xstrata holds the balance. In turn, as the holder of the Tampakan Project Financial and Technical Assistance Agreement (the Columbio FTAA), SMI acts as a contractor to the Philippine Government on behalf of the people of the Philippines.
Every few years, the Australian and Philippines governments come together at a ministerial foreign affairs and trade level to discuss bilateral trade and relationship matters. This engagement is known as the Philippines Australia Ministerial Meeting (the PAMM). The
last round of PAMM talks took place in Canberra (Australia) in
2011.
In mid-February this year, the next PAMM is scheduled to take place - this time in Manila (the Philippines). Both countries are scheduled to be represented in person by their Foreign Affairs and Trade Ministers (Australia) and Secretaries (the Philippines).
The talks, over two days, will cover a range of issues including co-operation on regional and global architecture/structure, development assistance and two-way trade. The talks are expected to include robust discussion about Philippine
commitment to minerals development, and the role Australia could play in assisting the Philippines to harness its natural wealth for
the benefit of its people, while at the same time providing a fair
and equitable return to government and to those investors and companies which offer their technical expertise and financing.
The Tampakan Copper-Gold Project is a prime example of an
Australian-led investment into the Philippines. Since discovery in
1992, more than $500 million has been invested in exploration and scoping and feasibility studies, and in social advancement and capacity building at the Tampakan Project.
Indophil's cash balance at the end of the December 2013 quarter was $215.1 million (previously $217.8 million). Interest earned from cash-at-hand during the quarter was $2 million. The Company's main expenditure commitment for the quarter - $1.8 million - was to the Tampakan Project.
EXPLORATION PROGRAM - THE PHILIPPINES
Following a comprehensive technical review of the results of the last two exploration programs within the Itogon Gold Project in Northern Luzon, Indophil is of the opinion that the project would not meet the Company's investment criteria, and as a result the Board has elected to terminate the project and withdraw. All statutory requirements have been met, the Baguio Office has
been closed, staff have been terminated and the project has been returned to its former owners.
In Eastern Mindanao, Indophil holds an interest in the Manat Gold Project. The Declaration of Mining Project Feasibility (DMF) has been submitted to the Philippine Government. It successfully passed through the regional Mines and Geosciences Bureau (MGB) process and was referred to the MGB Central Office
in Manila. We are still awaiting the MGB's response. Indophil continues to review the various options on progressing the project with its in-country partner, Alsons Development Corporation.
Tenement Approval Date Current Ownership Project Area (Km2) Agreement Type Equity
FTAA 02-95-X1 (Columbio)
23/03/1995
(R)11/12/02 Sagittarius Mines, Inc. Tampakan 304.9 Operating Royalty 37.50%
MPSA 094-97-XI 20/11/1997 (R)12/04/2002
Alsons Development
Corporation Manat 15.47 Farm-in & JV 25%
ASX listed code IRN
Total listed shares 1,203,146,194
Unlisted options 3,374,750
Share price trading range for the December 2013 quarter: High 18c
Low 11.7c
Current 16c
All currencies in Australian dollars unless stated otherwise.
Directors
Non-Executive Chairman Brian Phillips
CEO and Managing Director Richard Laufmann
Executive Director Tony Robbins
Non-Executive Director Kyle Wightman Non-Executive Director David Carland Non-Executive Director Nicasio Alcantara
Non-Executive Director Frederic DyBuncio
Company Secretary Kay Donehue
Chief Financial Officer Anita Addorisio
Gavan Collery
Manager Corporate Affairs
Indophil Resources NL
Email: gavan.collery@indophil.com
Office: +61 (03) 8620 5800
Mobile: +61 (0) 419 372 210
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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report
Indophil Resources NL
ABN Quarter ended ("current quarter")
45 076 318 173 31 December 2013
Consolidated statement of cash flows
Cash flows related to operating activities
1.1 Receipts from product sales and related debtors
1.2 Payments for (a) exploration & evaluation
(b) development
(c) production
(d) administration
1.3 Dividends received
1.4 Interest and other items of a similar nature received
1.5 Interest and other costs of finance paid
1.6 Income taxes paid
1.7 Other (provide details if material)
Net Operating Cash Flows
+ See chapter 19 for defined terms.
01/05/2010 Appendix 5B Page 1
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Appendix 5B
Mining exploration entity and oil and gas exploration entity quarterly report
Cash flows related to financing activities
1.14 Proceeds from issues of shares, options, etc.
1.15 Proceeds from sale of forfeited shares
1.16 Proceeds from borrowings
1.17 Repayment of borrowings
1.18 Dividends paid
1.19 Other (provide details if material)
Net financing cash flows
Payments to directors of the entity, associates of the directors, related entities of the entity and associates of the related entities
Current quarter
$A'000
1.23 Aggregate amount of payments to the parties included in item 1.2 218
1.24 Aggregate amount of loans to the parties included in item 1.10 1,798
1.25 Explanation necessary for an understanding of the transactions
Non-cash financing and investing activities
2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
Interest Income
$10,037,786 has been recorded as interest income on advances to associate entities for the period
1 January 2013 to 31 December 2013. The interest income is recorded as additional advances in the accounts and therefore is a non-cash settlement.
2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest
+ See chapter 19 for defined terms.
Appendix 5B Page 2 01/05/2013
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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report
Financing facilities available
3.1 Loan facilities
3.2 Credit standby arrangements
Estimated cash outflows for next quarter
4.1 Exploration and evaluation
4.2 Development
4.3 Production
4.4 Administration
Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.
+ See chapter 19 for defined terms.
01/05/2010 Appendix 5B Page 3
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Appendix 5B
Mining exploration entity and oil and gas exploration entity quarterly report
Changes in interests in mining tenements and petroleum tenements
6.1 Interests in mining tenements and petroleum tenements relinquished, reduced or lapsed
6.2 Interests in mining tenements and petroleum tenements acquired or increased
Issued and quoted securities at end of current quarter
7.5 Convertible debt securities (description)
+ See chapter 19 for defined terms.
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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report
7.6 Changes during quarter
(a) Increases through issues (b) Decreases through securities matured, converted
7.12 Unsecured notes (totals only)
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Appendix 5B
Mining exploration entity and oil and gas exploration entity quarterly report
1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).
2 This statement does give a true and fair view of the matters disclosed.
Signed:
Kay Donehue, Company Secretary
Date: January 2014
1 The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
2 The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in mining tenements and petroleum tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement or petroleum tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
3 Issued and quoted securities. The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.
4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of
Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.
5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.
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