More annual reports from Alara Resources Limited:
2021 Report2018
A n n u a l R e p o r t
Saudi Arabia
With our first mining licence
in hand, the Company is
officially advancing from
mineral exploration and
resource development,
to mining and copper
concentrate production.
Since 2011, the Company’s primary focus
has been mineral exploration and resource
development in the burgeoning mining sectors
of the Middle East.
In 2018, we reached a major milestone when
the Al Hadeetha Copper Project obtained its
first mining licence from the Public Authority
for Mining (‘PAM’) in Oman.
This was the first mining licence awarded by
PAM to an international joint venture company
(Al Hadeetha Resources LLC) and the first
copper mining licence to be issued in the
Sultanate since 2004.
Al Hadeetha Resources are now on track
to become the next producer of copper
concentrate in Oman, with a string of new
copper projects following closely behind.
This licencing milestone helps demonstrate
the Sultanate is serious about implementing
its economic diversification strategy, and
is ready to work with the private sector to
develop the mining industry, with copper
playing a key role in that development.
Oman
Delineation drilling
at Washishi Mazzaza
Project site, Oman.
Exploration target site
at Daris project, Oman.
Gossan at
Washihi-Mazzaza
Alara Resources Annual Report 2018
1
Alara Resources Limited
Mission Statement
We will increase shareholder value and become a leadingnd developer of mineral
deposits and mineral producer in the Middle East region.
Core Values
Contents
2 Chairman’s Letter
3 Managing Director’s Letter
4 Projects Overview
18 Board of Directors
20 Management Team
22 Directors’ Report
37 Auditor’s Independence Declaration
38
Consolidated Statement of Profit of Loss
and Other Comprehensive Income
39 Consolidated Statement of Financial Position
40 Consolidated Statement of Changes in Equity
41 Consolidated Statement of Cash Flows
42 Notes to the Financial Statements
63 Directors’ Declaration
64 Independent Auditor’s Report
69 Mineral Licences
73 JORC Competent Person’s Statement
74 Securities Information
75 Corporate Directory
Excellence
We will pursue excellence and will
strive for relevant best practice
combined with a fit-for-purpose
approach through continuous
improvement and teamwork in
all aspects of our business.
To achieve our goals we will ensure
our employees and business
partners have the appropriate
skills and resources to perform
their work effectively and
efficiently. We will foster an open
and supportive environment in
all activities and relationships.
Respect
Alara values and shows
consideration for its employees,
business partners, customers,
suppliers, governments,
communities, and the social
and physical environment in
which it operates.
Integrity
Alara and its employees are
committed to fairness and honesty
and operate with transparency
and accountability across all
levels of business.
2
Alara Resources Annual Report 2018
Chairman’s Letter
2019 is expected to be
“
a watershed year for
Alara as it moves from
exploration company
to mineral producer”
James D Phipps
Non-Executive Chairman
Dear Shareholder
In FY2018 Alara achieved a major
milestone with the grant of the mining
license for its Al Hadeetha Copper-Gold
Project in Oman. The focus is now on
mining infrastructure development,
with first copper production expected
for at the end of 2019. A number of other
significant achievements have broadened
the Company’s foundations, placing it in
a strong position for future growth.
Alara revised the financial projection for the Al Hadeetha
Project upwards, more than doubling from a forecast
net present value of US$39 million in the original, 2016,
feasibility study to US$90 million in June 2018.
Development work continues at Alara’s joint venture
Daris Copper Project (Block 7). The Company acquired
the right to acquire up to 70% of the adjacent Block 8
exploration licence, which is also prospective for copper.
A future mining operation at either Block would have
synergies for the Company, with output being processed
at the shared facility planned for Al Hadeetha.
The Company signed a heads of agreement for a
joint venture with Indian-listed South West Pinnacle
Exploration Limited, a successful drilling and exploration
services company. The proposed joint venture will
enable the parties to exploit opportunities in the rapidly
expanding Omani resource industry, as well as those in
surrounding countries.
Since the end of the year, the dismissal of long-
running court proceedings brought against Alara
by its joint venture partner in the Khnaiguiyah Zinc
Copper Project in Saudi Arabia is a welcome result. The
Company is exploring the possibility of the reissue of
the Khnaiguiyah mining licence and is seeking other
opportunities to extract value from its $23m plus
bankable feasibility study into that project.
FY2019 will be a company making year for Alara,
as it transitions from explorer to mineral producer,
continues to expand and develop its project portfolio
and diversifies its exposure to the resources industry
through the SW Pinnacle JV.
On behalf of the Board I would like to thank
Managing Director Justin Richard, Executive Director
Atmavireshwar Sthapak and their team, who have done
an excellent job in taking the Company to the strong
position in which it is today.
I also thank shareholders for their continued support
and I look forward to sharing an exciting and profitable
future with you at Alara.
Alara Resources Annual Report 2018
3
Managing Director’s Letter
Copper Mining in Oman
Oman has a rich long history of copper mining1.
After investing more than seven years and $50m into
mineral exploration, Alara and its partners now have:
– a portfolio of copper projects with complimentary
development options e.g. treating ore from other
nearby sites at the Al Hadeetha copper concentrator
plant;
– demonstrated their active participation and
contribution toward Oman’s rapidly growing mining
sector, and established strong relationships key
for the successful development of future mining
projects in Oman.
With the first mining licence in hand, Alara is now
extending its project portfolio beyond mineral
exploration to include mine development and
production.
Copper Outlook
Copper prices have risen more than 20% since Alara
announced feasibility study findings for the Al Hadeetha
Copper Project (‘Project’) in March 2016. Previously, the
World Bank copper price forecast showed the nominal
copper price rising from $5,000/t in 2016 to $5,388 in
2018, and then steadily continuing up to $7,000/t.
We saw copper prices rise more rapidly than expected,
breaking $7,000 several times in 2018, before being
subdued by recent trade tensions. In April, the World
Bank released a revised forecast which the Company
utilised in updating financial projections for the Project1.
Strong economic fundamentals continue to support
a solid copper price outlook. Electro technologies are
driving a more efficient energy system and the road to
renewable energy is paved with copper. Electric vehicles,
PV solar, wind and grid storage are all driving further
copper demand on top of increasing global urbanization.
In short, increasing copper demand is set to continue for
many years to come.
Within this context, an untapped copper reserve and
strong exploration potential within close proximity to
existing resources provide a solid base for establishing
Alara as a leading copper concentrate producer in the
Middle East.
Shareholder Return and Future Growth
Total shareholder return for financial year end 2018 was
107%. The Company’s market capitalisation more than
tripled from three years ago and is set to continue.
This growth has been underpinned by increased
resource estimates2, a maiden ore reserve3 and now
the Company’s first mining licence4.
Greater growth is anticipated as the Company
progresses into mineral production and further develops
its copper resource base.
“ First international joint
venture to receive a
copper mining licence
in Oman”
Justin Richard
Managing Director
First Mining Licence Granted
In 2018, Alara’s perseverance paid off when the
Company’s joint venture entity, Al Hadeetha Resources
LLC, became the first international joint venture to
receive a copper mining licence in Oman.
This long anticipated milestone occurred at a public
ceremony hosted by the Public Authority for Mining
(‘PAM’), with key government, business and community
leaders in attendance.
This is the first copper mining licence issued in Oman for
fourteen years. It marks the beginning of a new phase of
development for copper mining in the Sultanate.
Other copper projects, including Alara joint venture
projects, are also advancing and strengthen the case
for developing synergies and downstream linkages with
copper concentrate production in Oman.
Alara and its joint venture partners are working with
the mining authority to develop four other exploration
licences, including three with mining licence
applications pending.
1. Refer ASX Announcement dated 26 July 2018.
2. Refer ASX Announcement dated 19 September 2016.
3. Refer ASX Announcement dated 15 December 2016.
4. Refer ASX Announcement dated 3 July 2016.
4
Alara Resources Annual Report 2018
Projects Overview
Alara Resources Annual Report 2018
5
Projects overview
continued
OMAN
The Sultanate of Oman is the
second largest country in the GCC
region with an excellent geology
of minerals. Oman’s vast mineral
wealth remains relatively untapped.
Its mountains host intact and
exposed ophiolites, which contain
chromite, cobalt, copper, gold, lead,
manganese etc.
Oman’s mining sector has
attracted increasing interest
both domestically and abroad.
Its contribution to GDP shows a
compound annual growth rate
of >20%1.
In 2014 the Public Authority for
Mining was organised to regulate
the sector. In 2016 Mining
Development Oman (‘MDO’) was
established to help enable and
invest in local mining projects.
MDO plans to carry out upstream
and downstream mining activities
in collaboration with the private
sector.
Copper
Copper is a vital element for the
world’s electricity infrastructure,
digital communications and
green technologies. Voice and
data information systems rely
on copper. This important metal
also helps power wind energy
and solar collection, as well as
energy- efficient buildings and
electric vehicles. Copper production
in Oman began in ancient times.
The country has geology that is
enriched by extensive copper
mineralization with potential for the
development of many new copper
mining projects.
Fundamental supply and demand
forecasts continue to provide a
solid support base for copper prices
through 2025. Electric vehicles,
increasing urbanisation and
electrification are further expanding
market demand for copper.
1 Source: Oxford Business Group
Alara has joint venture interests
in five (copper-gold) exploration
licenses in Oman extending over
1186 km2. The Company has one
Mining Licence at Wadi Andam
covering 3 km2 and four other Mining
Licenses pending grant with an
area totalling 7 km2. Figure 1 shows
the locations of the Company’s
exploration licenses.
6
Alara Resources Annual Report 2018
Projects overview
continued
OMAN
Figure 1: Alara JV Exploration Licenses in Oman
In addition there are 10 (base
and precious metals) exploration
licenses applications pending grant
totaling 2,677km2 in Oman.
Lithium
Lithium and its compounds have
several industrial applications,
including heat-resistant glass and
ceramics, lithium grease lubricants,
flux additives for iron, steel and
aluminium production and lithium
and lithium-ion batteries, and
lithium-ion batteries. The large
interior drainage area around
Umm as Samin is known for the
deposition of evaporates over a long
period of time. Potential economic
concentration of alkali salts and
alkaline earths (including lithium)
could be explored within this
interior basin.
Alara has an Exploration License
application covering an area of
10 km2 pending grant in the Umm
as Samin basin of Oman.
Alara Resources Annual Report 2018
7
Projects overview
continued
OMAN
Copper Portfolio
Al Hadeetha Projects
Al Hadeetha Resources LLC (‘AHRL’) is a 70/30 Joint Venture (JV) between Alara Oman Operations Pty Ltd, a wholly
owned subsidiary of Alara Resources Limited (‘Alara’) and Al Hadeetha Investment Services LLC, a privately owned
Omani Company. Al Hadeetha Investment Services is related to the well-known Al Naba group, owned by Sheikh
Khalid Al Busaidi and his family. The JV between Alara and Al Hadeetha was formed in 2011 for the purpose of
exploring and developing the Washihi, Mullaq and Al Ajal copper- gold concessions and the surrounding regions.
Alara-led exploration in these areas has identified copper resources and mining license applications have been
submitted within each exploration license area. Table 1 provides the status of all Al Hadeetha JV licenses.
Table 1: Al Hadeetha JV licenses
Block/
License
Name
Wadi
Andam
Mullaq
Al Ajal
License owner
Al Hadeetha
Resources LLC
Oman
Al Hadeetha
Resources LLC
Oman
Al Hadeetha
Resources LLC
Oman
Exploration Licenses
Mining License within ELs
Alara JV
interests
Area
Date of
Grant
Status
Area
Date of
Application
Status
70%
39km2
Jan 2008
70%
41km2
Oct 2009
Renewal in
process
Valid pending
ML Application
3km2
April 2013
Granted
1km2
Jan 2013
In process
70%
25km2
Jan 2008
Valid pending
ML Application 1.5km2
Jan 2013
In process
Wadi Andam Copper Project
The Wadi Andam Exploration License
lies within the Oman Mountains,
approximately 160 kilometres
south-east of Muscat via sealed
road. It can be reached either from
the Muscat-Nizwa highway, 40 km to
the northwest, or from the Muscat-
Ibra highway, 45 km north along the
Wadi Andam valley. This prospect
is 5 km north of Washihi village and
2 kilometres west of Wadi Andam
and is distinguished by its gossan
which forms a whitish, isolated but
conspicuous hill in the centre of
a gravel plain which is easily seen
from a distance.
Figure 2: Location of Wadi Andam Exploration License and granted Wadi Andam
Mining License
8
Alara Resources Annual Report 2018
Projects overview
continued
OMAN
AHRL conducted extensive copper-gold exploration
programs in the license area that resulted in discoveries
of large copper deposits at Wadi Andam. Subsequently
a feasibility study was carried out supporting viable
development of a mine pit and the construction of a
1 mtpa copper concentration plant and the maiden
JORC reserve was announced in December 2016. In June
2018 Al Hadeetha JV secured Mining License to proceed
with Project Development. JORC resource and reserve
statements are provided in Table 2 and 3 below.
Table 2: Summary JORC Insitu Mineral Resources – 0.25% Cu
Cutoff
Resource
Classification
Indicated
Inferred
Grand Total
Tonnes
(Mt)
12.4
3.7
16.1
Cu
(%)
0.89
0.79
0.87
Au
(g/t)
0.22
0.23
0.22
* Based on JORC Code, 2012 edition
Table 3: JORC Ore Reserve Statement (As of 18 November
2016)
Classification
Probable
Ore Reserve
Tonnes
(Mt)
Cu Grade
(%)
Au Grade
(g/t)
9.7
0.88
0.22
In addition to the above mentioned resources, shallow
gold mineralisation in the Gossan was also identified
(JORC Inferred Resource of 0.31MT @ 0.51g/t Au) outside
the main ore body.
Next Steps
Having become the first international joint venture to
receive a copper mining licence in Oman, Al Hadeetha
Resources has now moved into the mine construction
phase. Engineering, procurement and construction bids
have been received. Preliminary works are underway
with major contracts commencing subject to final
finance approval. In the interim, the Company intends
to award a limited notice to proceed
with detailed engineering work to
avoid delaying the procurement and
construction schedule.
The Company has already received
indicative financing terms and
executed an offtake agreement and
project management agreement.
Mining contract proposals and plant
operation/maintenance proposals
have also been received.
The Company has worked hand in
hand with local community to ensure
the site was cleared of any unauthorised encroachment.
This step was preparatory to the installation of
perimeter fencing to secure the site and protects any
livestock from roaming into the construction area.
In connection with Haya Water, designs for a sewage
treatment plant that will supply water to the processing
plant are being evaluated before final contract award.
An application for electricity connection to the site has
been submitted to the power authority. The Company is
working with Tanfeedh’s implementation support and
follow-up unit to get this application executed.
The best case scenario is to have the plant operational
at the end of next year.
Project Development
The Mullaq exploration licence is less than five
kilometres from the Wadi Andem Mining Licence. Mullaq
includes strips of land strewn with copper slag from
old copper mines. A mining licence application was
submitted for Mullaq (along with an environmental
impact assessment) in the same year that the Wadi
Andem mining licence application was submitted.
The Company is working with Tanfeedh and the Public
Authority of Mining to review these applications and
determine the next step forward.
The Company aims to have additional copper resources
from Mullaq added to Al Hadeetha’s existing mining
inventory. This could further extend the mine life and
increase project revenues.
Future Growth Opportunities
The majority of the area around Wadi Andem is
covered by ancient and recent alluvial fans. Based
on the premise that sulfide mineralization in the area
is coincident with distinct reduction in the magnetic
susceptibility values of basaltic rocks, four other targets
have been identified for further follow-up, as shown in
Figure 3. It is proposed to follow-up these targets with
electrical geophysical methods (EM or IP) to confirm the
target potential followed by drilling.
Alara Resources Annual Report 2018
9
Projects overview
continued
OMAN
Figure 3: Potential regional
exploration targets at
Washihi License areas,
based on RTP magnetics
Exploration Targets
Exploration targets are estimated purely based on size, geological perception and structural interpretation of the
geophysical target, and without any other obvious geochemical, lithological or geo-statistical support. Anticipated
copper and gold mineralization targets in Washihi license area, in addition to already reported JORC resources at
Washihi, can potentially be categorized as per Table 4.
Table 4: Washihi Exploration Targets
License area
Target Number
Type of target
Estimated
Tonnages in
ranges
Grade Cu%
Grade Au (g/t)
Washihi
May 2018
Deemed granted as per law
3km2
April 2013
Active
39 km2
WHT-1
WHT-2
WHT-3
Extension of existing JORC
resources
3 - 4 MT
Untested geophysical targets
2.5 – 7.5 MT
0.9 -1.1
0.9 -1.1
0.1 – 0.3
0.1-0.3
Unseen high grade classic
mound type “conglomeratic
ores,” typical of Cyprus-type
deposits
0.5-1 MT
1.0 – 3.0
0.1-1.0
The potential quantity and grade of an exploration target is conceptual in nature. There is no certainty that further exploration work
will result in the determination of mineral resources or that the production target itself will be realized (ASX Listing Rule 5.16.5).
10
Alara Resources Annual Report 2018
Projects overview
continued
OMAN
Mullaq Exploration License
Mullaq Exploration License area
is adjacent to Washihi Exploration
License Area. The Mullaq prospect
lies within the Oman Mountains,
approximately 160 kilometres
south-east of Muscat via sealed
road. It can be reached either from
the Muscat-Nizwa highway, 40 km to
the northwest, or from the Muscat-
Ibra highway, 45 km north along the
Wadi Andam valley. Mullaq is located
5.5 km east of the Wadi Andam.
Access to the site is via approximately
7 km of unsealed track 4 km south of
Khadra Bin Daffa.
In Mullaq License area, although
previous explorers discovered
copper mineralization in layered
gabbro sequence, a large part of
the tenement remains unexplored.
Historical estimate of existing
mineralization at Mullaq stands
at 387,000t with 2.95% Cu.
Although no resource modelling has
been conducted, geophysical surveys
and drilling campaigns by Alara
confirmed the presence of potential
mineral deposits in the area.
Next Steps
With the grant of the mining license
and the proposed construction
of copper concentrator at nearby
Wadi Andem, the high grade Mullaq
deposit could be developed on hub
and spoke basis. To achieve this
AHRL has plans to delineate the
existing resource at Mullaq followed
by mining feasibility study.
Future growth opportunities
The ground magnetics survey
conducted at Mullaq demarcated
anomalies consistent with the
known VMS signatures in this
geological environment. A total
of nine targets were identified for
further follow-up, with the majority
being manifested by RTP magnetic
lows, similar to the Washihi
magnetic signature. All identified
exploration targets based on ground
magnetics in Mullaq (except MQ001)
remain untested. Also the existing
mineralization remains open for
further potential extensions.
Figure 4: Location of Mullaq EL and Applied Mining License
Figure 5: Potential regional exploration targets in Mullaq License areas, based on
RTP magnetics
Alara Resources Annual Report 2018
11
Projects overview
continued
OMAN
Exploration Targets
Exploration targets at Mullaq are estimated purely based on the size, geological perception and structural
interpretation of the geophysical target, and without any other obvious geochemical, lithological or geostatistical
support. Anticipated copper and gold mineralization targets in the Mullaq license area, in addition to non-JORC
mineralisation at Mullaq previously reported by others, can potentially be categorized as follows:
Table 5: Mullaq exploration targets
License area
Target Number
Type of target
Estimated
Tonnages in
ranges
Grade Cu%
Grade Au (g/t)
Mullaq 41km2
MQT-1
MQT-2
Extensions of non JORC
resources at Daris 3A5
0.25 – 1 MT
Untested geophysical targets
3 – 4 MT
1 – 3%
0.9 – 2%
0.09 – 1.2
0.09 – 0.3
The potential quantity and grade of an exploration target is conceptual in nature, there has been insufficient exploration to determine
a mineral resource and there is no certainty that further exploration work will result in the determination of mineral resources or that
the production target itself will be realised (per ASX Listing Rule 5.16.5).
In addition to the above, an ancient
copper slag sample from Mullaq
was tested at the Australian
Minerals Research Centre in Perth.
The tests showed potential for
economic extraction by long term
heap leaching methods. Further
evaluation is required to determine
the most economic options for
copper recovery.
The Mining License application
at Mullaq submitted in 2013
has progressed through
various ministries in Oman. An
Environmental Impact Assessment
was also completed previously.
AHRL considers the grant of a
Mining Licence as one key to further
exploration work in the area.
Al Ajal Exploration License
The Al Ajal Prospect is located
near the village of Al Ajal in Taww
area, about 20 km south of Barka,
which lies on the northern coast of
the Sultanate of Oman and about
65 km west of Muscat. Please refer
to Figure 6.
Figure 6: Location of Applied Al Ajal Mining License
12
Alara Resources Annual Report 2018
Projects overview
continued
OMAN
Alara carried out ground geophysical surveys over limited areas to confirm the geophysical signatures of exiting
mineralization. See Figure 7 below.
Figure 7: Al Ajal Geophysical Survey
Chargeability Slice modeled
at 100m depth
Figure 8: Geological map showing prospective areas within Al Ajal Exploration
License
Exploration Potential – Future
growth opportunities
Preliminary exploration confirmed
the presence of two more areas
of potential positivity in similar
geological trends. Al Ajal prospect
is unique in itself as it is considered
to be the only known mineral
occurrence in Oman Mountains
that is considered not associated
with the ophiolite volcanics of
Oman. Despite its small size and
difficult terrain, in view of the high
gold grades detected by previous
explorers this prospect warrants
further detailed exploration to
discover more copper and gold
bearing deposits.
The Mining License application
at Mullaq submitted in 2013
has progressed through various
ministries in Oman. AHRL considers
the grant of a Mining Licence a key to
further exploration work in the area.
Alara Resources Annual Report 2018
13
Projects overview
continued
OMAN
Daris Copper-Gold Project
The Daris Resource LLV is 50-50 JV
in Oman between Alara (with right
to increase to 70%) and Al Tamman
Trading Establishment LLC.
The Daris Project comprises one
exploration licence (Block 7) of
~587km2 located ~150km west of
the capital city Muscat in Oman. The
application for annual renewal of the
exploration licence is pending along
with two Mining Licence applications
filed over Daris East and Daris 3A5
prospects within the exploration
licence. Figure 9 and Table 6 provide
details of licenses at Daris.
By conducting extensive
exploration programs in Block 7
the JV has defined resources at
Daris East Prospect to measured
category under JORC, identified
mineralisation at Daris 3A5 prospect
and several exploration targets.
Two Mining License applications
were submitted over both of the
prospects and recent site visits
conducted by ministry officials
gave positive indications for these
applications advancing towards
issuance.
Table 6: Details of Licenses
Figure 9: Geological map showing prospective areas within Al Ajal Exploration
License
Block
Name
License
owner
Alara JV
interests
Area
Date of
Grant
Date of
Expiry
Application
for
renewal
Status
Area
Date of
Application
Status
Exploration License
Mining License within EL
Al
Tamman
Trading
and Est.
LLC,
Oman
Block 7
50% 587km2 Nov 2009 Nov 2012 May 2018
Daris
East
3.2km2
Daris
3A5
1km2
Deemed
renewed
as per
law
Dec 2012
Dec 2012
in
process
in
process
14
Alara Resources Annual Report 2018
Projects overview
continued
OMAN
Daris East Prospect
The current JORC Copper Resource for the Daris-East Prospect is outlined below:
Table 7: Current JORC Copper Resource for the Daris-East Prospect
Cut-off
grade
Cu%
0.5
0.5
Measured
Indicated
Measured and
Indicated
Inferred*
Tonnes
Cu%
Tonnes
Cu%
Tonnes
Cu%
Tonnes
Cu%
130,000
2.48
110,000
2.24
240,000
2.37
30,000
100,000
0.77
90,000
0.66
180,000
0.72
2,000
2.0
0.5
Ore type
Sulphides
Oxides
* Figures are approximate
Note:
– A total of 21 rotary (624m) and 41 diamond core (4,654m) holes totalling 5,278m have been drilled by Alara to test
shallow oxide mineralisation and to locate massive sulphide and stringer zones beneath the oxide cap at the Daris-
East prospect and to test geophysical targets in the vicinity.
– In addition historic drilling data from 44 holes totalling 4,353m have been included in the resource database.
Daris 3A5 Prospect
Preliminary drilling at Daris 3A5 has intersected high grade copper mineralisation and the Company plans to conduct
further drilling before resource estimations.
On 20 September 2012, Alara announced drilling results for Daris 3A5. The drill hole location map and intersection
table are given below:
Figure 10: Daris 3A5 Drillhole Location Maps
Alara Resources Annual Report 2018
15
Projects overview
continued
OMAN
Table 8: Significant Intersections from Alara Core Drilling
MINERALISED ZONE - SIGNIFICANT INTERSECTIONS – DARIS 3A5 PROSPECT
Significant Mineralisation
Mineralised Zone
Drill Hole
Intersections
D3DC001
D3DC002
D3DC003
D3DC008
Primary
Inclusion
Primary
Inclusion
Primary
Inclusion
Primary
Inclusion
Primary
Inclusion
Primary
D3DC009
Inclusion
Primary
Primary
Inclusion
D3DC010
Significant Intersection from Daris 3A5
From
(m)
15
30
28.4
34.35
50.6
50.6
41
51.5
23
33.5
21
23
36
57
59.35
To
(m)
37.65
37.65
46.25
46.25
59
54.05
71.75
68.7
35.8
35.8
31
25
39
67
65.7
Length
(m)
22.65
7.65
17.85
11.9
8.4
3.45
30.75
17.2
12.8
2.3
10
2
3
10
6.35
Cu
(%)
1.61
4.69
3.85
5.74
4.45
10.28
4.69
8.05
0.74
3.92
0.07
0.06
0.85
5.62
8.58
Au
(g/t)
3.39
3.71
2.61
2.06
1.36
3.10
1.56
2.67
6.62
5.20
3.34
7.13
0.01
1.16
1.78
Ag
(g/t)
50.68
77.95
22.51
24.07
20.34
46.79
16.75
28.95
31.11
106.37
5.41
23.67
1.23
17.82
27.48
Notes:
– The cut-off grade is 0.2% Cu in respect of intersections within the copper-rich zone.
– The drill intercepts are reported as drilled. True thickness will be calculated at the interpretation and resource
modelling stage.
Oman Oxide Ore Test Work
Copper oxide ore samples from two Daris deposits as well as those from other mines were tested to identify a suitable
copper and gold extraction method. The test results favourably suggest that oxide portions of Daris East and Daris
3A5 can readily be leached for copper however further work is required for effective extraction of gold from this ore.
Next Steps
The recent grant of the Al Hadeetha Mining License has provided the Company with a basis to further develop copper
exploration programs at Daris.
An optional analysis study and an advanced scoping study conducted in 2014 identified multiple options for Daris East
Resources, which will underpin further work in Block 7.
The Daris JV is collaborating with Mineral Development of Oman to develop a further exploration program for Block 7.
16
Alara Resources Annual Report 2018
Projects overview
continued
OMAN
Awtad Copper Project
The Awtad Project is located
immediately adjacent to the Licence
Area No. 7 (Block 7) comprising
the Daris Copper-Gold Project and
comprises a mineral exploration
licence (Block 8) of ~497km.
The Company has signed a binding
Heads of Agreement granting Alara
an initial 10% interest in the Project
and a right to increase to a 70%
shareholding in Awtad Copper LLC.
Alara has previously undertaken
some exploration activity on Block 8.
Rock chip samples returned multi-
elemental enrichment of up to 2.68%
Copper, 2.4ppm Silver, and 0.1%
Zinc indicating potential base metal
deposit below.
A summary of exploration previously
undertaken by Alara on the project
is as follows:
– Extensive geophysical surveys
have been completed - 86 line
kilometres of airborne VTEM,
14 line kilometres of ground
IP, 169 line kilometres of
ground magnetics and 202 line
kilometres of high resolution
ground magnetics;
– 76 RAB drill holes totalling
1,747m and 11 core drill holes
totalling 299m have been
completed;
– Drilling results (including
over the Al Mansur prospect)
were low grade in general and
inconclusive;
– Rock chip samples collected
250m southeast of Hole
AM12DD002 from oxidized,
hematitic altered basalt (Gossan)
having malachite stains returned
a multi-elemental enrichment
in the rocks of up to 2.68%
Copper, 2.4ppm Silver, 0.1% Zinc
and 48ppm arsenic indicating
potential base metal deposit
below.
Figure 11: Location of Block 8 Exploration License
Copper exploration/mining
companies in Oman
Over the past seven years Alara
and its joint venture partner have
developed a number of important
business relationships in Oman.
Previous reports have referred to
the potential for consolidation /
collaboration of copper assets in
Oman. The Company has announced
various MOU’s and other agreements
with key players in the Oman mining
sector from time to time.
MDO was established to enable and
invest in mining projects in Oman.
Alara and MDO continue to explore
opportunities for collaboration to
strengthen Oman’s mining sector
and deliver value to stakeholders.
If the relationship develops to a
point where the parties decide to
become equity partners, further
arrangements will need to be
finalised.
In January, a $100m deal for
developing the Yanqul copper-
gold project (Block 10) was
announced between MDO (20%),
Oman Mining Company (29%)
and Exo Mining (51%).
Development of the Yanqul project
is another important step forward
for development of Oman’s copper
industry and combined with
other copper projects help build
the business case for further
downstream activity.
In February, MDO and Mawarid
announced a JV for mineral
exploration on copper Blocks
1 and 2. During the year, Alara
engaged Mining & Process Solutions
to conduct test work at its facility
in the Australian Minerals Research
Centre. This work focused on leach
amenability testing of copper ore
samples from this and various other
copper blocks within Oman. Further
study is required to determine the
most economic options for copper
recovery.
Al Hadeetha Resources and
Mawarid Mining previously entered
a MOU to toll treat copper ore from
Al Hadeetha’s three exploration
licences. The parties were unable
effect the toll treatment agreement
without a mining licence (which has
now been issued to Al Hadeetha
Resources). After completing
its own mining operations,
Mawarid’s Lasail processing
plant was decommissioned and
put into care and maintenance.
Alara Resources Annual Report 2018
17
Projects overview
continued
Al Hadeetha Resources’ Mining Licence Award ceremony held at the Public Authority for Mining in Muscat Oman
Al Hadeetha’s feasibility
study was later completed,
underpinned by a proposed
1mpta processing plant and a
projected initial ten year mine
life. Opportunities for either one
of these two processing plants to
toll treat ore from other copper
blocks remain open.
Savannah Resources and its
local partners have copper
exploration licenses Blocks 4
and 5. Potential synergies exist
with Alara and its JV partners
holding copper Blocks 7 and 8.
After Al Hadeetha Resources
received its first copper mining
licence in June, offers and
expressions of interest were
received from various parties
interested to become equity
partners in Alara’s JV copper
projects. Discussions are
continuing to identify the best
strategic fit and value that each
prospective partner is able
to bring.
SAUDI ARABIA
The Company refers to its previous announcements regarding the
Khnaiguiyah Zinc Copper Project. In particular, dismissal of the case
commenced by Manajem before the Saudi Board of Grievances. Following
announcement of the dismissal, the ASX directed the Company to provide
details regarding an offer received from MetalsCorners Holding Company
(‘MCH’). MCH were keen to have the offer announced during the course of
the year. The Company is considering all options and will provide a further
update to shareholders once a material development occurs.
Alara invested a total of $30m developing the Khnaiguiyah Zinc-Copper
Project, including $23m on a definitive feasibility study which remains
with Alara.
Aside the feasibility study, an offer was received for one of the Company’s
subsidiaries (Alara Saudi Operations Pty Ltd). The ASX directed the Company
to provide details of this offer which the Company considers immaterial and
unlikely to proceed.
More importantly, the court dismissal opens new doors for development
of the Khnaiguiyah Zinc-Copper Project. These development pathways are
being pursued and will be further elaborated as details are confirmed.
18
Alara Resources Annual Report 2018
Board of Directors
James D Phipps
Non-Executive Chairman
Justin Richard
Managing Director & CEO
James D Phipps
Non-Executive Chairman of the Board
B.A. (Philosophy), J.D. (Law)
Justin Richard
Managing Director & CEO
MBA, LLB, FGIA, FCIS
Mr Phipps is a strategic advisor,
investor and lawyer with extensive
Middle East experience (30+
years, including 18+ years in
residence) across a variety of
industries (e.g., development,
commerce, franchising,
distribution, heavy industry,
infrastructure, communications,
sports entertainment, high tech,
investment, start ups, and mining).
In recent years, James served as
principal advisor to a prominent
member of the Saudi royal family,
providing strategic advice relative to
a worldwide portfolio of businesses,
properties and investments. From
May 2014 through May 2016, James
chaired Sheffield United Football
Club, the first “United” and one of
the first “association football” clubs
worldwide, as well as a founding
member of the English Premier
League. Sheffield United now
plays in the EFL’s Championship
division. James has experience in
organizational development and
corporate turnarounds and has
served in a chief executive role at
different companies in a turnaround
capacity. Of particular value to
the Company is the experience
James brings in these areas: legal,
strategic planning and development,
governance, and Middle Eastern
business operations.
Mr Richard is an accomplished
commercial manager and
corporate lawyer. He joined
Alara in 2011, and in 2013 took
up residence in the Middle East
as CEO of Alara’s international
joint venture businesses.
After being appointed Managing
Director in 2015, he lead the
Company through successful capital
raisings to complete a feasibility
study, maiden ore reserve and a
mining licence for the Al Hadeetha
Copper Project in Oman. He has
established key stakeholder
relationships for the Company as it
transitions to mine development and
production of copper concentrate.
Prior to joining Alara, Justin
worked with UGL Limited
(Resources Divisions), Bateman
Engineering, Minter Ellison Lawyers
(Construction, Engineering and
Infrastructure, Insurance &
Corporate Risk) and as Managing
Director of Irrigate Australia.
Mr Richard has a MBA from London
Business School, a law degree
from the University of Western
Australia and is a Fellow of the
Governance Institute and Institute
of Chartered Secretaries and
Administrators.
Alara Resources Annual Report 2018
19
Stephen Gethin
Company Secretary and Alternate
Director
Mr Gethin is a lawyer with over
20 years’ experience gained in
a national law firm and General
Counsel and Company Secretary
roles in various international ASX-
listed companies, and specialises
in corporate law, tax and resources.
Mr Gethin excels in structuring and
documenting complex transactions,
particularly where challenging tax
issues are involved. His “in-house”
experience has given him a deep
understanding of the practical
realities faced by business.
Mr Gethin has had legal oversight
of all stages of developing mining
operations from the greenfields
stage until tendering out mine
construction contracts. He has
provided advice and documentation
for resource and other projects
in Australia and, managing
local lawyers, in over 20 foreign
countries. Mr Gethin has acted for
various ASX-listed companies in
takeovers via on- and off-market
bid and scheme of arrangement.
Vikas Jain
Non-Executive Director
Atmavireshwar Sthapak
Executive Director
Stephen Gethin
Company Secretary and
Alternate Director
Vikas Jain
Non-Executive Director
MBA
Mr Jain holds an MBA obtained
in the USA and as a wealth of
experience encompassing around
15 years in the field of mineral
exploration and allied activities,
including open-pit mining.
Mr Jain is currently Managing
Director and CEO of the Indian
compnay South West Pinnacle
Exploration P/L, a company he
founded in 2006 and under his
leadership grew to become a leading
exploration company in India.
After starting in mineral exploration,
South West Pinnacle has since
added coal-bed methane
production, transportation,
geophysical logging and other
geological activities to its domain.
Atmavireshwar Sthapak
Executive Director
BASc, MTech (Applied Geology)
Mr Sthapak is a geologist
specialising in mineral resource
exploration and evaluation studies.
He joined Alara in 2011, making
valuable contributions to the
Company as an Exploration Manager
and a Study Manager based in
Muscat, including discovery of
large VMS copper mineralisation
extensions at the Washihi project
in Oman.
Prior to Alara, Mr Sthapak’s career
spanned 10 years with ACC / ACC-
CRA Ltd, and 10 years with Rio
Tinto (Australasia) where he was
awarded a Rio Tinto Discovery Award
in 2009. He has worked on world
class deposits, including Mt. Isa
type copper deposits in Australia,
and copper, gold and diamond mines
on four continents.
20
Alara Resources Annual Report 2018
Management Team
Justin Richard
Managing Director & CEO
Atmavireshwar Sthapak
Executive Director
Dinesh Aggarwal
Chief Financial Officer
Don Welty
Senior Commercial Officer
Don Welty
Senior Commercial Officer
B.Bus Admin, Masters in Management
R. Don Welty’s career has taken
him around the globe focusing on
foundational mining investments
which have a triple bottom line: good
for the country, shareholders and
the local community.
He is comfortable interacting at the
highest levels in the private sector
and government: focusing on mining
investment programs, with the
ability to convene, communicate
with and be the catalyst for change
to influence and advocate for new
mining opportunities. He believes
in creating Mining Public-Private
Partnerships and developing new
financial economic models and
investments that meet the needs of
the countries where the programs
are being created.
He has extensive experience as
an investment advisor, with more
than twenty years of professional
investment work experience in
the Middle East. Most recently he
helped establish the Investment
Commissions of Iraq and
Afghanistan.
Mr. Welty received a B.S. in
Management (with a focus on
finance) from Brigham Young
University and has a Masters in
Management from Westminster
College. He has been adjunct
professor at Brigham Young
University, Westminster College
and University of Tennessee
MBA Programs.
Dinesh Aggarwal
Chief Financial Officer
FCPA, CA, CMA, FTI, DipFS (Advanced)
Mr Aggarwal has over 20 years
of experience in Accounting,
Finance and Business
Management in top corporate
positions, both in Australia and
overseas, and is the Managing
Director of Fortuna Advisory
Group. Fortuna is an award-
winning, multi-disciplinary
practice with specialised
divisions in Tax & Business
Advisory, Legal Services,
Mortgage Broking and Financial
Planning.
Mr Aggarwal advises clients
in Australia and overseas on
tax matters and business
services, and advises the
Australian operations of
several multi-nationals. He
also handles tax disputes with
the ATO including appeals
to the AAT. He is the former
Chairman of the Public Practice
Committee of CPA Western
Australia and is currently a
member of the National Public
Practice Advisory Committee of
CPA Australia.
Named as one of Australia’s top
three SME Tax Advisers in 2015
by the Tax Institute, Mr Aggarwal
has also won the prestigious
CPA Australia 40 Under 40 Young
Business Leaders Award for
2012 and 2013. In 2016, he was
awarded the ISWA Personal
Excellence Award. In 2018
Fortuna is a national finalist
in the Australian Accounting
Awards for Best Business
Advisory Firm. The Fortuna
Group also has a philanthropic
arm - Fortuna Foundation.
Alara Resources Annual Report 2018
21
Venkatesan Ganesan
Corporate Financial Adviser
(MBA, CPA, ACA, ACS, CBV)
Contractor, joined Alara in
September 2017 Based in Dubai.
Mr Ganesan runs a boutique
advisory services firm in Dubai and
India. He has spent over 15 years in
a Big-4 financial advisory practice
and has advised a variety of industry
clients on transaction matters. He
also spent six years in an upstream
E&P business at the start of his
career. Mr Ganesan is currently
assisting Alara in optimising
development stage capital.
Tina Newbon
Office Manager
Adv. Dip. Accounting, Adv. Dip. Business
Administration
Mrs Newbon joined Alara in 2011
as Executive Assistant to the
CEO and has since been involved
in many aspects of the business
including office administration,
human resources, corporate affairs,
finance, leasing/relocation, ASX
requirements and IT management.
Mrs Newbon is a highly experienced
administrator with over 15 years of
administration, finance and project
experience including BGC Blokpave,
Shell Australia, WA Gas Networks
and BHP Billiton.
Rexin Kamilas
Finance and Administrative Manager
M.Com, Tally
Mr Kamilas is an experienced
administrator who has been
working for over eight years in
Oman. He joined Alara in 2011 as
an Administrative and Accounting
Assistant and has since been
involved in business procurement,
auditing, leasing, travel, insurance,
banking and payroll for the
company’s projects in both Saudi
Arabia and Oman.
Tina Newbon
Office Manager
Rexin Kamilas
Finance and Administrative
Manager
Venkatesan Ganesan
Corporate Financial
Adviser
22
Directors’ Report
Alara Resources Annual Report 2018
The Directors present their report on Alara Resources Limited (Company or Alara or AUQ) and the entities it controlled at the end of or during the financial
year ended 30 June 2018 (the Consolidated Entity).
REVIEW OF OPERATIONS
Al Hadeetha Copper-Gold Project
(Alara - 70%: Al Hadeetha Investments LLC – 30%, of Al Hadeetha Resources LLC (AHR))
In May 2018 a Mining License was granted for the Company’s Al Hadeetha Copper-Gold Project in Oman.
Oman
The Al Hadeetha feasibility study financial modelling was revised in June 2018 to take account of the fact that copper prices have increased >$1,000/t since
the feasibility study and more rapidly than previously forecast. The revised World Bank forecasts shows further rises as supply deficits open up. The Base
Case financial modelling shows robust returns as follows (figures in US dollars):
Forecast Revenue over 10.4 years:
Forecast EBITDA over 10.4 years:
Forecast Free Cash Flow over 10.4 years:
Project NPV:
Forecast IRR:
$561 million
$252 million
$155 million
$90 million
34%
The Base Case used a flat copper price over life-of-mine of US$7,000/t, the LME average Cash Settlement Price for February 2018. The gold price is
assumed as US$1300/oz (real).
A summary of case scenarios and associated financial returns are summarised in Tables 1 and 2 below.
Table 1. Copper and Gold prices used for Base Case, Market Case and High Case
Case Scenario
Base Case
Market Case
High Case
Based on flat Cu price equal to LME average Cash Settlement Price for
February 2018
Based on World Bank price forecast for 2018 to 20251 (excluding forecast
increase post 2025 to 7,000)
Based on investment bank projections and copper futures pricing2
Table 2. Financial Summary of Base Case, Market Case and High Case.
Cu
US$/t
7,000 for Life of Mine
Minimum 6,800
Maximum 6,900
7,050 rising to 8000
Total Revenue
US$ millions
Total Opex
US$ millions
EBITDA
US$ millions
NPV*
US$ millions
Case Scenario
Base Case
Market Case
561
553
275
275
252
244
High Case
*NPV is based on a discount rate of 6% calculated from indicative WACC and 80:20 debt to equity ratio%
309
622
275
90
85
120
Au
US$/oz
1,300
1,300
1,300
IRR %
34
32
40
Project Finance
The Company is working with financiers to finalise project finance and approval procedures are progressing steadily. Due diligence has been completed.
Financing provisions are expected to remain in line with indicative terms received previously.
Project Contracts
In June 2018 the Company received an advance payment under an offtake agreement allowing early works to proceed prior to finalisation of bank finance and
execution of the EPC contracts.
Early works are underway and contract terms for engineering, procurement and construction have been finalised and are ready for execution. Project
Management Consultants have also been appointed. The Company has also received separate quotations for Engineering and Procurement, and
Construction. Engaging directly with local construction contractors offered the added benefit of accessing an already established in-country labour force and
helps meet Omani content requirements.
Construction of the 1 mtpa copper processing plant is scheduled for completion by year end 2019. Exploration programs for Al Hadeetha Resources’ adjoining
exploration licence ‘Mullaq’ and nearby ‘Al Ajal’ are also continuing.
1
2
Released 24 April 2018: http://pubdocs.worldbank.org/en/458391524495555669/CMO-April-2018-Forecasts.pdf
www.metalbulletin.com/Article/3785039/FORECAST-Copper-price-to-hit-8000-per-tonne-in-2018-Goldman.html. Copper contracts traded on the Shanghai Futures
Exchange at approximately 51,860 yuan ($8,003) per tonne as at 20 June 2018.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 2
Alara Resources Annual Report 2018
Daris Copper-Gold Project
(Alara - 50% with option to increase to 70%: Al Tamman Trading Establishment LLC – 50%, of Daris Resources LLC (DRL))
23
Oman
The Daris project comprises two high grade deposits within the 587km² exploration licence, which includes two mining licence applications covering 4.5km².
The project fits well with a ‘hub and spoke’ model, which provides for processing of Daris ore at the Al Hadeetha copper concentration plant to be built 100km
to the south. However, new leach processing methods are also being investigated which could allow Daris to operate as a stand-alone project. The
processing method has been tested on deposits in Australia and South America and yielded very high recoveries of metal from both low grade copper oxide
and sulphide ores.
Awtad Copper-Gold Project
(Alara right to subscribe for 10% initially with subsequent earn in up to 70% +, existing local shareholders = balance of shareholding of Awtad Copper LLC)
Oman
The Awtad Project comprises an area of ~497 km² (Block 8) and is located immediately adjacent to the Block 7 (Daris Copper-Gold Project). Alara has a
right to an initial 10% interest (increasing to 50-70%+) in the concession owner, Awtad Copper LLC.
Exploration previously undertaken on the project include:
86 line kilometres of airborne VTEM, 14 line kilometres of ground IP, 169 line kilometres of ground magnetics and 202 line kilometres of high
resolution ground magnetics;
76 RAB drill holes totalling 1,747m and 11 core drill holes totalling 299m;
Drilling results (including over the Al Mansur Prospect) were low grade in general and inconclusive.
Khnaiguiyah Zinc-Copper Project
Saudi Arabia
The Khnaiguiyah project includes the development and operation of an open-cut zinc-copper mine and associated infrastructure over an approximate 13-year
mine life.
Alara Resources has invested over $30m into this project, including:
over $3 million in payments to its former joint venture partners for transfer of the Mining Licence to the joint venture company; and
over $23 million to produce a definitive feasibility study with Proved and Probable JORC Reserves of 26.1Mt at 3.3% Zn and 0.24% Cu and a Base
Case Project NPV of $172 million at a zinc price of US$2,315/t3.
The project reached an impasse after the former licence holder, United Arabian Mining Company LLC, wrote to the Deputy Minister for Mineral Resources
asking to halt transfer of the mining licence to the JV company, as required under the JV agreement.
In December 2015, Alara announced it had been advised of the cancellation of the Khnaiguiyah Mining Licence. Alara funded and is now in the unique
position of holding the only bankable feasibility study for the project, and remains open to any reasonable solution for advancing the project into production.
The Company has communicated with the Council of Economic Development Affairs’ Priority Project Office (PPO) in respect to this Project. These
communications were later extended to include representatives from United Arabian Mining Company and Metals Corners Holdings. The PPO is a
government initiative empowered by HRH Mohammed Bin Salman, Crown Prince of Saudi Arabia in his capacity as President of Council for Economic and
Development Affairs. The PPO was established to assist selected private sector projects that face implementation difficulties and provide them with needed
support, as an authorised escalation entity, to obtain fast-track government approvals.
South West Pinnacle JV
Oman
In March 2018 the Company executed a Heads of Agreement with South West Pinnacle Exploration Limited (SWPE) to form a new joint venture providing
drilling and mineral exploration services in Oman, to focus on Oman’s burgeoning mineral exploration sector. Alara and SWPE will hold equal shares in the JV
entity. Final documents and related transactions are subject to regulatory requirements of Australia, India and Oman.
Alara and SWPE commenced working together in Oman in 2012. This business relationship continued to develop to the point where the two companies
decided to create the joint venture to better enable them to pursue opportunities in Oman.
The joint venture will engage in drilling, exploration and mine development activities, and offer these services to other mining / exploration companies in Oman
and the GCC, including Alara’s other joint ventures.
[The remainder of this page is intentionally blank]
3
Compared to the LME price of >$3,000/t as at 28 August 2018 and the High Case of US$2,373/t (see page 21 of the 2013 Annual Report).
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 3
Directors’ Report continued 24
Alara Resources Annual Report 2018
Directors’ Report continued
Corporate Information
Alara is a company limited by shares that is incorporated in Western Australia.
Cash Position
The Company’s cash position at 30 June 2018 was A$3.3 million (30 June 2017: A$1.9 million).
In December 2017, a total of 31,500,000 shares were issued to Al Hadeetha Investments LLC (AHI) under a placement at an issue price of $0.03 (3 cents)
per share, raising $945,000. AHI is the joint venture partner with the company’s subsidiary Alara Oman Operations Pty Ltd in the Al Hadeetha Copper-Gold
project in Oman.
Company Officer Changes
Effective 1 May 2018, Fortuna Advisory Group took over the outsourced company secretarial and accounting services for the Company from Corporate Board
Services (CBS).
On 1 May 2018 Ian Gregory, of CBS, resigned as a Company Secretary. Stephen Gethin was appointed alternate Director to Mr. Justin Richard and
Company Secretary on 1 May 2018. The Company acknowledged the valued contributions made by Mr Gregory and CBS since May 2017.
Principal Activities
The principal activities of entities within the Consolidated Entity during the year were the exploration, evaluation and development of mineral exploration
licenses in Oman, including the conversion of the “Washihi” exploration license to a mining licence.
Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of the Consolidated Entity save as otherwise disclosed in this Directors’ Report or the financial
statements and notes thereto.
Dividends
No dividends have been paid or declared during the financial year.
[The remainder of this page is intentionally blank]
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 4
Directors’ Report continued Alara Resources Annual Report 2018
25
Directors’ Report continued
Operating Results
Consolidated
Total revenue
Total expenses
Profit/Loss before tax
Income tax benefit
Profit/Loss after tax
Loss per Share
Consolidated
Basic and Diluted profit/(loss) per share (cents)
Weighted average number of ordinary shares outstanding during the year used in the
calculation of basic loss per share
Cash Flows
Consolidated
Net cash flow used in operating activities
Net cash flow from investing activities
Net cash flow provided by financing activities
Net change in cash held
Cash held at year end
Financial Position
Outlined below is the Consolidated Entity’s Financial Position and prior year comparison.
Consolidated Entity
Cash
Trade and other receivables
Exploration and evaluation
Other assets
Total assets
Trade and other payables
Unearned Income
Financial liabilities
Provisions
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Parent interest
Non-controlling interest
Total equity
2018
$
26,817
(750,603)
(723,786)
-
(723,786)
2018
(0.011)
2017
$
37,753
(498,527)
(460,774)
55,840
(404,934)
2017
(0.04)
614,087,452
584,929,630
2018
$
1,294,000
(1,139,922)
1,296,159
1,450,237
3,346,943
2018
$
3,346,943
12,896
9,415,666
70,418
2017
$
(556,704)
(812,720)
1,900,505
531,081
1,885,556
2017
$
1,885,556
72,299
7,996,698
63,854
12,845,923
10,018,407
66,850
1,624,382
583,756
73,265
2,348,253
115,368
-
215,939
100,676
431,983
10,497,670
9,586,424
66,107,405
906,345
(54,259,832)
12,753,918
(2,256,248)
65,169,992
208,726
(53,568,320)
11,810,398
(2,223,974)
10,497,670
9,586,424
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 5
Directors’ Report continued 26
Alara Resources Annual Report 2018
Securities in the Company
Issued Capital
Fully paid ordinary shares, listed options and unlisted options on issue in the Company as at the date of this report are as follows:
Fully paid ordinary shares
quoted on ASX
629,017,589
629,017,589
Total
Listed
options
–
–
Unlisted
options
3,000,000
3,000,000
Total
632,017,589
632,017,589
Unlisted Options
During and subsequent to the end of the financial year, no unlisted options were issued.
Likely Developments and Expected Results
The Consolidated Entity intends to construct mining infrastructure for its Al Hadeetha Copper Gold Project, with the expected construction period being 15
months. Thereafter the Company intends to commence production and sale of copper and gold from the Al Hadeetha mine. Financial projections for the Al
Hadeetha Project are set out on page 23 of this Report. The Company intends to continue exploration, evaluation and development activities in relation to
its other mineral exploration licences in Oman in future years. The results of these activities depend on a range of technical and economic factors and
also industry, geographic and company specific issues.
Environmental Regulation and Performance
The Consolidated Entity holds licences and abides by Acts and Regulations issued by the relevant mining and environmental protection authorities of the
countries in which the Consolidated Entity operates. These licences, Acts and Regulations specify limits and regulate the management of discharges to the
air, surface waters and groundwater associated with exploration and mining operations as well as the storage and use of hazardous materials. There have
been no significant breaches of the Consolidated Entity’s licence conditions.
[The remainder of this page is intentionally blank]
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 6
Directors’ Report continued Alara Resources Annual Report 2018
27
Board of Directors
The names and details of the directors of the Company in office during the financial year and until the date of this report are as follows.
Names, qualifications, experience and special responsibilities of current Directors
James D. Phipps
BA (Philosophy), JD (Law)
Appointed
Previously Alternate Director to HRH Prince Abdullah (from 28 October 2013 to 1 November 2014)
Appointed
Chairman
2015;
July
31
Non-Executive Chairman
2014;
Director
November
1
industries (e.g. development, commerce,
Experience
James Phipps is a strategic advisor, investor and lawyer with extensive Middle East experience (30+ years, including 18+ years in residence) across a variety
infrastructure, communications, sports entertainment, high tech,
of
investment, start-ups and mining). In recent years, James served as principal advisor to a prominent member of the Saudi Royal Family, providing strategic
advice relative to a worldwide portfolio of businesses, properties and investments. From May 2014 through May 2016, James chaired Sheffield United
Football Club, the first “United” and one of the first “association football” clubs worldwide, as well as a founding member of the English Premier League.
Sheffield United now plays in the EFL’s Championship division. James has experience in organisational development and corporate turnarounds and has
served in a chief executive role at different companies in a turnaround capacity. Of particular value to the Company is the experience James brings in these
areas: legal, strategic planning and development, governance, and Middle Eastern business operations.
franchising, distribution, heavy industry,
Special Responsibilities
Chairman of the Remuneration and Nomination Committee and Member of the Audit Committee.
Other Directorships in Listed Companies in Past 3 Years
Saudi Paper Manufacturing Company (Saudi Stock Exchange - “Tadawul”: Code 2300) – November 2011 to June 2016.
Justin J Richard
MBA, LLB, GradDipACG, FGIA, FCIS
Managing Director
Appointed 16 June 2015
Experience
Justin Richard is a corporate lawyer and accomplished business manager who joined Alara as Legal and Commercial manager in 2011. In 2013, he took up
residence in the Middle East as CEO of Alara’s international joint venture companies.
After being appointed Managing Director in 2015, Mr Richard lead the company through capital raisings to complete a feasibility study, a maiden ore reserve
statement, and a mining licence for the Al Hadeetha Copper Gold project in Oman. He has established key business relationships for the Company as it
expands its scope of operation from mineral exploration to mine development and production of copper concentrate. Prior to joining Alara, Mr Richard worked
with UGL Limited (Resources Division), Bateman Engineering and Minter Ellison Lawyers (Insurance & Corporate Risk, and Construction, Engineering and
Infrastructure). He has a MBA from London Business School, a law degree from the University of Western Australia and is a Fellow of the Governance
Institute.
Alternate Director
On 1 May 2018, Justin Richard appointed Stephen Gethin as his Alternate Director4. Mr Gethin’s experience and qualifications are set out below.
Other Directorships in Listed Companies in Past 3 Years
None
Atmavireshwar Sthapak
Bachelor of Applied Science and Master of Technology, Applied Geology
Executive Director
Appointed 22 September 2015 as Non-Executive Director
Appointed 3 February 2016 as Executive Director
Experience
Atmavireshwar Sthapak is a geologist specializing in mineral resource exploration and evaluation studies. He joined Alara in 2011, making valuable
contributions to the Company as an Exploration Manager and a Study Manager based in Muscat; including discovery of large VMS copper mineralisation
extensions at the Washihi project in Oman and recent resource upgrade at Washihi. Prior to Alara, his career spanned 10 years with ACC / ACC-CRA Ltd,
and 10 years with Rio Tinto (Australasia) where he was awarded a Rio Tinto Discovery Award in 2009. He has worked on world class deposits; including Mt.
Isa type copper deposits in Australia, and copper, gold and diamond mines on four continents.
Special Responsibilities
Member of the Audit Committee and Remuneration and Nomination Committee.
Other Directorships in Listed Companies in Past 3 Years
None
4
Pursuant to Clause 10.1 of the Company’s Constitution.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 7
Directors’ Report continued 28
Alara Resources Annual Report 2018
Vikas Jain
MBA
Non-Executive Director
Appointed 6 April 2016
Experience
Vikas Jain holds an MBA obtained in the USA and has a vast experience of around 17 years in the field of mineral exploration and allied activities. He is
currently Managing Director and CEO of the Indian Company South West Pinnacle Exploration Limited, founded by him in 2006. Under his leadership and
able guidance, this company has grown manifold and at present is a premier exploration company in India. The company started primarily as a mineral
logging,
exploration company and progressively added Coal Bed Methane (CBM) exploration and production, aquifer mapping, HDD, geophysical
transportation and other geological activities into its domain. He also has wide experience in open cast mining of various minerals and allied activities through
his earlier stint with other companies as well as his current involvement in other family run businesses and interests.
Special Responsibilities
Chairman of the Audit Committee and Member of the Remuneration and Nomination Committee.
Other Directorships in Listed Companies in Past 3 Years
•
South West Pinnacle Exploration Limited, listed on the National Stock Exchange, Emerge Platform in February 2018, India
Stephen Gethin
Barrister and Solicitor of the Supreme Court of Western Australia and of the High Court of Australia
Alternate Director to Justin Richard
Appointed 1 May 2018
Experience
Stephen Gethin is a highly regarded Director and Company Secretary with over 23 years’ experience in the provision of corporate legal advice and
documentation and over 14 years’ experience in the provision of ASX-listed secretarial services in a range of industries, including resources, technology and
investment. Prior to founding a private legal practice in 2013, he served as General Counsel and Company Secretary of Strike Resources Limited (ASX:SRK)
and before that held the same roles at ERG Limited (ASX:ERG). Mr Gethin also provides legal advice for a number of other ASX listed and private
companies.
Other Directorships in Listed Companies in Past 3 Years
Nil
Retired Directors
All the directors held office during the year and up to the date of this report.
Company Secretary
Stephen Gethin
Barrister and Solicitor of the Supreme Court of Western Australia and of the High Court of Australia
Company Secretary
Appointed 1 May 2018
Experience
Refer to Mr Gethin’s details above.
Retired Company Secretary
The following Company Secretary resigned during the financial year:
Ian Gregory – 30 June 2015 to 30 April 2018.
Directors’ Interests in Shares and Options
As at the date of this report, the relevant interests of the Directors in shares and options held in the Company are:
James Phipps
Justin Richard
Atmavireshwar Sthapak
Vikas Jain
Stephen Gethin
Fully Paid Ordinary Shares
–
31,757,037
1,951,4515
34,285,2306
–
Options
–
–
–
–
–
5
6
Refer Alara’s 28 August 2017 ASX Announcement: Appendix 3Y.
Refer Alara’s 16 May 2017 ASX Announcement: Appendix 3Y.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 8
Directors’ Report continued Alara Resources Annual Report 2018
29
Directors’ Meetings
The number of meetings and resolutions of directors (including meetings of committees of directors) held during the year and the number of meetings (or
resolutions) attended by each director were as follows:
Name of Director
Appointment / Resignation
Appointed 1 November 2014;
appointed member of
Audit Committee and
Remuneration Committee
30 June 2016
Appointed 16 June 2015
Appointed 22 September 2015
Appointed 6 April 2016
Appointed 1 May 2018
James Phipps
Justin Richard
Atmavireshwar
Sthapak
Vikas Jain
Stephen Gethin7
(Alternate Director to Justin
Richard)
Audit Committee
Board
Audit Committee
Meetings
Attended
Maximum
Possible
Meetings
Meetings
Attended
Maximum
Possible
Meetings
Remuneration and
Nomination Committee
Maximum
Possible
Meetings
Meetings
Attended
12
11
11
11
–
12
12
12
12
–
4
3
3
4
4
4
1
1
-
1
1
1
-
1
The Audit Committee currently comprises Non-Executive Directors, Vikas Jain (as Chairman) (since 6 April 2016), James Phipps (since 30 June 2015) and
Atmavireshwar Sthapak (since 28 September 2016).
The Audit Committee has a formal charter to prescribe its objectives, duties and responsibilities, access and authority, composition, membership requirements
of the Committee and other administrative matters. Its function includes reviewing and approving the audited annual and reviewed half-yearly financial reports,
ensuring a risk management framework is in place, reviewing and monitoring compliance issues, reviewing reports from management and matters related to
the external auditor. The Audit Committee Charter may be viewed and downloaded from the Company’s website.
[The remainder of this page is intentionally blank]
7
Mr Gethin attended all Board meetings since his appointment in his capacity as Company Secretary but not in his capacity as Alternate Director.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 9
Directors’ Report continued 30
Alara Resources Annual Report 2018
REMUNERATION REPORT
The following information in the Remuneration Report has been audited. This Remuneration Report details the nature and amount of remuneration for each
Director and Company Executive (being a company secretary or senior managers with authority and responsibility for planning, directing and controlling the
major activities of the Company or Consolidated entity, directly or indirectly) (Key Management Personnel or KMP) of the Consolidated Entity in respect of
the financial year ended 30 June 2018.
Key Management Personnel
Directors
James Phipps
Justin Richard
Atmavireshwar Sthapak
Vikas Jain
Stephen Gethin
Executives
Stephen Gethin
Ian Gregory
Non-Executive Director (appointed 1 November 2014); Non-Executive Chairman (from 31 July 2015);
Alternate Director to HRH Prince Abdullah (until 1 November 2014)
Managing Director (appointed 16 June 2015); Country Manager, Saudi Arabia and Oman
Executive Director (first appointed 22 September 2015)
Non-Executive Director (appointed 31 March 2016)
Alternate Director to Justin Richard (appointed 1 May 2018)
Company Secretary (appointed 1 May 2018)
Company Secretary (appointed 30 March 2015, resigned 30 April 2018)
Remuneration and Nomination Committee
The Remuneration and Nomination Committee currently comprises Non-Executive Directors, James Phipps (member since 30 June 2015 and Chairman
since 31 July 2015) and Vikas Jain (since 6 April 2016) and Atmavireshwar Sthapak (since 28 June 2016).
The Remuneration and Nomination Committee has a formal charter to prescribe its purpose, key responsibilities, composition, membership requirements,
powers and other administrative matters. The Committee has a remuneration function (with key responsibilities to make recommendations to the Board on
policy governing the remuneration benefits of the Managing Director and Executive Directors, including equity-based remuneration and assist the Managing
Director to determine the remuneration benefits of senior management and advise on those determinations) and a nomination function (with key
responsibilities to make recommendations to the Board as to various Board matters including the necessary and desirable qualifications, experience and
competencies of Directors and the extent to which these are reflected in the Board, the appointment of the Chairman and Managing Director, the development
and review of Board succession plans and addressing Board diversity). The Remuneration and Nomination Committee Charter may be viewed and
downloaded from the Company’s website.
Remuneration Policy
The Board (with guidance from the Remuneration and Nomination Committee) determines the remuneration structure of all Key Management Personnel
having regard to the Consolidated Entity’s strategic objectives, scale and scope of operations and other relevant
including experience and
qualifications, length of service, market practice, the duties and accountability of Key Management Personnel and the objective of maintaining a balanced
Board which has appropriate expertise and experience, at a reasonable cost to the Company. The Board recognises that the performance of the Company
depends upon the quality of its Directors and Executives. To achieve its financial and operating objectives, the Company must attract, motivate and retain
highly skilled Directors and Executives.
factors,
The Company embodies the following principles in its remuneration framework:
Provide competitive rewards to attract and retain high calibre Executives.
Structure remuneration at a level that reflects the Executive’s duties and accountabilities and is competitive.
Remuneration Structure
The structure of non-executive director and executive director remuneration is separate and distinct.
Director Remuneration
Objective
The Board seeks to set aggregate remuneration (for directors) 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 shall be determined from time to
time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was at
the General Meeting held on 26 May 2011 where shareholders approved an aggregate remuneration of $275,000 per year. The amount of aggregate
remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers
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 and for sitting on relevant board committees. The fee size is commensurate with the workload and responsibilities
undertaken.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 10
Directors’ Report continued Alara Resources Annual Report 2018
31
Managing Director and Senior Executive Remuneration
Objective
The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and
so as to ensure total remuneration is competitive by market standards. Formal employment contracts are entered into with the Managing Director and senior
executives. Details of these contracts are outlined later in this report.
Consequences of Company Performance on Shareholder Wealth
In considering the Company’s performance and benefits for shareholder wealth, the Board have regard to the following information in relation to the current
financial year and the previous four financial years:
Basic earnings/(loss) per share – cents
Dividend – cents per share
Net Profit/(Loss) attributable to members
Market Capitalisation
Fixed Remuneration
2018
2017
2016
2015
2014
(0.11)
-
(691,512)
$18.2m
(0.04)
–
(7.42)
–
(0.67)
–
(258,526)
(30,595,088)
(1,661,238)
$8.4m
$14m
$4m
0.30
–
732,003
$12.1m
During the financial year,
superannuation contributions, as detailed below (Details of Remuneration Provided to Key Management Personnel).
the Key Management Personnel of
the Company are paid a fixed base salary/fee per annum plus applicable employer
Performance Related Benefits/Variable Remuneration
Performance related benefits/variable remuneration payable to Key Management Personnel is disclosed in the table Details of Remuneration Provided to Key
Management Personnel. Justin Richard was paid expat allowances, including house, school, travel and medical insurance and Atmavireshwar Sthapak was
paid allowances including house, travel and medical insurance.
Special Exertions and Reimbursements
Pursuant to the Company’s Constitution, each Director is entitled to receive:
Payment for the performance of extra services or the undertaking of special exertions at the request of the Board and for the purposes of the
Company.
Payment for reimbursement of all reasonable expenses (including traveling and accommodation expenses) incurred by a Director for the purpose of
attending meetings of the Company or the Board, on the business of the Company, or in carrying out duties as a Director.
Post-Employment Benefits
Other than employer contributions to nominated complying superannuation funds or gratuity of Key Management Personnel (where applicable) and
entitlements to accrued unused annual and long service leave (where applicable), the Company does not presently provide retirement benefits to Key
Management Personnel.
The Company notes that shareholder approval is required where a Company proposes to make a “termination payment” (for example, a payment in lieu of
notice, a payment for a post-employment restraint and payments made as a result of the automatic or accelerated vesting of share based payments) in
excess of one year’s “base salary” (defined as the average base salary over the previous 3 years) to a director or any person who holds a managerial or
executive office.
Long-Term Benefits
Other than early termination benefits disclosed in ‘Employment Contracts’ below, Key Management Personnel have no right to termination payments save for
payment of accrued unused annual and long service and/or end of service leave (where applicable).
[The remainder of this page is intentionally blank]
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 11
Directors’ Report continued 32
Alara Resources Annual Report 2018
Details of Remuneration Provided to Key Management Personnel
Short-term benefits
Cash payments
Post-employment
benefits
Other long-
term benefits
Equity
based
benefits
At risk
STI
Options
related
Salary,
and fees
Allo-
wances(i)
Cash
Bonus
Non-
cash(ii)
Fixed
Other(iii)
Super-
annuation
Termi-
nation
Other Options
Total
Key Management
Person
Perfor-
mance
based
2018
%
%
%
%
$
$
Executive Directors:
Justin Richard
Atmavireshwar
Sthapak
–
–
100%
100%
Non-Executive Directors:
James Phipps
Vikas Jain
Stephen Gethin(v)
–
–
–
100%
100%
–
Company Secretary:
Stephen Gethin(iv)
Ian Gregory(v)
–
–
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
282,150
168,797
151,104
25,908
75,000
50,000
–
7,110
110,220
–
–
–
–
–
$
–
–
–
–
–
–
–
$
$
22,652
64,102
12,035
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
$
-
-
–
–
–
–
–
$
–
–
–
–
–
$
–
–
–
–
–
–
–
$
537,701
189,047
75,000
50,000
–
7,110
110,220
Notes:
(i)
Allowances is based on the executive agreement and may include company car allowance,
rent allowance and security bond, and school allowance received from subsidiaries and
related joint venture entities.
(iii) Other short-term benefits consist of exchange gain/(loss) due to foreign currency translation
from Oman Riyal to Australia Dollars to Australian Dollars on Mr Richard’s salary.
(iv) Appointed 1 May 2018. Remuneration, in his capacity as Company Secretary, paid to Fortuna
(ii) Non-cash benefits include net leave and/or end of service gratuity accrued or paid pursuant to
Advisory Group.
relevant labour laws.
(v) Resigned on 30 April 2018, remuneration paid to Corporate Board Services.
Short-term benefits
Cash payments
Post-employment
benefits
Other
long-
term
benefits
Equity
based
benefits
Total
End of
Servic
e(iv) /
Termi-
nation
Other Options
Salary,
and fees
Allo-
wances(i)
Cash
Bonus
Non-
cash(ii) Other(iii)
Super-
annuation
$
$
282,150
148,341
205,383
24,723
75,000
50,000
-
113,655
–
–
–
–
–
$
–
–
–
–
–
–
–
$
$
$
$
17,695
3,633
78,637
–
– 11,484
6,179
–
–
–
–
–
–
–
–
–
–
–
-
–
–
–
–
-
–
–
–
–
$
-
–
–
–
–
–
–
$
–
–
–
–
–
–
–
$
595,349
182,876
75,000
50,000
-
113,655
Key Management Person
2017
Perfor-
mance
based
At risk
STI
Fixed
%
%
Executive Directors:
%
–
–
Justin Richard
Atmavireshwar Sthapak(v)
-
-
100%
100%
James Phipps
Vikas Jain(vi)
Ian Gregory(vii)
Ian Gregory(vii)
Elizabeth Hunt(viii)
Notes:
Non-Executive Directors:
–
–
–
100%
100%
100%
Company Secretary:
–
–
100%
100%
–
–
–
–
–
Option
s
related
%
–
–
–
–
–
–
–
(i)
Allowances are based on the executive agreement and may include company car allowance,
rent allowance and security bond, and school allowance received from subsidiaries and
related joint venture entities.
(ii) Non-cash benefits include net annual leave expensed but not paid during the year.
(iii) Other short-term benefits consist of exchange gain/(loss) due to foreign
(iv) Under Omani labour law, an End of Service Gratuity is payable upon termination of employment.
(v) Appointed 2 September 2015 with remuneration and allowances commencing January 2016.
(vi) Appointed 6 April 2016
(vii) Appointed 30 June 2015, remuneration paid to Corporate Board Services.
(viii) Appointed 31 August 2015, remuneration paid to Mining Corporate Pty Ltd.
currency translation from Oman Riyal to Australia Dollars and Saudi Riyal
to Australian Dollars on Mr Richard’s salary.
Equity Based Benefits
The Company has not provided any equity based benefits (e.g. grant of shares or options) to Key Management Personnel during the financial year.
No shares were issued as a result of the exercise of options held by Key Management Personnel during the financial year.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 12
Directors’ Report continued Alara Resources Annual Report 2018
33
Options Lapsed During the Year
During and subsequent to the end of the financial year, no listed or unlisted options lapsed without being exercised.
Details of Shares Held by Key Management Personnel
Ordinary Fully Paid Shares
Balance at
1 July 2017
Balance at
appointment
2018
Name of Director/KMP
Justin Richard
Atmavireshwar Sthapak(ii)
James Phipps
Vikas Jain
Ian Gregory(iii)
Stephen Gethin(iv)
Notes:
(i) Includes shares held / acquired by Mr Richard’s spouse. Mr Richard submitted a request for trading approval to the Company on 2 occasions during the period.
(ii) Mr Sthapak submitted a request for trading approval to the Company on 1 occasion during the relevant period.
2,612,489
1,051,451
–
–
–
–
30,757,037
900,000
–
34,285,230
–
Balance at
cessation
(iii) Resigned 30 April 2018.
Net change
–
–
Balance at
30 June 2018
33,369,526(i)
1,951,451
–
34,285,230
-
(iv) Appointed 1 May 2018.
2017
Ordinary Fully Paid Shares
Balance at
1 July 2016
Balance at
appointment
Net change
Balance at
cessation
Balance at
30 June 2017
Name of Director/KMP
Justin Richard
Atmavireshwar Sthapak(ii)
James Phipps
Vikas Jain
Ian Gregory(iii)
Elizabeth Hunt(iv)
Notes:
(i) Includes shares held by Mr Richard’s spouse. Mr Richard submitted a request for trading approval to the Company on 3 occasions during the relevant period. (ii) Mr Sthapak submitted
a request for trading approval to the Company on 2 occasions during the relevant period. (iii) Resigned 30 April 2018 (iv) Resigned 31 March 2017
20,500,000
–
–
30,000,000
–
–
10,257,037
900,000
–
4,285,230
–
–
30,757,037(i)
900,000
–
34,285,230
–
–
The following Key Management Personnel retired during the 2018 year with balances at cessation:
Ian Gregory – 30 April 2017: Nil shares
[The remainder of this page is intentionally blank]
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 13
Directors’ Report continued 34
Alara Resources Annual Report 2018
Details of Options Held By Key Management Personnel
2018
Granted
–
–
Balance at
1 July 2017
–
–
Name of
Director/KMP
Justin Richard
Atmavireshwar
Sthapak
James Phipps
Vikas Jain
Stephen Gethin(i)
Ian Gregory(ii)
Notes: (ii) Appointed 1 May 2018. (ii) Resigned 30 April 2018.
–
–
–
–
–
–
–
–
Exercised
–
–
Acquired
–
–
Lapsed /
Cancelled
–
–
Balance at
Commencement/
Cessation
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at
30 June
2018
–
–
–
–
–
Granted
and
vested
during
year
–
–
–
–
–
–
Vested and
exercisable
at 30 June
2018
–
–
–
–
–
–
Balance
at
30 June
2017
Granted
and
vested
during
year
Vested and
exercisable
at 30 June
2017
Granted
Exercised
Acquired
Lapsed /
Cancelled
Balance at
Cessation
2017
Name of
Director/KMP
Justin Richard
Atmavireshwar
Sthapak
James Phipps
Balance at
1 July 2016
20,000,000
–
–
–
–
–
4,250,000
–
–
30,000,000
Vikas Jain
Ian Gregory(i)
Elizabeth Hunt(ii)
Notes: (i) Resigned 30 April 2018. (i) Appointed 6 April 2016 Resigned 31 March 2017.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(15,750,000)
–
–
(30,000,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Employment Contracts
(a)
Managing Director/CEO – Justin Richard
Justin Richard was the Company’s Legal & Commercial Manager since August 2011 and Alara’s Country Manager
for Saudi Arabia since November 2012
and Oman since December 2013. He was appointed Managing Director on 16 June 2015. The terms of his employment contract were carried over from his
previous agreement contract with no increase in salary or allowance, the material terms of which are as follows:
One year term with annual base salary of A$282,150 (subject to adjustments for exchange rate variations* for salaries paid in Saudi Arabian Riyals
and Omani Rials);
Expatriate allowances (including housing, school and travel) totalling approximately A$175,000 per annum (subject to adjustments for exchange rate
variations*);
Provision of medical insurance cover;
Standard annual leave (20 days) and personal/sick leave (10 days paid) entitlements plus any additional entitlements prescribed under relevant
Labour Law;
60 days long service leave after 6 years of service and 5 days long service leave in respect of each year of service thereafter;
Compulsory statutory ‘end of service’ payments due under Saudi Arabian / Omani Law; and
One month’s notice of termination within first six months, subject to repatriation provisions which total approximately three months remuneration.
*Exchange rate variations based on rates prevailing at the time the expatriate assignments commenced.
(b)
Technical Director – Atmavireshwar Sthapak
Atmavireshwar Sthapak was appointed Non-Executive Director on 22 September 2015 and subsequently appointed as Executive Director on 3 February
2016. The material terms of his contract are as follows8:
An annual base salary of OMR 43,200 per annum;
Use of a company car;
Provision of medical insurance cover;
Allowances totalling OMR 7,750 per annum;
Compulsory statutory ‘end of service’ payments due under Oman Labour Law;
Standard annual leave (20 days) and personal/sick leave (10 days paid) entitlements plus any additional entitlements prescribed under Oman Labour
Law;
Separate bonus totalling up to OMR 2000 paid in 2018; and
Either party may terminate this agreement by providing one months’ notice.
8
Refer Alara’s 3 February 2016 ASX Announcement: Appointment of Executive Director
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 14
Directors’ Report continued Alara Resources Annual Report 2018
35
(c)
Other Executives
Details of the material terms of formal employment/consultancy agreements (as the case may be) between the Company and other Key Management
Personnel during the period are as follows:
Key Management
Personnel and
Position(s) Held
Ian Gregory
Alternate Director and
Company Secretary
Stephen Gethin
Alternate Director and
Company Secretary
Relevant Date(s)
Base Salary/Fees per annum
Other Terms
30 June 2015
(commencement date)
30 April 2018
(resignation date)
1 May 2018
(commencement date)
$110,220 per annum (including accounting services)
payable to Corporate Board Services Pty Ltd, to which
Ian Gregory is a consultant.
Notice period 1 month.
One year fixed-term contract
expiring 30 April 2019.
$42,660 plus GST per annum. (The Company pays
Fortuna Advisory group $110,400 as a combined
amount for Company Secretarial and Chief Financial
Officer services. Mr Gethin is a consultant to Fortuna
Advisory Group through Fortuna Legal Pty Ltd, of
which he is a director. Of the fee annual received by
Fortuna Advisory Group, it pays Fortuna Legal
$42,660).
Other Benefits Provided to Key Management Personnel
No Key Management Personnel has during or since the end of the financial year, received or become entitled to receive a benefit, other than a remuneration
benefit as disclosed above, by reason of a contract made by the Company or a related entity with the Director or with a firm of which he is a member, or with a
Company in which he has a substantial interest. There were no loans to directors or executives during the reporting period.
Employee Share Option Plan
The Company has an Employee Share Option Plan (the ESOP) which was most recently approved by shareholders at the 2014 Annual General Meeting held
on 19 November 2014. The ESOP was developed to assist in the recruitment, reward, retention and motivation of employees (excluding Directors) of Alara.
Under the ESOP, the Board will nominate personnel to participate and will offer options to subscribe for shares to those personnel. A summary of the terms of
ESOP is set out in Annexure A to Alara’s Notice of Annual General Meeting and Explanatory Statement dated 2 October 2014. No securities were issued to
KMP under the ESOP during the financial year (2017: Nil).
Director Loan Agreement
There were no loan agreements with the Directors during the year.
Securities Trading Policy
The Company has a Securities Trading Policy, a copy of which is available for viewing and downloading from the Company’s website.
Voting and Comments on the Remuneration Report at the 2017 Annual General Meeting
At the Company’s most recent (2017) Annual General Meeting (AGM), a resolution to adopt the 2017 Remuneration Report was put to a vote and passed
unanimously on a show of hands with the proxies received also indicating majority (95.04%) support in favour of adopting the Remuneration Report.9 No
comments were made on the Remuneration Report at the AGM.
Engagement of Remuneration Consultants
The Company has not engaged any remuneration consultants to provide remuneration recommendations in relation to Key Management Personnel during the
year. The Board has established a policy for engaging external Key Management Personnel remuneration consultants which includes, inter alia, that the
Remuneration and Nomination Committee be responsible for approving all engagements of and executing contracts to engage remuneration consultants and
for receiving remuneration recommendations from remuneration consultants regarding Key Management Personnel.
This concludes the audited Remuneration Report.
Directors’ and Officers’ Insurance
The Company insures Directors and Officers against liability they may incur in respect of any wrongful acts or omissions made by them in such capacity (to
the extent permitted by the Corporations Act 2001) (D&O Policy). Details of the amount of the premium paid in respect of the insurance policies are not
disclosed as such disclosure is prohibited under the terms of the contract.
9
Refer Alara’s 17 November 2017 ASX Announcement: Results of Meeting
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 15
Directors’ Report continued 36
Alara Resources Annual Report 2018
Directors’ Deeds
In addition to the rights of indemnity provided under the Company’s Constitution (to the extent permitted by the Corporations Act), the Company has also
entered into a deed with each of the Directors (Officer) to regulate certain matters between the Company and each Officer, both during the time the Officer
holds office and after the Officer ceases to be an officer of the Company, including the following matters:
The Company’s obligation to indemnify an Officer for liabilities or legal costs incurred as an officer of the Company (to the extent permitted by the
Corporations Act).
Subject to the terms of the deed and the Corporations Act, the Company may advance monies to the Officer to meet any costs or expenses of the
Officer incurred in circumstances relating to the indemnities provided under the deed and prior to the outcome of any legal proceedings brought
against the Officer.
Legal Proceedings on Behalf of Consolidated Entity (Derivative Actions)
Except for the legal proceedings in Saudi Arabia as noted above, no person has applied for leave of a court to bring proceedings on behalf of the
Consolidated Entity or intervene in any proceedings to which the Consolidated Entity is a party for the purpose of taking responsibility on behalf of the
Consolidated Entity for all or any part of such proceedings and the Consolidated Entity was not a party to any such proceedings during and since the financial
year.
Auditor
Details of the amounts paid or payable to the Company’s auditors (Bentleys Audit & Corporate (WA) Pty Ltd for 30 June 2018 and RSM Chartered
Accountants for the Oman entity audits) for audit and non-audit services (paid to a related party of Bentleys Audit and Corporate (WA) Pty Ltd) provided
during the financial year are set out below (refer to Note 5):
Audit and Review Fees
$
34,582
Fees for Other Non-Audit Services
$
–
Total
$
34,582
The Board is satisfied that the provision of non-audit services by the auditors during the year is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The Board is satisfied that the nature of the non-audit services disclosed above did not compromise the
general principles relating to auditor independence as set out in the Institute of Chartered Accountants in Australia and APES 110 Code of Ethics for
Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risk and rewards.
Bentleys Audit & Corporate (WA) Pty Ltd continue in office in accordance with section 327B of the Corporations Act 2001.
Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 forms part of this Directors Report and is set
out on page 37. This relates to the Audit Report, where the Auditors state that they have issued an Independence Declaration.
Events Subsequent to Reporting Date
The Directors are not aware of any matters or circumstances at the date of this Directors’ Report, other than those referred to in this Directors’ Report or the
financial statements or notes thereto, that have significantly affected or may significantly affect the operations, the results of operations or the state of affairs
of the Company and Consolidated Entity in subsequent financial years.
Signed for and on behalf of the Directors in accordance with a resolution of the Board:
Justin Richard
Managing Director
28 September 2018
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 16
Directors’ Report continued Alara Resources Annual Report 2018
37
Auditor’s Independence Declaration
To the Board of Directors
Auditor’s Independence Declaration under Section 307C of the
Corporations Act 2001
As lead audit partner for the audit of the financial statements of Alara Resources Limited
for the financial year ended 30 June 2018, I declare that to the best of my knowledge and
belief, there have been no contraventions of:
the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
any applicable code of professional conduct in relation to the audit.
Yours faithfully
BENTLEYS
Chartered Accountants
DOUG BELL CA
Partner
Dated at Perth this 28th day of September 2018
38
Alara Resources Annual Report 2018
Consolidated Statement of Profit of Loss and Other Comprehensive Income
For the year ended 30 June 2018
Revenue
Personnel
Occupancy costs
Finance expenses
Corporate expenses
Extinguishment of financial liability
Administration expenses
LOSS BEFORE INCOME TAX
Income tax benefit
PROFIT/(LOSS) FOR THE YEAR
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Total other comprehensive income/(loss)
Note
3
12,14
2018
$
26,817
(345,462)
(59,631)
(9,048)
(49,899)
-
(286,563)
(723,786)
-
(723,786)
2017
$
37,753
(379,902)
(51,355)
(3,043)
(61,985)
236,413
(238,655)
(460,774)
55,840
(404,934)
697,619
697,619
(178,669)
(178,669)
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR
(26,167)
(583,603)
Profit/(loss) attributable to:
Owners of Alara Resources Limited
Non-controlling interest
Total comprehensive income/(loss) for the year attributable to:
Owners of Alara Resources Limited
Non-controlling interest
(691,512)
(32,274)
(723,786)
6,107
(32,274)
(26,167)
(258,526)
(146,408)
(404,934)
(437,195)
(146,408)
(583,603)
Earnings/Loss per share:
Basic earnings/(loss) per share cents
Diluted earnings/(loss) per share cents
6
6
(0.11)
(0.11)
(0.04)
(0.04)
The accompanying notes form part of this consolidated financial statement.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 18
Alara Resources Annual Report 2018
39
Consolidated Statement of Financial Position
As at June 2018
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
TOTAL CURRENT ASSETS
NON CURRENT ASSETS
Property, plant and equipment
Exploration and evaluation
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Financial liabilities
Unearned Income
Provisions
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
Parent interest
Non-controlling interest
TOTAL EQUITY
The accompanying notes form part of this consolidated financial statement.
Note
7
8
9
10
11
12
13
14
15
13
16
17
2018
$
3,346,943
12,896
26,615
3,386,454
43,803
9,415,666
9,459,469
2017
$
1,885,556
72,299
9,728
1,967,583
54,126
7,996,698
8,050,824
12,845,923
10,018,407
66,850
37,001
103,851
583,756
1,624,382
36,264
2,244,402
115,368
75,450
190,818
215,939
-
25,226
241,165
2,348,253
431,983
10,497,670
9,586,424
66,107,405
906,345
(54,259,832)
12,753,918
(2,256,248)
10,497,670
65,169,992
208,726
(53,568,320)
11,810,398
(2,223,974)
9,586,424
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 19
40
Alara Resources Annual Report 2018
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Issued Capital
Note
$
63,485,425
–
–
–
–
Balance as at 1 July 2016
Foreign currency translation
reserve
Net income and expense
recognised directly in
equity
Loss for the year
Total comprehensive loss for
the year
Transactions with owners in their
capacity as owners:
Share placement
Share placement costs
Options issued during
the year
Balance as at 30 June 2017
16
16
17
1,830,052
(145,485)
–
65,169,992
Options
Reserve
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
Non-Controlling
Interest
$
$
Total
$
_
–
–
–
–
–
–
20,000
20,000
367,395
(53,309,794)
(2,077,566)
8,465,460
(178,669)
(178,669)
–
(178,669)
–
–
–
–
(258,526)
(258,526)
(146,408)
(146,408)
(178,669)
(178,669)
(404,934)
(583,603)
–
–
–
–
–
-
–
–
–
1,830,052
(145,485)
20,000
188,726
(53,568,320)
(2,223,974)
9,586,424
Balance as at 1 July 2017
65,169,992
20,000
188,726
(53,568,320)
(2,223,974)
9,586,424
Foreign currency translation
reserve
Net income and expense
recognised directly in
equity
Loss for the year
Total comprehensive loss for
the year
Transactions with owners in their
capacity as owners:
Share placement
Share placement costs
Options issued during
the year
16
16
17
–
–
–
–
945,000
(7,587)
–
–
–
–
–
–
–
-
697,619
697,619
–
697,619
–
–
–
–
–
–
–
697,619
697,619
(691,512)
(691,512)
(32,274)
(32,274)
(723,786)
(26,167)
–
–
–
–
–
–
945,000
(7,587)
-
Balance as at 30 June 2018
66,107,405
20,000
886,345
(54,259,832)
(2,256,248)
10,497,670
The accompanying notes form part of this consolidated financial statement.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 20
Alara Resources Annual Report 2018
41
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customer
Payments to suppliers and employees (inclusive of GST)
Interest received
Income tax refunded/(paid)
NET CASHFLOWS USED IN OPERATING ACTIVITIES
7b
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment
Payments for exploration and evaluation activities
NET CASHFLOWS USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing ordinary shares
Proceeds from exercise of options
Costs of issuing ordinary shares
Proceeds from borrowings
NET CASHFLOWS PROVIDED BY INVESTING ACTIVITIES
2018
$
1,624,382
(410,926)
24,581
55,963
1,294,000
(5,255)
(1,134,667)
(1,139,922)
937,413
_
_
358,746
1,296,159
2017
$
-
(895,640)
37,753
301,183
(556,704)
(1,079)
(811,641)
(812,720)
1,445,821
384,230
(145,485)
215,939
1,900,505
NET INCREASE IN CASH AND CASH EQUIVALENTS HELD
1,450,237
531,081
Cash and cash equivalents at beginning of the financial year
Effect of exchange rate changes on cash
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
7
1,885,556
11,150
3,346,943
1,365,691
(11,216)
1,885,556
The accompanying notes form part of this consolidated financial statement.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 21
42
Alara Resources Annual Report 2018
Notes to the Financial Statements
For the year ended 30 June 2018
1.
SUMMARY OF ACCOUNTING POLICIES
Statement of Significant Accounting Policies
The principal accounting policies adopted in the preparation of these financial statements are set out below.
The financial report includes the financial statements for the Consolidated Entity consisting of Alara Resources Limited and its controlled and jointly
controlled entities. Alara Resources Limited is a company limited by shares, incorporated in Western Australia, Australia and whose shares are
publicly traded on the Australian Securities Exchange (ASX).
Basis of preparation
1.1.
These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting
Interpretation, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Alara Resources
Limited is a for-profit entity for the purposes of preparing the financial statements.
Compliance with IFRS
The consolidated financial statements of the Consolidated Entity, Alara Resources Limited, also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current
assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied.
Going Concern Assumption
The financial report has been prepared on the going concern basis, which contemplates continuity of normal business activities and realisation of
assets and settlement of liabilities in the ordinary course of business.
During the year the Consolidated Entity made an operating Loss before tax of $723,786 (2017: Loss $460,774) and has a working capital position
of $ 3,282,603 (2017: $1,776,765).
The ability of the Consolidated Entity to continue as a going concern is dependent upon it maintaining sufficient funds for its operations and
commitments. The Directors continue to be focused on meeting the Consolidated Entity’s business objectives and are mindful of the funding
requirements to meet these objectives. To enable the Consolidated Entity to advance its Projects into production, it would be required to raise funds
from debt or equity sources. Should the Consolidated Entity not be able to obtain this funding it has the ability to defer these plans and meet its
contractual commitments and manage cash flow in line with its available funds. The Directors consider the basis of going concern to be appropriate
given the current cash and working capital position of the Consolidated Entity relative to its fixed and discretionary commitments.
On 15 March 2017 Alara Oman Operations Pty Ltd (a wholly owned subsidiary of the Company) entered into an off-take agreement for the supply
of copper concentrate from the Al Hadeetha Project to Statdrome Pte Ltd (Offtake Agreement). Under the Offtake Agreement, annual concentrate
production from the Al Hadeetha Copper Project (Wadi Andem site) will be shipped at regular intervals from the Sohar port (unless a smelter is
operating in Oman). The Offtake Agreement includes pre-payments by Statdrome totalling US$6 million to assist in funding project construction
costs and mine start-up, and will be drawn down in instalments during the project construction phase, starting once the mining licence is issued. In
June 2018 Statdrome made the first pre-payment of US$1.2 million under the Offtake Agreement.
On 16 April 2017, Al Hadeetha Resources LLC (AHR) (the joint venture company which conducts the Al Hadeetha Copper-Gold Project (Project),
in which the Company is a 70% shareholder) entered into an unsecured loan agreement as borrower with Al Hadeetha Investments LLC (Lender)
(an un-related company, which holds the remaining 30% of the shares in AHR). Under the agreement, AHR may draw down a maximum of USD 2
million (AUD 2,592,600; OMR 739,075) to assist with working capital for the Project (AHI to AHR Loan). The AHI to AHR Loan bears interest at
LIBOR plus two percent per annum. The AHI to AHR Loan will be in effect for the duration of the Project joint venture agreement, at which time
AHR must repay any outstanding balance. AHR must make interim repayments equal to its available net cash profit (if any) at the end of each
financial year. During the year AHR made drawdowns under the AHI to AHR Loan totalling OMR 116,764 (USD 315,973; AUD 409,596). The total
amount drawn down (being the total amount owing by AHR under the AHI to AHR Loan to the end of the year) is OMR 166,411 (USD 450,325;
AUD 583,756). If AHR determines at the end of any quarter or other period that it has a working capital shortfall it may draw down the whole or part
of the shortfall, until the entire AHI to AHR Loan amount is drawn down. The remaining, undrawn balance of the AHI to AHR Loan is OMR 572,664
(USD 1,549,675; AUD 2,008,844).
Although the AHI to AHR Loan is shown as a liability in the consolidated financial statements, loans by entities within the Alara Consolidated Entity
to AHR, which is also within that Consolidated Entity (“Consolidated Entity AHR Loans”) are not shown in the consolidated financial
statements. The Consolidated Entity AHR Loans total $A7.09 million and are subject to the same loan terms as the AHI to AHR Loan. The
Consolidated Entity AHR Loans are repayable on the same basis as the AHI to AHR Loan. Therefore, if AHR makes a loan repayment to AHI, AHR
will also be required to make a loan repayment to its lenders within the Alara Consolidated Group on a pro-rata basis.
The Directors are confident that the Consolidated Entity can continue as a going concern and as such are of the opinion that the financial report
has been appropriately prepared on a going concern basis.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 22
Alara Resources Annual Report 2018
43
1
SUMMARY OF ACCOUNTING POLICIES (Continued)
Principles of Consolidation
1.2.
The consolidated financial statements incorporate the assets and liabilities of the subsidiaries of Alara Resources Limited as at 30 June 2018 and
the results of its subsidiaries for the year then ended. Alara Resources Limited and its subsidiaries are referred to in this financial report as the
Consolidated Entity. All transactions and balances between Consolidated Entity companies are eliminated on consolidation, including unrealised
gains and losses on transactions between Consolidated Entity companies. Where unrealised losses on intra-group asset sales are reversed on
consolidation, the underlying asset is also tested for impairment from a Consolidated Entity perspective. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Consolidated
Entity. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date
of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a
subsidiary’s profit or loss and net assets that is not held by the Consolidated Entity. The Consolidated Entity attributes total comprehensive income
or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.
Foreign Currency Translation and Balances
1.3.
Functional and presentation currency
The functional currency of each entity within the Consolidated Entity is measured using the currency of the primary economic environment in which
that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and
presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign
currency monetary items are translated at the year-end exchange rate. Exchange differences arising on the translation of monetary items are
recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the
translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the
exchange difference is recognised in profit or loss.
Consolidated entity
The financial results and position of foreign operations whose functional currency is different from the Consolidated Entity’s presentation currency
are translated as follows:
(a) assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;
(b)
(c)
income and expenses are translated at average exchange rates for the period; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations are transferred directly to the Consolidated Entity’s foreign currency translation
reserve in the statement of financial position. These differences are recognised in profit or loss in the period in which the operation is disposed.
Joint Arrangements
1.4.
Joint arrangements exist when two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control, in the event the
Company does not share control the financials are consolidated (or deconsolidated in the event of loss of control) (refer to 1.2 for further
information). The Consolidated Entity’s joint arrangements are currently of one type:
Joint operations
Joint operations are joint arrangements in which the parties with joint control have rights to the assets and obligations for the liabilities relating to
the arrangement. The activities of a joint operation are primarily designed for the provision of output to the parties to the arrangement, indicating
that:
the parties have the rights to substantially all the economic benefits of the assets of the arrangement; and
all liabilities are satisfied by the joint participants through their purchases of that output. This indicates that, in substance, the joint participants
have an obligation for the liabilities of the arrangement.
Leases
1.5.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on a
straight-line basis over the period of the lease.
Comparative Figures
1.6.
Certain comparative figures have been adjusted to conform to changes in presentation for the current financial year.
Critical Accounting Judgements and Estimates
1.7.
The preparation of the Consolidated Financial Statements requires Directors to make judgements and estimates and form assumptions that affect
how certain assets, liabilities, revenue, expenses and equity are reported. At each reporting period, the Directors evaluate their judgements and
estimates based on historical experience and on other various factors they believe to be reasonable under the circumstances, the results of which
form the basis of the carrying values of assets and liabilities (that are not readily apparent from other sources, such as independent valuations).
Actual results may differ from these estimates under different assumptions and conditions.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 23
Notes to the Financial StatementsFor the year ended 30 June 2018 44
Alara Resources Annual Report 2018
1
SUMMARY OF ACCOUNTING POLICIES (Continued)
Exploration and evaluation expenditure
The Consolidated Entity’s accounting policy for exploration and evaluation expenditure being capitalised include the Daris Project where these
costs are expected to be recoverable through the successful development of the area or where activities in the area have not yet reached a stage
that permits reasonable assessment of the existence or otherwise of economically recoverable reserves. In the case of the Al Hadeetha project, a
maiden reserve announcement was issued in December 2016. This policy requires management to make certain estimates to future events and
circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates and assumptions may
change as new information becomes available. If, after having capitalised the expenditure under the policy, a judgement is made that recovery of
the expenditure is not possible, the relevant capitalised amount will be written off to the statement of profit or loss and other comprehensive income.
Share-based payments transactions
The Consolidated Entity measures the cost of equity-settled transactions with Directors and employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined using a Black-Scholes options valuation model, taking into account
the terms and conditions upon which the instruments were granted. The related assumptions are detailed in Note 18. The accounting estimates
have no impact on the carrying amounts of assets and liabilities but will impact expenses and equity.
New, Revised or Amending Accounting Standards and Interpretations Adopted
1.8.
The Consolidated Entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (AASB) that are mandatory for the current reporting period. The adoption of these Accounting Standards and
Interpretations did not have any significant impact on the financial performance or position of the Consolidated Entity during the financial year.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
New Accounting Standards and Interpretations not yet Mandatory or Early Adopted
1.9.
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early
adopted by the Consolidated Entity for the annual reporting period ended 30 June 2018. The Consolidated Entity’s assessment of the impact of
these new or amended Accounting Standards and Interpretations, most relevant to the Consolidated Entity, are set out below.
AASB 9 Financial Institutions
The Standard will be applicable retrospectively and includes revised requirements for the classification and measurement of financial instruments,
revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting.
The key changes that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications
to the accounting of embedded derivatives, upfront accounting for expected credit loss, and the irrevocable election to recognise gains and losses
on investments in equity instruments that are not held for trading in other comprehensive income. Based on preliminary analysis the directors
anticipate that the adoption of AASB 9 is unlikely to have a material impact on the Group’s financial instruments.
AASB 15 Revenue from Contracts with Customers
When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles-based model. Apart
from a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non-
monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers.
The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective,
AASB 15 provides the following five-step process:
identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
determine the transaction price;
allocate the transaction price to the performance obligations in the contract(s); and
recognise revenue when (or as) the performance obligations are satisfied.
The transitional provisions of this Standard permit an entity to either: restate the contracts that existed in each prior period presented per AASB
108: Accounting Policies, Changes in Accounting Estimates and Errors (subject to certain practical expedients in AASB 15); or recognise the
cumulative effect of retrospective application to incomplete contracts on the date of initial application. There are also enhanced disclosure
requirements regarding revenue.
Given the current nature of the Group there is not expected to be a material
production the group will assess the impact of the standard.
impact on adoption of this standard. Upon commencement of
AASB 16 Leases
When effective,
this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related
Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or
finance leases.
The main changes introduced by the new Standard are as follows:
recognition of a right-of-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating
to low-value assets);
depreciation of right-of-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of the liability in
principal and interest components;
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 24
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
45
inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease liability using the index or rate at
the commencement date;
application of a practical expedient to permit a lessee to elect not to separate non-lease components and instead account for all components
as a lease; and
inclusion of additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB 108 or
recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. The group is
currently continuing to assess the impact of these changes, however based on the operating leases currently held (refer note 21) it is not expected
to have a material impact.
2.
PARENT ENTITY INFORMATION
The following information provided relates to the Company, Alara Resources Limited, as at 30 June 2018.
Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Options Reserve
Accumulated losses
Total equity
Profit/(loss) for the year
Other comprehensive income for the year
Total comprehensive income /(loss) for the year
3.
LOSS FOR THE YEAR
The operating loss before income tax includes the following items of revenue and expense:
Revenue
Interest
2018
$
1,244,273
8,991,745
10,236,018
51,354
36,264
87,618
10,148,400
66,107,404
20,000
(55,979,004)
10,148,400
(375,436)
–
(375,436)
2018
$
26,817
26,817
2017
$
1,690,036
7,995,422
9,685,458
73,808
25,226
99,034
9,586,424
65,169,992
20,000
(55,603,568)
9,586,424
(583,603)
–
(583,603)
2017
$
37,753
37,753
ACCOUNTING POLICY NOTE
Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be
reliably measured. All revenue is stated net of the amount of goods and services tax (GST) except where the amount of GST incurred is not
recoverable from the Australian Tax Office. The following specific recognition criteria must also be met before revenue is recognised:
Interest Revenue – Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial
assets.
Other Revenues – Other revenues are recognised on a receipts basis.
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ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 25
Notes to the Financial StatementsFor the year ended 30 June 2018 46
Alara Resources Annual Report 2018
4.
INCOME TAX EXPENSE
Income tax expense
(a)
Current tax benefit
Deferred tax expense
Total income tax benefit per statement of profit or loss and other comprehensive income
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit/(Loss) before income tax
Tax at the Australian tax rate of 27.5% (2017: 27.5%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Assessable amounts
Deductible amounts
Non-assessable income
Non-deductible expenses
(Refund) of Research & Development Claim
Deferred tax assets recognised/(not recognised)
Tax rate difference
Income tax expenses
(c) Deferred tax assets
Other
Tax losses
Potential tax benefit at 30%
Set-off deferred tax liabilities
Net deferred tax assets
(d) Deferred tax liabilities
Resource Projects
Set-off deferred tax assets
Net deferred tax liability
(e) Deferred tax assets not recognised
Deferred tax assets have not been recognised in relation to the following matters:
Tax losses – Australia
Capital losses – Australia
Tax losses – Oman
2018
$
-
-
-
(723,786)
(199,041)
179,048
(90,981)
-
104,560
-
(35,198)
41,612
-
1,757
97,506
99,263
(99,263)
-
(99,263)
(99,263)
99,263
-
1,698,879
450,990
592,855
2,742,724
2017
$
(55,840)
-
(55,840)
(460,774)
(126,713)
-
-
(1,048)
123,457
(55,840)
4,304
-
(55,840)
6,020
392,310
398,330
(398,330)
-
(398,330)
(398,330)
398,330
-
856,569
450,990
-
1,307,559
The benefit of the deferred tax assets not recognised will only be obtained if:
(i) The Consolidated Entity derives future income that is assessable for Australian income tax purposes and is of a type and an amount sufficient
to enable the benefit of them to be realised;
(ii) The Consolidated Entity continues to comply with the conditions for deductibility imposed by tax legislation in Australia; and
(iii) There are no changes in tax law which will adversely affect the Consolidated Entity in realising the benefit of them.
The Consolidated Entity has elected to consolidate for taxation purposes and has entered into a tax sharing and funding agreement in respect of
such arrangements.
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ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 26
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
47
4
INCOME TAX EXPENSE (Continued)
ACCOUNTING POLICY NOTE
Income Tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the notional income tax rate
for each taxing jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of
assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses (if applicable). Deferred tax assets and
liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based
on those tax rates which are enacted or substantively enacted for each taxing jurisdiction. The relevant tax rates are applied to the cumulative
amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary
differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary
differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit
or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses. The amount of deferred tax assets benefits brought to
account or which may be realised in the future, is based on the assumption that no adverse change will occur in income taxation legislation and the
anticipation that the Consolidated Entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the
conditions of deductibility imposed by the law. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying
amount and tax bases of investments in controlled entities where the Company is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or
to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in other
comprehensive income or equity are also recognised directly in other comprehensive income or equity.
Tax consolidation legislation
The Consolidated Entity implemented the tax consolidation legislation. The head entity, Alara Resources Limited, and the controlled entities in the
tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in
the tax consolidated group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, the
Company also recognises the current tax liabilities (or assets) and the deferred tax assets (as appropriate) arising from unused tax losses and
unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements within
the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Consolidated Entity. Any differences
between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or
distribution from) wholly-owned tax consolidated entities.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the
Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the
expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the cash flow
statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.
5.
AUDITOR’S REMUNERATION
During the year the following fees were paid or payable for services provided by the auditors to the Consolidated Entity, their related practices and
non-audit related firms:
Bentleys Audit and Corporate (WA) Pty Ltd – Auditors of the Consolidated Entity
(Audit and review of financial reports)
RSM Chartered Accountants – Auditors of Oman-controlled entities
(Audit and review of financial reports)
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2018
$
31,908
2,674
34,582
2017
$
32,000
6,181
38,181
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 27
Notes to the Financial StatementsFor the year ended 30 June 2018 48
Alara Resources Annual Report 2018
6.
EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss) per share cents
Diluted earnings/(loss) per share cents
Profit/(loss) $ used to calculate earnings/(loss) per share
Weighted average number of ordinary shares during the period used in calculation of
basic earnings/(loss) per share
Weighted average number of ordinary shares during the period used in calculation of
diluted earnings/(loss) per share
2018
$
(0.11)
(0.11)
(691,512)
2017
$
(0.04)
(0.04)
(258,526)
614,087,452
584,929,630
614,087,452
584,929,630
Under AASB 133 "Earnings per share", potential ordinary shares such as options will only be treated as dilutive when their conversion to ordinary
shares would increase loss per share from continuing operations.
ACCOUNTING POLICY NOTE
Basic Earnings per share is determined by dividing the operating result after income tax by the weighted average number of ordinary shares on
issue during the financial period. Diluted Earnings per share adjusts the figures used in the determination of basic earnings per share by taking into
account amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise from the exercise of options
outstanding during the financial period.
7.
CASH AND CASH EQUIVALENTS
Cash in hand
Cash at bank
Term deposits
2018
$
1,480
2,130,209
1,215,254
3,346,943
2017
$
4,047
551,193
1,330,316
1,885,556
The Consolidated Entity has granted numerous term deposit security bonds to the value of $108,000 (2017: $93,468) which has not been called up
as at the reporting date. The Parent Entity also has a bank guarantee for the sublease of the former office to the value of $64,943 (2017: $ 64,943).
The effective interest rate on short-term bank deposits was 2.45% (2017: 2.41%) with an average maturity of 71 days.
(a) Risk exposure
The Consolidated Entity’s exposure to interest rate and foreign exchange risk is discussed in Note 20. The maximum exposure to credit risk at the
end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.
ACCOUNTING POLICY NOTE
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments and bank overdrafts.
Bank overdrafts (if any) are shown within short-term borrowings in current liabilities on the statement of financial position.
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ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 28
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
49
7.
CASH AND CASH EQUIVALENTS (Continued)
(b) Reconciliation of Net Profit/(Loss) after Tax to Net Cash Flow
From Operations
Profit/(Loss) after income tax
Loan extinguishment
Foreign exchange movement
Depreciation
Equity settled share-based payments
(Increase)/Decrease in Assets:
Trade and other receivables
Other current assets
Increase/(Decrease) in Liabilities:
Advance received from customers
Trade and other payables
Provisions
Net cashflows from/(used in) operating activities
(c) Non-cash financing and investing activities
Share based payments (Refer to Note 17)
8.
TRADE AND OTHER RECEIVABLES
Current
Amounts receivable from:
Sundry debtors
Goods and services tax recoverable
2018
$
(723,786)
-
415,446
11,369
-
59,403
(16,887)
1,624,382
(48,518)
(27,409)
1,294,000
2017
$
(404,934)
(236,413)
(100,092)
15,562
256,413
245,961
(1,749)
-
(254,045)
(77,407)
(556,704)
-
(20,000)
2018
$
5,797
7,099
12,896
2017
$
63,785
8,514
72,299
(a) Risk exposure
Information about the Consolidated Entity's exposure to credit risk, foreign exchange risk and interest rate risk is in Note 20.
(b) Impaired receivables
None of the above receivables are impaired or past due.
ACCOUNTING POLICY NOTE
Trade and other receivables are recorded at amounts due less any provision for doubtful debts. An estimate for doubtful debts is made when
collection of the full amount is no longer probable. Bad debts are written off when considered non-recoverable.
9.
OTHER CURRENT ASSETS
Prepayments
2018
$
26,615
26,615
2017
$
9,728
9,728
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ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 29
Notes to the Financial StatementsFor the year ended 30 June 2018 50
Alara Resources Annual Report 2018
10.
PROPERTY, PLANT AND EQUIPMENT
Year ended 30 June 2017
Carrying amount at beginning
Additions
Write-offs
Depreciation expense
Exchange Difference
Closing amount at reporting date
Year ended 30 June 2017
Cost or fair value
Accumulated depreciation
Net carrying amount
Year ended 30 June 2018
Carrying amount at beginning
Additions
Write-offs
Depreciation expense
Exchange Difference
Closing amount at reporting date
Year ended 30 June 2018
Cost or fair value
Accumulated depreciation
Net carrying amount
Motor
Vehicles
$
Office
Equipment
$
Plant and
Equipment
$
27,085
_
–
(3,865)
(1,715)
21,505
26,932
(5,427)
21,505
21,505
–
–
(3,207)
745
19,043
28,063
(9,020)
19,043
33,632
1079
_
(10,448)
5,908
30,171
189,253
(159,082)
30,171
30,171
_
–
(7,349)
237
23,059
191,075
(168,016)
23,059
3,786
–
_
(1,249)
(87)
2,450
21,056
(18,606)
2,450
2,450
–
–
(812)
63
1,701
21,941
(20,240)
1,701
Total
$
64,503
1,079
_
(15,562)
4,106
54,126
237,241
(183,115)
54,126
54,126
_
–
(11,368)
1,045
43,803
241,079
(197,276)
43,803
ACCOUNTING POLICY NOTE
All plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that
is directly attributable to the acquisition of the items. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is
not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that
will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present value in
determining recoverable amount. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be
measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. The
depreciable amount of all
life to the Consolidated Entity
commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are:
fixed assets is depreciated on a diminishing value basis over the asset's useful
Class of Fixed Asset
Office Equipment
Motor Vehicles
Plant and Equipment
Depreciation Rate
15 – 37.5%
33.3%
15 – 33.3%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written
down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on
disposals are determined by comparing proceeds with carrying amount. These are included in the statement of profit or loss and other
comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to
retained earnings.
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ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 30
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
51
11.
EXPLORATION AND EVALUATION
Opening balance
- Exploration and evaluation expenditure
- Exchange differences
Closing balance
2018
$
7,996,698
1,036,170
382,798
9,415,666
2017
$
7,327,012
613,007
56,679
7,996,698
On 21 October 2010, Alara Saudi Operations Pty Limited, a wholly owned subsidiary of the Company, entered into a shareholders’ agreement with
mineral licences holder, United Arabian Mining LLC (Manajem). Pursuant to the shareholders’ agreement a joint venture entity, Khnaiguiyah Mining
Company LLC (KMC) (in which the Consolidated Entity has a 50% shareholding interest) was established and Manajem are required to transfer
legal title to the mining licence and exploration licences over the Khnaiguiyah Project to KMC. The Consolidated Entity has obtained independent
advice confirming that valid and legally enforceable rights existed for KMC to commercially exploit the Khnaiguiyah Project. The financial
statements of previous Annual Reports were prepared on this basis with the asset carried at $33,190,221 as at 30 June 2015. Following
cancellation of the Khnaiguiyah Mining Licence, a provision for impairment of the carrying value of exploration and evaluation attributable to the
Khnaiguiyah Project was made. It is expected this provision for impairment will be reversed once Alara can demonstrate its exploration and
evaluation expenses (relating to the Khnaiguiyah Project and the accompanying Feasibility Study) will be recovered via its agreement with Bayan
Mining Company LLC or otherwise (see accounting policy note on mineral exploration and evaluation expenditure below).
Alara Oman Operations Pty Limited (a wholly owned Australian subsidiary) gained a 70% shareholding interest in a jointly controlled company, Al
Hadeetha Resource LLC (Oman), on 23 November 2011. The principal activity of the company is exploration, evaluation and development of
mineral licences in Oman.
Alara Oman Operations Pty Limited (a wholly owned Australian subsidiary) gained a 50% shareholding interest in a jointly controlled company,
Daris Resources LLC (Oman), on 1 December 2010. The principal activity of this company is exploration, evaluation and development of mineral
licences in Oman. The Consolidated Entity has a valid and legally enforceable contractual right to commercially exploit the Daris Project held by
Daris Resources LLC (in which the Consolidated Entity has a 50% shareholding interest) and does not hold the legal title to the mineral exploration
licence (which is held by the other 50% shareholder of Daris Resources LLC). The financial statements have been prepared on this basis (refer
Note 23 for further disclosures). Should these legal rights not be enforceable, the carrying value of Exploration and Evaluation Expenditure
attributable to the Daris Project would be impaired.
The Consolidated Group has entered in to a Heads of Agreement with Copper LLC, under which wholly owned subsidiary Alara Oman Operations
Pty Ltd would become a 10% shareholder in the Awtad Block 8 Project. As part of the Heads of Agreement, Awtad acknowledges OMR 246,215
(AUD 812,316) previously spent on the project by Alara as the basis for Alara’s interest in that project.
The Consolidated Entity has granted security bonds to the value of $108,000 (2017: $93,468) which have not been called up as at reporting date.
ACCOUNTING POLICY NOTE
Mineral Exploration and Evaluation Expenditure
Exploration, evaluation and development expenditure incurred is accumulated (i.e. capitalised) in respect of each identifiable area of interest. These
costs are only carried forward where they are expected to be recoverable through the successful development of the area or where activities in the
area and includes areas that have not yet reached a stage that permits reasonable assessment of the existence or otherwise of economically
recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to
abandon the area is made. Exploration and evaluation expenditure is written-off when it fails to meet at least one of the conditions outlined above or
an area of interest is abandoned. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the
carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest that the
carrying amount exceeds the recoverable amount, the impairment loss will be measured in accordance with the Consolidated Entity’s impairment
policy (Note 1.7). This policy requires management to make certain estimates to future events and circumstances, in particular whether an
economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes
available. If, after having capitalised the expenditure under the policy, a judgement is made that recovery of the expenditure is not possible, the
relevant capitalised amount will be written off to the statement of profit or loss and other comprehensive income.
Impairment of Non-Financial Assets
At each reporting date, the Consolidated Entity reviews the carrying values of its tangible and intangible assets to determine whether there is any
indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s
fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable
amount is expensed to the profit or loss. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 31
Notes to the Financial StatementsFor the year ended 30 June 2018 52
Alara Resources Annual Report 2018
12.
TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables
2018
$
39,110
27,740
66,850
2017
$
65,383
49,985
115,368
Due to the short-term nature of the trade and other payables, their carrying value is assumed to approximate their fair value.
(a) Risk exposure
Details of the Consolidated Entity's exposure to risks arising from current payables are set out in Note 20.
ACCOUNTING POLICY NOTE
These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of financial year which are unpaid.
The amounts are unsecured and are usually paid within 30 days of recognition.
13.
PROVISIONS
Current
Employee benefits – annual leave
Non-Current
Employee benefits – long service leave
2018
$
37,001
36,264
73,265
2017
$
75,450
25,226
100,676
Amounts not expected to be settled within the next 12 months
The entire annual leave obligation is presented as current as the Consolidated Entity does not have an unconditional right to defer settlement. The
non-current provision for long service leave is a provision towards the future entitlements of employees who will have completed the required period
of long service and that is not expected to be taken or paid within the next 12 months.
ACCOUNTING POLICY NOTE
Employee Benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the
period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and
are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in other payables and
accruals together with other employee benefit obligations.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the
employee renders the related service is recognised in 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 up to the end of the reporting period using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency
that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the
entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual
settlement is expected to occur.
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ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 32
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
53
14.
FINANCIAL LIABILITIES
Non-Current
Loan with unrelated third party (i)
2018
$
583,756
583,756
2017
$
215,939
215,939
(i)
(ii)
On 16 April 2017, Al Hadeetha Resources LLC (AHR) (the joint venture company which conducts the Al Hadeetha Copper-Gold Project
(Project), in which the Company is a 70% shareholder) entered into an unsecured loan agreement as borrower with Al Hadeetha
Investments LLC (Lender) (an un-related company, which holds the remaining 30% of the shares in AHR). Under the agreement, AHR
may draw down a maximum of USD 2 million (AUD 2,592,600; OMR 739,075) to assist with working capital for the Project (AHI to AHR
Loan). The AHI to AHR Loan bears interest at LIBOR plus two percent per annum. The Loan will be in effect for the duration of the Project
joint venture agreement, at which time AHR must repay any outstanding balance. AHR must make interim repayments equal to its
available net cash profit (if any) at the end of each financial year. During the year AHR made drawdowns under the Loan totalling OMR
116,764 (USD 315,973; AUD 409,596). The total amount drawn down (being the total amount owing by AHR under the Loan to the end of
the year is OMR 166,411 (USD 450,325; AUD 583,756). If AHR determines at the end of any quarter or other period that it has a working
capital shortfall it may draw down the whole or part of the shortfall, until the entire Loan amount is drawn down. The remaining, un-drawn
balance of the Loan is OMR 572,664 (USD 1,549,675; AUD 2,008,844).
Although the AHI to AHR Loan is shown as a liability in the consolidated financial statements, loans by entities within the Alara
Consolidated Entity to AHR, which is also within that Consolidated Entity (Consolidated Entity AHR Loans) are not shown in the
consolidated financial statements. The Consolidated Entity AHR Loans total $A7.09 million and are subject to the same loan terms as the
AHI to AHR Loan. The Consolidated Entity AHR Loans are repayable on the same basis as the AHI to AHR Loan. Therefore, if AHR
makes a loan repayment to AHI, AHR will also be required to make a loan repayment to its lenders within the Alara Consolidated Group on
a pro-rata basis.
On 26 October 2017 AHI gave a bank guarantee of OMR 30,000 to the Omani Ministry of the Environment as security for performance of
the environmental obligations of AHR in connection with the Al Hadeetha Project mining licence. AHI was required to deposit the amount
of the face value of the bank guarantee with its bank as security in the event that the bank guarantee is called upon. Pursuant to an
agreement between the Consolidated Entity and AHI, the Consolidated Entity paid OMR 20,000 to AHI on or about that date, representing
an approximation of its share of liability to contribute to the costs of remediating any unmet environmental obligations of AHR. This amount
will be returned to the Consolidated Entity in the event that AHR performs its environmental obligations in relation to that mining licence.
15.
UNEARNED INCOME
Non-Current
Unearned income
2018
$
1,624,382
1,624,382
2017
$
-
-
On 15 March 2017 Alara Oman Operations Pty Ltd (a wholly owned subsidiary of the Company) entered into an off-take agreement for the supply
of copper concentrate from the Al Hadeetha Project to Statdrome Pte Ltd (Offtake Agreement). Under the Offtake Agreement, annual concentrate
production from the Al Hadeetha Copper Project (Wadi Andem site) will be shipped at regular intervals from the Sohar port (unless a smelter is
operating in Oman). The Offtake Agreement includes pre-payments by Statdrome totalling US$6 million to assist in funding project construction
costs and mine start-up, and will be drawn down in instalments during the project construction phase, starting once the mining licence is issued. In
June 2018 Statdrome made the first pre-payment of US$1.2 million under the Offtake Agreement. This amount represents unearned income,
classified as a non-current liability in the Consolidated Statement of Financial Position. The amount of this liability in AUD is shown in the table
above.
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ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 33
Notes to the Financial StatementsFor the year ended 30 June 2018 54
Alara Resources Annual Report 2018
16.
ISSUED CAPITAL
Fully paid ordinary shares
2018
№
629,017,589
2017
№
597,517,589
2018
$
2017
$
66,107,404
65,169,992
2017
Balance as at 1 July 2016
- Share movement during the 2017 financial year
- Share issue costs during the 2017 financial year
Balance as at 30 June 2017
2018
Balance as at 1 July 2017
- Share movement during the 2018 financial year
- Share issue costs during the 2018 financial year
Balance as at 30 June 2018
№
506,015,000
91,502,589
–
597,517,589
№
597,517,589
31,500,000
–
629,017,589
$
63,485,425
1,830,052
(145,485)
65,169,992
$
65,169,992
945,000
(7,587)
66,107,405
Each fully paid ordinary share carries one vote per share and the right to participate in dividends. Ordinary shares have no par value and the
Company does not have a limit on the amount of its capital.
Capital risk management
The Consolidated Entity's objective when managing its capital is to safeguard its ability to continue as a going concern, so that it can continue to
provide returns for shareholders and benefits for other stakeholders and to maintain a capital structure balancing the interests of all shareholders.
The Board will consider capital management initiatives as is appropriate and in the best interests of the Consolidated Entity and shareholders from
time to time. The Consolidated Entity had no external borrowings as at 30 June 2018, other than as disclosed in Note 14. The Consolidated
Entity's non-cash investments can be realised to meet accounts payable arising in the normal course of business.
Accounting Policy Note
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a
business, are included in the cost of the acquisition as part of the purchase consideration.
17.
RESERVES
Foreign currency translation reserve
Options reserve
2018
$
886,345
20,000
906,345
2017
$
188,726
20,000
208,726
Foreign currency translation reserve
Exchange differences arising on translation of a foreign controlled entity's financial results and position are taken to the foreign currency translation
reserve. The reserve is de-recognised when the investment is disposed of.
Options reserve
The number of unlisted options outstanding over unissued ordinary shares at the reporting date is as follows:
Employees’ Options
Unlisted options exercisable at $0.04; expiring 9 March 2020
Grant date
9 Mar 2017
Number of
options
3,000,000
3,000,000
2018
$
20,000
20,000
2017
$
20,000
20,000
The Option Reserve records the consideration (net of expenses) received by the Company on the issue of listed options and the fair value of
unlisted Employees' options that were issued for nil consideration.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 34
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
55
18.
SHARE-BASED PAYMENTS
There were no share-based payments in 2018 financial year.
Grant date
Expiry date
Exercise
price
Opening
balance
Employees
9 Mar 2017
9 Mar 2020
$0.04
Weighted average exercise price
Weighted average exercise price
3,000,000
3,000,000
$0.04
Movement during the year
As at 30 June 2018
Granted
Exercised
Lapsed
Closing
balance
Vested and
exercisable
Fair value
$
-
-
-
–
–
–
–
–
–
3,000,000
3,000,000
$0.04
3,000,000
3,000,000
$0.04
20,000
20,000
There were no shares issued as a result of the exercise of any options during the year (2017: NIL).
The fair value of these options are expensed, from their date of grant, over their vesting period; fair values are determined as at date of grant using
the Black-Scholes options valuation model that takes into account the exercise price, the term of the option, the underlying share price as at date of
grant, the expected price volatility of the underlying shares and the risk-free interest rate for the term of the option. The Company is required to
expense the fair value of options granted, on the basis that the fair value cost at date of grant is apportioned over the vesting period applicable to
each option. The model inputs for assessing the fair value of options granted during the period are as follows:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Options are granted for no consideration and vest as detailed in the table below;
Exercise price is as detailed in the table above;
Grant or issue date is as detailed in the table above;
Expiry date is as detailed in the table above;
Share price is based on the last bid price on ASX as at date of grant, as detailed in the table below;
Expected price volatility of the Company’s shares has been assessed independently as described in the table below;
Expected dividend yield is nil; and
Risk-free interest rate is based on the 3/5 year Commonwealth bond yield, as detailed in the table below.
Date of issue Description of unlisted options
Vesting criteria
9 Mar 2017
$0.04 (9 Mar 2020) Options
Vested at the date of the issue of the options
Share price at
grant date
$0.022
Risk free
rate
2.08%
Price
volatility
100%
ACCOUNTING POLICY NOTE
Director/Employee Options
The fair value of options granted by the Company to directors and employees is recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured as at grant date and is expensed in full as at their date of issue where they are 100% vested on grant
and otherwise over their vesting period (where applicable). The fair value at grant date is determined using the Black-Scholes valuation model that
takes into account the exercise price, the term of the option, the vesting criteria, the unlisted nature of the option, the share price at grant date and
the expected price volatility of the underlying shares in the Company, and the risk-free interest rate for the term of the option. Upon the exercise of
options, the balance of the reserve relating to those options is transferred to share capital.
19.
SEGMENT INFORMATION
The Board has considered the activities/operations and geographical perspective within the operating results and have determined that the
Consolidated Entity operates in the resource exploration, evaluation and development sector within geographic segments - Australia, Saudi Arabia
and Oman.
2018
Total segment revenues
Total segment loss before tax
Total segment assets
Total segment liabilities
2017
Total segment revenues
Total segment loss before tax
Total segment assets
Total segment liabilities
Australia
$
26,817
(390,888)
3,372,604
(1,712,000)
37,491
(378,106)
2,208,115
(99,034)
Oman
$
_
(342,876)
9,473,319
(636,253)
262
(293,175)
7,810,292
(332,949)
Saudi Arabia
$
–
9,978
–
–
–
210,507
–
_
Total
$
26,817
(723,786)
12,845,923
(2,348,253)
37,753
(460,774)
10,018,407
(431,983)
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 35
Notes to the Financial StatementsFor the year ended 30 June 2018 56
Alara Resources Annual Report 2018
19
SEGMENT INFORMATION (Continued)
(a) Reconciliation of segment information
(i) Total Segment Assets
Total Assets as per Statement of Financial Position
(ii) Total Segment Revenues
Total Revenue as per Statement of Profit or Loss
and Other Comprehensive Income
(iii) Total Segment profit/(loss) before tax
Total Consolidated Entity profit/(loss) before tax
2018
$
2017
$
12,845,923
10,018,407
26,817
37,753
(723,786)
(460,774)
ACCOUNTING POLICY NOTE
Operating Segments
The Consolidated Entity has applied AASB 8: Operating Segments which requires that segment information be presented on the same basis as
that used for internal reporting purposes. An operating segment is a component of the Consolidated Entity that engages in business activities from
which it may earn revenues and incur expenses. An operating segment's operating results are reviewed regularly by the management to make
decisions on allocation of resources to the relevant segments and assess performance. Unallocated items comprise mainly share investments,
corporate and office expenses.
20.
FINANCIAL RISK MANAGEMENT
The Consolidated Entity's financial instruments mainly consist of deposits with banks, accounts receivable and payable, and investments in a listed
security. The principal activity of the Consolidated Entity is resource exploration, evaluation and development. The main risks arising from the
Consolidated Entity's financial instruments are market (which includes price, interest rate and foreign exchange risks), credit and liquidity risks. Risk
management is carried out by the Board of Directors. The Board evaluates, monitors and manages the Consolidated Entity's financial risk in close
co-operation with its operating units. The financial receivables and payables of the Consolidated Entity in the table below are due or payable within
30 days. The financial investments are held for trading and are realised at the discretion of the Board.
The Consolidated Entity holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities at amortised cost
Trade and other payables
Financial liabilities
Net Financial Assets
(a) Market Risk
2018
$
3,346,943
12,896
3,359,839
(66,850)
(583,756)
(650,606)
2017
$
1,885,556
72,299
1,957,855
(115,368)
(215,939)
(331,307)
2,709,233
1,626,548
(i) Price risk
The Consolidated Entity is exposed to equity securities price risk. This arises from investments held by the Consolidated Entity and classified in
the statement of financial position at fair value through profit or loss. The Consolidated Entity is not directly exposed to commodity price risk.
The value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific
to the individual instrument or its issuer or factors affecting all instruments in the market. The Consolidated Entity does not manage this risk
through entering into derivative contracts, futures, options or swaps. Market risk is minimised through ensuring that investment activities are
undertaken in accordance with Board established mandate limits and investment strategies.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 36
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
57
21.
FINANCIAL RISK MANAGEMENT (Continued)
interest rate risk
(ii)
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Consolidated
Entity's exposure to market risk for changes in interest rates relate primarily to investments held in interest bearing instruments and its loan
from third parties. The average interest rate applicable to funds held on deposit during the year was 2.45% (2017: 2.41%).
Cash at bank
Term deposits
Loan from third parties
2018
$
2,130,209
1,215,254
(583,756)
2,761,707
2017
$
551,193
1,330,316
(215,939)
1,665,570
The Consolidated Entity has borrowings subject to interest rate risk. The possible impact on profit or loss or total equity on this exposure is
displayed below:
Loan with unrelated third party
Change in profit
Increase by 1%
Decrease by 1%
Change in equity
Increase by 1%
Decrease by 1%
Revenue
Change in profit
Increase by 3%
Decrease by 3%
Change in equity
Increase by 3%
Decrease by 3%
2018
$
(5,838)
5,838
(5,838)
5,838
2018
$
100,408
(100,408)
100,408
(100,408)
2017
$
(2,159)
2,159
(2,159)
2,159
2017
$
56,567
(56,567)
56,567
(56,567)
(iii) Foreign exchange risk
The Consolidated Entity is exposed to foreign currency risk in cash held in Omani Riyals (OMR) by the Consolidated Entity's foreign controlled
entity, foreign resource project investment commitments and exploration and evaluation expenditure on foreign exploration and evaluation. The
primary currency giving rise to this risk is Omani Riyals (OMR). The Consolidated Entity has not entered into any forward exchange contracts
as at reporting date and is currently fully exposed to foreign exchange risk. The Consolidated Entity's exposure to foreign currency risk at
reporting date was as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Non-current financial liabilities
2018
OMR
141,441
5,429
(5,644)
(186,412)
(45,186)
2017
OMR
78,855
261
(13,447)
(64,144)
1,525
The Consolidated Entity's exposure to foreign exchange risk is mitigated by having comparable asset and liability balances in US dollars.
Therefore a sensitivity analysis has not been performed. The Consolidated Entity enters into forward exchange contracts with its Australian
bank from time to time to hedge against foreign exchange risk.
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 37
Notes to the Financial StatementsFor the year ended 30 June 2018 58
Alara Resources Annual Report 2018
20.
FINANCIAL RISK MANAGEMENT (Continued)
(b) Credit risk
Credit risk refers to the risk that a counterparty under a financial instrument will default (in whole or in part) on its contractual obligations resulting in
financial loss to the Consolidated Entity. Concentrations of credit risk are minimised primarily by undertaking appropriate due diligence on potential
investments, carrying out all market transactions through approved brokers, settling non-market transactions with the involvement of suitably
qualified legal and accounting personnel (both internal and external), and obtaining sufficient collateral or other security (where appropriate) as a
means of mitigating the risk of financial loss from defaults. This financial year there was no necessity to obtain collateral. The credit quality of the
financial assets are neither past due nor impaired and can be assessed by reference to external credit ratings (if available with Standard & Poor's)
or to historical information about counterparty default rates. The maximum exposure to credit risk at reporting date is the carrying amount of the
financial assets as summarised below:
Cash and cash equivalents
AA-
No external credit rating available
Trade and other receivables (due within 30 days)
No external credit rating available
2018
$
3,345,463
1,480
3,346,943
12,896
2017
$
1,881,509
4,047
1,885,556
72,299
The Consolidated Entity measures credit risk on a fair value basis. The carrying amount of financial assets recorded in the financial statements, net
of any provision for losses, represents the Consolidated Entity’s maximum exposure to credit risk. All receivables noted above are due within 30
days. None of the above receivables are past due.
(c) Liquidity risk
Liquidity risk is the risk that the Consolidated Entity will encounter difficulty in meeting obligations associated with financial
liabilities. There is
sufficient cash and cash equivalents and the non-cash investments can be realised to meet accounts payable arising in the normal course of
business. The financial liabilities maturity obligation is disclosed below:
2018
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Other financial liabilities
Net inflow/(outflow)
2017
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Non-current financial liabilities
Net inflow/(outflow)
Less than
6 months
$
6-12
months
$
3,346,943
12,896
3,359,839
(66,850)
-
(66,850)
3,292,989
1,885,556
72,299
1,957,855
(115,368)
-
1,842,487
-
–
–
–
–
–
–
–
–
–
–
-
–
1-5
years
$
–
–
–
–
(583,756)
(583,756)
(583,756)
–
–
–
–
(215,939)
(215,939)
Total
$
3,346,943
12,896
3,359,839
(66,850)
(583,756)
(650,606)
2,709,233
1,885,556
72,299
1,957,855
(115,368)
(215,939)
1,626,548
(d) Fair Value of Financial Assets and Liabilities
The carrying amount of financial instruments recorded in the financial statements represents their fair value determined in accordance with the
accounting policies disclosed in Note 1. The aggregate fair value and carrying amount of financial assets at reporting date are set out in Notes 7 &
8. The financial liabilities at reporting date are set out in Note 12 & 14.
(e) Fair value measurements
The fair value of financial assets and financial
Consolidated Entity’s financial assets and liabilities approximate their fair values.
liabilities must be estimated for recognition and measurement or for disclosure purposes. The
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 38
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
59
21.
FINANCIAL RISK MANAGEMENT (Continued)
ACCOUNTING POLICY NOTE
Financial Instruments
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial
assets, this is equivalent to the date that the entity commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit
or loss’, in which case transaction costs are expensed to profit or loss immediately. Subsequent to initial recognition, these instruments are
measured as set out below:
Financial assets at fair value through profit or loss - A financial asset is classified in this category if acquired principally for the purpose of
selling in the short term or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of
Financial Instruments. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the profit
or loss in the period in which they arise.
Loans and receivables - Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market and are stated at amortised cost using the effective interest rate method.
Financial liabilities - Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and
amortisation.
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all
unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. At each reporting date,
the Consolidated Entity assesses whether there is objective evidence that a financial
instrument has been impaired. Impairment losses are
recognised in the profit or loss. The Consolidated Entity’s investment portfolio (comprising listed and unlisted securities) is accounted for as
“financial assets at fair value through profit or loss”.
Fair Value Estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair
value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based
on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Consolidated Entity is the current bid
price; the appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial instruments that are not traded in
an active market (for example over-the-counter derivatives) is determined using valuation techniques, including but not limited to recent arm’s
length transactions, reference to similar instruments and option pricing models. The Consolidated Entity may use a variety of methods and makes
assumptions that are based on market conditions existing at each reporting date. Other techniques, such as estimated discounted cash flows, are
used to determine fair value for other financial instruments.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. 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 Consolidated Entity for similar financial instruments. The Consolidated Entity’s investment portfolio (comprising listed and unlisted
securities) is accounted for as a “financial assets at fair value through profit or loss” and is carried at fair value based on the quoted last bid prices
at reporting date.
21.
COMMITMENTS
(a) Lease Commitments
Non-cancellable operating lease commitments:
Within 1 year
1-5 years
After 5 years
Total
2018
$
10,889
-
–
10,889
2017
$
23,750
460
–
24,210
The Group leases office space under a non-cancellable operating lease. On renewal, the terms of the lease are renegotiated. The Group
does not have an option to purchase the leased asset at the expiry of the lease period. During the year the Group has signed a sub-lease for
the office space hence mitigating the outstanding lease commitments remaining on the lease.
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ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 39
Notes to the Financial StatementsFor the year ended 30 June 2018 60
Alara Resources Annual Report 2018
22.
CONTROLLED ENTITIES
Investment in Controlled Entities
Alara Resources Limited (AUQ)
Alara Peru Operations Pty Ltd (APO)
Alara Saudi Operations Pty Ltd (ASO)
Saudi Investments Pty Limited (SIV)
Alara Oman Operations Pty Limited (AOO)
Alara Kingdom Operations Pty Limited (AKO)
Alara Saudi Holdings Pty Limited (ASH)
Alara Resources LLC
Al Hadeetha Resources LLC
Alara Resource Ghana Limited
Alara Peru S.A.C
23.
JOINTLY CONTROLLED ENTITIES
Controlled
entity
Parent
AUQ
Principal Activity
Exploration
Inactive
Country of
Incorporation
Australia
Australia
Date of
Incorporation
6-Dec-06
9-Mar-07
AUQ
AUQ
AUQ
AUQ
AUQ
AOO
AOO
AUQ
APO
Management
Australia
4-Aug-10
Development
Management
Management
Inactive
Exploration
Exploration /
Development
Inactive
Inactive
Australia
Australia
Australia
Australia
Oman
Oman
Ghana
Peru
14-Feb-11
28-Jun-10
5-Sep-11
5-Jun-13
2-Oct-10
6-Feb-07
8-Dec-09
1-Mar-07
Jun-18
100%
100%
100%
100%
100%
100%
100%
70%
70%
100%
100%
Jun-17
100%
100%
100%
100%
100%
100%
100%
70%
70%
100%
100%
Investment in Jointly Controlled Entities
Daris Resources LLC
Controlled
entity
AOO
Principal Activity
Exploration
Country of
Incorporation
Oman
Date of
Incorporation
1-Dec-10
Jun-18
50%
Jun-17
50%
24.
RELATED PARTY TRANSACTIONS
(a) Controlled and Jointly Controlled Entities
Details of the interest in controlled entities and jointly controlled entities are set out in Notes 22 and 23.
(b) Transactions with other related parties
The following transactions occurred with related parties during the year ending 30 June 2018:
(i) Director loan agreement
There was no outstanding directors’ loan during the year.
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Key Management of the Consolidated Entity are each Director and Company Executive being a company secretary or senior managers with
authority and responsibility for planning, directing and controlling the major activities of the Company or Consolidated entity. Details of key
management personnel individual remuneration are disclosed in the remuneration report section of the directors’ report.
Key Management Personnel remuneration includes the following expenses:
Short term employee benefits:
Remuneration including bonuses and allowances
Social security costs
Total short term employee benefits
Long service leave
Total other long-term benefits
Post-employment benefits:
Defined benefit pension plans
Defined contribution pension plans
Total post-employment benefits
Termination benefits
Share-based payments
Total remuneration
2018
$
934,391
–
934,391
34,687
34,687
–
–
–
–
–
2017
$
999,217
–
999,217
–
–
–
–
–
17,663
–
969,078
1,016,880
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 40
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
61
25.
CONTINGENT ASSETS AND LIABILITIES
Contingent assets and liabilities exist
development and advancement of the same, as described below.
in relation to certain exploration and evaluation of
the Consolidated Entity subject
to the continued
(a)
(b)
(c)
(d)
(e)
(f)
Shareholders’ Agreement (SHA) – Khnaiguiyah Mining Company – Khnaiguiyah Zinc-Copper Project (Saudi Arabia) – On 21 October
2010, Alara Saudi Operations Pty Limited, a wholly owned subsidiary of the Company, entered into a shareholders’ agreement with mineral
licences holder, United Arabian Mining (“Manajem” in Arabic) Company (Manajem) pursuant to which Alara would pay a total of US$7.5 million to
Manajem in stages subject to completion of project milestones and the parties forming a new joint venture company, Khnaiguiyah Mining Company
LLC (KMC), which will hold the Khnaiguiyah Zinc-Copper Project mineral licences. KMC was incorporated in Saudi Arabia on 10 January 2010.
Alara has paid Manajem a total of US$3.654 million (including advance payments of US$3.388 million in respect of the tranches payable under the
Shareholders Agreement in connection with the transfer of the Khnaiguiyah Mining Licence to KMC.
In November 2014, Alara served notice on
Manajem suspending Alara’s obligations under the SHA and reserving Alara’s rights to file claims against Manajem (in addition to the counter-
claims referred to in (c) below) pursuant to Manajem’s breaches under the SHA and updated JV Agreement (referred to in (b) below).
Updated Joint Venture Agreement – Khnaiguiyah Mining Company – Khnaiguiyah Zinc-Copper Project (Saudi Arabia) – In March 2014,
Alara Saudi Operations Pty Limited, a wholly owned subsidiary of the Company, entered into a series of agreements with Manajem to update the
joint venture between the parties. This included amendments to the Shareholders’ Agreement referred to in (a) above and provided for Alara to
acquire an additional 10% of the joint venture entity, KMC, thus increasing its equity to 60% (from 50%) and have control of KMC and the Project.
Under these updated joint venture agreements Alara would pay a total of US$6,664,120 to Manajem (principally) in stages conditional on
attainment defined milestones (with such amount to be added to Alara’s loan to KMC, repayable from KMC net profits) and issue 60 million shares
to Manajem subject to Alara shareholder approval. The parties also agreed to settle and/or waive all historical claims in relation to the KMC joint
venture and or the Khnaiguiyah Project. As at the date of this report, no payment has been effected as Manajem has, inter alia, not yet complied
with its initial obligation under the same to notify the Deputy Ministry of Mineral Resources (DMMR) to recommence the process to effect the
transfer of the ML to KMC.
‘Financial Claim’ – Khnaiguiyah Zinc-Copper Project (Saudi Arabia) – In November 2014, former Khnaiguiyah Project joint venture partner,
Manajem, filed a ‘claim’ against Alara Saudi Operations Pty Limited before the Board of Grievance in Riyadh, Kingdom of Saudi Arabia. Manajem
legal counsel maintain that
alleges broad unspecified breaches of the SHA and Saudi
Manajem’s claims are unsubstantiated and has lodged a counter-claim against Manajem based on a number of specific breaches of the SHA by
Manajem (including via acting through Manajem company executives) pursuant to Manajem’s obligations under the SHA and in relation to a
number of operational matters involving the JV Company, KMC. Alara will defend Manajem’s claim and pursue its counter-claims against Manajem
before the Board of Grievance in accordance with due process. There next court date is scheduled for October 2018.
law by Alara. Alara, based on the advice of external
Shareholders’ Agreement – Daris Resources LLC – Daris Copper-Gold Project (Oman) – On 28 August 2010, Alara Oman Operations Pty
Limited, a wholly owned subsidiary of the Company, entered into a shareholders’ agreement with Daris Copper Project concession holder, Al
Tamman Trading Establishment LLC (ATTE) pursuant to which Alara will invest up to a total of US$7 million into a new joint venture company
(“Daris Resources LLC” (DarisCo)) to gain up to a 70% shareholding. DarisCo was incorporated in Oman on 1 December 2010 (Alara 50%: ATTE
50%). To the extent that further funding is required, Alara is entitled to advance up to US$4 million to DarisCo as a loan (on commercial terms and
repayable as a priority before distribution of dividends) - convertible into equity in DarisCo to take Alara’s interest to 70%. DarisCo has exclusive
rights (to be further formalised under a management agreement with ATTE) to manage, operate and commercially exploit the concession. DarisCo
is governed by a 6-member board of directors with 3 nominees (including the Chairman) from Alara and 3 nominees from ATTE.
Shareholders’ Agreement – Alara Resources LLC (Oman) – On 8 August 2010, Alara Oman Operations Pty Limited, a wholly owned subsidiary
of the Company, entered into a shareholders’ agreement with Sur United International Co. LLC (SUR) pursuant to which a new joint venture
company (“Alara Resources LLC” (AlaraCo)) will be established to identify, secure and commercially exploit other exploration and evaluation in
Oman introduced to AlaraCo by SUR. AlaraCo was incorporated in Oman in 2 October 2010. Alara contributed 100% of the initial capital of
150,000 Omani Rials (RO) (equivalent to ~A$425,000 at that time) for its 70% shareholding interest in AlaraCo with SUR holding the balance of
30%. Alara is entitled to advance funds to AlaraCo as a loan (on commercial terms and repayable as a priority before distribution of dividends).
SUR is entitled to receive a priority payment out of net profits equivalent to 2% NSR (Net Smelter Return) – which amount is deducted from the
dividend entitlement of SUR. There is a mechanism for the dilution of SUR’s profit interest (ie. 30%) if SUR fails to meet capital calls after a
‘Decision to Mine’ has been made by Alara in respect of a proposed ‘Mine’ (supported by the results of any feasibility study confirming the
commercial viability of the exploitation of a ‘Mine’). If SUR's entitlement to dividends is diluted below 10% as above, SUR has an option to assign
its dividend rights to Alara in return for a 2% NSR payment from AlaraCo, subject to AlaraCo making a net profit. The shareholders agreement is
subject to conditions precedent including, amongst other matters, the execution of an ancillary loan agreement (which is currently pending
execution by the parties) and an exploration licence being granted to AlaraCo – AlaraCo has lodged several applications for exploration licences
over open areas prospective for base and precious metals introduced by SUR (which are currently pending grant by the Oman Government).
AlaraCo is governed by a 5-member board of directors with 3 nominees (including the Chairman) from Alara and 2 nominees from SUR.
Shareholders’ Agreement – Al Hadeetha Copper-Gold Project (Oman) – On 23 November 2011, Alara Oman Operations Pty Limited (a wholly
owned subsidiary of the Company) entered into a shareholders’ agreement with the concession holder, Al Hadeetha Resources LLC (AHR) and
the then shareholders of AHR. An Amendment Agreement between Alara and Al Hadeetha Investments LLC (AHI) dated 3 August 2013
acknowledges Alara now holds a 70% shareholding in AHR and AHI holds 30%. Post completion of a definitive feasibility study, the AHR Board
may issue shareholders with payment notices requiring them to contribute equity funding in proportion to their shareholding. If AHI declines to
make the required capital contribution to develop the Project’s first mine, then Alara may elect to pay AHI the amount which AHI were required to
contribute under their payment notice and (subject to Omani law) Alara may increase its economic interest in AHR to 75%. This payment shall be
treated as a loan and Alara shall be entitled to 60% of all dividends in favour of AHI until such time that 25% of the total amount required under the
payment notices is repaid to Alara. If an AHR shareholder’s interest falls below 10%, that party shall (subject to Omani law) assign its dividend and
voting rights to the other shareholder(s) in exchange for a 2% net smelter return on production payable by AHR. AHR is governed by a 3-member
Board of directors with two nominees appointed by Alara (including the Chairman) and 1 nominee appointed by AHI (30% shareholder).
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 41
Notes to the Financial StatementsFor the year ended 30 June 2018 62
25
(g)
(h)
(i)
Alara Resources Annual Report 2018
CONTINGENT ASSETS AND LIABILITIES (Continued)
Directors' Deeds – The Company has entered into deeds of indemnity with each of its Directors indemnifying them against liability incurred in
discharging their duties as directors/officers of the Consolidated Entity. As at the reporting date, no claims have been made under any such
indemnities and accordingly, it is not possible to quantify the potential financial obligation of the Consolidated Entity under these indemnities.
Bayan Mining LLC JV Agreement – On 16 July 2015 Saudi Investments Pty Ltd (a wholly owned subsidiary of the Company) entered into a JV
agreement with Bayan Mining LLC. 40,000,000 shares are to be issued upon satisfaction of all of the conditions precedent, which includes the
granting of the Khnaiguiyah mining licence to Bayan or the JV.
Off-take agreement – Al Hadeetha Copper Gold Project – On 15 March 2017 Alara Oman Operations Pty Ltd (a wholly owned subsidiary of the
Company) (Seller) entered into an off-take agreement for the supply of copper concentrate from the Al Hadeetha Copper Project (Offtake
Agreement) to Statdrome Pte Ltd (Buyer). Under the Offtake Agreement, annual concentrate production of approximately 35,000 wmt will be
shipped at regular intervals from the Sohar port. There also exists the possibility of supplying the material to the Omani smelter in case it restarts.
However, the project financial model allows for sea freight and other charges associated with the sale of concentrate from the port at Sohar. The
Offtake Agreement also includes a pre-payment by the Buyer of US$6 million to assist in funding project construction costs and mine start-up, and
will be drawn down in instalments during the project construction phase, starting once the mining licence is issued. In June 2018 the Buyer made
the first pre-payment of US$1.2 million under the Offtake Agreement.
The prepayment is to be repaid to the Buyer by it deducting US$0.5 million plus interest from each amount due to the Seller under provisional
invoices for the sale of copper concentrate to the Buyer.
If the Seller does not deliver copper concentrate to the Buyer as agreed, the Buyer may
call upon a guarantee provided by the Seller and Al Hadeetha Investment LLC for the performance of the Seller’s obligations under the Offtake
Agreement.
26.
SUBSEQUENT EVENTS
The Directors are not aware of any matters or circumstances at the date of this Directors’ Report, other than those referred to in this Directors’ Report or the
financial statements or notes thereto, that have significantly affected or may significantly affect the operations, the results of operations or the state of affairs
of the Company and Consolidated Entity in subsequent financial years.
[The remainder of this page is intentionally blank]
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 42
Notes to the Financial StatementsFor the year ended 30 June 2018 Alara Resources Annual Report 2018
Directors’ Declaration
The Directors of the Company declare that:
63
1.
2.
3.
4.
5.
The Financial Statements, comprising the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated
Statement of Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows and
accompanying notes as set out on pages 38 to 62, are in accordance with the Corporations Act 2001 and:
(a)
(b)
Comply with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001; and
Give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2018 and of its performance for the year
ended on that date;
In the Directors’ 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;
The Remuneration Report disclosures set out (within the Directors’ Report) on pages 30 to 35 (as the audited Remuneration Report)
comply with section 300A of the Corporations Act 2001;
The Company has included in the notes to the Financial Statements an explicit and unreserved statement of compliance with the
International Financial Reporting Standards.
The Directors have received the declarations required to be made to the Directors by the Managing Director (the person who performs the
chief executive officer function) and Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 for the financial
year ended 30 June 2018.
This declaration is made in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001.
Justin Richard
Managing Director
28 September 2018
ALARA RESOURCES LIMITED
2018 FULL YEAR REPORT | 43
64
Alara Resources Annual Report 2018
Independent Auditor’s Report
Independent Auditor's Report
To the Members of Alara Resources Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Alara Resources Limited (“the Company”) and its
subsidiaries (“the Consolidated Entity”), which comprises the consolidated statement of
financial position as at 30 June 2018, the consolidated statement of profit or loss and
other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion:
a.
the accompanying financial report of the Consolidated Entity is in accordance with
the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Consolidated Entity’s financial position as
at 30 June 2018 and of its financial performance for the year then ended;
and
complying with Australian Accounting Standards and the Corporations
Regulations 2001.
b.
the financial report also complies with International Financial Reporting Standards
as disclosed in Note 1.
Basis for Opinion
We 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 about
whether the financial report is free from material misstatement. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Consolidated Entity in
accordance with the auditor independence requirements of the Corporations Act 2001
and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Alara Resources Annual Report 2018
65
Independent Auditor’s Report
To the Members of Alara Resources Limited (Continued)
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 25 to the financial statements. Alara Saudi
Operations Pty Ltd, a wholly-owned subsidiary of Alara Resources Ltd, is the defendant in a legal claim
alleging breaches of the Shareholders’ Agreement and Saudi Arabian law. Alara Saudi Operations Pty Ltd has
filed a counter-action. Several preliminary hearings have been held and as at the date of this report, the
ultimate outcome of the matter cannot presently be determined, and no provision for any liability or asset that
may result has been made in the financial report. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter
How our audit addressed the key audit matter
Exploration and Evaluation $9,415,666
Our procedures included, amongst others:
(Refer to Note 11)
Exploration and evaluation is a key audit matter due
to:
− The significance of the balance to the
Consolidated Entity’s financial position.
− The level of judgement required in evaluating
management’s application of the requirements of
AASB 6 Exploration for and Evaluation of
Mineral Resources (“AASB 6”). AASB 6 is an
industry specific accounting standard requiring
the application of significant judgements,
estimates and industry knowledge. This includes
specific requirements for expenditure to be
capitalised as an asset and subsequent
requirements which must be complied with for
capitalised expenditure to continue to be carried
as an asset.
− The assessment of impairment of exploration
and evaluation expenditure being inherently
difficult.
− Assessing management’s determination of its
areas of interest for consistency with the
definition in AASB 6. This involved analysing the
tenements in which the consolidated entity holds
an interest and the exploration programmes
planned for those tenements;
− For each area of interest, we assessed the
Consolidated Entity’s rights to tenure by
corroborating to government registries and
evaluating agreements in place with other parties
as applicable;
− We tested the additions to capitalised
expenditure for the year by evaluating a sample
of recorded expenditure for consistency to
underlying records, the capitalisation
requirements of the Consolidated Entity’s
accounting policy and the requirements of
AASB 6;
− We considered the activities in each area of
interest to date and assessed the planned future
activities for each area of interest by evaluating
budgets for each area of interest.
Independent Auditor’s Report continued 66
Alara Resources Annual Report 2018
Independent Auditor’s Report
To the Members of Alara Resources Limited (Continued)
Key audit matter
How our audit addressed the key audit matter
− We assessed each area of interest for one or
more of the following circumstances that may
indicate impairment of the capitalised
expenditure:
− the licenses for the right to explore expiring in
the near future or are not expected to be
renewed;
− substantive expenditure for further
exploration in the specific area is neither
budgeted or planned
− decision or intent by the Consolidated Entity
to discontinue activities in the specific area of
interest due to lack of commercially viable
quantities of resources; and
− data indicating that, although a development
in the specific area is likely to proceed, the
carrying amount of the exploration asset is
unlikely to be recovered in full from
successful development or sale.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine 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 in accordance with Australian Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial report complies with International Financial Reporting Standards.
Independent Auditor’s Report continued Alara Resources Annual Report 2018
67
Independent Auditor’s Report
To the Members of Alara Resources Limited (Continued)
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to
obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are responsible for
the direction, supervision and performance of the Group audit. We remain solely responsible for our
audit opinion.
Independent Auditor’s Report continued 68
Alara Resources Annual Report 2018
Independent Auditor’s Report
To the Members of Alara Resources Limited (Continued)
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2018.
The directors of the Company are responsible for the preparation and presentation of the remuneration report
in accordance with s 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of Alara Resources Limited, for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
BENTLEYS
Chartered Accountants
DOUG BELL CA
Partner
Dated at Perth this 28th day of September 2018
Independent Auditor’s Report continued Alara Resources Annual Report 2018
69
Mineral Licences
SAUDI ARABIA
Information regarding the Company’s mineral licenses, mineral resources and ore reserves is current as at 30 June 2018, based on a
Khnaiguiyah Zinc-Copper Project
review as at that date.
SAUDI ARABIA
The Khnaiguiyah Zinc-Copper Project1 is located approximately 170km south-west of the capital city Riyadh and 35km north-west of Al-Quwayiyah,
which is a regional centre located around the Riyadh to Jeddah Expressway.
Khnaiguiyah Zinc-Copper Project
The Khnaiguiyah Project previously comprised one mining licence, 2 exploration licences and 5 exploration licence applications, totalling
approximately 380km2 held or applied for by United Arabian Mining Company (“Manajem”). The two exploration licences expired and are considered
The Khnaiguiyah Zinc-Copper Project1 is located approximately 170km south-west of the capital city Riyadh and 35km north-west of Al-Quwayiyah,
by Alara to be non-core to the Khnaiguiyah Project. The mining licence that was issued in December 2010, was cancelled in or about December
which is a regional centre located around the Riyadh to Jeddah Expressway.
2015, and is currently the subject of a legal appeal by Manajem.
The Khnaiguiyah Project previously comprised one mining licence, 2 exploration licences and 5 exploration licence applications, totalling
As at the date of this report, a final appeal decision had not been made, nor had the mining licence been reissued.
approximately 380km2 held or applied for by United Arabian Mining Company (“Manajem”). The two exploration licences expired and are considered
by Alara to be non-core to the Khnaiguiyah Project. The mining licence that was issued in December 2010, was cancelled in or about December
Licence
2015, and is currently the subject of a legal appeal by Manajem.
Tenement
Owner
Location/ Property
Name
Grant/ Application
Date
Country
Project
Status
Area
As at the date of this report, a final appeal decision had not been made, nor had the mining licence been reissued.
Khnaiguiyah Zinc-Copper
5.462km2
Project
Project
Mining Lease No 2.
Qaaf
Tenement
Cancelled – appeal
decision pending
Status
Area
2010
Grant/ Application
Date
TBC
Licence
Owner
~170km west of
Riyadh
Location/ Property
Name
Saudi
Arabia
Country
Khnaiguiyah Zinc-Copper
Project
TBC
Cancelled – appeal
decision pending
Mining Lease No 2.
Qaaf
2010
5.462km2
~170km west of
Riyadh
Saudi
Arabia
1 Refer to 18 April 2013 ASX Announcement: Maiden JORC Ore Reserves – Khnaiguiyah Zinc-Copper Project
1 Refer to 18 April 2013 ASX Announcement: Maiden JORC Ore Reserves – Khnaiguiyah Zinc-Copper Project
70
Mineral Licences
OMAN
Alara Resources Annual Report 2018
Al Hadeetha and Daris Copper-Gold Projects
Alara has joint venture interests in five copper-gold deposits located within four Exploration Licences in Oman extending over 692km2. These deposits
are also covered by 5 Mining Licence applications pending grant, totalling ~9km2.
The Washihi/Mullaq2 prospects are located ~160km south-southwest of Muscat (the capital of Oman) and the Al Ajal Prospect is located about 65
km southwest of capital. The Daris Copper-Gold Project3 is located ~150km west of Muscat. Both projects/prospects are located very close to high
quality bitumen roads.
Al Hadeetha Copper-Gold Project
The current status of all licences/applications for this project is presented in the table below.
Licence
Name
Licence Owner
Alara JV
Interest
Exploration Licence
Area
Date of Grant
Date of
Expiry
Status
Area
Mining Licence within EL
Date of
Application
Status
Washihi-
Mazzaza
Al Hadeetha
Resources LLC
Mullaq
Al Hadeetha
Resources LLC
Al Ajal
Al Hadeetha
Resources LLC
70%
39km2
Jan 2008
Nov 2016
Active*
2.1km2
Dec 2012
Active
70%
41km2
Oct 2009
Nov 2016
Active*
1km2
Jan 2013
Pending
70%
25km2
Jan 2008
Nov 2016
Active*
1.5km2
Jan 2013
Pending
*Pursuant to Ministerial decree (38/2013) which declares that the exploration licence ends when its duration ends, unless the licensee has submitted an application for
a mining licence, in which case the duration for the exploration licence extends until the date that a determination is made on the mining application.
Table 1: Washihi JORC Mineral Resources
Cu %
Cut off
0.20
0.25
0.30
0.40
0.50
Indicated Resource
Inferred Resource*
Tonnes
(Million)
Copper (Cu)
%
Gold (Au)
g/t
Tonnes
(Million)
Copper (Cu)
%
Gold (Au)
g/t
12.40
12.40
12.40
12.20
11.40
0.89
0.89
0.89
0.90
0.93
0.22
0.22
0.22
0.22
0.23
3.70
3.70
3.70
3.50
3.00
0.78
0.79
0.79
0.81
0.88
0.23
0.23
0.23
0.24
0.25
* Figures are approximate
2
3
Refer Alara’s 8 December 2011 ASX Announcement: Project Acquisition - Al Ajal-Washihi-Mullaq Copper-Gold Project in Oman
Refer Alara’s 30 August 2010 ASX Announcement: Project Acquisition - Daris Copper Project in Oman
Alara Resources Annual Report 2018
71
Mineral Licences
Table 2: Gossan Hill Mineralisation - Gold4
Table 2: Gossan Hill Mineralisation - Gold4
Mineral Resources estimated will be converted into Mineral Reserves.
Notes
1. Mineral Resources are not Mineral Reserves. There is no certainty that all or any part of the
Notes
1. Mineral Resources are not Mineral Reserves. There is no certainty that all or any part of the
2. Mineral Resources reported in accordance with the JORC 2012.
3.
2. Mineral Resources reported in accordance with the JORC 2012.
3.
4. Mineral resource tonnages have been rounded to reflect the accuracy of the estimate.
5.
4. Mineral resource tonnages have been rounded to reflect the accuracy of the estimate.
5.
Mineral Resources estimated will be converted into Mineral Reserves.
Resource for Cu-Au is stated @ 0.25 % Cu cut-off grade; the mineral resource for gold in the
Gossan hill (outside main ore body) has been stated @ .25 g/t Au.
Resource for Cu-Au is stated @ 0.25 % Cu cut-off grade; the mineral resource for gold in the
Gossan hill (outside main ore body) has been stated @ .25 g/t Au.
1 ounce of Au = 31.1035 grams.
1 ounce of Au = 31.1035 grams.
Cut off
Au g/t
Cut off
Au g/t
0.05
0.05
0.10
0.10
0.15
0.15
0.20
0.20
0.25
0.25
0.30
0.30
0.35
0.35
0.40
0.40
0.45
0.45
0.50
0.50
Ounces
k/Oz
Ounces
k/Oz
5.74
5.74
5.69
5.69
5.63
5.63
5.31
5.31
5.03
5.03
4.73
4.73
4.55
4.55
4.09
4.09
3.79
3.79
3.02
3.02
Kilo Tonnes
(kt)
Kilo Tonnes
(kt)
439.00
439.00
420.30
420.30
405.60
405.60
346.90
346.90
307.60
307.60
274.40
274.40
257.40
257.40
220.50
220.50
197.80
197.80
147.80
147.80
Inferred Resource*
Inferred Resource*
Gold (Au)
g/t
Gold (Au)
g/t
0.41
0.41
0.42
0.42
0.43
0.43
0.48
0.48
0.51
0.51
0.54
0.54
0.55
0.55
0.58
0.58
0.60
0.60
0.64
0.64
* Figures are approximate
Table 3: Summary of Washihi Copper Gold Mineral Resources @ 0.25% Cu Cut-off5
Table 3: Summary of Washihi Copper Gold Mineral Resources @ 0.25% Cu Cut-off5
Copper (Cu)
%
Copper (Cu)
%
0.89
0.89
0.79
0.79
0.87
0.87
Gold (Au)
g/t
Gold (Au)
g/t
0.22
0.22
0.23
0.23
0.22
0.22
Tonnes
Mt
Tonnes
Mt
12.4
12.4
3.7
3.7
16.1
16.1
Resource
classification
Resource
classification
Indicated
Indicated
Inferred
Inferred
Grand total
Grand total
Indicated Resources were converted to a Probable Ore Reserve after the application of modifying factors, including pit optimization, mine design and
an economic evaluation6.
Indicated Resources were converted to a Probable Ore Reserve after the application of modifying factors, including pit optimization, mine design and
an economic evaluation6.
The Ore Reserve estimate (based on a 0.3% Cu cut-off), and in pit mineral inventory are shown in Tables 4 and 5 below.
The Ore Reserve estimate (based on a 0.3% Cu cut-off), and in pit mineral inventory are shown in Tables 4 and 5 below.
Table 4: Washihi Ore Reserve
Table 4: Washihi Ore Reserve
Classification
Classification
Tonnes
Mt
Tonnes
Mt
9.7
9.7
Probable
Probable
Table 5: Washihi Mining Inventory
Table 5: Washihi Mining Inventory
Classification
Classification
Ore reserve
Ore reserve
Inferred resource*
Inferred resource*
Total
Total
Tonnes
Mt
Tonnes
Mt
9.7
9.7
0.3
0.3
10.0
10.0
* Figures are approximate
Ore reserve
Ore reserve
Copper (Cu)
%
Copper (Cu)
%
0.88
0.88
Copper (Cu)
%
Copper (Cu)
%
0.88
0.88
0.65
0.65
0.87
0.87
Gold (Au)
g/t
Gold (Au)
g/t
0.22
0.22
Gold (Au)
g/t
Gold (Au)
g/t
0.22
0.22
0.22
0.22
0.22
0.22
4
5
4
6
5
6
Refer Alara’s 19 September 2016 ASX Announcement
Refer Alara’s 15 December 2016 ASX Announcement: Maiden JORC Ore Reserves – Al Hadeetha Copper-Gold Project
Refer Alara’s 19 September 2016 ASX Announcement
Detail of the modifying factors supporting the Ore Reserve are contained in Appendix 1 (JORC Code, 2012 Edition - Table 1) of the 15 December announcement.
Refer Alara’s 15 December 2016 ASX Announcement: Maiden JORC Ore Reserves – Al Hadeetha Copper-Gold Project
Detail of the modifying factors supporting the Ore Reserve are contained in Appendix 1 (JORC Code, 2012 Edition - Table 1) of the 15 December announcement.
72
Mineral Licences
Daris Copper-Gold Project
Alara Resources Annual Report 2018
The current status of all licences/applications for this project is presented in the table below.
Block
Name
Licence Owner Alara JV Interest
Exploration Licence
Mining Licences within EL
Area
Date of
Grant
Date of
Expiry
Status
Area
Date of
Application
Status
Block 7
Al Tamman
Trading and Est.
LLC
50%
587km2
Nov 2009
Feb 2016
Active*
Daris East
3.2km2
Daris 3A-5
1.3km2
June 2012
Pending
*Pursuant to Ministerial decree (38/2013) which declares that the exploration licence ends when its duration ends, unless the licensee has submitted an application for
a mining licence, in which case the duration for the exploration licence extends until the date that a determination is made on the mining application.
Table 6: Daris-East JORC Mineral Resources
Ore type
Cut-off
grade
Cu%
Sulphides
Oxides
0.5
0.5
* Figures are approximate
Measured
Indicated
Tonnes
Cu%
Gold
(Au)
g/t
Tonnes
Cu%
Gold
(Au)
g/t
Measured and
Indicated
Tonnes
Cu%
Inferred*
Tonnes
Cu%
Gold
(Au)
g/t
Gold
(Au)
g/t
130,000
2.48
0.23
110,000
2.24
0.51
240,000
2.37
0.43
30,000
2.25
0.55
100,000
0.77
0.03
90,000
0.66
0.14
180,000
0.72
0.08
2,000
0.61
0.97
The information in these JORC Resource tables was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC
Code 2012 on the basis that the information has not materially changed since it was last reported.
Alara Resources Annual Report 2018
73
JORC Competent Person’s Statement
JORC Competent Persons Statements
The information in this report that relates to the feasibility study of the Al Hadeetha Copper-Gold project is based on information compiled by Mr Atmavireshwar Sthapak,
who is a Member of the Australasian Institute of Mining and Metallurgy and is an executive director of Alara Resources. Mr Sthapak has sufficient experience which is
relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking to qualify as a Competent Person as defined in the
JORC Code, 2012 edition. Mr Sthapak consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The information in this report that relates to Ore Reserve of the Al Hadeetha Project was compiled by Mr Harry Warries, who is a Fellow of the Australasian Institute of
Mining and Metallurgy. He is employed by Mining Focus Consultants Pty Ltd. Mr Warries has sufficient experience which is relevant to the style of mineralisation and
type of deposit under consideration, and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves.’ In assessing the appropriateness of the Ore Reserve estimate, Mr Warries has relied on
various reports, from both internal and external sources, in either draft or final version, which form part of or contribute to the Al Hadeetha Project Feasibility Study.
These reports are understood to be compiled by persons considered by Alara to be competent in the field on which they have reported. Mr Warries consents to the
inclusion in the report of the information in the form and context in which it appears.
The information in this report that relates to JORC Resources of the Daris Copper Gold Project and the Al Hadeetha Copper-Gold Project (Oman) are based on, and
fairly represents, information and supporting documentation prepared by Mr Ravi Sharma, who is a Chartered Member of The Australasian Institute of Mining and
Metallurgy, Registered Member of The Society for Mining, Metallurgy and Exploration. Mr Sharma was a principal consultant to Alara Resources and has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking to qualify as a Competent Person
as defined in the JORC Code, 2012 edition. Mr Sharma approves and consents to the inclusion in the report of the matters based on his information in the form and
context in which it appears.
Production Target
The 1mtpa production target over a projected ten-year mine life referred to in this report is based on the same information as is contained in the Company’s ASX
announcement titled Oman Activities Update dated 24 Jan 2017. All material assumptions underpinning the production target in that announcement continue to apply
and have not materially changed.
Forward Looking Statements
This report contains “forward-looking statements” and “forward-looking information”, including statements and forecasts which include without limitation, expectations
regarding future performance, costs, production levels or rates, mineral reserves and resources, the financial position of Alara, industry growth and other trend
projections. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “is expecting”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes”, or variations (including negative variations) of such words and phrases, or state that certain
actions, events or results “may”, “could”, “would”, “might”, or “will” be taken, occur or be achieved. Such information is based on assumptions and judgements of
management regarding future events and results. The purpose of forward-looking information is to provide the audience with information about management’s
expectations and plans. Readers are cautioned that forward-looking information involves known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of Alara and/or its subsidiaries to be materially different from any future results, performance or achievements expressed
or implied by the forward-looking information. Such factors include, among others, changes in market conditions, future prices of gold and silver, the actual results of
current production, development and/or exploration activities, changes in project parameters as plans continue to be refined, variations in grade or recovery rates, plant
and/or equipment failure and the possibility of cost overruns.
Forward-looking information and statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience
and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the
circumstances at the date such statements are made, but which may prove to be incorrect. Alara believes that the assumptions and expectations reflected in such
forward-looking statements and information are reasonable. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may
have been used. Alara does not undertake to update any forward-looking information or statements, except in accordance with applicable securities laws.
74
Securities Information
(Current at 30 October 2018)
Issued Securities
Fully paid ordinary shares
Total
At a general meeting of shareholders:
Alara Resources Annual Report 2018
Quoted
on ASX
629,017,589
629,017,589
Unlisted
Total
–
–
629,017,589
629,017,589
(a)
(b)
on a show of hands, each person who is a member or sole proxy has one vote; and
on a poll, each shareholder is entitled to one vote for each fully paid share.
Summary of Directors’ and Employees’ Unlisted Options
Description of Unlisted Options
Date of Issue
Exercise Price
Expiry Date
Vesting Criteria1
No. of Options
9 March 2017
$0.04 (9 Mar 2020) Options
$0.04
9 March 2020
None
3,000,000
Distribution of Listed Ordinary Fully Paid Shares
Number of Holders
Number of Units
% of Total Issued Capital
Spread of Holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
887
280
134
343
271
1,915
Unmarketable parcel
Minimum $500.00 parcel at $0.016 per unit
Minimum parcel size
31,250
Top 20 Listed Ordinary Fully Paid Shareholders
Rank
Shareholder
301,637
661,991
1,124,907
13,341,661
613,587,393
629,017,589
Holders
1,470
0.05%
0.11%
0.18%
2.12%
97.55%
100%
Units
5,312,852
Shares Held
% Issued Capital
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Mr Vikas Malu*
Ms Meng Meng*
Citicorp Nominees Pty Limited*
Mr Vikas Jain*
Mr Justin Richard*
Al Hadeetha Investment Services LLC*
Metal Corners Holdings Co
Mr Piyush Jain
Whitechurch Developments Pty Ltd
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