ANNUAL REPORT 2017
Competent Persons
Unless otherwise advised, the information in this report that relates to exploration results, Mineral Resources and Ore Rreserves is based on information compiled by Mr D Ian Chalmers,
FAusIMM, FAIG, (director of the Company) who 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 ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (JORC, 2012).
Ian Chalmers consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.
Tomingley Gold Project:
■ The information in this report that relates to the Mineral Resource estimates for the Tomingley Gold Project (annual update released to ASX on 4 September 2017) is based on, and fairly
represents, information which has been compiled by Mr Craig Pridmore MAusIMM, Geology Superintendent Tomingley Gold Operations and an employee of Alkane Resources Ltd. Mr
Pridmore has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent
Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Pridmore consented to the inclusion in the
report of the matters based on his information in the form and context in which they appear.
■ The information in this report that relates to the Ore Reserve estimate for the Tomingley Gold Project (annual update released to ASX on 4 September 2017) is based on, and fairly represents,
information which has been compiled by Mr John Millbank MAusIMM (Proactive Mining Solutions), an independent consultant. Mr Millbank has sufficient experience that is relevant to the
style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Millbank consented to the inclusion in the report of the matters based on his information in the form
and context in which they appear.
Dubbo Project:
■ The information in this report that relates to the Mineral Resource estimates is based on, and fairly represents, information which has been compiled by Mr Stuart Hutchin MAIG, an employee
of Mining One Pty Ltd. Mr Hutchin has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken
to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Hutchin consented
to the inclusion in this report of the matters based on his information in the form and context in which they appear.
■ The information in this report that relates to the Ore Reserve estimate is based on, and fairly represents, information which has been compiled by Mr Ievan Ludjio MAusIMM(CP) and Mr
Mark Van Leuven FAusIMM (CP), employees of Mining One Pty Ltd. Mr Ludjio and Mr Van Leuven have sufficient experience that is relevant to the style of mineralisation and type of deposit
under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’. Mr Ludjio and Mr Van Leuven each consented to the inclusion in this report of the matters based on his information in the form and context in which
they appear.
Disclaimer
This report contains certain forward looking statements and forecasts, including possible or assumed reserves and resources, production levels and rates, costs, prices, future performance
or potential growth of Alkane Resources Ltd, industry growth or other trend projections. Such statements are not a guarantee of future performance and involve unknown risks and uncertainties,
as well as other factors which are beyond the control of Alkane Resources Ltd. Actual results and developments may differ materially from those expressed or implied by these forward looking
statements depending on a variety of factors. Nothing in this report should be construed as either an offer to sell or a solicitation of an offer to buy or sell securities.
This document has been prepared in accordance with the requirements of Australian securities laws, which may differ from the requirements of United States and other country securities laws.
Unless otherwise indicated, all Ore Reserve and Mineral Resource estimates included or incorporated by reference in this document have been, and will be, prepared in accordance with the
JORC classification system of the Australasian Institute of Mining, and Metallurgy and Australian Institute of Geosciences.
A L K A N E R E S O U R C E S LT D
C O M P A N Y I N F O R M A T I O N
C O N T E N T S
ACN 000 689 216 ABN 35 000 689 216
DIRECTORS
I J Gandel
D I Chalmers
N P Earner
A D Lethlean
SECRETARY
K E Brown
REGISTERED OFFICE AND
PRINCIPAL PLACE OF BUSINESS
Ground Floor, 89 Burswood Road, Burswood WA 6100
Telephone: 61 8 9227 5677 Facsimile: 61 8 9227 8178
SHARE REGISTRY
Advanced Share Registry Limited
110 Stirling Highway, Nedlands WA 6009
Telephone: 61 8 9389 8033 Facsimile: 61 8 9262 3723
AUDITORS
PricewaterhouseCoopers
BUSINESS REVIEW
■ Chairman’s report
■ Resourcing tomorrow’s technology
■ Major projects and operations
■ Exploration
■ Sustainability
FINANCIAL REPORT
■ Directors’ report
■ Auditor's independence declaration
■ Consolidated statement of comprehensive income
Brookfield Place, 125 St Georges Terrace, Perth WA 6000
■ Consolidated balance sheet
SECURITIES EXCHANGE LISTINGS
Australian Securities Exchange (Perth)
Ordinary fully paid shares
Code: ALK
OTCMarkets - OTCQX International
American Depositary Receipts (ADR)
Code: ANLKY
Level 1 ADR Sponsor
The Bank of New York Mellon
Depositary Receipts Division
101 Barclay Street, 22W, New York NY 10286
United States of America
INTERNET
Internet Home Page: http://www.alkane.com.au
E-mail address: mail@alkane.com.au
■ Consolidated statement of changes in equity
■ Consolidated statement of cash flows
■ Notes to the consolidated financial statements
■ Directors’ declaration
■ Independent auditor’s report
SHAREHOLDER INFORMATION
CORPORATE GOVERNANCE STATEMENT
TENEMENT SCHEDULE
A N N U A L R E P O R T 2 0 1 7
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C H A I R M A N ' S R E P O R T
It is with great pleasure that
I present to you the Alkane
Resources Annual Report for
2017. It has been a positive
year in which the Company
has largely focused on
preparations for significant
developments touching both
our major projects – the
Dubbo Project and the gold
operations at Tomingley.
The Dubbo Project, which is expected to position Alkane as a significant world producer of critical
technology metals, is presently almost construction-ready as we finalise the off-take, design and
financing arrangements. Considerable efforts have been expended during the past year to establish
and consolidate relationships with potential customers, leading to an important MOU with Siemens.
Our preferred approach is to produce high-value downstream products, and to this end the Company
has been working to finalise product specifications for individual manufacturers, with the view to
evaluation and prequalification. Whilst we are highly confident of our ability to sell our base grade
products into the marketplace generally, we have preferred to focus on customers with requirements
for higher grade material (and consequently higher value), which we have already produced at our
demonstration plant at ANSTO.
It is a propitious time to be progressing the Dubbo Project. Recent developments in China’s
manufacturing sector are likely to lead to restricted supply outside China of certain critical elements
that underpin many of the megatrends driving today’s economy. Prices of these materials have already
begun to climb as demand increases and the period of oversupply appears to have ended. As the
most advanced poly-metallic project of its kind outside China, the Dubbo Project is highly significant
as a potential long-term, reliable and independent supply option for these critical materials –
including zirconias and rare earth elements. We look forward to finalising the financing and proceeding
to construction.
At Tomingley Gold Operations (TGO), record production in the June 2017 quarter contributed to a total
of 68,836 ounces poured for the financial year, which was within full-year guidance, despite rain
severely hampering production during the first half of the year. A major focus for the year was
investigation of the resource below the Wyoming One pit with the view to developing underground
mining activities, and we are working towards producing a positive outcome later this year.
Our exploration efforts have targeted the discovery of significant gold deposits in the style of the
Ridgeway-Cadia porphyry gold copper or McPhillamys gold deposits. Testing commenced in a
section of the prospective belt that makes up the broader Tomingley Gold Project area, including near
Alkane’s currently inactive Peak Hill Gold Mine site. A drilling program was also carried out in four
target areas of our Northern Molong Porphyry Project, confirming the potential of this 15km long
corridor to host significant deposits.
This Annual Report marks my first as Chairman, and on behalf of the Board and the entire Alkane
community, I wish to extend thanks to retiring Chairman, John Dunlop, for leading the Company for
the past 11 years. John’s engineering and mining expertise was particularly instrumental in the
development of TGO, where he provided invaluable input into the feasibility study, construction and
commissioning of the gold processing plant and mining operation. We wish him well for the future.
I also wish to acknowledge Ian Chalmers, who has stepped down as Managing Director after almost
11 years (and 30+ years at Alkane). In that time he has driven the Company back into gold
production and advanced the world class Dubbo Project through feasibility towards construction.
I am delighted that the Company has retained his services as Technical Director on the Board, which
ensures that the Group continues to benefit from his geological expertise and substantial knowledge
of the Dubbo Project.
We welcome Nic Earner, formerly the Chief Operations Officer, to the role of Managing Director,
and we look forward to augmenting the Board with diverse and experienced candidates as the
project progresses.
Finally, my thanks to the entire Alkane Resources team, including strategic partners and consultants,
along with our many shareholders, for their ongoing support of Alkane. Particular thanks must be
extended to retiring Chief Geologist, Terry Ransted, for his years leading the exploration team, and
Sean Buxton for his leadership of the TGO team. We wish them both all the best for the future.
Ian Gandel
Chairman
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A N N U A L R E P O R T 2 0 1 7
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R E S O U R C I N G T O M O R R O W ’ S T E C H N O L O G Y
ABOUT ALKANE
GLOBAL MEGATRENDS NEED TECHNOLOGY METALS
Alkane Resources is a multi-
commodity mining and
The Dubbo Project will produce a host of critical materials that underpin many of the so-called
megatrends driving today’s global economy. Growth of these megatrend industries is escalating;
moreover, several are converging, creating growth rates much higher than historical levels.
exploration company with a
■ Clean energy – power generation with low emissions and enhanced energy storage
focus on technology metals that
■ Transportation – electric vehicles and aerospace developments using new materials
■ Ageing population – new detection and treatment methods in healthcare
■ Internet of Things – data networking of smart devices, vehicles and buildings
■ Automation and robotics – the road to artificial intelligence
are essential for a range of
future sustainable technologies.
Clean energy, electric vehicles,
artificial intelligence and
modern healthcare all rely on
elements that will be produced
by Alkane subsidiary, Australian
Strategic Materials (ASM) –
namely zirconium, certain rare
earths, hafnium and niobium.
ASM’s Dubbo Project, which is
currently construction-ready, is
poised to position the Company
as a strategic and significant
producer of these critical
materials.
Alkane’s projects and
operations – encompassing the
Dubbo Project, the Tomingley
Gold Operations and other
interests in gold and copper –
are located in Central Western
New South Wales, Australia.
The Company’s sustainable
practices include upholding
stringent social and
environmental standards, with
the view to minimising carbon
footprint and leaving a positive
legacy for local communities
and the land alike.
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A L K A N E R E S O U R C E S LT D
These megatrends all rely on myriad new and emerging technologies, many of which rely in turn on specialty materials or “technology metals” that will be
produced by Alkane subsidiary, Australian Strategic Materials (ASM).
■ Zirconium – Zirconium-based ceramics are used in solid oxide fuel cells, special alloys, dental replacements and jet turbine coatings; zirconium is also
used in kidney dialysis and smartphones.
■ Rare earth elements – Praseodymium/neodymium alloys are used in permanent magnets for wind power turbines, electric vehicles and industrial
robots; rare earth elements are also used in medical imaging techniques, smartphones, fibre optics, special alloys, ceramics and electronics.
■ Hafnium – Hafnium is used in several aerospace alloys and ceramics, while hafnium oxide is emerging as a material of choice in semiconductors and
data storage devices.
■ Niobium – Niobium’s main use is in high-strength low-alloy (HSLA) steels; niobium alloys are being used in aerospace rocket engine nozzles (with
hafnium); niobium is also used widely in engineering steels (including turbines), MRIs, capacitors for electric motors and mobile electronics.
A N N U A L R E P O R T 2 0 1 7
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ALKANE: AN ALTERNATIVE SOURCE OF SUPPLY
The global markets for most of the products that will be produced by the Dubbo Project are largely controlled by China’s vast manufacturing industry. China
currently produces more than 75% of the world’s zirconium and over 90% of high-value rare earth elements. Recent developments in Chinese domestic
policies, however, are expected to have far-reaching effects in China and world markets, particularly in those countries heavily invested in manufacturing.
Announced in March 2017, the Made in China 2025 policy aims to move Chinese industry away from low-value, polluting industries to manufacturing for
higher-value, downstream markets. As a result, several high-technology sectors now have various targets of up to 80% domestic supply by 2025. Alkane
expects the outcome of these new policies to have the unintended consequence of restricting rest-of-world supply of certain critical elements (including
zirconium and rare earth elements) due to consumption by downstream Chinese manufacturers. Moreover, supply of technology components containing these
elements (such as rare earth permanent magnets and electric motors) would potentially cease as China focuses on selling finished products (such as electric
vehicles or total wind turbine systems).
This means countries currently relying on supply from China will need to seek alternatives and develop complete mine-to-market supply chains in order to
continue and guarantee production.
The Dubbo Project is highly significant as a potential long-term,
reliable and independent supply option outside China.
MARKET CONDITIONS
Due to the announced changes in China’s manufacturing sector, Alkane expects that the period of low prices and oversupply is now over for rare earths and
zirconium materials. The Chinese government has already embarked upon a “war on pollution”, leading to stricter enforcement of environmental laws across
the sector. The imposition of additional regulations along with environmental inspections and audits are causing temporary plant closures and are also likely to
curb some illegal mining.
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ZIRCONIUM
At the end of the 2017 financial year, zirconium chemical prices were 40% higher than end-2016, breaching US$2000/t for the base product, zirconium
oxychloride (ZOC), to reach the highest levels in four to five years. This was partially due to the Chinese government-led clean-up of industry, which resulted
in reduced production of ZOC, and also due to increased prices of the raw material, zircon, from which most zirconium is produced. The 20% increase in
zircon price was underpinned by restricted supply. Further increase in ZOC price seems likely, as China increases the focus on ZOC waste streams (containing
uranium and thorium) from production from conventional mineral sands sources, and their disposal.
Australian Strategic Materials (ASM) will produce and supply zirconium as zirconium chemicals (zirconium
oxychloride ZOC and zirconium basic carbonate ZBC) and chemical zirconia (zirconium dioxide) in two basic
grades – a standard grade and a high-purity grade at a range of product specifications.
RARE EARTHS
Continued strong and growing demand for rare earth permanent magnets in large-volume markets (such as renewable energy, electric vehicles and robotics)
remains the primary driver for rare earths (mainly praseodymium and neodymium) and accounts for more than 75% of demand by value. At present, over 90%
supply of high-value rare earths is from China, making the market sensitive to the recent developments in China’s manufacturing sector. Praseodymium and
neodymium prices closed the financial year at the highest levels in two years.
The price of magnet rare earths is anticipated to continue to increase with demand, and also in response to expected further developments in China. To recoup
a US$30-40B industry clean-up cost, rare earth prices could double; moreover, if illegal rare earth mining is curbed (currently accounting for more than 50%
of supply), production will be reduced. Additionally, the Made in China imperative will lead to increased domestic demand, with less available for export.
ASM represents a source of critical rare earths that is independent of the dominant Chinese market. The
Dubbo Project will produce a range of high-value rare earth oxides and metals – including the key magnet rare
earths, praseodymium, neodymium, samarium, terbium and dysprosium.
A N N U A L R E P O R T 2 0 1 7
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R E S O U R C I N G T O M O R R O W ’ S T E C H N O L O G Y CONTINUED
HAFNIUM
In today’s market, hafnium is only produced as a consequence of recovering hafnium-free zirconium metal for use in the nuclear industry. It is always found in
nature combined with zirconium, from which it must be separated using advanced metallurgical processing. As a result, supply is currently dependent on
companies that manufacture “nuclear” grade zirconium. This has limited world production to around 70tpa, of which about 75% relies on feedstock from China.
Ongoing losses by one of the main hafnium producers, France’s Areva, alongside the announced Chapter 11 bankruptcy of another major producer,
Westinghouse Electric Corporation, has put the hafnium market under pressure. In 2016, demand for hafnium, which is deemed essential for a wide range of
existing and emerging applications, exceeded supply, and the market is likely to remain constrained in 2017. Even with Chinese zirconium companies starting
to produce hafnium-free zirconium for their own nuclear industry, the few additional tonnes thus produced are expected to be consumed domestically. Despite
this, the number of emerging applications could lead to double the demand for hafnium in the next 10 years, up to 150tpa.
ASM will offer a unique source of hafnium that is independent of both the Chinese and non-Chinese nuclear
zirconium industries. The Company’s start-up production will be around 50tpa in the form of hafnium chloride
and hafnium dioxide powders at a number of different product specifications – including high-purity grades
suitable for use in semiconductor applications.
NIOBIUM
The niobium market has remained largely flat, but is one of the most stable specialty metal markets, owing to the support of the three main producers. The
main driver for demand remains high-strength low-alloy (HSLA) steels, which are widely used in the construction and automotive industries.
ASM will be the only Australian producer of ferro-niobium (onsite at the Dubbo Project) via a joint venture with
Treibacher Industrie AG. A few different specifications containing different alloying impurities will be produced
to meet market demand.
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A L K A N E R E S O U R C E S LT D
“The Dubbo Project will
produce a host of critical
materials that underpin many of
the so-called megatrends driving
today’s global economy. Growth
of these megatrend industries is
escalating; moreover, several
are converging, creating growth
rates much higher than
historical levels.”
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M A J O R P R O J E C T S A N D O P E R A T I O N S
Development of Alkane’s Dubbo
Project, through wholly owned
subsidiary, Australian Strategic
Materials Ltd (ASM), represents
a potential long-term strategic
supply of critical minerals for a
range of future technologies
and remains the primary focus
for the Company. The gold
operations at Tomingley also
continue, with record production
in the June quarter and
assessment of the most
profitable approach to
underground mining scheduled
for completion late in 2017.
TOMINGLEY GOLD PROJECT
Alkane’s Tomingley Gold Project consists of five exploration licences, one gold lease and 10 mining
leases covering a 50km long prospective belt that extends from around the village of Tomingley,
located approximately 50km south-west of Dubbo in Central Western NSW, to near Parkes in the south
(an area of approximately 270 square kilometres). The Project incorporates the Company’s currently
active Tomingley Gold Operations and the inactive Peak Hill Gold Mine.
TOMINGLEY GOLD OPERATIONS (TGO)
Wholly owned by Alkane, TGO is based on four gold deposits near Tomingley (Wyoming One,
Wyoming Three, Caloma One and Caloma Two) totalling 483,000 ounces. Production for the year
ended June 2017 totalled 68,836 ounces of gold poured at an All in Sustaining Cost (AISC*) of
A$1335/oz. A total of 226,771 ounces of gold have been recovered since start up in 2014.
2017 production was an excellent result largely due to a record 27,924 ounces of gold poured in the
June 2017 quarter at an AISC of A$906, which counterbalanced the rain-hampered production in the
first half of the financial year. The total annual production was within the original full year guidance.
Production for the 2018 financial year is expected to be 65,000 to 70,000 ounces of gold at an AISC
of A$1100 to A$1200.
Commissioned in January 2014, the TGO processing plant has been operating at the design
capacity of 1Mtpa since late May 2014. In line with the original project schedule, open cut mining
at Tomingley is scheduled to be completed in the September quarter of 2018. Meanwhile, TGO is
investigating the Mineral Resource below the Wyoming One pit through a substantial core drilling
program, with a view to determining the most profitable approach to underground mining by
the end of 2017.
*
AISC = All In Sustaining Cost comprises all site operating costs, royalties, mine exploration, sustaining capex and mine
development and an allocation of corporate costs, presented on the basis of ounces produced.
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A L K A N E R E S O U R C E S LT D
2017 Highlights
TGO PRODUCTION
■ Gold poured 68,836 ounces
■ Gold sold 69,929 ounces at average A$1678/oz
■ All In Sustaining Cost A$1335/oz
■ Revenues of A$117.3M and operating cash flow of A$32.7 million
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MINERAL RESOURCES AND ORE RESERVES
The Company reports Ore Reserves and Mineral Resources for TGO as at 30 June 2017 in accordance with the 2012 edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2012). These estimates take into account ore depleted by mining during the
2017 financial year and were reported to the ASX on 4 September 2017. Mineral Resources are wholly inclusive of Ore Reserves.
Tomingley Gold Operations Mineral Resources (as at 30 June 2017)
DEPOSIT
MEASURED
INDICATED
INFERRED
TOTAL
TOTAL GOLD
TONNAGE
GRADE
TONNAGE
GRADE
TONNAGE
GRADE
TONNAGE
GRADE
(Kt)
(g/t Au)
(Kt)
(g/t Au)
(Kt)
(g/t Au)
(Kt)
(g/t Au)
(Koz)
Open Pittable Resources
(cut off 0.50g/t Au)
Wyoming One
Wyoming Three
Caloma One
Caloma Two
Stockpiles
Sub Total
Underground Resources
(cut off 2.50g/t Au)
Wyoming One
Wyoming Three
Caloma One
Caloma Two
Sub Total
TOTAL
1,716
86
954
-
762
3,518
169
10
-
-
179
3,697
1.7
2.0
1.6
0.0
1.0
1.6
4.8
3.6
0.0
0.0
4.7
1.8
400
16
1,016
956
1.6
1.3
1.2
2.1
625
33
824
927
1.1
1.4
1.2
1.1
2,388
1.73
2,409
1.3
206
6
5
80
297
2,685
4.4
3.1
3.0
3.4
4.1
1.9
363
4
16
53
436
2,845
4.2
3.1
2.9
3.2
4.0
1.7
2,741
135
2,794
1,883
762
8,315
738
20
21
133
912
9,227
1.6
1.7
1.3
1.6
1.0
1.4
4.4
3.4
2.9
3.3
4.2
1.7
137
8
120
97
23
385
104
2
2
14
122
508
Apparent arithmetic inconsistencies are due to rounding.
Tomingley Gold Operations Ore Reserves (as at 30 June 2017)
DEPOSIT
PROVED
PROBABLE
TOTAL
TOTAL GOLD
Open Pittable Reserves (cut off 0.50g/t Au)
Wyoming One
Wyoming Three
Caloma One
Caloma Two
Stockpiles
Sub Total
Underground Reserves (cut off 2.50g/t Au)
Wyoming One*
Sub Total
TOTAL
Apparent arithmetic inconsistencies are due to rounding.
TONNAGE
(Kt)
GRADE
(g/t Au)
TONNAGE
(Kt)
GRADE
(g/t Au)
TONNAGE
(Kt)
GRADE
(g/t Au)
1,033
0
58
-
762
1,853
224
224
2,077
1.7
0
2.2
-
1.0
1.4
4.0
4.0
1.7
134
0
0
167
-
301
300.5
300.5
602
1.5
0
0
2.7
-
2.2
3.4
3.4
2.8
1,167
0
58
167
762
2,154
524.4
524.4
2,678
1.6
0
2.2
2.7
1.0
1.5
3.7
3.7
1.9
(Koz)
63
0
4
14
22
104
62
62
166*
*The Underground Reserves were advised in the ASX release of 9 December 2015 and these reserves are currently subject to a detailed core drilling program
and revised feasibility study, scheduled to be completed late 2017.
12
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Comparison of 2016/2017 TGO Mineral Resources and Ore Reserves
DEPOSIT
TOTAL RESOURCES
TOTAL RESERVES
2016
2017
2016
2017
TONNAGE
GRADE
GOLD
TONNAGE
GRADE
GOLD
TONNAGE
GRADE
GOLD
TONNAGE
GRADE
GOLD
(Kt)
(g/t Au)
(koz)
(Kt)
(g/t Au)
(koz)
(Kt)
(g/t Au)
(koz)
(Kt)
(g/t Au)
(koz)
Wyoming One
Wyoming Three
Caloma One
Caloma Two
Stockpiles
Underground
TOTAL
3,067
135
3,700
1,789
701
932
10,324
1.6
1.7
1.4
2.0
0.8
4.2
1.8
153
8
163
112
18
125
579
Apparent arithmetic inconsistencies are due to rounding.
2,741
135
2,794
1,883
762
912
9,227
1.6
1.7
1.3
1.6
1.0
4.2
1.7
137
8
120
97
23
123
508
1,447
0
1,322
318
701
524
4,312
1.6
0.0
1.5
3.2
0.8
3.7
1.8
78
0
62
33
18
62
253
1,167
0
58
167
762
524
2,678
1.6
0.0
2.2
2.7
1.0
3.7
1.9
63
0
4
15
22
62
166
The table above compares the Mineral Resources and Ore Reserves year on year with 2016 as per the current reporting requirements. The primary differences
from 2016 to 2017 are:
■ Ore mined from Caloma One, Caloma Two and Wyoming One during the period.
■ Mining at Wyoming Three completed in 2016.
■ Caloma One mining nearing completion at the end of the period.
REGIONAL EXPLORATION
Alkane has also stepped up the exploration effort for additional resources and reserves in the 30km long prospective belt that comprises the broader
Tomingley Gold Project area. Among the targets being reviewed for longer term development opportunities is Alkane’s Peak Hill Gold Mine, located 15km
south of TGO, which was itself previously in operation from 1996 to 2005. The Company is currently testing an initial belt of approximately 12km that runs
from south of TGO to just north of the Peak Hill Gold Mine site. Early results indicate the presence of stratigraphy and mineralisation similar to that which
hosts the ore deposits at Tomingley.
A N N U A L R E P O R T 2 0 1 7
13
M A J O R P R O J E C T S A N D O P E R A T I O N S CONTINUED
DUBBO PROJECT
Owned by Alkane subsidiary, Australian Strategic Materials (ASM), the Dubbo Project is based upon large in-ground resources of the metals zirconium,
hafnium, niobium, tantalum, yttrium and rare earth elements, and represents a potential strategic supply of these critical minerals for a range of future
technologies. Located at Toongi, 25km south of the large regional centre of Dubbo in Central Western NSW, the Dubbo Project has a potential mine life of
70+ years and is the most advanced poly-metallic project of its kind outside China.
The project is currently construction-ready, subject to financing. The mineral deposit and surrounding land has been acquired, all State and Federal approvals
are in place, and the project has a well-established flowsheet. Based on a strong business case, the Company is now focusing on refining marketing strategies
for Dubbo Project products, including product off-take agreements and product prequalification where possible.
Dubbo Project Product Output
Tonnes Produced
Zirconium (Zr)
as zirconium chemicals & zirconia: 16,374tpa (ZrO2 units)
Hafnium (Hf)
as hafnium oxide: 50tpa (HfO2 units)*
Niobium (Nb)
as ferro-niobium: 1,967tpa (Nb units)
Rare Earth Elements (REE)
as chemical concentrate: 6,664tpa (rare earth oxide units)
including 921tpa neodymium and 237tpa praseodymium oxides
*
Startup output; potential for 200tpa Hf, depending on market demand.
Tonnages are for 1,000,000tpa production, based on recoveries developed
from mass balances of the demonstration pilot plant.
MINERAL RESOURCES AND ORE RESERVES
Revenue Split
Zirconium (Zr)
42%
Hafnium (Hf)
10%
Niobium (Nb)
17%
Other Rare Earths
5%
Magnet Rare Earths
(Pr, Nd, Dy, Tb, Sm)
25%
The Company reports Ore Reserves and Mineral Resources for the Dubbo Project as at 30 June 2017 in accordance with the 2012 edition of the Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2012). These estimates, provided by independent industry consultants
Mining One Pty Ltd, take into account revised engineering, costings and revenue data, and were reported to the ASX on 19 September 2017.
The reportable Mineral Resources are based on the open pittable Toongi deposit, which has a depth extent of 115 metres below surface. These Mineral
Resources are wholly inclusive of Ore Reserves, which are based on economic parameters applied to the Mineral Resources, reflecting an initial project
horizon of 20 years.
Dubbo Project Mineral Resources (as at 30 June 2017)
RESOURCE CATEGORY
Measured
Inferred
TOTAL
TONNES
(Mt)
42.81
32.37
75.18
ZrO2
(%)
1.89
1.90
1.89
HfO2
(%)
0.04
0.04
0.04
*
TREO% is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O5, Ta2O5, Y2O3
Dubbo Project Ore Reserves (as at 30 June 2017)
RESOURCE CATEGORY
Proved
Probable
TOTAL
TONNES
(Mt)
18.90
0
18.90
ZrO2
(%)
1.85
1.85
HfO2
(%)
0.04
Nb2O5
(%)
0.45
0.44
0.44
Nb2O5
(%)
0.440
Ta2O5
(%)
0.03
0.03
0.03
Ta2O5
(%)
0.029
Y2O3
(%)
0.14
0.14
0.14
Y2O3
(%)
0.136
TREO*
(%)
0.74
0.74
0.74
TREO*
(%)
0.735
0.04
0.440
0.029
0.136
0.735
*
TREO% is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O5, Ta2O5, Y2O3
14
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Measured
Inferred
TOTAL
Proved
Probable
TOTAL
COMPARISON OF 2011/2016 TO 2017 MINERAL RESOURCES AND ORE RESERVES
The tables below compare the Mineral Resources and Ore Reserves year on year with 2016 as per the current reporting requirements.
Comparison Dubbo Project Mineral Resources
RESOURCE CATEGORY
TONNES
2011/2016
Nb2O5
(%)
0.46
0.46
Ta2O5
(%)
0.03
0.03
HfO2
(%)
0.04
0.04
Y2O3
(%)
0.14
0.14
ZrO2
(%)
1.96
1.96
TREO*
TONNES
0.74
0.74
42.81
32.37
ZrO2
(Mt)
1.89
1.90
HfO2
(%)
0.04
0.04
2017
Nb2O5
(%)
0.45
0.44
Ta2O5
(%)
0.03
0.03
Y2O3
(%)
0.14
0.14
TREO*
(%)
0.74
0.74
(Mt)
35.7
37.5
73.2
1.96
0.04
0.46
0.03
0.14
0.74
75.18
1.89
0.04
0.44
0.03
0.14
0.74
*
TREO% is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O5, Ta2O5, Y2O3
Comparison Dubbo Project Ore Reserves
RESOURCE CATEGORY
TONNES
2011/2016
Nb2O5
(%)
0.46
0.46
Ta2O5
(%)
0.03
0.03
HfO2
(%)
0.04
0.04
Y2O3
(%)
0.14
0.14
ZrO2
(%)
1.92
1.93
TREO*
TONNES
ZrO2
(Mt)
HfO2
(%)
2017
Nb2O5
(%)
Ta2O5
(%)
Y2O3
(%)
TREO*
(%)
0.75
0.74
18.90
1.85
0.04
0.44
0.029
0.136
0.735
0
(Mt)
8.07
27.86
35.93
1.93
0.04
0.46
0.03
0.14
0.74
18.90
1.85
0.04
0.44
0.029
0.136
0.735
*
TREO% is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O5, Ta2O5, Y2O3
The primary differences from 2016 to 2017 are:
■ Mineral Resources are 2.7% higher for the total, with Measured 19% higher. Metal grades are fundamentally the same.
■ Proved Ore Reserves are 134% higher with metal grades similar, reflecting greater confidence in the Project economics.
■ Total Ore Reserves have been reduced 47% due to removal of the Probable Reserves. This reflects that the initial project site design and regulatory
approvals, including appropriate waste storage facilities, is for a start-up 20 year life.
A N N U A L R E P O R T 2 0 1 7
15
M A J O R P R O J E C T S A N D O P E R A T I O N S CONTINUED
ENGINEERING
During the 2017 financial year, ASM has been working with Outotec, a global minerals and metals technology supplier, to refine the engineering design and
overall project cost. This has led to the development of a modularised build approach, which involves the staged build of the processing plant while
preserving the project economics. ASM considers the most advantageous option is to build the plant in two stages, each of half capacity, utilising some
common infrastructure. This will allow the second stage to be built after the first stage is successfully commissioned and market pricing achieved for the
products.
Costing for such a modularised build is being refined to allow construction to commence quickly following financing. Pending completion of this study, the
following revenue and cost estimates have been calculated for the operation (details in ASX Announcement 28 October 2016):
■ Stage 1 – Revenue US$200-220M, Opex US$120-130M
■ Stage 1+2 – Revenue US$400-440M, Opex US$220-230M
FINANCING
ASM continues to work with its financial advisors, Sumitomo Mitsui Banking Corporation, to pursue the funding strategy for the project. Strategic investment,
Export Credit Agency (ECA) finance and commercial debt remain the key components of the envisaged project funding suite. ASM has presented to numerous
local and international fund managers, and discussions are continuing with relevant ECAs and commercial banks.
MARKETING AND OFF-TAKE STRATEGIES
Development and refinement of marketing strategies for Dubbo Project products has continued, bolstered by the appointment of Mr Alister MacDonald as
General Manager – Marketing, extending his past role as technical marketing consultant since 2008. Mr MacDonald has over 30 years international experience
in zirconium and related materials across the value chain.
In addition, ASM finalised a worldwide zirconium sales and marketing agreement with Minchem, a leading European manufacturing and trading company. A
12 month toll processing agreement has also been signed with Vietnam Rare Earths JSC (VTRE) for processing of rare earth concentrates into separate rare
earth oxides and metals as required, following a memorandum of understanding (MOU) in April 2016.
ASM’s preferred approach is to work directly with tech companies and focus on producing higher-value downstream products. This model is deemed to be the
most profitable, while simultaneously offering best value, shorter lead times and transparent supply chains for customers. To this end, ASM and Minchem
have had many discussions with interested companies across the world, with the view to securing zirconium product off-take agreements, supplier
prequalification, MOUs or Letters of Intent (LOI).
In March 2017, Minchem had secured six non-binding LOIs for the supply of zirconium chemicals that will account for approximately 60% of the stage 1
development output, totalling about 15% of anticipated project revenues. These LOIs reflect expressions of interest in zirconia products, provided specifications
for each prospective customer are met.
Discussions are also moving forward with prospective rare earth customers, with interest levels rising to a point that the Dubbo Project rare earth output is at
risk of demand for the products being greater than the anticipated production.
In October 2016, Alkane signed an MOU with global industrial group Siemens regarding the procurement of Siemens equipment and operational solutions,
and future off-take of Dubbo Project products. The MOU paves the way for Siemens to use Dubbo Project products (in particular rare earths for permanent
magnets, as well as the metals niobium, zirconium, and hafnium) in a range of high tech and green energy solutions – such as wind turbines. In turn, ASM
will explore options to procure Siemens equipment and systems for the Dubbo Project processing plant.
For the purpose of producing sample products for customer evaluation and possible prequalification, the Dubbo Project Demonstration Pilot Plant at ANSTO
was run during the September 2016 quarter. Zirconium products at different purity grades were produced, including a standard grade 99.1% and high-purity
“nuclear” grade 99.6% zirconia. High-purity samples of hafnium oxide were also produced. Further development of value-added zirconium and hafnium
chemicals, oxides and metals continued during the year, with a major focus on high-purity chemical precursors.
In order to establish and prove downstream toll processing supply and logistics functions of rare earth products, and bring forward customer approvals in
advance of Dubbo Project development, ASM purchased two parcels of rare earth concentrate on the open market, totalling 80 tonnes. These were
subsequently processed by VTRE to produce approximately 31 tonnes of separated rare earth oxides, including cerium, praseodymium and neodymium
oxides. They will be sold on the market as oxides or metal alloys.
Disruption to China’s supply of both zirconium chemical and rare earth magnet metals has given rise to increased urgency for western companies to secure
long-term independent supplies of critical elements. Growing uncertainty over prices and supply makes the Dubbo Project an important new global source of
supply.
16
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A N N U A L R E P O R T 2 0 1 7
17
E X P L O R A T I O N
The Company has interests at a
number of projects in Central
Western New South Wales.
During the 2017 financial year,
exploration efforts were again
predominantly focused on the
Tomingley Gold Project and the
Northern Molong Porphyry
Project.
NORTHERN MOLONG PORPHYRY PROJECT (GOLD-COPPER)
Alkane Resources Ltd 100%
Encompassing three exploration licences (Bodangora, Kaiser and Finns Crossing), the Northern
Molong Porphyry Project covers an area of 110 square kilometres, centred about 20km north of
Wellington and about 35km east of Dubbo. The project covers a large portion of the northern Molong
Volcanic Belt, which is highly prospective for alkali porphyry-related mineralisation similar to the
Cadia Valley deposits near Orange.
During the year, an RC drilling program tested four target areas (Driell Creek, Boda, Kaiser and
Windora), confirming the potential of this 15km-long corridor to host significant deposits. The first
results of a follow-up diamond drilling program completed post year-end were announced in August
2017, confirming the presence of epithermal style gold mineralisation crosscutting earlier porphyry
gold-copper mineralisation at the Boda Prospect. (See ASX announcements of 3 April 2017 and 15
August 2017.)
ELSIENORA (GOLD)
Alkane Resources Ltd 100%
The Elsienora tenements are located 75km south of Blayney and are considered prospective for
orogenic style gold mineralisation and volcanic hosted gold and base metal mineralisation. Alkane
initially earned an 80% interest in two exploration licences at Elsienora, then finalised an agreement to
purchase the residual 20% interest in the tenements. Previous RC drilling tested the strike extensions
of the Cuddyong Prospect (ASX announcement 6 May 2016). No field activity took place during the
year.
18
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WELLINGTON (GOLD-COPPER)
Alkane Resources Ltd 100%
The Wellington Project hosts Galwadgere, a small copper-gold deposit
with volcanogenic massive sulphide-type characteristics. No field activity
took place during the year.
ROCKLEY (GOLD)
Alkane Resources Ltd 100%
The Rockley Project, located 35km south-east of Blayney, is considered
prospective for McPhillamys style gold mineralisation. No field activity
took place during the year.
CUDAL (GOLD-ZINC)
Alkane Resources Ltd 100%
Cudal is located 20km north-west of the Cadia Valley Operations of
Newcrest Mining. The Company continues actively seeking joint venture
partners for this tenement.
ORANGE EAST PROJECT (GOLD-COPPER)
Alkane Resources Ltd earning 80%
The Orange East Project is located approximately 15km east-south-east
of Orange and consists of one exploration licence covering approximately
45 square kilometres. The project area hosts the historic Carangara copper
workings at Byng (1850 to 1875); however, the most compelling
exploration target is at the Gunnarbee prospect, where a multi-element soil
geochemical anomaly, with a similar elemental suite to the surface
anomaly at McPhillamys, has been outlined over an area of 1000m by
500m. No field activity took place during the year with land access
arrangements under discussion.
LEINSTER REGION JOINT VENTURE (NICKEL-GOLD)
Alkane Resources Ltd 19.4% diluting
Alkane has a diluting 19.4% interest in this Western Australian nickel-gold
exploration venture (Miranda and McDonough tenements). The remaining
share is held by Australian Nickel Investments (ANI, a subsidiary of
Western Areas Ltd).
ANI advised that activities have been focused in the Apollo area, which
lies approximately 7km south-east of the main Cosmos nickel belt. The
stratigraphy is genetically related to the “Camelot Nickel Camp”, known
to host significant volumes of high and low-grade nickel sulphide
mineralisation. The prospective Camelot ultramafics (igneous rocks with
a very low silica content and rich in minerals) have been interpreted to
extend into the Apollo area. Work has been focused on extending the
surface MLEM data coverage to the remainder of the tenement and to
cover the area of known ultramafic lithology.
A heritage survey was undertaken prior to the commencement of proposed
drilling at Apollo. Formal approval of those holes cleared to be drilled on
the survey was received in the December 2016 quarter.
A N N U A L R E P O R T 2 0 1 7
19
S U S T A I N A B I L I T Y
SUSTAINABILITY STATEMENT
Alkane Resources strives to
deliver excellent environmental
and social performance in all
that we do.
The Company is keen to assist
regional communities to flourish
and become more resilient, and
to provide a safe and rewarding
working environment for
employees. We are committed
to safe environmental practices
and to the delivery of
biodiversity improvement at all
our mining and exploration
sites.
Our aim is to leave a positive
legacy for local communities
and the land alike, that long
outlasts the life of our activities
in the region.
SUSTAINABLE SUPPLY CHAIN
Alkane understands the importance leading technology companies are placing on the sustainable and
ethical sourcing of raw materials across the supply chain – from mining and processing through to
end-of-life. We share these values and are wholly committed to upholding stringent social and
environmental standards for the mining and processing of our products.
Our mining and processing activities are carefully designed to occupy a small physical footprint, use
low volumes of power, water and other consumables, and produce waste residues that are treated and
stored with minimum impact to the environment. We also focus on protecting, nurturing and
enhancing local biodiversity, as well as land rehabilitation once mining is finished.
We are diligent about ensuring that the conditions for our workforce – including the employees of our
marketing and off-take partners in Australia and overseas – meet international occupational health and
safety standards, with no exploitation or child labour. The Company has comprehensive systems of
control and accountability, and administers corporate governance with openness and integrity based
on the principles and recommendations of the ASX Corporate Governance Council.
Many of our specialty technology metal products will be produced onsite at Australian Strategic
Materials’ (ASM’s) Dubbo Project, with others to be produced and marketed globally by business
partners. As many of the Company’s prospective customers are expected to enter into direct
purchasing agreements with ASM or one of its off-take partners, the simplified and direct supply chain
will bypass China (currently where many technology metals are processed), making it highly
sustainable, cost-effective and easily traceable.
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ENVIRONMENTAL MANAGEMENT
Alkane seeks to minimise our environmental footprint at all our mining and exploration sites, and we work hard to protect the wide variety of native species that
live in our project areas. Our aim is to restore sites to be stable functioning ecosystems that are non-polluting and productive. This is achieved through careful
design, creation of biodiversity offset areas, progressive rehabilitation, monitoring and management actions.
The process commences when we start developing a mining project – before any soil is turned. In accordance with commitments made in respective
Environmental Impact Statements, consent conditions, Mining Operations Plans and Environment Protection Licences, meticulous plant design ensures our
operations comply with regulation for water recycling and residue management to ensure sites are safe for local wildlife. Progressive rehabilitation of mining
landforms commences in the early days of operation and continues for the life of the mine and beyond.
The establishment and care of biodiversity offset areas forms an important part of Alkane’s commitment to the environment and the community. These
designated areas are earmarked for the restoration and creation of new native habitats for animal species, especially those that are threatened and endangered,
along with other measures to encourage biodiversity.
The Dubbo Project biodiversity offset areas (totalling 1,021Ha) are being managed by Alkane subsidiary, Toongi Pastoral Company (TPC), along with 1,995Ha
of agricultural land. A Conservation Property Vegetation Plan was executed by Central West Local Land Services on 31 May 2017. This agreement outlines
specific management actions and is binding on title in perpetuity.
At Tomingley Gold Operations (TGO), 121.6Ha of biodiversity offset areas are also protected by a Conservation Property Vegetation Plan signed in agreement
with Local Land Services. Over the past few years, many thousands of trees and shrubs have been planted around the TGO site, including 35 hectares of native
grey box (eucalyptus) woodland.
Alkane’s track record in environmental management is illustrated by the rehabilitated landforms at the Peak Hill Gold Mine (in operation 1996 to 2005). A
pleasant bushland setting frames the five mining voids, which are now open to the public. The site is increasingly species-rich, with several native bird and
mammal species established as a result of Alkane’s rehabilitation of the mining leases and adjoining land.
A N N U A L R E P O R T 2 0 1 7
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S U S T A I N A B I L I T Y CONTINUED
“Alkane aims to leave
a positive legacy for local
communities and the
land alike that long
outlasts the life of our
activities in the region.”
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ALKANE’S INTEGRATED APPROACH
TO FARMING AND CONSERVATION
With the establishment of Toongi Pastoral
Company (TPC), Alkane is proud to have
invested in agriculture to demonstrate that
mining, farming and nature conservation can
co-exist in harmony with the local community.
Overseen by a professional Farm Manager,
TPC manages the Dubbo Project’s residual
agricultural land and assets as a single
productive mixed farm. The aim is for TPC to
operate as a profitable agricultural enterprise
that demonstrates sustainable farming
technologies – including genetics, soil and
pasture management and engineering
solutions. After just a year, it is already
operating at a level of agricultural excellence,
producing ethical, sustainable and
environmentally conscious mixed farming
produce, including lamb and beef.
TPC also manages the Dubbo Project’s
designated biodiversity offset areas. The
integration of the biodiversity offset areas with
the farm means this land is managed as an
integral component of the farm (as opposed
to being managed by the mining operations or
a third party), making the best and most
efficient use of company resources and
expertise. The vital biodiversity offset areas
for the Dubbo Project include grassy white
box woodlands, Wiradjuri cultural heritage
sites and habitats for the Pink-tailed Worm-
lizard, a vulnerable local species for which
Alkane is taking a leading role in
conservation.
Alkane aims to leave a positive legacy for
local communities and the land alike that long
outlasts the life of our activities in the region.
This integrated approach to farming and
conservation ensures effective and efficient
land management, and provides the
foundation for a positive triple bottom line
outcome – social, environmental and
financial.
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S U S T A I N A B I L I T Y CONTINUED
EMPLOYEES AND DIVERSITY
Alkane is committed to employing members of the local community where possible, with the majority of employees living in the local area as the Company
does not support a “fly-in/fly-out” scheme. At financial year end the Group had 200 personnel on the payroll, with 17% being female. Achieving a good
gender balance in such an historically male-dominated industry is a challenge essential to maintaining a culture of equal opportunity.
COMMUNITY ENGAGEMENT AND SUPPORT
Alkane is an active and engaged member of the communities in which it operates – in particular the Narromine Shire, Parkes Shire and Dubbo Regional
Council local government areas in Central Western NSW. The Company’s goal is to support the development of more resilient regional communities through
the establishment of permanent infrastructure (such as a long-term water supply options project), sponsorship of local events and organisations, provision of
training and career opportunities to local students and residents, and the creation of local economic opportunities for service providers. Alkane aims to leave a
positive legacy that will long outlive the duration of mining operations.
In order to ensure strong relationships are maintained with local communities, Alkane is also committed to clear and regular communications about its
operations and development activities. The Company seeks to ensure community members can easily engage with Alkane representatives from the inception
of projects through to completion, and participates regularly at regional events to discuss the Group’s projects. Alkane also sometimes hosts mining industry-
related educational groups wishing to tour project sites.
WORK HEALTH AND SAFETY REVIEW
In keeping with its reputation for integrity and responsible behaviour, Alkane complies with all laws and regulations in relation to the environment and work
health and safety (WHS). The Company strives for continuous improvement of its standards for TGO, the Peak Hill Gold Mine decommissioning and closure,
and for ongoing exploration and mine development.
RISK MANAGEMENT
Alkane is committed to the active management of risks to its operations and has a Risk Management Committee composed of directors and management to
assist the Managing Director to identify, assess, monitor and manage the Company’s risks. The Company’s Risk Management Coordinator is tasked with the
responsibility of keeping the risk management policy, framework and registers updated, subject to formal approval of policy amendments by the Board.
TGO continues to monitor and audit critical controls as part of its ongoing risk management process. A specialised software package assists with the
management of the complexities for the high level risks. Over the next twelve months, ASM and Outotec will conduct construction risk assessments during the
engineering redesign of the Dubbo Project.
WORK HEALTH AND SAFETY
Alkane’s personnel are distributed across several office locations and operations across Central Western NSW (Orange, Dubbo, Peak Hill and Tomingley),
Sydney and Perth. The largest concentration of employees is at TGO, located south-west of Dubbo.
The TGO Mine Safety Management and Operations Management systems are in place, with both subjected to a rigorous auditing and inspection regime to
ensure their integrity. A thorough employee safety induction program is used to on-board all employees and contractors at the TGO site to ensure safe
operations at all times.
As for Alkane’s other sites, a full-time site supervisor maintains the Peak Hill Gold Mine leases and infrastructure during decommissioning. The facilities at the
mine site also provide support for exploration activities at the nearby Tomingley Gold Project, which encompasses TGO. Alkane also maintains exploration
offices in Dubbo and Orange to service the Group’s other tenements in Central Western NSW.
During the reporting period, three injuries resulting in lost time occurred at TGO; two injuries also required restricted work, as well as two injuries requiring
minor medical treatment. TGO has a total recordable injury frequency rate (TRIFR) of 2.37 per 200,000 hours worked, and a TRIFR of 11.85 per 1,000,000
hours worked, which is well below the metals and extractives industry average of 23.86 for the 2017 financial year.
TGO reported the following incidents to the NSW Environment Protection Authority (EPA) during the reporting period:
■ Two dust exceedances – Record hot weather in February 2017 resulted in elevated dust levels across NSW, according to many of the EPA’s PM10
monitoring stations. Tomingley Gold Operations did everything that was reasonably practical to minimise dust generation from the mine site in
accordance with the Dust Control Procedure.
■ Two noise exceedances – The first occurred during a significant flood event in October 2016 when the Newell Highway was closed and the other in
April 2017 due to meteorological enhancing conditions as the cooler months started.
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A L K A N E R E S O U R C E S LT D
DIRECTORS' REPORT
Your Directors present their report on the Consolidated Entity consisting of Alkane Resources Ltd ("the Company") and the entities it controlled at the end of, or
during, the year ended 30 June 2017. Throughout the report, the Consolidated Entity is also referred to as the Group.
DIRECTORS
The following persons were Directors of Alkane Resources Ltd during the whole of the financial year and up to the date of this report:
■ J S F Dunlop
■ I J Gandel
As of 1 September 2017, Chairman J S F Dunlop will retire and D I Chalmers will step down as Managing Director. Mr Chalmers will continue on the Board as
Technical Director. Director I J Gandel will assume the role of Non-Executive Chairman and Chief Operations Officer Nic Earner will assume the role of
Managing Director.
■ D I Chalmers
■ A D Lethlean
The Board continues its efforts to seek to appoint additional independent members who will bring complimentary skill sets and diversity to the Group’s
leadership.
INFORMATION ON DIRECTORS
John Stuart Ferguson Dunlop - Non-Executive Chairman
BE (Min), MEng SC (Min), PCertArb, FAusIMM (CP), FIMM, MAIME, MCIMM
Appointed Director and Chairman 3 July 2006
Mr Dunlop is a consultant mining engineer with over 46 years surface and underground mining experience both in Australia and overseas. He is a former
Director of the Australasian Institute of Mining and Metallurgy (2001 - 2006) and is a Board member and past Chairman of MICA (Mineral Industry
Consultants Association).
Mr Dunlop was Non-Executive Chairman of Alliance Resources Ltd (30 November 1994 - 31 May 2016). He has also been a Non-Executive Director of
Copper Strike Ltd (9 November 2009 - 6 June 2014) and a Director of Gippsland Ltd (1 July 2005 - 12 July 2013). Mr Dunlop is also a certified arbitrator
and mineral asset valuer and consults widely overseas.
Mr Dunlop is a member of the Audit Committee and Chairman of the Remuneration and Nomination Committees.
David Ian (Ian) Chalmers - Managing Director
MSc, FAusIMM, FAIG, FIMM, FSEG, MSGA, MGSA, FAICD
Appointed Director 10 June 1986, appointed Managing Director 5 October 2006
Mr Chalmers is a geologist and graduate of the Western Australia Institute of Technology (Curtin University) and has a Master of Science degree from the
University of Leicester in the United Kingdom. He has worked in the mining and exploration industry for over 45 years, during which time he has had
experience in all facets of exploration and mining through feasibility and development to the production phase.
Mr Chalmers was Technical Director until his appointment as Managing Director in 2006, overseeing the Group's minerals exploration efforts across Australia
(New South Wales and Western Australia), Indonesia and New Zealand and the development and operations of the Peak Hill Gold Mine (NSW). Since taking on
the role as chief executive he has steered the Company through construction and development of the now fully operational Tomingley Gold Operations and to
the threshold of development of the world class Dubbo Project.
Mr Chalmers is a member of the Nomination Committee.
Ian Jeffrey Gandel - Non-Executive Director
LLB, BEc, FCPA, FAICD
Appointed Director 24 July 2006
Mr Gandel is a successful Melbourne based businessman with extensive experience in retail management and retail property. He has been a Director of the
Gandel Retail Trust and has had an involvement in the construction and leasing of Gandel shopping centres. He has previously been involved in the Priceline
retail chain and the CEO of a chain of serviced offices.
Through his private investment vehicles, Mr Gandel has been an investor in the mining industry since 1994. Mr Gandel is currently a substantial holder in a
number of publicly listed Australian companies and, through is private investment vehicles, now holds and explores tenements in his own right in Victoria,
Western Australia and New South Wales. Mr Gandel is also a Non-Executive Director of Alliance Resources Ltd (appointed 15 October 2003) and in June
2016 was appointed Non-Executive Chairman of that company. He is also Non-Executive chairman of Octagonal Resources Ltd (appointed 10 November
2010)(this company sought delisting from the ASX in February 2016 and converted to Pty Ltd status in April 2016) and has been a Director and Non-
Executive Chairman of Gippsland Ltd (24 June 2009 - 14 April 2015).
Mr Gandel is a member of the Audit, Remuneration and Nomination Committees.
A N N U A L R E P O R T 2 0 1 7
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DIRECTORS’ REPORT CONTINUED
INFORMATION ON DIRECTORS (continued)
Anthony Dean Lethlean - Non-Executive Director
BAppSc (Geology)
Appointed Director 30 May 2002
Mr Lethlean is a geologist with over 10 years mining experience including 4 years underground on the Golden Mile in Kalgoorlie. Subsequently, Mr Lethlean
worked as a resources analyst with various stockbrokers including formerly as a principal of Helmsec Global Capital Ltd. Mr Lethlean is a Non-Executive
Director of Alliance Resources Ltd (appointed 15 October 2003).
Mr Lethlean is senior independent Director, Chairman of the Audit Committee and a member of the Remuneration and Nomination Committees.
COMPANY SECRETARY
Karen E V Brown
BEc (hons)
Ms Brown is a Director and Company Secretary of Mineral Administration Services Pty Ltd which provides company secretarial, corporate administration and
accounting services to the Group. She has considerable experience in corporate administration of listed companies over a period of some 29 years, primarily
in the mineral exploration industry.
DIVIDENDS - ALKANE RESOURCES LTD
No dividends have been paid by the Company during the financial year ended 30 June 2017 nor have the Directors recommended that any dividends be paid
(2016: nil).
REVIEW OF OPERATIONS
The Group continues to be actively involved in mineral exploration and evaluation, development and extraction with a regional focus in the central west of New
South Wales. Exploration and evaluation activities continue on tenements held by the Group, mining operations continue at the Tomingley Gold Operation and
evaluation activities continue in relation to the Dubbo Project.
RESULT FOR THE YEAR
The Group’s net loss for the period after tax was $28,937,000 (30 June 2016: net profit $4,695,000). The net loss included impairment charges of
$39,975,000 for the gold cash generating unit for the year ended 30 June 2017 (refer to note 9 for details). The result includes a profit before tax and
non-recurring items of $17,129,000 in relation to the Tomingley Gold Operations (30 June 2016: $14,304,000)
TOMINGLEY GOLD OPERATIONS
The gold operations at Tomingley are located approximately 50 kilometres south-west of Dubbo in the Central West of NSW. The operations are based on four
gold deposits. Wyoming One, Wyoming Three (mining completed), Caloma One (mining completed August 2017) and Caloma Two.
Mining occurred in three pits during the year, Caloma One, Caloma Two and Wyoming One. Persistent heavy rain during the first half of the year (656mm v
long term average 223mm) dramatically impacted production by delaying ore releases, particularly at the base of the Wyoming One starter pit, and impacting
mining fleet productivity during weather events and in the recovery afterwards. Material movements, and as a result production, were well below plan with
production of 22,191 ounces and all in sustaining cost (AISC) well above plan at $1,959 per ounce for the first half of the year.
The operation recovered strongly in the second half as weather improved. Utilisation of a third digging fleet was extended through the second half of the year
to reduce the waste movement deficiency from the first half. Average grade mined increased from 1.43g/t to 2.59g/t as a result of mining ore from the higher
grade Caloma Two pit and accessing higher grade zones in the Caloma One pit. As a result, production and AISC for the second half of the year were
significantly improved at 46,645 ounces at $1,038 per ounce.
Total material movements for the period of 8,140,469 bcm comprised 7,679,110 bcm of waste and 461,359 bcm of ore, with 4,606,789 bcm being extracted
in the second half. The average stripping ratio of 16.6 represented an increase from the corresponding period reflecting the removal of overburden in the
Wyoming One and Caloma Two pits, and will reduce significantly in the 2018 financial year.
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REVIEW OF OPERATIONS (continued)
TOMINGLEY GOLD OPERATIONS (continued)
Milling for the period was in line with design capacity at 1,087,983 tonnes. Gold recovery increased from 90.9% to 91.5% in line with expectations as
increased oxide ore was available for processing from the Wyoming One and Caloma Two pits.
Production for the year exceeded the upgraded market guidance on 27 June 2017 at 68,836 ounces, with all in sustaining cost (AISC) within guidance at
$1,335 per ounce.
The average sales price achieved for the period of $1,678 per ounce represented an increase of $73 per ounce from the prior year. Gold sales of 69,929
ounces resulted in sales revenue of $117,338,000, an increase of $8,204,000 (8%) from the prior period.
Cash flows from Tomingley underpinned the Group’s strong operating cash inflow of $54,748,000, an increase of $17,262,000 (46%) from the prior year.
Investing outflows (which also include exploration and evaluation outflows) were in line with the prior year at $40,689,000.
The table below summarises the key operational information.
TGO PRODUCTION
SEPT QUARTER
DEC QUARTER
MAR QUARTER
JUN QUARTER
2016
2016
2017
2017
FY
2017
FY
2016
Waste mined
Ore mined
Ore mined
Stripping Ratio
Grade mined (2)
Ore milled
Head grade
Gold recovery
Gold poured (3)
Revenue Summary
Gold sold
Average price realised
Gold revenue
Cost Summary
Mining
Processing
Site support
C1 Cash Cost
Royalties
Sustaining capital
Rehabilitation
Corporate
All-in Sustaining Cost (1)
Bullion on hand
Stockpiles
Ore for immediate milling
Grade(2)
Contained gold
BCM's
BCM's
Tonnes
Ratio
g/t
Tonnes
g/t
%
Ounces
Ounces
A$/Oz
A$000's
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
Ounces
Tonnes
g/t
Ounces
1,533,279
83,356
221,139
18.4
1.51
231,797
1.50
90.1
10,435
10,000
1,627
16,273
1,188
505
148
1,841
35
130
68
65
2,139
3,368
1,799,904
117,141
318,216
15.4
1.39
279,338
1.48
90.4
11,756
12,519
1,666
20,859
1,029
450
118
1,597
40
37
72
57
1,803
2,572
2,165,717
94,079
249,109
23.0
2.42
281,654
2.36
91.1
18,721
16,303
1,694
27,623
721
269
80
1,070
51
8
73
34
1,236
4,986
2,180,211
166,782
434,404
13.1
2.69
295,194
3.10
92.8
27,924
31,107
1,690
52,582
485
168
49
702
57
46
71
29
905
1,814
7,679,110
461,359
1,222,868
16.6
2.08
1,087,983
2.15
91.5
68,836
69,929
1,678
117,338
748
295
84
1,127
49
47
71
41
1,335
1,814
6,199,820
507,140
1,285,454
12.2
1.84
1,096,105
2.08
90.9
67,812
67,983
1,605
109,134
736
292
96
1,124
46
31
18
37
1,256
2,971
661,645
0.80
17,201
709,148
0.79
18,195
620,271
0.75
15,126
761,829
0.95
23,300
761,829
0.95
23,300
701,047
0.82
18,480
(1)
All in Sustaining Cost (AISC) comprises all site operating costs, royalties, mine exploration, sustaining capex, mine development and an allocation of corporate costs on the
basis of ounces produced. AISC does not include share based payments or net realisable value provision for product inventory.
(2)
Based on the resource models.
(3) Represents gold poured at site, not adjusted for refining adjustments which results in minor differences between the movements in bullion on hand and the difference between
production and sales.
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DIRECTORS’ REPORT CONTINUED
REVIEW OF OPERATIONS (continued)
TOMINGLEY GOLD OPERATIONS (continued)
Guidance for financial year 2018 provides for expected production of 65,000 to 70,000 ounces and AISC expected to be within the range of $1,100 to $1,200
per ounce.
Ore will mainly be sourced from the Wyoming One and Caloma Two pits, with mining finishing in the Caloma One pit in August 2017. The current life of mine
plan sees the open cut pits finishing in the September quarter of financial year 2019. A small cut back of the Caloma One pit to the north east utilising smaller
equipment has been designed and whilst not scheduled is an option for Tomingley should the economics allow it in the future. Low grade stockpiles of
approximately 612,000 tonnes are also available for milling, but are at present not scheduled until the potential underground material is available to be
blended with it.
A significant drilling program continues targeting strike extensions and in-fill areas for the potential underground operation below the Wyoming One pit with
the aim of lifting the gold ounces per vertical metre in any future designs. The program is expected to be completed around October 2017, at which time the
geological models will be updated and a mine plan evaluated for development. A regional air core drilling program commenced during the year on tenements
proximate to the Tomingley mining lease for potential open pit or underground ore to be processed at the Tomingley plant. The program is ongoing.
DUBBO PROJECT
Alkane Resources Ltd’s subsidiary, Australian Strategic Materials Ltd (ASM) changed its name from Australian Zirconia Ltd in December 2016. The project
name has been modified to the Dubbo Project.
The project is proceeding towards development as a potential strategic supply of critical minerals for a range of high-tech and sustainable technologies. It is
based on a large resource of zirconium, hafnium, niobium, tantalum, yttrium and rare earth elements, located at Toongi, 30 kilometres south of the large
regional centre of Dubbo in the Central West of NSW. The Dubbo Project is a unique, long-life asset with a potential mine life of 70 plus years. Unlike many
projects of this kind, it is a polymetallic deposit providing potential revenue from multiple product streams.
The Dubbo Project remains ready for construction, subject to financing, with the mineral deposit and surrounding land wholly owned, all State and Federal
approvals in place, an established flowsheet and a solid business case. Efforts during the period focussed on product development and marketing with
potential customers to confirm the suitability of the product suite for their needs. High purity samples of zirconia and hafnia (hafnium oxide) produced from
the demonstration pilot plant were dispatched to customers as a condition precedent to further discussions with these customers for the purchase of ASM's
future products.
During the year the Group announced the results of its modularisation concept study. As well as reducing up front capital requirements, the modularisation
concept is expected to provide greater construction flexibility by staging the overall build of the project whilst preserving the project economics. ASM has
engaged Outotec to refine the existing engineering and design to provide bankable level costing for the processing section of the project using the
modularised build philosophy (ASX announcement 28 October 2016). This comprehensive task should allow ASM to quickly commence the construction
phase following financing. Results of the work with Outotec are expected in the last quarter of 2017 calendar year.
Due diligence of Vietnam Rare Earth JSC, the owner of a rare earth separation facility, continued during the year. As part of the extended due diligence, an initial
twelve month toll treatment agreement was executed in June 2017 and two shipments of light rare earth concentrates acquired on market totalling 80 tonnes
were processed producing approximately 31 tonnes of separated rare earth oxides including cerium, lanthanum, praseodymium and neodymium oxides.
Minchem Ltd, ASM’s sales and marketing agent for zirconium products to be produced from the Dubbo Project, has secured six non-binding letters of intent
for the supply of zirconium chemicals th, at would account for about 60% of the stage 1 development of the 8,150 tpa of zirconia (ZrO2) equivalent products,
supporting about 15% of the anticipated project revenues. Further zirconium chemicals letters of intent are expected in coming months.
Development of value added zirconium and hafnium chemicals, oxides and metals continued during the year with a focus on producing high purity chemical
precursors.
Significant price increases have occurred to date in 2017 for zirconium and magnet related rare earths (praseodymium and neodymium). Zirconium
oxychloride (ZOC) prices have increased by circa 40% during the year resulting in the highest prices for four to five years. ZOC is the key indicator of the
zirconium chemical industry. The increase was due to a combination of increased raw material prices, stricter enforcement of and increased focus on
compliance with environmental laws and the imposition of additional regulation by Chinese authorities.
An approximate 25% increase in prices in 2017 for the key magnet rare earths, praseodymium and neodymium, has taken prices to the highest levels in two
years. Further price increases are expected on the back of strong demand, with little or no increase in supply expected in the near term. Increased efforts by
Chinese government authorities conducting environmental compliance inspections and audits is also likely to impact the level of illegal production, further
reducing supply. Growth in demand for high performance rare earth permanent magnets is occurring due to clean energy and transport policies and initiatives
by governments worldwide to meet national and international targets for reduced emissions. The rapid growth in demand for electric vehicles is attracting
significant media attention worldwide, but there is equally strong demand for other applications for magnets including wind power and industrial robots. Some
forward buying and stock building is also being reported for magnet rare earths, as well as producers withholding supply for higher prices.
30
A L K A N E R E S O U R C E S LT D
REVIEW OF OPERATIONS (continued)
DUBBO PROJECT (continued)
ASM continues to work with its financial advisors, Sumitomo Mitsui Banking Corporation, to pursue the funding strategy for the project. The changing market
dynamics and improved pricing for key products is expected to assist in discussions with customers to secure long term product offtake and investment in the
project. The ability of the Dubbo Project to provide long term sustainable security of supply of a diverse range of over 15 critical metals and oxides is one of
the strong themes which is being increasingly recognised both in Australia and overseas.
EXPLORATION
The Company maintained a focussed multi commodity exploration program in the Central West of NSW. After the persistent rain events in the first half of the
year limiting ground access, an extensive reconnaissance aircore drilling program commenced to test the prospective rock sequence between Tomingley and
the Peak Hill gold mine 15km to the south of Tomingley. Over 20,000 metres has been completed and several zones of gold mineralisation defined. Two
diamond cores totalling 791 metres tested two target areas to provide detailed geological information for 3D interpretation.
At the Northern Molong Porphyry Project (NMPP), which covers an area of 110 km2 located approximately 20 km north of Wellington in the central west of
NSW and encompasses three exploration licences; Bodangora, Kaiser and Finns Crossing two core holes tested the down dip extension of the thick low grade
gold-copper mineralisation in the Kaiser-Boda areas. The project covers a large portion of the northern Molong Volcanic Belt (MVB) which is host to a number
of mineral deposits exemplified by the world class alkalic porphyry deposits within the Cadia Valley Operations of Newcrest Mining Ltd.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The financial position and performance of the Group has been impacted by the following specific events or transactions during the year ended 30 June 2017
when compared to the year ended 30 June 2016:
■ An impairment expense of $39,975,000 was recorded during the year as a result of significant and prolonged impact that weather has had on operations
and performance of the Tomingley Gold Operations and due to revisions to the life of mine plan. Refer note 9 for details; and
■ Strong operating cash flows from the Tomingley Gold Operation has led to an increase in the closing cash balance by $17,514,000 to $41,969,000.
For a detailed discussion about the Group’s performance please refer to the Review of Operations.
EVENTS SINCE THE END OF THE FINANCIAL YEAR
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected the Group's operations, results or state of affairs, or significantly
affect;
(a)
the Group's operations in future financial years, or
(b)
the results of those operations in future financial years, or
(c)
the Group's state of affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
The Group intends to continue evaluation activities in relation to the Dubbo Project in line with details provided in the Review of Operations. Efforts at the
Tomingley Gold Operation continue to be focussed on optimising performance and extending the mine life for both open pit and underground operations.
Exploration and evaluation activities will continue on existing tenements and opportunities to expand the Group's tenement portfolio will be pursued with a
view to ensuring there is a pipeline of development opportunities to be considered.
Refer to the Review of Operations for further detail on planned developments.
ENVIRONMENTAL REGULATION
The Group is subject to significant environmental regulation in respect of its exploration and evaluation, development and mining activities.
The Group aspires to the highest standards of environmental management and insists its staff and contractors maintain that standard. A significant
environmental incident is considered to be one that causes a major impact or impacts to land biodiversity, ecosystem services, water resources or air, with
effects lasting greater than one year. There were no significant environmental incidents reported at any of the Group's operations.
A N N U A L R E P O R T 2 0 1 7
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DIRECTORS’ REPORT CONTINUED
MEETINGS OF DIRECTORS
The numbers of meetings of the Company's Board of Directors and of each Board Committee held during the year ended 30 June 2017, and the numbers of
meetings attended by each Director were:
FULL MEETINGS
OF DIRECTORS
AUDIT
NOMINATION
REMUNERATION
MEETINGS OF COMMITTEES
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
J S F Dunlop
D I Chalmers
I J Gandel
A D Lethlean
15
17
17
17
17
17
17
17
4
*
4
4
4
*
4
4
3
3
3
3
3
3
3
3
5
*
5
5
5
*
5
5
*
Not a member of the relevant committee.
REMUNERATION REPORT
The Directors' are pleased to present Alkane Resources Ltd's remuneration report which sets out remuneration information for the Company's Non-Executive
Directors, Executive Director and other Key Management Personnel.
The report contains the following sections:
(a)
Key Management Personnel disclosed in this report
(b) Remuneration governance
(c) Use of remuneration consultants
(d)
Executive remuneration policy and framework
(e) Statutory performance indicators
(f)
Non-Executive Director remuneration policy
(g) Voting and comments made at the Company's 2016 Annual General Meeting
(h) Details of remuneration
(i)
(j)
Service agreements
Details of share-based payments and performance against key metrics
(k) Shareholdings and share rights held by Key Management Personnel
(a) KEY MANAGEMENT PERSONNEL DISCLOSED IN THIS REPORT
Non-Executive and Executive Directors
■ J S F Dunlop
■ D I Chalmers
■ I J Gandel
■ A D Lethlean
Other Key Management Personnel
NAME
POSITION
N Earner
M Ball
A MacDonald
K E Brown
Chief Operations Officer
Chief Financial Officer
General Manager - Marketing (appointed 1 February 2017)
Company Secretary
There have been no changes to Directors or Key Management Personnel since the end of the reporting period. Refer to the Directors Report for upcoming
changes to the Board composition.
(b) REMUNERATION GOVERNANCE
The Company has established a Remuneration Committee to assist the Board in fulfilling its corporate governance responsibilities with respect to remuneration
by reviewing and making appropriate recommendations to the Board on:
■ the overall remuneration strategy and framework for the Company;
■ the operation of the incentive plans which apply to the Executive team, including the appropriateness of key performance indicators and performance
hurdles; and
■ the assessment of performance of and remuneration of the Executive director, Non-Executive Directors and other Key Management Personnel.
32
A L K A N E R E S O U R C E S LT D
REMUNERATION REPORT (continued)
The Remuneration Committee is a Committee of the Board and at the date of this report the members were independent Non-Executive Directors J S F Dunlop,
A D Lethlean and I J Gandel.
Their objective is to ensure that remuneration policies and structures are fair, competitive and aligned with the long-term interests of the Company and its
shareholders.
The Company's annual Corporate Governance Statement provides further information on the role of this Committee.
(c) USE OF REMUNERATION CONSULTANTS
No remuneration consultants were engaged in the financial year to provide remuneration advice.
(d) EXECUTIVE REMUNERATION POLICY AND FRAMEWORK
In determining Executive remuneration, the Board (or the Remuneration Committee as its delegate) aims to ensure that remuneration practices:
■ are competitive and reasonable, enabling the Company to attract and retain key talent while building a diverse, sustainable and high achieving workforce;
■ are aligned to the Company’s strategic and business objectives and the creation of shareholder value;
■ promote a high performance culture recognising that leadership at all levels is a critical element in this regard;
■ are transparent; and
■ are acceptable to shareholders.
The Executive remuneration framework has three components:
■ Total Fixed Remuneration (TFR),
■ Short-Term Incentives (STI), and
■ Long-Term Incentives (LTI).
(i)
Executive remuneration mix
The Company has in place Executive incentive programs which provide the mechanism to place a material portion of Executive pay "at risk". No new short
term or long term incentives were issued to Executives during the year.
(ii) Total fixed remuneration
Total Fixed Remuneration (TFR) consists of base salary, benefits and superannuation. Benefits may include health insurance, car allowances and salary
sacrifice arrangements. TFR levels are assessed against the median level of the resources sector through independent market data. Individual TFR is
determined within an appropriate range around the market median by referencing the specific role and associated responsibilities, individual experience and
performance.
A review is conducted of remuneration for all employees and Executives on an annual basis, or as required. The Remuneration Committee is responsible for
determining Executive TFR.
(iii)
Incentive arrangements
The Company uses both short term and long term incentive programs to balance the short and long term aspects of business performance, to reflect market
practice, to attract and retain key talent and to ensure a strong alignment between the incentive arrangements of Executives and the creation and delivery of
shareholder return.
The Company has used both performance rights and share appreciation rights as the mechanisms for Executive incentives. The performance rights plan was
approved by shareholders at the 2016 Annual General Meeting and the share appreciation rights plan was approved by shareholders at the 2014 Annual
General Meeting.
A N N U A L R E P O R T 2 0 1 7
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DIRECTORS’ REPORT CONTINUED
REMUNERATION REPORT (continued)
(d) EXECUTIVE REMUNERATION POLICY AND FRAMEWORK (continued)
(iii)
Incentive arrangements (continued)
Long-term incentives
The LTI is designed to focus Executives on delivering long term shareholder returns. Eligibility for the plan is restricted to Executives and nominated Senior
Managers, being the employees who are most able to influence shareholder value. Under the plan, participants have an opportunity to earn up to 100% of their
total fixed remuneration (calculated at the time of approval by the Remuneration Committee) comprised of part performance rights and part share appreciation
rights, provided that predefined targets are met over a three year performance period. Performance rights are the reward vehicle for targets that are milestone
based whereas share appreciation rights are the reward vehicle for shareholder return targets as the number of shares to be issued upon vesting is impacted by
the quantum of shareholder value created. The LTI vesting period is three years.
The performance rights component of the LTI will be provided in the form of rights to ordinary shares in Alkane Resources Ltd that will vest at the end of the
three year vesting period provided the predefined targets are met. On vesting, the rights automatically convert into one ordinary share each. Participants do not
receive any dividends and are not entitled to vote in relation to the rights to shares prior to the vesting period. If a participant ceases to be employed by the
Group within this period, the rights will be forfeited, except in limited circumstances that are approved by the Board on a case-by-case basis.
Under the share appreciation rights plan, participants are granted rights to receive fully paid ordinary shares in the Company. Rights will only vest if the
predefined TSR performance condition is met. If a participant ceases to be employed by the Group within this period, the rights will be forfeited, except in
limited circumstances that are approved by the Board on a case-by-case basis.
Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan.
An absolute TSR target, as opposed to a TSR target relative to an index or a peer group, has been used to reflect:
■ the developmental stage of the Dubbo Project and the impact that the successful development is expected to have on the market value of the Group; and
■ the absence of a sufficient number of comparable companies to benchmark against.
Targets are generally reviewed annually and set for a forward three year period. Targets reflect factors such as the expectations of the Group’s business plans,
the stage of development of the Group’s projects and the industry business cycle. The most appropriate target benchmark (i.e. the use of an absolute or a
relative TSR target) will be reviewed each year prior to the granting of rights.
Vesting of the rights is subject to the Group's TSR, including share price growth, dividends and capital returns, exceeding certain growth hurdles over a three-
year period.
The Remuneration Committee is responsible for determining the LTI to vest based on an assessment of whether the predefined targets are met. To assist in this
assessment, the Committee receives detailed reports on performance from management. The Committee has the discretion to adjust LTI's downwards in light
of unexpected or unintended circumstances.
(iv) Clawback policy for incentives
Under the terms and conditions of the Company’s incentive plan offer and the plan rules, the Board (or the Remuneration Committee as its delegate) has
discretion to determine forfeiture of unvested equity awards in certain circumstances (e.g. unlawful, fraudulent or dishonest behaviour or serious breach of
obligations to the Company). All incentive offers and final outcomes are subject to the full discretion of the Board (or the Remuneration Committee as its
delegate).
(v) Share trading policy
The trading of shares issued to participants under any of the Company’s employee share plans is subject to, and conditional upon, compliance with the
Company’s employee share trading policy. Executives are prohibited from entering into any hedging arrangements over unvested rights under the Company’s
employee incentive plans. The Company would consider a breach of this policy as gross misconduct which may lead to disciplinary action and potentially
dismissal.
34
A L K A N E R E S O U R C E S LT D
REMUNERATION REPORT (continued)
(e) STATUTORY PERFORMANCE INDICATORS
The Company aims to align Executive remuneration to the Company’s strategic and business objectives and the creation of shareholder wealth. The table
below shows measures of the Group’s financial performance over the last 5 years as required by the Corporations Act 2001. However, these are not
necessarily consistent with the specific measures in determining the variable amounts of remuneration to be awarded to Key Management Personnel. As a
consequence, there may not always be a direct correlation between the statutory key performance measures and the variable remuneration rewarded.
30 JUNE
2017
117,792
(28,937)
(5.8)
-
0.24
30 JUNE
2016
109,624
4,695
1.1
-
0.20
30 JUNE
2015
102,467
(4,086)
(1.0)
-
0.28
30 JUNE
2014
25,264
(6,170)
(1.7)
-
0.27
30 JUNE
2013(1)
1,370
(66,418)
(17.8)
-
0.31
0.3%
3.0%
0.0%
0.0%
0.1%
Revenue ($'000)
Profit/(loss) for the year attributable to owners ($'000)
Basic earnings/(loss) per share (cents)
Dividends payments ($'000)
Share price at period end ($)
Total KMP incentives vested as a
percentage of profit/(loss) for the year %
(1)
Six month period
(f) NON-EXECUTIVE DIRECTOR REMUNERATION POLICY
On appointment to the Board, all Non-Executive Directors enter into a Service Agreement with the Company in the form of a letter of appointment. The letter
summarises the Board policies and terms, including remuneration, relevant to the office of Director.
Non-Executive Directors receive a Board fee and fees for chairing or participating on Board Committees. Non-Executive Directors appointed do not receive
retirement allowances. Fees provided are inclusive of superannuation and the Non-Executive Directors do not receive performance-based pay.
Fees are reviewed annually by the Remuneration Committee taking into account comparable roles and market data obtained from independent data providers.
The current base fees for Non-Executive Directors have not changed since 1 January 2013.
The maximum annual aggregate Directors’ fee pool limit (inclusive of applicable superannuation) is $700,000 and was approved by shareholders at the
Annual General Meeting on 16 May 2013.
Details of Non-Executive Director fees in the year ended 30 June 2017 are as follows:
Base fees
Chair
Other Non-Executive Directors
Additional fees
Audit Committee - chair
Audit Committee - member
Remuneration Committee - chair
Remuneration Committee - member
$ PER ANNUM
125,000
75,000
7,500
5,000
7,500
5,000
For services in addition to ordinary services, Non-Executive Directors may charge per diem consulting fees at the rate specified by the Board from time to time
for a maximum of 4 days per month over a 12 month rolling basis. Any fees in excess of this limit are to be approved by the Board.
(g) VOTING AND COMMENTS MADE AT THE COMPANY'S 2016 ANNUAL GENERAL MEETING
The Company received more than 91% of “yes” votes on its remuneration report for the last financial period ended 30 June 2016. The Company did not
receive any specific feedback at the AGM or throughout the year on its remuneration practices.
A N N U A L R E P O R T 2 0 1 7
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DIRECTORS’ REPORT CONTINUED
REMUNERATION REPORT (continued)
(h) DETAILS OF REMUNERATION
The following table shows details of the remuneration expense recognised for the Directors and the Key Management Personnel of the Group for the current
and previous financial year measured in accordance with the requirements of the accounting standards.
30 JUNE 2017
Executive Director
D I Chalmers
Other KMP
N Earner
M Ball
A MacDonald
K E Brown(5)
Total Executive Director and other KMP
Total NED remuneration(6)
Total KMP remuneration expense
30 JUNE 2016
Executive Director
D I Chalmers
Other Key Management Personnel
N Earner
M Ball
K E Brown(5)
Total Executive Director and other KMP
Total NED remuneration(6)
Total KMP remuneration expense
FIXED REMUNERATION
VARIABLE
TOTAL
REMUNERATION
CASH
SALARY(1)
$
NON
MONETARY
BENEFITS(1)
$
ANNUAL
AND LONG
SERVICE
LEAVE(2)
$
POST-
EMPLOYMENT
BENEFITS(3)
$
RIGHTS TO
DEFERRED
SHARES(4)
$
$
360,000
36,296
14,571
34,200
117,141
562,208
397,213
347,782
150,000
210,000
1,464,995
283,106
1,748,101
-
-
-
-
36,296
-
36,296
14,145
13,501
383
-
42,600
-
42,600
36,407
29,985
13,854
-
114,446
26,894
141,340
128,856
101,523
-
-
347,520
-
347,520
576,621
492,791
164,237
210,000
2,005,857
310,000
2,315,857
FIXED REMUNERATION
VARIABLE
TOTAL
REMUNERATION
CASH
SALARY(1)
$
NON
MONETARY
BENEFITS(1)
$
ANNUAL
AND LONG
SERVICE
LEAVE(2)
$
POST-
EMPLOYMENT
BENEFITS(3)
$
RIGHTS TO
DEFERRED
SHARES(4)
$
$
360,000
25,643
7,939
34,200
153,381
581,163
396,000
337,177
302,229
1,395,406
283,106
1,678,512
-
-
-
25,643
-
25,643
2,321
2,438
-
12,698
-
12,698
37,620
29,640
-
101,460
26,894
128,354
168,719
132,930
-
455,030
-
455,030
604,660
502,185
302,229
1,990,237
310,000
2,300,237
(1)
(2)
(3)
(4)
Short-term benefits as per Corporations Regulation 2M.3.03(1) Item 6.
Other long-term benefits as per Corporations Regulation 2M.3.03(1) Item 8.
Post employment benefits are provided through superannuation contributions.
Rights to deferred shares granted under the executive STI and LTI schemes are expensed over the performance period, which includes the year to which the incentive relates
and the subsequent vesting period of the rights. Rights to deferred shares are equity-settled share based-payments as per the Corporations Regulation 2M.3.03(1) Item11. These
include negative amounts for rights forfeited during the year. Details of each grant of share right was provided in the table in section (j). Shareholder approval was received in
advance to the grant of share rights where required.
(5) Corporate administration and company secretarial fees paid to Mineral Administration Services Pty Ltd, a -Company associated with Ms Brown.
(6) Refer below for details of Non-Executive Directors (NED) remuneration.
36
A L K A N E R E S O U R C E S LT D
REMUNERATION REPORT (continued)
(h) DETAILS OF REMUNERATION (continued)
30 JUNE 2017
Non-Executive Directors
J S F Dunlop
I J Gandel
A D Lethlean
Total Non-Executive Directors
30 JUNE 2016
Non-Executive Directors
J S F Dunlop
I J Gandel
A D Lethlean
Total Non-Executive Directors
CASH SALARY
AND FEES
SUPERANNUATION
$
$
TOTAL
$
125,571
77,626
79,909
283,106
125,571
77,626
79,909
283,106
11,929
7,374
7,591
26,894
11,929
7,374
7,591
26,894
137,500
85,000
87,500
310,000
137,500
85,000
87,500
310,000
The relative proportions of remuneration expense recognised during the year that are linked to performance and those that are fixed are as follows:
Executive Director of Alkane Resources Ltd
I Chalmers
Other Key Management Personnel
N Earner
M Ball
A MacDonald
FIXED REMUNERATION
AT RISK - STI
AT RISK - LTI
2017
%
79
78
79
100
2016
%
74
72
74
-
2017
%
2016
%
-
-
-
-
8
9
8
-
2017
%
21
22
21
-
2016
%
18
19
18
-
Company Secretary K E Brown, is not an employee of the Company and therefore is not eligible to participate in incentive programs. Instead a fixed fee for
services rendered is paid as set out previously.
A MacDonald commenced employment on 1 February 2017 and is not yet a participant in the Group’s incentive plans.
(i)
SERVICE AGREEMENTS
Remuneration and other terms of employment for the Managing Director and Key Management Personnel are formalised in Service Agreements. The Service
Agreements specify the components of remuneration, benefits and notice periods. Participation in the STI and LTI plans is subject to the Board’s discretion.
Other major provisions of the Agreements relating to remuneration are set out below.
NAME AND POSITION
TERM OF AGREEMENT
TFR(1)
TERMINATION PAYMENT(2)
D I Chalmers - Managing Director
N Earner - Chief Operations Officer
M Ball - Chief Financial Officer
A MacDonald - General Manager - Marketing
K E Brown - Company Secretary
Commencing 1 July 2016 - renewable annually
On-going commencing 2 September 2013
On-going commencing 29 October 2012
On-going commencing 1 February 2017
Commencing 1 July 2016 - renewable annually
$394,200
$433,620
$377,767
$394,200
$210,000
By mutual agreement
2 months
2 months
6 months
12 months maximum(3)
(1)
Total Fixed Remuneration (TFR) is for the year ended 30 June 2017 and is inclusive of superannuation but does not include long service leave accruals. K E Brown is not an
employee of the company, therefore superannuation is not required to be paid on her earnings. TFR is reviewed annually by the Remuneration Committee. D I Chalmers' contract
includes motor vehicle expenses up to value of $36,000 plus applicable taxes in addition to the figure in the table above.
(2) Specified termination payments are within the limits set by the Corporations Act 2001 and therefore do not require shareholder approval. In the event that the Managing Director's
contract was terminated and a termination benefit of longer than twelve months was agreed, shareholder approval would be required.
(3)
Termination by mutual agreement.
A N N U A L R E P O R T 2 0 1 7
37
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O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
DIRECTORS’ REPORT CONTINUED
REMUNERATION REPORT (continued)
(j) DETAILS OF SHARE BASED PAYMENTS AND PERFORMANCE AGAINST KEY METRICS
Details of each grant of share rights affecting remuneration in the current or a future reporting period are set out below.
NAME
Executive Director
I Chalmers
FY2015 LTI - Performance Rights
FY2015 LTI - Share Appreciation Rights
FY2016 LTI - Performance Rights
FY2016 LTI - Share Appreciation Rights
Other Key Management Personnel
N Earner
FY2015 LTI - Performance Rights
FY2015 LTI - Share Appreciation Rights
FY2016 LTI - Performance Rights
FY2016 LTI - Share Appreciation Rights
M Ball
FY2015 LTI - Performance Rights
FY2015 LTI - Share Appreciation Rights
FY2016 LTI - Performance Rights
FY2016 LTI - Share Appreciation Rights
DATE OF
GRANT
NUMBER
OF RIGHTS
GRANTED
FAIR VALUE OF
SHARE RIGHTS
AT DATE OF
GRANT
$
NUMBER
OF SHARE
RIGHTS AT
FAIR VALUE
$
PERFORMANCE
PERIOD
END
SHARE BASED
PAYMENT
EXPENSE
CURRENT
YEAR
$
5/12/2014
5/12/2014
18/11/2015
18/11/2015
5/12/2014
5/12/2014
18/11/2015
18/11/2015
5/12/2014
5/12/2014
18/11/2015
18/11/2015
666,667
1,800,000
562,500
2,250,000
733,333
1,980,000
618,750
2,475,000
577,777
1,560,000
487,500
1,950,000
0.21
0.07
0.25
0.09
0.21
0.07
0.25
0.09
0.21
0.07
0.25
0.09
140,000
126,000
140,625
202,500
154,000
138,600
154,688
222,750
121,333
109,200
121,875
175,500
30/06/2017
30/06/2017
30/06/2018
30/06/2018
30/06/2017
30/06/2017
30/06/2018
30/06/2018
30/06/2017
30/06/2017
30/06/2018
30/06/2018
18,666
42,000
(11,025)
67,500
20,534
46,200
(12,128)
74,250
16,177
36,400
(9,554)
58,500
(1)
The value at grant date for share rights granted during the year as part of remuneration is calculated in accordance with AASB 2 Share Based Payments. Differences will arise
between the number of share rights at fair value in the table above and the STI and LTI percentages mentioned in section (d) due to different timing of valuation of rights as
approved by the Remuneration Committee and at grant. Refer to note 19 for details of the valuation techniques used for the rights plan.
(2) Share rights only vest if performance and service targets are achieved. The determination is usually made at the conclusion of the statutory audit.
The number and percentage of share rights that vested and the number and percentage of share rights that were forfeited relating to a performance period
which ended during the current financial year are set out below:
NAME
Executive Director
I Chalmers
FY2015 LTI - Performance Rights
FY2015 LTI - Share Appreciation Rights
Other Key Management Personnel
N Earner
FY2015 LTI - Performance Rights
FY2015 LTI - Share Appreciation Rights
M Ball
FY2015 LTI - Performance Rights
FY2015 LTI - Share Appreciation Rights
VESTING
DATE
NUMBER
OF RIGHTS
GRANTED
% OF
SHARE
RIGHTS
VESTED
NUMBER
OF SHARE
RIGHTS
VESTED
% OF
SHARE
RIGHTS
NUMBER
OF SHARE
RIGHTS
FORFEITED
FORFEITED
23/08/2017
23/08/2017
666,667
1,800,000
23/08/2017
23/08/2017
733,333
1,980,000
23/08/2017
23/08/2017
577,777
1,560,000
20%
0%
20%
0%
20%
0%
133,333
-
146,666
-
115,555
-
80%
100%
80%
100%
80%
100%
533,334
1,800,000
586,667
1,980,000
462,222
1,560,000
38
A L K A N E R E S O U R C E S LT D
REMUNERATION REPORT (continued)
(j) DETAILS OF SHARE BASED PAYMENTS AND PERFORMANCE AGAINST KEY METRICS (continued)
The determination of the number of rights that are to vest or be forfeited is made by the Remuneration Committee after the statutory audit has been
substantially completed. As such, the actual determination was made after the balance date however details have been included in the current Remuneration
Report as the relevant performance period concluded at the end of the current financial year.
Performance against key metrics
No short term incentives were issued to Executives during the year.
The vesting period for the FY2015 LTI ended at 30 June 2017. The LTI consisted of performance rights, being the reward vehicle for targets that are milestone
based, and share appreciation rights, being the reward vehicle for shareholder return based targets with the number of shares to be issued upon vesting being
impacted by the quantum of shareholder value created.
The table below provides details of the actual performance against the LTI performance metrics.
LTI REWARD VEHICLE
PERFORMANCE METRICS
WEIGHTING
VESTED
OUTCOME
Performance Rights
Progress of evaluation and development
of Dubbo Project towards production
Mining costs per bcm achieved
>15% below contract mining rates
or comparable size operations
40%
10%
0%
10%
Performance
threshold not met
Performance
threshold exceeded
Share Appreciation Rights
Absolute total shareholder return (TSR)
50%
0%
TSR threshold not met
Vesting of the share appreciation rights was subject to the Company’s TSR, including share price growth, dividends and capital returns, exceeding certain
growth hurdles over the three year performance period as set out in the table below.
TSR COMPOUND ANNUAL GROWTH RATE (CAGR)
% SHARE APPRECIATION RIGHTS VESTING
Less than 15% CAGR
15% CAGR
Above 15% CAGR up to 25% CAGR
Above 25% CAGR
Nil
50% vesting
Pro rata vesting from 50% - 100%
100%
(k) SHAREHOLDINGS AND SHARE RIGHTS HELD BY KEY MANAGEMENT PERSONNEL
The number of shares in the Company and share rights for ordinary shares in the Company held by each Director and Key Management Personnel are set out
below.
Share holdings
30 JUNE 2017
Directors of Alkane Resources Ltd
J S F Dunlop
A D Lethlean
D I Chalmers
I J Gandel
Other Key Management Personnel
K E Brown
N Earner
M Ball
A MacDonald (2)
NUMBER OF ORDINARY SHARES
BALANCE
AT 1 JULY
2016
PURCHASED
RECEIVED ON
VESTING OF
/ (SOLD)
SHARE RIGHTS(1)
BALANCE AT
30 JUNE
2017
1,123,200
520,076
2,827,542
109,869,451
854,992
-
-
500,000
-
-
-
-
-
-
-
-
-
-
191,249
-
-
210,375
165,750
-
1,123,200
520,076
3,018,791
109,869,451
854,992
210,375
165,750
500,000
(1)
Does not include rights that vested post balance date. Refer to section (j) of the Remuneration Report for details.
(2) A MacDonald was appointed General Manager - Marketing 1 February 2017 however purchased the shares prior to 1 July 2016
A N N U A L R E P O R T 2 0 1 7
39
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P
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Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
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D
U
L
E
DIRECTORS’ REPORT CONTINUED
REMUNERATION REPORT (continued)
(k) SHAREHOLDINGS AND SHARE RIGHTS HELD BY KEY MANAGEMENT PERSONNEL (continued)
Share holdings (continued)
30 JUNE 2016
Directors of Alkane Resources Ltd
J S F Dunlop
A D Lethlean
D I Chalmers
I J Gandel
Other Key Management Personnel
K E Brown
Share rights
Executive Director
D I Chalmers
Performance Rights
Share Appreciation Rights
Other Key Management Personnel
N Earner
Performance Rights
Share Appreciation Rights
M Ball
Performance Rights
Share Appreciation Rights
Total Performance Rights
Total Share Appreciation Rights
Executive Directors
D I Chalmers
Performance Rights
Share Appreciation Rights
Other Key Management Personnel
N Earner
Performance Rights
Share Appreciation Rights
M Ball
Performance Rights
Share Appreciation Rights
Total Performance Rights
Total Share Appreciation Rights
NUMBER OF ORDINARY SHARES
BALANCE
AT 1 JULY
2015
PURCHASED
/ (SOLD)
RECEIVED ON
VESTING OF
SHARE RIGHTS
BALANCE AT
30 JUNE
2016
936,000
433,396
2,356,284
91,557,875
187,200
86,680
471,258
18,311,576
712,492
142,500
-
-
-
-
-
RIGHTS
GRANTED
RIGHTS
VESTED
RIGHTS
LAPSED
1,123,200
520,076
2,827,542
109,869,451
854,992
BALANCE AT
30 JUNE
2017
UNVESTED
-
-
-
-
-
-
-
-
(133,333)
-
(533,334)
(1,800,000)
562,500
2,250,000
(146,666)
-
(115,555)
-
(395,554)
-
(586,667)
(1,980,000)
(462,222)
(1,560,000)
(1,582,223)
(5,340,000)
618,750
2,475,000
487,500
1,950,000
1,668,750
6,675,000
BALANCE AT
30 JUNE
2016
UNVESTED
RIGHTS
GRANTED
RIGHTS
VESTED
RIGHTS
LAPSED
BALANCE
AT 1 JULY
2016
UNVESTED
1,229,167
4,050,000
1,352,083
4,455,000
1,065,277
3,510,000
3,646,527
12,015,000
BALANCE
AT 1 JULY
2015
UNVESTED
666,667
1,800,000
843,749
2,250,000
(191,249)
-
(90,000)
-
1,229,167
4,050,000
733,333
1,980,000
577,777
1,560,000
1,977,777
5,340,000
928,125
2,475,000
731,250
1,950,000
2,503,124
6,675,000
(210,375)
-
(165,750)
-
(567,374)
-
(99,000)
-
(78,000)
-
(267,000)
-
1,352,083
4,455,000
1,065,277
3,510,000
3,646,527
12,015,000
40
A L K A N E R E S O U R C E S LT D
REMUNERATION REPORT (continued)
(k) SHAREHOLDINGS AND SHARE RIGHTS HELD BY KEY MANAGEMENT PERSONNEL (continued)
The determination of the number of rights that are to vest or be forfeited is made by the Remuneration Committee after the statutory audit has been
substantially completed. As such, the actual determination was made after the balance date however details have been included in the current Remuneration
Report as the relevant performance period is the current financial year.
The information in this section has been audited with the rest of the remuneration report.
INDEMNIFICATION AND INSURANCE OF OFFICERS
Alkane Resources Ltd has entered into deeds of indemnity, access and insurance with each of the Directors. These deeds remain in effect as at the date of this
report. Under the deeds, the Company indemnifies each Director to the maximum extent permitted by law against legal proceedings or claims made against or
incurred by the Directors in connection with being a Director of the Company, or breach by the Group of its obligations under the deed.
The liability insured is the indemnification of the Group against any legal liability to third parties arising out of any Directors or officers duties in their capacity
as a Director or Officer other than indemnification not permitted by law.
No liability has arisen under this indemnity as at the date of this report.
The Group has not otherwise, during or since the financial year, indemnified nor agreed to indemnify an officer of the Group or of any related body corporate,
against a liability incurred as such by an officer.
During the year the Company has paid premiums in respect of Directors' and Executive Officers' Insurance. The contracts contain prohibitions on disclosure of
the amount of the premiums and the nature of the liabilities under the policies.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the
Group is important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out in note 20.
The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the
non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied
that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act
2001 for the following reasons:
■ all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor
■ none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional
Accountants.
AUDITOR'S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 42.
ROUNDING OF AMOUNTS
The company has relied on the relief provided by the ‘ASIC Corporations (Rounding in Financial/Directors' Report) Instrument 2016/191’, issued by the
Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in the Directors' report. Amounts in the Directors' report have been
rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of Directors.
D I Chalmers
Director
Perth
29 August 2017
A N N U A L R E P O R T 2 0 1 7
41
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I
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F
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A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
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E
AUDITOR’S INDEPENDENCE DECLARATION
42
A L K A N E R E S O U R C E S LT D
Financial statements
■ Consolidated statement of comprehensive income
■ Consolidated balance sheet
■ Consolidated statement of changes in equity
■ Consolidated statement of cash flows
■ Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
44
45
46
47
48
81
82
A N N U A L R E P O R T 2 0 1 7
43
C
O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Continuing operations
Revenue
Cost of sales
Gross profit
Other net income
Expenses
Other expenses
Finance charges
Total expenses
(Loss)/Profit before income tax
Income tax benefit/(expense)
(Loss)/Profit for the period after income tax
YEAR ENDED
30 JUNE
2017
$'000
117,792
(99,338)
18,454
30 JUNE
2016
$'000
109,624
(95,351)
14,273
539
975
(51,526)
(1,035)
(52,561)
(33,568)
4,631
(28,937)
(8,149)
(436)
(8,585)
6,663
(1,968)
4,695
NOTES
2
3
4
3
5
8(c)
Total comprehensive (loss)/profit for the period
(28,937)
4,695
Total comprehensive (loss)/profit for the period is attributable to:
Owners of Alkane Resources Ltd
(Loss)/Profit is attributable to:
Owners of Alkane Resources Ltd
(28,937)
(28,937)
(28,937)
(28,937)
4,695
4,695
4,695
4,695
CENTS
CENTS
(Loss)/Profit per share attributable to the ordinary equity holders of the Company:
Basic (loss)/profit per share
Diluted (loss)/profit per share
21
21
(5.8)
(5.7)
1.1
1.1
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
44
A L K A N E R E S O U R C E S LT D
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2017
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Biological assets
Total current assets
Non-current assets
Exploration and evaluation
Property, plant and equipment
Other financial assets
Biological assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
NOTES
6(a)
6(b)
7(a)
7(b)
7(c)
7(d)
6(c)
7(b)
6(d)
7(e)
5(d)
7(e)
8(a)
8(b)
8(c)
30 JUNE
2017
$'000
41,969
2,445
9,644
218
54,276
83,107
60,627
4,233
507
148,474
202,750
11,166
8,169
19,335
-
18,488
18,488
37,823
30 JUNE
2016
$'000
24,455
1,720
12,394
-
38,569
72,553
102,941
7,197
-
182,691
221,260
8,745
1,703
10,448
4,747
15,755
20,502
30,950
164,927
190,310
219,948
1,330
(56,351)
164,927
213,791
3,933
(27,414)
190,310
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
A N N U A L R E P O R T 2 0 1 7
45
C
O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
ATTRIBUTABLE TO OWNERS OF ALKANE RESOURCES LTD
SHARE-BASED
ACCUMULATED
Balance at 1 July 2015
Profit for the year
Total comprehensive profit for the year
Transactions with owners in their capacity as owners:
Share placement (Note 8(a))
Share issue transaction costs
Deferred tax credit recognised in equity
Share based payments
Balance at 30 June 2016
Balance at 1 July 2016
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Share placement (Note 8(a))
Share based payments
Share issue transaction costs
Deferred tax credit recognised in equity
Balance at 30 June 2017
SHARE
CAPITAL
$'000
201,845
-
-
12,388
(147)
(295)
-
11,946
213,791
213,791
-
-
4,141
2,570
(670)
116
219,948
PAYMENTS RESERVE
$'000
714
-
-
-
-
-
3,219
3,219
3,933
3,933
-
-
-
(2,603)
-
-
1,330
LOSSES
$'000
(32,109)
4,695
4,695
-
-
-
-
-
TOTAL
EQUITY
$'000
170,450
4,695
4,695
12,388
(147)
(295)
3,219
15,165
(27,414)
190,310
(27,414)
(28,937)
(28,937)
-
-
-
-
(56,351)
190,310
(28,937)
(28,937)
4,141
(33)
(670)
116
164,927
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
46
A L K A N E R E S O U R C E S LT D
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees (inclusive of GST)
Interest received
Finance costs paid
Royalties and selling costs
Other receipts
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for exploration expenditure
Payments for security deposits
Refund of security deposits
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of share issue
Proceeds from borrowings
Repayment of borrowings
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at end of year
YEAR ENDED
30 JUNE
2017
$'000
117,338
(60,250)
454
(719)
(2,723)
648
54,748
(33,551)
53
(10,154)
(2,028)
4,991
(40,689)
4,141
(670)
7,912
(7,928)
3,455
17,514
24,455
41,969
30 JUNE
2016
$'000
109,134
(70,051)
490
(248)
(2,819)
980
37,486
(33,634)
26
(6,789)
(2,151)
2,541
(40,007)
12,388
(147)
4,000
(4,114)
12,127
9,606
14,849
24,455
NOTES
10(a)
8(a)
8(a)
6(a)
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
A N N U A L R E P O R T 2 0 1 7
47
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O
M
P
A
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Y
I
N
F
O
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M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
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T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
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M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2017
CONTENTS OF THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
How numbers are calculated
1
2
3
4
5
6
7
8
9
Segment information
Revenue
Expenses
Other income and expense items
Income tax
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Impairment of non-current assets
10
Cash flow information
Risk
11
12
13
Critical accounting estimates and judgements
Financial risk management
Capital risk management
Unrecognised items
14
15
16
Contingent liabilities and contingent assets
Commitments
Events occurring after the reporting period
Other information
Interests in other entities
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Assets pledged as security
Parent entity financial information
Summary of significant accounting policies
17
18
19
20
21
22
23
24
48
Page
49
50
51
51
52
52
56
58
63
64
66
67
67
68
69
70
70
70
71
72
72
72
73
75
75
76
77
77
A L K A N E R E S O U R C E S LT D
HOW NUMBERS ARE CALCULATED
This section provides additional information about those individual line items in the financial statements that the directors consider
most relevant in the context of the activities of the entity, including:
(a) accounting policies that are relevant for an understanding of the items recognised in the financial statements. These cover
situations where the accounting standards either allow a choice or do not deal with a particular type of transaction.
(b) analysis and sub-totals, including segment information.
(c) information about estimates and judgements made in relation to particular items.
1
2
3
4
5
6
7
8
9
Segment information
Revenue
Expenses
Other income and expense items
Income tax
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Impairment of non-current assets
10
Cash flow information
50
51
51
52
52
56
58
63
64
66
A N N U A L R E P O R T 2 0 1 7
49
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P
A
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Y
I
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F
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M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
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T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
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M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
1
SEGMENT INFORMATION
(a) SEGMENT RESULTS
The Board of Alkane Resources Ltd has identified two reportable segments, being gold operations and the exploration and evaluation of rare metals.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker that are used to make
strategic decisions.
Costs that do not relate to either of the operating segments, have been identified as unallocated costs. Corporate assets and liabilities that do not relate
to either of the operating segments have been identified as unallocated. The Group has formed a tax consolidation group and therefore tax balances have
been allocated to the unallocated grouping.
The Group utilises a central treasury function and therefore the cash balances have been allocated to the unallocated segment. The prior year total
segment assets have been restated to reallocate cash to the unallocated segment.
30 JUNE 2017
Gold sales to external customers
Interest income
Total segment revenue
GOLD
OPERATIONS
RARE METALS
UNALLOCATED
$'000
$'000
$'000
GROUP
$'000
117,338
175
117,513
-
191
191
-
88
88
117,338
454
117,792
Segment net loss before income tax
(25,811)
(287)
(7,470)
(33,568)
Segment net loss includes the following non-cash adjustments:
Depreciation and amortisation
Deferred stripping costs capitalised
Impairment charges
Exploration expenditure written off or provided for
Restructuring provision
Inventory product movement and provision
Income tax benefit
Total non-cash adjustments
Total segment assets
Total segment liabilities
Net segment assets
30 JUNE 2016
Gold sales to external customers
Interest income
Total segment revenue
Segment net profit/(loss) before income tax
Segment net profit / (loss) includes the following non-cash adjustments:
Depreciation and amortisation
Deferred stripping costs capitalised
Exploration expenditure written off or provided for
Inventory product movement and provision
Income tax expense
Total non-cash adjustments
Total segment assets
Total segment liabilities
Net segment assets
(42,265)
26,603
(39,975)
-
(2,965)
(2,660)
-
(61,262)
48,916
(34,297)
14,619
109,134
257
109,391
14,304
(29,929)
15,740
-
424
-
(13,765)
96,393
(24,194)
72,199
(3)
-
-
(5)
-
-
-
(8)
101,419
(1,505)
99,914
-
-
-
(276)
-
-
(160)
-
-
4,631
4,195
52,415
(2,021)
50,394
-
233
233
(42,544)
26,603
(39,975)
(165)
(2,965)
(2,660)
4,631
(57,075)
202,750
(37,823)
164,927
109,134
490
109,624
(264)
(7,377)
6,663
-
-
(17)
-
-
(17)
93,170
(1,014)
92,156
(260)
-
(99)
-
(1,968)
(2,327)
31,697
(5,742)
25,955
(30,189)
15,740
(116)
424
(1,968)
(16,109)
221,260
(30,950)
190,310
50
A L K A N E R E S O U R C E S LT D
2
REVENUE
Revenue from continuing operations
Gold sales
Other revenue
Interest income
Total revenue
(a) REVENUE
YEAR ENDED
30 JUNE
2017
$'000
30 JUNE
2016
$'000
117,338
109,134
454
117,792
490
109,624
Revenue is measured at the fair value of the consideration received or receivable. The Group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met where applicable.
(b) GOLD SALES
Revenue from gold sales is recognised where there has been a transfer of risks and rewards from the Group to an external party, no further processing is
required by the Group, quality and quantity has been determined with reasonable accuracy and collectability is probable.
(c)
INTEREST INCOME
Interest is recognised as it is accrued using the effective interest method.
3
EXPENSES
Cost of sales
Cash costs of production
Deferred stripping costs capitalised
Inventory product movement
Inventory product provision for net realisable value
Depreciation and amortisation
Royalties and selling costs
Share based payments
Other expenses
Impairment charges
Restructuring provision
Corporate administration
Employee remuneration and benefits expensed
Share based payments
Professional fees and consulting services
Exploration expenditure provided for or written off
Directors' fees and salaries expensed
Depreciation
Dubbo project expenses not capitalised
Non-core project expenses
NOTES
9
11(g)
YEAR ENDED
30 JUNE
2017
$'000
77,584
(26,603)
4,684
(2,024)
42,265
3,432
-
99,338
39,975
2,965
2,098
2,366
142
1,229
165
588
279
997
722
51,526
30 JUNE
2016
$'000
76,236
(15,740)
(601)
177
29,929
3,251
2,099
95,351
-
-
2,002
2,019
1,120
1,271
116
580
260
659
122
8,149
A N N U A L R E P O R T 2 0 1 7
51
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S
R
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I
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W
F
I
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A
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C
A
L
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E
P
O
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T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
3
EXPENSES (continued)
(a) CASH COSTS OF PRODUCTION
Cash costs of production include ore and waste mining costs, processing costs and site administration and support costs. Cash costs of production
include $20,139,000 of employee remuneration and benefits (2016: $18,238,000).
(b) DEFERRED STRIPPING COSTS CAPITALISED
Stripping costs capitalised represent the costs incurred in the development and production phase of a mine and are capitalised as part of the cost of
constructing the mine and subsequently amortised over the useful life of the ore body that access is provided to on a units-of-production basis.
Refer to note 7(d)(i) for further detail on the Group's accounting policy for deferred stripping costs.
(c)
INVENTORY PRODUCT MOVEMENT
Inventory product movement represents the movement in balance sheet inventory of ore stockpiles, gold in circuit and bullion on hand.
Refer to note 7(a)(i) for further details on the Group's accounting policy for inventory.
(d)
INVENTORY PRODUCT PROVISION FOR NET REALISABLE VALUE
Inventories must be carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs to complete processing and to make a sale. The net realisable value provision equals the decrement between the net
realisable value and the carrying value before provision.
Refer to note 7(a)(i) for further details on the Group's accounting policy for inventory.
4 OTHER INCOME AND EXPENSE ITEMS
(a) OTHER NET INCOME
Net foreign exchange gains
Loss on disposal of non-current assets
Other income
YEAR ENDED
30 JUNE
2017
$'000
39
(146)
646
539
30 JUNE
2016
$'000
8
(13)
980
975
The other income includes the sale of water available under certain owned water licences of $169,000 (2016: $211,000) as well as NSW government
payroll tax rebate under the Job Actions Plan of $28,000 (2016: $587,000). For for first time this year, income was recognised from the farming activity
which started up in May 2016 for agistment and livestock sales of $290,000.
5
INCOME TAX
(a)
INCOME TAX (BENEFIT)/EXPENSE
Deferred tax (benefit)/expense
Total income tax (benefit)/expense
YEAR ENDED
30 JUNE
2017
$'000
(4,631)
(4,631)
30 JUNE
2016
$'000
1,968
1,968
52
A L K A N E R E S O U R C E S LT D
5
INCOME TAX (continued)
(b) RECONCILIATION OF INCOME TAX (BENEFIT)/EXPENSE TO PRIMA FACIE TAX PAYABLE
YEAR ENDED
(Loss)/Profit before income tax expense
Tax at the Australian tax rate of 30.0% (2016 - 30.0%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Tax benefits of deductible equity raising costs
Research and development tax incentive
Non-deductible share based payments
Other items
Subtotal
Non-recognition of deferred tax asset on temporary differences
Adjustments for current tax of prior periods
Utilisation of previously unrecognised tax losses
Income tax (benefit)/expense
(c) DEFERRED TAX ASSETS
The balance comprises temporary differences attributable to:
Tax losses
Research and development tax incentive
Rehabilitation provisions and assets
Property, plant and equipment
Other
Total deferred tax assets
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax assets
De-recognition of deferred tax assets
Net recognised deferred tax assets
30 JUNE
2017
$'000
(33,568)
(10,070)
(85)
(363)
32
3
(10,483)
7,565
(24)
(1,689)
(4,631)
1,066
3,870
4,114
21,587
2,162
32,799
(25,234)
7,565
(7,565)
-
30 JUNE
2016
$'000
6,663
1,999
(339)
(526)
966
37
2,137
-
-
(169)
1,968
705
3,506
870
10,828
1,112
17,021
(17,021)
-
-
-
A N N U A L R E P O R T 2 0 1 7
53
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O
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P
A
N
Y
I
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F
O
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M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
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I
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F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
5
INCOME TAX (continued)
(c) DEFERRED TAX ASSETS (continued)
MOVEMENTS
At 1 July 2015
Charged/(credited)
-
-
At 30 June 2016
to profit or loss
directly to equity
At 1 July 2016
Charged/(credited)
- to profit or loss
- directly to equity
At 30 June 2017
REHABILITATION
PROVISION
AND ASSETS
$'000
PROPERTY,
PLANT AND
EQUIPMENT
$'000
R&D TAX
INCENTIVE
CREDITS
$'000
TAX LOSSES
$'000
2,898
(2,193)
-
705
705
361
-
1,066
844
26
-
870
870
3,244
-
4,114
10,148
680
-
10,828
10,828
10,759
-
21,587
1,919
1,587
-
3,506
3,506
364
-
3,870
De-recognition of deferred tax asset
charged to profit or loss
Net recognised deferred tax assets available
for offset against deferred tax liabilities
(d) DEFERRED TAX LIABILITIES
The balance comprises temporary differences attributable to:
Exploration expenditure
Other
Total deferred tax liabilities
Set-off of deferred tax assets
Net recognised deferred tax liabilities
MOVEMENTS
At 1 July 2015
Charged/(credited)
-
At 30 June 2016
to profit or loss
At 1 July 2016
Charged/(credited)
-
At 30 June 2017
to profit or loss
EXPLORATION
EXPENDITURE
$'000
19,575
2,191
21,766
21,766
3,166
24,932
OTHER
$'000
TOTAL
$'000
1,302
17,111
105
(295)
1,112
1,112
934
116
2,162
30 JUNE
2017
$'000
(24,932)
(302)
(25,234)
25,234
-
OTHER
$'000
20
(18)
2
2
300
302
205
(295)
17,021
17,021
15,662
116
32,799
(7,565)
25,234
30 JUNE
2016
$'000
(21,766)
(2)
(21,768)
17,021
(4,747)
TOTAL
$'000
19,595
2,173
21,768
21,768
3,466
25,234
54
A L K A N E R E S O U R C E S LT D
5
INCOME TAX (continued)
(e) DEFERRED TAX RECOGNISED DIRECTLY IN EQUITY
Relating to equity raising costs
(f) UNRECOGNISED TEMPORARY DIFFERENCES AND TAX LOSSES
Unrecognised tax losses
Potential tax benefit at 30% (2016: 30%)
30 JUNE
2017
$'000
(116)
30 JUNE
2016
$'000
295
19,618
5,885
20,602
6,181
The potential benefit of carried forward tax losses will only be obtained if taxable income is derived of a nature and amount sufficient to enable the
benefit from the deductions to be realised. In accordance with the Group’s policies for deferred taxes, a deferred tax asset is recognised only if it is
probable that sufficient future taxable income will be generated to offset against the asset.
Determination of future taxable profits requires estimates and assumptions as to future events and circumstances including commodity prices, ore
resources, exchange rates, future capital requirements, future operational performance, the timing of estimated cash flows, the ability to successfully
develop and commercially exploit resources.
Tax legislation prescribes the rate at which tax losses transferred from entities joining a tax consolidation group can be applied to taxable incomes and
this rate is diluted by changes in ownership, including capital raisings. As a result the reduction in the rate at which the losses can be applied to future
taxable incomes, the period of time over which it is forecast that these losses may be utilised has extended beyond that which management considers
prudent to support their continued recognition for accounting purposes. Accordingly no deferred tax asset has been recognised for certain tax losses.
Recognition for accounting purposes does not impact the ability of the Group to utilise the losses to reduce future taxable profits.
Alkane Resources Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these
entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements.
Unrecognised temporary differences
Potential tax benefit at 30% (2016: 30%)
30 JUNE
2017
$'000
25,217
7,565
30 JUNE
2016
$'000
147
44
Deferred tax assets relating to deductible temporary differences can only be recognised to the extent that it is probable that future taxable profits will be
available against which the deductible temporary difference can be utilised. The deferred tax asset relating to impairment expense has not been
recognised at this time as it is not probable that sufficient future taxable profits will be available against which to offset the deductible temporary
differences. Recognition for accounting purposes does not impact the ability of the Group to utilise the deductible temporary differences to reduce future
taxable profits.
A N N U A L R E P O R T 2 0 1 7
55
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O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
6
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
This note provides information about the Group's financial instruments, including:
■ an overview of all financial instruments held by the Group;
■ specific information about each type of financial instrument;
■ accounting policies; and
■ information about determining the fair value of the instruments, including judgements and estimation uncertainty involved.
Financial assets at amortised cost
Cash and cash equivalents
Receivables
Other financial assets
NOTES
6(a)
30 JUNE
2017
$'000
41,969
358
4,233
46,560
30 JUNE
2016
$'000
24,455
24
7,197
31,676
The receivables balance above excludes prepayments and tax receivable balances which do not meet the definition of financial assets. Refer to note 6(b)
for total receivables balance.
The financial assets are presented as current assets as management intends to dispose of them within 12 months of the end of the reporting period.
Other financial assets are not expected to be disposed of within 12 months and are presented as non current assets.
Financial liabilities at amortised cost
Trade and other payables
(a) CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Deposits at call
30 JUNE
2017
$'000
30 JUNE
2016
$'000
NOTES
6(d)
11,166
8,745
30 JUNE
2017
$'000
38,969
3,000
41,969
30 JUNE
2016
$'000
24,455
-
24,455
Cash at bank at balance date weighted average interest rate was 2.0% (2016: 0.9%).
(i)
Classification as cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions and other short-term, highly liquid investments
with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk
of changes in value.
56
A L K A N E R E S O U R C E S LT D
6
FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
(b) RECEIVABLES
Prepayments
GST and fuel tax credit receivable
Other receivables
(i)
Classification as receivables
30 JUNE
2017
$'000
692
1,395
358
2,445
30 JUNE
2016
$'000
849
847
24
1,720
Other receivables generally arise from transactions outside the usual operating activities of the Group. Collateral is not normally obtained.
Receivables are recognised initially at fair value and then subsequently measured at amortised cost, less provision for impairment. If collection of
the amounts is expected in one year or less they are classified as current assets, if not, they are presented as non-current assets.
Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision for impairment
is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of
receivables. The amount of the provision is recognised in the statement of comprehensive income.
(ii) Fair value of receivables
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value.
(iii)
Impairment and risk exposure
Information about the impairment of receivables, their credit quality and the Group’s exposure to credit risk, foreign currency risk and interest rate
risk can be found in note 12.
(c) OTHER FINANCIAL ASSETS
Non-current assets
Interest bearing security deposits
30 JUNE
2017
$'000
30 JUNE
2016
$'000
4,233
7,197
The above deposits are held by financial institutions or regulatory bodies as security for rehabilitation obligations as required under the respective
exploration and mining leases or as required under agreement. The Group utilised a short term performance bond facility during the year resulting in the
return of some of the existing security deposits totalling $4,991,000. At balance date $2,000,000 of this new facility was backed by security deposits,
with the remainder to be backed by 29 September 2017. Refer to note 22 for details of assets pledged as security.
All interest bearing security deposits are held in Australian dollars and therefore there is no exposure to foreign currency risk. Please refer to note 12(a)
for the Group's exposure to interest rate risk. The fair value of other financial assets is equal to its carrying value.
(d) TRADE AND OTHER PAYABLES
Current liabilities
Trade payables
Other payables
30 JUNE
2017
$'000
5,629
5,537
11,166
30 JUNE
2016
$'000
2,647
6,098
8,745
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid.
Current trade and other payables are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented in current
liabilities unless payment is not due within 12 months from the reporting date.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.
A N N U A L R E P O R T 2 0 1 7
57
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O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
7
NON-FINANCIAL ASSETS AND LIABILITIES
This note provides information about the Group's non-financial assets and liabilities, including:
■ specific information about each type of non-financial asset and non-financial liability
-
-
-
-
-
inventories (note 7(a))
biological assets (note 7(b))
exploration and evaluation (note 7(c))
property, plant and equipment (note 7(d))
provisions (note 7(e))
■ accounting policies for the above assets and liabilities
■ information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved.
(a)
INVENTORIES
Current assets
Ore stockpiles
Gold in circuit
Bullion on hand
Consumable stores
30 JUNE
2017
$'000
4,545
1,581
1,736
1,782
9,644
30 JUNE
2016
$'000
3,450
2,359
4,713
1,872
12,394
(i)
Assigning costs to inventories
The cost of individual items of inventory are determined using weighted average costs. Cost comprises direct materials, direct labour and an
appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are
assigned to ore stockpiles, gold in circuit and bullion on hand on the basis of weighted average costs. Inventories must be carried at the lower of
cost and net realisable value. At balance date ore stockpiles, gold in circuit, bullion on hand and consumable stores were carried at cost (2016: ore
stockpiles, gold in circuit and bullion on hand were carried at net realisable value, with consumable stores carried at cost).
No provision was recorded at 30 June 2017 to write down inventories to their recoverable value (2016: $2,024,000). The movement in the
provision of $2,024,000 (2016: $177,000) was recognised as a credit or reversal expense during the year and included in cost of sales in the
statement of comprehensive income.
Consumable stores include diesel, explosives and other consumables items.
(b) BIOLOGICAL ASSETS
Current assets
Non-current assets
30 JUNE
2017
$'000
218
507
30 JUNE
2016
$'000
-
-
Biological assets comprise sheep and cattle which were acquired during the year by Toongi Pastoral Company Pty Ltd as part of the ramp up of farming
operations on the surrounding land to the Dubbo Project mining lease.
58
A L K A N E R E S O U R C E S LT D
7
NON-FINANCIAL ASSETS AND LIABILITIES (continued)
(c) EXPLORATION AND EVALUATION
Opening balance
Expenditure during the year
Amounts provided for or written off
Closing balance
30 JUNE
2017
$'000
72,553
10,719
(165)
83,107
30 JUNE
2016
$'000
65,251
7,418
(116)
72,553
Exploration and evaluation costs are carried forward on an area of interest basis. Costs are recognised and carried forward where rights to tenure of the
area of interest are current and either:
■ the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or
■ activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise
of economically recoverable reserves, and active and significant exploration and evaluation activities in, or in relation to, the area of interest are
continuing.
Exploration and evaluation assets are tested for impairment when reclassified to development tangible or intangible assets, or whenever facts or
circumstances indicate impairment. An impairment loss is recognised for the amount by which the exploration and evaluation assets carrying amount
exceeds their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets fair value less costs of disposal and
their value in use.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and
evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mine properties under development. No
amortisation is charged during the exploration and evaluation phase.
Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or
alternatively, sale of the respective areas of interest.
There may exist, on the Group's exploration properties, areas subject to claim under native title or containing sacred sites or sites of significance to
Aboriginal people. As a result, exploration properties or areas within tenements may be subject to exploration or mining restrictions.
(d) PROPERTY, PLANT AND EQUIPMENT
LAND AND
BUILDINGS
$'000
PLANT AND
EQUIPMENT
$'000
MINE
CAPITAL WIP
PROPERTIES
$'000
$'000
TOTAL
$'000
YEAR ENDED 30 JUNE 2017
Opening cost
Additions
Transfers between classes
Disposals
Net movement
Closing cost
Opening accumulated depreciation and impairment
Depreciation charge
Disposals
Impairment charge
Net movement
39,616
-
113
(16)
97
39,713
(7,661)
(1,570)
-
(2,317)
(3,887)
Closing accumulated depreciation and impairment
(11,549)
Closing net carrying value
28,164
72,204
-
1,172
(513)
659
72,863
(45,676)
(9,969)
332
(10,219)
(19,856)
(65,532)
7,331
708
3,548
(3,860)
-
(312)
396
-
-
-
-
-
-
110,282
36,855
2,575
-
39,430
149,712
(66,532)
(31,005)
-
(27,439)
(58,444)
222,810
40,403
-
(529)
39,874
262,684
(119,869)
(42,544)
332
(39,975)
(82,187)
(124,976)
(202,057)
396
24,736
60,627
A N N U A L R E P O R T 2 0 1 7
59
C
O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
7
NON-FINANCIAL ASSETS AND LIABILITIES (continued)
(d) PROPERTY, PLANT AND EQUIPMENT (continued)
YEAR ENDED 30 JUNE 2016
Opening cost
Additions
Disposals
Transfers between classes
Net movement
Closing cost
Opening accumulated depreciation and impairment
Depreciation charge
Disposals
Net movement
Closing accumulated depreciation and impairment
Closing net carrying value
LAND AND
BUILDINGS
$'000
PLANT AND
EQUIPMENT
$'000
MINE
CAPITAL WIP
PROPERTIES
$'000
$'000
TOTAL
$'000
25,660
-
-
13,956
13,956
39,616
(6,072)
(1,589)
-
(1,589)
(7,661)
31,955
70,006
-
(68)
2,266
2,198
72,204
(35,752)
(9,953)
29
(9,924)
(45,676)
26,528
819
17,196
-
(17,307)
(111)
83,011
26,186
-
1,085
27,271
179,496
43,382
(68)
-
43,314
708
110,282
222,810
-
-
-
-
-
708
(47,885)
(18,647)
-
(18,647)
(66,532)
43,750
(89,709)
(30,189)
29
(30,160)
(119,869)
102,941
All property, plant and equipment is stated at historical cost less accumulated depreciation and impairment charges. Historical cost includes:
■ expenditure that is directly attributable to the acquisition of the items;
■ direct costs associated with the commissioning of plant and equipment including pre-commissioning costs in testing the processing plant;
■ where the asset has been constructed by the Group, the cost of all materials used in construction, direct labour on the project and project
management costs associated with the asset; and
■ the present value of the estimated costs of dismantling and removing the asset and restoring the site on which it is located.
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 Group and the cost of the item can be measured reliably. The carrying amount of any
component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance is charged to profit or loss during the
reporting period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost over their estimated useful
lives as follows:
Buildings
Plant and equipment
Mining properties
Office equipment
Furniture and fittings
Motor vehicles
Software
units of production
units of production
units of production
3 - 5 years
4 years
4 - 5 years
2 - 3 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
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 the carrying amount. These are included in the statement of comprehensive
income.
60
A L K A N E R E S O U R C E S LT D
7
NON-FINANCIAL ASSETS AND LIABILITIES (continued)
(d) PROPERTY, PLANT AND EQUIPMENT (continued)
(i) Deferred stripping costs capitalised
Overburden and other mine waste materials removed during the initial development of an open pit mine in order to access the mineral deposit is
referred to as development stripping. Costs directly attributable to development stripping inclusive of an allocation of relevant overhead
expenditure, are capitalised as a non-current asset in mine properties. Capitalisation of development stripping costs cease at the time that ore
begins to be extracted from the mine. Development stripping costs are amortised over the useful life of the ore body that access has been provided
to on a units of production basis.
Production stripping commences at the time that ore begins to be extracted from the mine and normally continues throughout the life of a mine.
The costs of production stripping are charged to the income statement as operating costs, when the current ratio of waste material to ore extracted
for a component of the ore body is below the expected stripping ratio of that component. When the ratio of waste to ore is not expected to be
constant, production stripping costs are accounted for as follows:
■ all costs are initially charged to profit or loss and classified as operating costs;
■ when the current ratio of waste to ore is greater than the estimated ratio of a component of the ore body, a portion of the stripping costs,
inclusive of an allocation of relevant overhead expenditure, is capitalised to mine properties; and
■ the capitalised stripping asset is amortised over the useful life of the ore body to which access has been improved.
The amount of production stripping costs capitalised or charged in a reporting period is determined so that the stripping expense for the period
reflects the estimated strip ratio of the ore component. Changes to the estimated waste to ore ratio of a component of the ore body are accounted
for prospectively from the date of change. Deferred stripping capitalised is included in mine properties.
(ii) Mine properties
Mine properties represent the accumulation of all exploration, evaluation and development expenditure incurred by the Group in relation to areas of
interest for which the technical feasibility and commercial viability of the extraction of mineral resources are demonstrable.
When further development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried
forward as part of the mine property only when it is probable that the additional future economic benefits associated with the expenditure will flow
to the Group. Otherwise such expenditure is classified as part of the cost of production. Mine properties are amortised on a units of production
basis over the economically recoverable resources of the mine concerned. The unit of production was changed from tonnes milled for mine
properties other than deferred stripping to ounces produced (refer note 11).
Refer to note 9 for the Group's accounting policy in relation to impairment of non-current assets.
(e) PROVISIONS
Employee benefits
Rehabilitation
Restructuring
Other provisions
(i)
Provisions
CURRENT
$'000
1,993
5,571
558
47
8,169
30 JUNE 2017
NON-CURRENT
$'000
617
15,464
2,407
-
18,488
TOTAL
$'000
2,610
21,035
2,965
47
26,657
CURRENT
$'000
1,703
-
-
-
1,703
30 JUNE 2016
NON-CURRENT
$'000
422
15,333
-
-
15,755
TOTAL
$'000
2,125
15,333
-
-
17,458
Provisions are recognised when the Group has a present legal or constructive obligation, it is probable that an outflow of resources will be required
to settle the obligation, and the amount can be reliably estimated.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end
of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised in finance charges.
A N N U A L R E P O R T 2 0 1 7
61
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O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
7
NON-FINANCIAL ASSETS AND LIABILITIES (continued)
(e) PROVISIONS (continued)
(ii)
Information about individual provisions and significant estimates
Employee benefits
The provision for employee benefits relates to the Group's liability for long service leave and annual leave.
The current provision represents amounts for annual leave that are expected to be settled within 12 months of the end of the period in which the
employees render the related service in respect of employees' services up to the reporting date and are measured at the amounts expected to be
paid when the liabilities are settled.
The liability for long service leave not expected to vest within 12 months after the end of the period in which the employees render the related
service is recognised in the non-current provision for employee benefits and measured at the present value of expected future payments to be
made in respect of services provided up to the end of the reporting period. 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 corporate bonds with terms and currencies that match as closely as possible, the estimated future cash outflows. Where the Group does
not have an unconditional right to defer settlement for any annual or long service leave owed, it is classified as a current provision regardless of
when the Group expects to realise the provision.
Restructuring provision
The provision for restructuring relates to the Group's liability for severance payments for the current open cut gold mining operations.
The current provision represents restructuring amounts that are expected to be settled within 12 months of the end of the period in which the
employees render the related service in respect of employees' services up to the reporting date and are measured at the amounts expected to be
paid when the liabilities are settled.
The liability for restructuring benefits not expected to vest within 12 months after the end of the period is recognised in the non-current provision.
Consideration is given to the expected employee turnover and other factors in determining the value of the restructuring benefits. The non-current
provision has not been discounted to present value as the impact of discounting is not material.
Rehabilitation and mine closure
The Group has obligations to dismantle and remove certain items of property, plant and equipment and to restore and rehabilitate the land on which
they sit.
A provision is raised for the estimated cost of settling the rehabilitation and restoration obligations existing at balance date, discounted to present
value using an appropriate pre-tax discount rate.
Where the obligation is related to an item of property, plant and equipment, its cost includes the present value of the estimated costs of
dismantling and removing the asset and restoring the site on which it is located. Costs that relate to obligations arising from waste created by the
production process are recognised as production costs in the period in which they arise.
The discounted value reflects a combination of management's assessment of the nature and extent of the work required, the future cost of
performing the work required, the timing of cash flows and the discount rate. The increase in the provision due to the passage of time of $367,000
(2016: $188,000) was recognised in finance charges in the statement of comprehensive income.
The provisions are reassessed at least annually. A change in any of the assumptions used to determine the provisions could have a material impact
on the carrying value of the provision.
(iii) Movements in provision
Movements in rehabilitation and mine closure provision during the financial year are set out below:
Rehabilitation and mine closure
Opening balance
Additional provision incurred
Expenditure during the year
Unwinding of discount
Change in estimate
Closing balance
30 JUNE
2017
$'000
15,333
4,539
(1,454)
367
2,250
21,035
30 JUNE
2016
$'000
6,552
8,011
(1,113)
188
1,695
15,333
62
A L K A N E R E S O U R C E S LT D
8
EQUITY
(a) CONTRIBUTED EQUITY
Ordinary shares - fully paid
8(a)(ii)
505,215,669
476,159,490
219,948
213,791
30 JUNE
2017
SHARES
30 JUNE
2016
SHARES
30 JUNE
2017
$'000
30 JUNE
2016
$'000
NOTES
(i) Movements in ordinary share capital
DETAILS
Opening balance 1 July 2015
Share placement
Less: Transaction costs arising on share issues
Deferred tax credit recognised directly in equity
Balance 30 June 2016
Opening balance 1 July 2016
Employee share scheme issue
Share placement
Less: Transaction costs arising on share issues
Deferred tax credit recognised directly in equity
Balance 30 June 2017
NUMBER OF SHARES
$'000
414,218,670
61,940,820
476,159,490
-
-
476,159,490
476,159,490
8,348,983
20,707,196
505,215,669
-
-
505,215,669
201,845
12,388
214,233
(147)
(295)
213,791
213,791
2,570
4,141
220,502
(670)
116
219,948
During the 2016 financial year the Company undertook a one for five non-renounceable entitlement issue at an issue price of $0.20 per new share.
The offer closed on 23 May 2016 raising $12,388,000 (before costs) and resulting in the issue of 61,940,820 new shares. The shortfall of
20,707,196 shares was placed to a number of institutional and professional investors on 7 July 2016 raising $4,141,000 (before costs).
(ii) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and
amounts paid on the shares held.
Every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one
vote. Ordinary shares have no par value.
(b) RESERVES
Share-based payments
The share-based payments reserve is used to recognise:
■ the grant date fair value of shares issued to employees
■ the grant date fair value of deferred rights granted to employees but not yet vested
(c) ACCUMULATED LOSSES
Movements in accumulated losses were as follows:
Opening balance
Net (loss)/profit for the year
Closing balance
30 JUNE
2017
$'000
(27,414)
(28,937)
(56,351)
30 JUNE
2016
$'000
(32,109)
4,695
(27,414)
A N N U A L R E P O R T 2 0 1 7
63
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O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
9
IMPAIRMENT OF NON-CURRENT ASSETS
Impairment of non-current assets
Gold cash generating unit
30 JUNE
2017
$'000
30 JUNE
2016
$'000
39,975
-
At each balance date, the Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets
have been subject to an impairment charge or reversal of impairment charge. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent if any, of the impairment charge or reversal. Where it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its
recoverable amount. An impairment charge is recognised immediately in the statement of comprehensive income.
Where an impairment charge subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable
amount, not to exceed the carrying amount that would have been determined had no impairment charge been recognised for the asset or CGU in prior
years. A reversal of an impairment charge is recognised immediately in the statement of comprehensive income.
The recoverable amount of a CGU is the higher of its fair value less costs of disposing (FVLCD) and its value in use (VIU). FVLCD is the best estimate of
the amount obtainable from the sale of a CGU in an arm's length transaction between knowledgeable willing parties, less the costs of disposal. This
estimate is determined on the basis of best available market information taking into account specific conditions.
VIU is the present value of the future cash flows expected to be derived from the CGU or group of CGU's. Cash flow projections are based on economic
and regulatory assumptions and forecast trading conditions prepared by management.
As a result of the significant and prolonged impact that weather has had on the operations and performance of the Tomingley Gold Operation during the
first half financial year, management have undertaken a review of the carrying value of the non-current assets relating to the gold cash generating unit.
The review was further impacted by drilling performed during the period on the proposed underground mine which has led to a revision of certain
sections of the geological resource model resulting in a reduction in the underground mineral inventory. An update of the detailed mine design,
scheduling and financials incorporating the revised geological model is in progress. Management estimates that the impact of this reduction in mineral
inventory means that the value of the proposed underground operation should be reduced. Resources and reserves are updated annually, around August.
Management remain confident based on the strong geological understanding of the deposit that there is significant value to be unlocked that could lead
to a profitable underground mine and is working on the most cost effective means to identify additions to the mineral inventory to offset the recent
changes.
A further impairment was recorded after completion of the annual business planning process for financial year 2018 which saw the removal of a
scheduled cutback in the Caloma One pit. The cutback requires the use of smaller equipment than currently utilised at the operation and whilst being
designed and able to be executed was removed from the mining schedule until other ore sources are available concurrently to manage the execution risk.
Management will continue to review the economics and timing of the cutback for possible inclusion in future mining schedules.
The key assumptions used in the FVLCD calculations include:
■ commercially recoverable mineral inventories
■ production volumes and efficiencies which can include potential future expansions and improvements in efficiency
■ the cash costs of production adjusted for the effects of taxation
■ the forecast AUD/USD foreign exchange rate
■ the forecast USD gold price
■ cash flows include the effects of taxation
■ a post-tax discount rate reflecting the time value of money, the price for bearing the uncertainty inherent in the asset and other relevant factors
64
A L K A N E R E S O U R C E S LT D
9
IMPAIRMENT OF NON-CURRENT ASSETS (continued)
VIU is the present value of the estimated future cash flows expected to be derived from the cash generating unit or group of cash generating unit's in its
current condition. Cash flow projections are based on economic and regulatory assumptions and forecast trading conditions prepared by management.
The key assumptions used in the VIU calculations include:
■ commercially recoverable mineral inventories
■ production volumes and efficiencies based on the assets current operating capacity and efficiency
■ the cash costs of production
■ the balance date AUD/USD foreign exchange rate
■ cash flows are not adjusted for the effects of taxation
■ the balance date USD gold price
■ a pre-tax discount rate was used, which equated to a post-tax rate of 8%, reflecting the time value of money, the price for bearing the uncertainty
inherent in the asset and other relevant factors
The VIU valuation methodology provided the higher recoverable amount and therefore the gold cash generating unit has been valued on that basis. A
total impairment expense of $39,975,000 (2016: Nil) has been recorded against the property, plant and equipment of the gold cash generating unit.
The deferred tax asset relating to the impairment expense has not been recorded as at this time it is not probable that sufficient future taxable profits will
be available to utilise all of the Group’s available deferred tax assets. The Group will reassess at each reporting date whether the unrecognised deferred
tax asset can subsequently be recognised. Refer to note 5 for details.
A N N U A L R E P O R T 2 0 1 7
65
C
O
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P
A
N
Y
I
N
F
O
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M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
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M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
10 CASH FLOW INFORMATION
(a) RECONCILIATION OF (LOSS)/PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES
YEAR ENDED
(Loss)/profit after tax
Non-cash adjustments
Depreciation and amortisation
Non-cash finance charges
Impairment charges
Share-based payments
Net loss on disposal of non-current assets
Exploration costs provided for or written off
Change in operating assets and liabilities:
Increase in trade and other receivables
Decrease/(increase) in inventories
Increase/(decrease) in trade and other payables
(Decrease)/increase in deferred tax balances
Increase in provisions
Net cash inflow from operating activities
30 JUNE
2017
$'000
(28,937)
42,544
367
39,975
(32)
146
165
(577)
2,004
226
(4,631)
3,498
54,748
30 JUNE
2016
$'000
4,695
30,189
188
-
3,219
13
116
(130)
(889)
(2,253)
1,968
370
37,486
66
A L K A N E R E S O U R C E S LT D
RISK
This section of the notes discusses the Group’s exposure to various risks and shows how these could affect the Group’s financial
position and performance.
11
12
13
Critical accounting estimates and judgements
Financial risk management
Capital risk management
67
68
69
11 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management
also needs to exercise judgement in applying the Group’s accounting policies.
(a) CARRYING VALUE OF NON-CURRENT ASSETS
Non-current assets include capitalised exploration and evaluation expenditures and mine properties. The Group has capitalised significant exploration
and evaluation expenditure on the basis either that such expenditure is expected to be recouped through future successful development (or alternatively
sale) of the areas of interest concerned or on the basis that it is not yet possible to assess whether it will be recouped and activities are planned to
enable that determination.
The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides
to exploit the related lease itself, or, if not, whether it successfully recovers the related exploration asset through sale. The future recoverability of mine
properties is dependent on the generation of sufficient future cash flows from operations (or alternately sale). Factors that could impact the future
recoverability of exploration and evaluation and mine properties include the level of reserves and resources, future technological changes, costs of
drilling and production, production rates, future legal changes (including changes to environmental restoration obligations) and changes to commodity
prices and exchange rates.
Estimates of recoverable quantities of resources and reserves also include assumptions requiring significant judgment as detailed in the resource and
reserve statements.
The Group has recorded an impairment against the gold cash generating unit in the financial year. The preparation of valuations to support the carrying
value of non-current assets requires significant judgement by management. Refer to note 9 for details.
(b) DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Non-current assets include property, plant and equipment. The Group reviews the useful lives of depreciable asset at each reporting date or when there is
a change in the pattern in which the asset's future economic benefits are expected to be consumed, based on the expected utilisation of the assets.
Depreciation and amortisation are calculated using units of production for mine development, rehabilitation asset and mining plant and equipment. Up to
31 December 2016, tonnes milled was the unit of production. From 1 January 2017 the unit of production was changed to ounces produced. The
change was made as a result of the greater variability in ore grades in the remaining scheduled mine life leading to ounces produced better matching
with the recognition of revenues. The impact of the change was to bring forward the recognition of $6,284,000 in depreciation and amortisation charges
into the current financial year.
(c) REHABILITATION AND MINE CLOSURE PROVISIONS
These provisions represent the discounted value of the present obligation to restore, dismantle and rehabilitate certain items of property, plant and
equipment and to rehabilitate exploration and mining leases. The discounted value reflects a combination of management's assessment of the nature and
extent of the work required, the future cost of performing the work required, the timing of cash flows and the discount rate. Changes to one or more of
these assumptions is likely to result in a change to the carrying value of the provision and the related asset or a change to profit and loss in accordance
with the Group's accounting policy stated in note 7(e)(ii).
(d) NET REALISABLE VALUE AND CLASSIFICATION OF INVENTORY
The Group's assessment of the net realisable value and classification of its inventory requires the use of estimates, including the estimation of the
relevant future commodity or product price, future processing costs and the likely timing of sale.
A N N U A L R E P O R T 2 0 1 7
67
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P
A
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Y
I
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F
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M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
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W
F
I
N
A
N
C
A
L
I
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P
O
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T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
11 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
(e)
INCOME TAXES
The Group is subject to income taxes in Australia. Significant judgement is required in determining the provision for income taxes. There are certain
transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group
estimates its tax liabilities based on the Group's understanding of the tax law. Where the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such
determination is made.
In addition, the Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary
differences (deferred tax liabilities) relating to the same taxation authority against which the unused tax losses can be utilised. Utilisation of the tax losses
also depends on the ability of the entity to satisfy certain tests at the time the losses are recouped. Refer to note 5(c) and 5(f) for the current recognition
of tax losses.
The deferred tax asset relating to impairment expense has not been recorded at this time as it is not probable that sufficient future taxable profits will be
available to utilise the Group's available deferred tax assets. Refer to note 5(f) for details.
(f)
SHARE BASED PAYMENTS
The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date at which
they are granted. The fair value for share appreciation rights is determined with the assistance of an external valuer. The number of performance rights
issued under the long term incentive plan are adjusted to reflect management’s assessment of the probability of meeting the targets and service
condition. The related assumptions are set out in note 19. The accounting estimates and assumptions relating to equity settled share based payments
would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.
(g) PROVISION FOR RESTRUCTURING COSTS
Restructuring costs are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary
redundancy in exchange for these benefits. The Group recognises restructuring costs when it is demonstrably committed to either: terminating the
employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an
offer made to encourage voluntary redundancy. Significant judgement is required in determining the probability of retention of employees. Refer note
7(e).
12 FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, equity price risk, commodity price risk and
interest risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as gold forward
contracts to mitigate certain risk exposures.
This note presents information about the Group's exposure to each of the above risks, their objectives, policies and processes for measuring and
managing risk, and the management of capital.
The Board of Directors' has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and
manages the financial risks relating to the operations of the Group through regular reviews of the risks and mitigating strategies.
(a) MARKET RISK
Market risk is the risk that changes in market prices, such as foreign exchange rates, equity prices, commodity prices and interest rates will affect the
Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return.
(i)
Foreign exchange risk
The Group's sales revenue for gold is denominated in US dollars and the majority of operating costs are denominated in Australian dollars, hence
the Group's cash flow is significantly exposed to movement in the A$:US$ exchange rate. The Group mitigates this risk through the use of derivative
instruments, including but not limited to Australian dollar denominated gold forward contracts.
These Australian dollar denominated gold forward contracts are entered into and continue to be held for the purpose of physical delivery of gold
bullion. As a result, the contracts are not recorded in the financial statements. Refer to notes 14(a) and 15(c) for further information.
68
A L K A N E R E S O U R C E S LT D
12 FINANCIAL RISK MANAGEMENT (continued)
(a) MARKET RISK (continued)
(ii) Commodity price risk
The Group's sales revenues are generated from the sale of gold. Accordingly, the Group's revenues are exposed to commodity price fluctuations,
primarily gold. The Group mitigates this risk through the use of derivative instruments, including but not limited to Australian dollar denominated
gold forward contracts.
(iii) Interest rate risk
The Group's main interest rate risk arises through its cash and cash equivalents and other financial assets held within financial institutions. The
Group minimises this risk by utilising fixed rate instruments where appropriate.
Summarised market risk sensitivity analysis
INTEREST RATE RISK
IMPACT ON (LOSS)/PROFIT AFTER TAX
30 JUNE 2017
30 JUNE 2016
CARRYING
AMOUNT
$'000
41,969
358
4,233
(11,165)
+100BP
$'000
-100BP
$'000
294
-
30
-
324
(294)
-
(30)
-
(324)
CARRYING
AMOUNT
$'000
24,455
273
7,197
(8,745)
+100BP
$'000
-100BP
$'000
171
-
50
-
221
(171)
-
(50)
-
(221)
Financial assets
Cash and cash equivalents
Receivables *
Other financial assets
Financial liabilities
Trade and other payables
Total increase / (decrease) in profit
*
The receivables balance excludes prepayments and tax balances which do not meet the definition of financial assets or liabilities.
There is no exposure to foreign exchange risk or commodity price risk for the above financial assets and liabilities.
(b) CREDIT RISK
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposure to customers, including
outstanding receivables and committed transactions.
(i)
Risk management
The Group limits its exposure to credit risk in relation to cash and cash equivalents and other financial assets by only utilising banks and financial
institutions with acceptable credit ratings.
(ii) Credit quality
Tax receivables and prepayments do not meet the definition of financial assets. None of the Group's receivables were past due or impaired at
balance date.
(c) LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group's approach to managing liquidity risk is
to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group's reputation. The Board of Directors' monitors liquidity levels on an ongoing basis.
The Group's financial liabilities generally mature within 3 months, therefore the carrying amount equals the cash flow required to settle the liability.
13 CAPITAL RISK MANAGEMENT
The Group's objectives when managing capital are to safeguard the 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 an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the
capital structure, the Group may return capital to shareholders, pay dividends to shareholders, issue new shares or sell assets.
A N N U A L R E P O R T 2 0 1 7
69
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P
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Y
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F
O
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M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2016
UNRECOGNISED ITEMS
This section of the notes provides information about items that are not recognised in the financial statements as they do not (yet)
satisfy the recognition criteria.
14
15
16
Contingent liabilities and contingent assets
Commitments
Events occurring after the reporting period
70
70
71
14 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(a) CONTINGENT LIABILITIES
The Group has contingent liabilities estimated at up to $5,100,000 for the potential acquisition of several parcels of land surrounding the Dubbo Project
(2016: $3,400,000). The landholders have the right to require subsidiary Australian Strategic Materials Ltd to acquire their property as provided for in the
development consent conditions for the Dubbo Project or under agreement with Australia Strategic Materials Ltd.
(b) CONTINGENT ASSETS
The Group has entered into forward gold sales contracts which are not accounted for on the balance sheet. A contingent asset of $1,601,000 (2016:
contingent liability $7,074,000) existed at the balance date in the event that the contracts are not settled by the physical delivery of gold.
15 COMMITMENTS
(a) EXPLORATION AND MINING LEASE COMMITMENTS
In order to maintain current rights of tenure to exploration and mining tenements, the Group will be required to outlay the amounts disclosed in the below
table. These costs are discretionary, however if the expenditure commitments are not met then the associated exploration and mining leases may be
relinquished.
Within one year
(b) NON-CANCELLABLE OPERATING LEASES
30 JUNE
2017
$'000
1,175
30 JUNE
2016
$'000
1,373
The Group leases various offices under operating leases. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of
the leases are renegotiated.
Within one year
Later than one year but not later than five years
30 JUNE
2017
$'000
381
321
702
30 JUNE
2016
$'000
358
-
358
70
A L K A N E R E S O U R C E S LT D
15 COMMITMENTS (continued)
(c) PHYSICAL GOLD DELIVERY COMMITMENTS
As part of its risk management policy, the Group enters into gold forward contracts to manage the gold price of a proportion of anticipated sales of gold.
During the year as part of the financing arrangement with Macquarie Bank Ltd, the Group entered into two gold call option contracts totalling 12,000
ounces.
The gold forward and option contracts disclosed below did not meet the criteria of financial instruments for accounting purposes on the basis that they
met the normal purchase / sale exemption because physical gold would be delivered into the contract. Accordingly, the contracts were accounted for as
sale contracts with revenue recognised in the period in which the gold commitment was met.
30 JUNE 2017
Fixed forward contracts
Within one year
Gold call options
Within one year
30 JUNE 2016
Fixed forward contracts
Within one year
Later than one year but not later than five years
Total
Gold call options
Later than one year but not later than five years
(d) CAPITAL COMMITMENTS
GOLD FOR
PHYSICAL
DELIVERY
OUNCES
CONTRACTED
GOLD SALE
PRICE
PER OUNCE ($)
VALUE OF
COMMITTED
SALES
$'000
17,500
1,716
30,030
12,000
1,771
21,252
50,900
13,000
63,900
1,683
1,715
85,680
22,300
107,980
12,000
1,771
21,252
Capital expenditure committed for at the end of the reporting period but not recognised as liabilities amounted to $858,000 (2016: $1,435,000).
16 EVENTS OCCURRING AFTER THE REPORTING PERIOD
No other matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the
Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
A N N U A L R E P O R T 2 0 1 7
71
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F
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M
A
T
I
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N
I
B
U
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N
E
S
S
R
E
V
I
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W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2016
OTHER INFORMATION
This section of the notes includes other information that must be disclosed to comply with the accounting standards and other
pronouncements, but that is not immediately related to individual line items in the financial statements.
17
18
19
20
21
22
23
24
Interests in other entities
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Assets pledged as security
Parent entity financial information
Summary of significant accounting policies
72
72
73
75
75
76
77
77
17 INTERESTS IN OTHER ENTITIES
The Group’s subsidiaries at 30 June 2017 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are
held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The state of incorporation or
registration is also their principal place of business.
NAME OF ENTITY
STATE OF INCORPORATION
Australian Zirconia Holdings Pty Ltd
Australian Strategic Materials Ltd
Tomingley Holdings Pty Ltd
Tomingley Gold Operations Pty Ltd
Toongi Pastoral Company Pty Ltd
Western Australia
Western Australia
New South Wales
New South Wales
New South Wales
OWNERSHIP INTEREST HELD
BY THE GROUP
2017
%
100
100
100
100
100
2016
%
100
100
100
100
100
18 RELATED PARTY TRANSACTIONS
(a) PARENT ENTITIES
The Parent Entity within the Group is Alkane Resources Ltd.
(b) SUBSIDIARIES
Interests in subsidiaries are set out in note 17.
72
A L K A N E R E S O U R C E S LT D
18 RELATED PARTY TRANSACTIONS (continued)
(c) KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
YEAR ENDED
30 JUNE
2017
$
1,784,397
141,340
42,600
347,520
2,315,857
30 JUNE
2016
$
1,704,154
128,355
12,698
455,030
2,300,237
Disclosures relating to Key Management Personnel are set out in the Remuneration Report.
Ms K E Brown is associated with Mineral Administration Services Pty Ltd, a Company which provides corporate administration and company secretarial
services to the Group. This fee is disclosed as short term employee benefits in the remuneration report.
(d) TRANSACTIONS WITH OTHER RELATED PARTIES
The following transactions occurred with related parties:
Nuclear IT, a Director related entity, provides information technology consulting services to the Group which includes the coordination of the purchase of
information technology hardware and software for the current year of $94,000 (2016: $89,000). The terms are documented in a Service Level Agreement
and represent normal commercial terms and conditions.
During the period fees amounting to $210,000 (2016: $302,229) were paid to Mineral Administration Services (MAS) in which the company secretary of
the Group, Ms K E Brown has a substantial financial interest. MAS provides administration and company secretarial services to the Group.
(e) RELATED PARTY PAYABLES
There were no invoices outstanding at the end of the reporting period in relation to transactions with related parties (2016: $29,643).
19 SHARE-BASED PAYMENTS
Share-based compensation benefits are provided to employees via the Group's incentive plans. The incentive plans consist of the short term and long
term incentive plans for Executive Directors and other Executives and the employee share scheme for all other employees. Information relating to these
plans is set out in the remuneration report and below.
The fair value of rights granted under the short term and long term incentive plans is recognised as an employee benefits expense with a corresponding
increase in equity. The total amount to be expensed is determined by reference to the fair value of the rights granted, which includes any market
performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market performance vesting
conditions.
Non-market vesting conditions and the impact of service conditions are included in assumptions about the number of rights that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the
end of each period, the entity revises its estimates of the number of rights that are expected to vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to original estimates, if any, in statement of comprehensive income, with a corresponding adjustment
to equity.
The initial estimate of fair value for market based and non-vesting conditions is not subsequently adjusted for differences between the number of rights
granted and number of rights that vest.
When the rights are exercised, the appropriate amount of shares are transferred to the employee. The proceeds received net of any directly attributable
transaction costs are credited directly to equity.
Under the employee share scheme, shares issued by the Group to employees for no cash consideration vest immediately on grant date. On this date, the
market value of the shares issued is recognised as an employee benefits expense with a corresponding increase in equity.
The fair value of deferred shares granted to employees for nil consideration under the employee share scheme is recognised as an expense over the
relevant service period, being the year to which the incentive relates and the vesting period of the shares. The fair value is measured at the grant date of
the shares and is recognised in equity in the share-based payment reserve. The number of shares expected to vest is estimated based on the non-market
vesting conditions. The estimates are revised at the end of each reporting period and adjustments are recognised in profit or loss and the share-based
payment reserve.
A N N U A L R E P O R T 2 0 1 7
73
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P
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Y
I
N
F
O
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M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
19 SHARE-BASED PAYMENTS (continued)
Executive Directors and other Executives
The Company’s remuneration framework is set out in the remuneration report, including all details of the performance rights and share appreciation
rights plans, the associated performance hurdles and vesting criteria.
Participation in the plans is at the discretion of the Board of Directors and no individual has a contractual right to participate in the plans or to receive
any guaranteed benefits. Participation is currently restricted to senior Executives within the Group.
The determination of the number of rights that are to vest or be forfeited is made by the Remuneration Committee after the statutory audit has been
substantially completed. As such, the actual determination was made after the balance date however details have been included in the tables below as
the relevant performance period is the current financial year.
The following tables illustrate the number and weighted average fair value of, and movements in, share rights during the year.
Performance Rights
Outstanding at the beginning of the year
Issued during the year
Vested during the year
Lapsed during the year
Outstanding at the end of the year
2017
WEIGHTED
2016
WEIGHTED
NUMBER OF
AVERAGE FAIR
NUMBER OF
AVERAGE FAIR
SHARES RIGHTS
VALUE $
SHARE RIGHTS
VALUE $
7,204,278
-
(570,553)
(3,766,930)
2,866,795
0.23
-
0.23
0.23
0.23
3,907,405
4,945,307
(1,232,047)
(416,387)
7,204,278
0.21
0.25
0.25
0.25
0.23
The number of Performance Rights to be granted is determined by the Remuneration Committee with reference to the fair value of each Performance
Right which is generally the volume weighted average price for the month preceding the start of the performance period. This will differ from the fair
value reported in the table above which is determined at the time of grant.
Share Appreciation Rights
Outstanding at the beginning of the year
Issued during the year
Lapsed during the year
Outstanding at the end of the year
2017
WEIGHTED
2016
WEIGHTED
NUMBER OF
AVERAGE FAIR
NUMBER OF
AVERAGE FAIR
SHARES RIGHTS
VALUE $
SHARE RIGHTS
VALUE $
23,737,499
-
(12,270,312)
11,467,187
0.08
-
0.08
0.08
10,550,000
13,187,499
-
23,737,499
0.07
0.09
-
0.08
The number of Share Appreciation Rights to be granted is determined by the Remuneration Committee with reference to the fair value of each Share
Appreciation Right at the time performance targets are set. This will differ from the fair value reported in the table above which is determined at the time
of grant.
The Performance Rights, which have non-market based hurdle conditions, have been valued using the Black-Scholes-Merton model to estimate the fair
value at valuation date.
The Share Appreciation Rights, which have market based hurdle conditions, have been valued using a Monte Carlo simulation based model to test the
likelihood of attaining the Total Shareholder Return hurdle. The Monte Carlo model incorporates the impact of this market based condition on the fair
value of the rights.
74
A L K A N E R E S O U R C E S LT D
19 SHARE-BASED PAYMENTS (continued)
The following table lists the inputs to the models used.
GRANT DATE
5/12/2014
18/11/2015
PERFORMANCE
HURDLE
DIVIDEND
YIELD
TSR and Non-Market
TSR and Non-Market
%
-
-
EXPECTED
STOCK
VOLATILITY
%
65
70
RISK FREE
RATE
%
2.60
2.25
EXPECTED
LIFE YEARS
2.57
2.62
EXPENSES ARISING FROM SHARE BASED PAYMENTS TRANSACTIONS
WEIGHTED
AVERAGE
SHARE PRICE
AT GRANT
DATE
$
0.07
0.09
Performance rights
Employee share scheme
Share appreciation rights
20 REMUNERATION OF AUDITORS
YEAR ENDED
30 JUNE
2017
$
(119,322)
(180,913)
442,235
142,000
30 JUNE
2016
$
267,165
2,309,173
641,792
3,218,130
During the year the following fees were paid or payable for services provided by the auditor of the Parent Entity, its related practices and non-related
audit firms:
PRICEWATERHOUSECOOPERS
(i)
Audit and other assurance services
Audit of annual financial statements
Review of half year financial statements
Other assurance services
Total remuneration for audit and other assurance services
(ii) Other services
Other advisory services
21 EARNINGS PER SHARE
(a) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
Weighted average number of ordinary shares used in denominator
in calculating basic profit/(loss) per share
Weighted average number of ordinary shares used as the denominator in
calculating diluted profit/(loss) per share
YEAR ENDED
30 JUNE
2017
$
120,800
61,145
-
181,945
30 JUNE
2016
$
115,600
35,950
42,875
194,425
166,810
3,500
YEAR ENDED
2017
NUMBER
2016
NUMBER
502,874,260
420,783,944
506,617,269
424,809,827
A N N U A L R E P O R T 2 0 1 7
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T
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O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
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D
U
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E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
22 ASSETS PLEDGED AS SECURITY
As at the date of this report $4,233,000 (2016: $7,197,000) in deposits has been provided as security. Refer to note 6(c) for details.
During the period the Group entered into a working capital facility with Macquarie Bank Ltd comprising the following:
■ a performance bond facility of $5,053,000 which of which $2,000,000 was cash backed at balance date with the balance due to be cash backed by
29 September 2017; and
■ a project loan facility which was fully drawn to $7,000,000 during the period and repaid in full as at balance date; and
■ a hedging facility.
The Group provided the following securities for the working capital facility:
■ a combination security agreement providing security over all of the assets of Tomingley Holdings Pty Ltd and Tomingley Gold Operations Pty Ltd;
■ a first ranking registered mining mortgage over the Tomingley Mining Lease in accordance with the Mining Act 1992 (NSW);
■ land mortgages and a water rights mortgage over the holdings of Tomingley Gold Operations Pty Ltd; and
■ a guarantee provided by Alkane Resources Ltd and Tomingley Holdings Pty Ltd.
The Australian-dollar denominated project loan is subject to a floating rate that is fixed each quarter and loan which is carried at amortised cost. The
facility did not have any impact on the entity’s exposure to foreign exchange and is subject to interest rate risk. The remainder of the borrowings relate to
the insurance premium funding facility which is a fixed interest rate Australian-dollar denominated loan.
The table below represents the carrying value of the assets pledged as security:
Current
Cash and cash equivalents
Receivables
Inventories
Total current assets pledged as security
Non-current
Plant and equipment
Total non-current assets pledged as security
Total assets pledged as security
30 JUNE
2017
$'000
7,080
1,987
9,630
18,697
33,608
33,608
52,305
30 JUNE
2016
$'000
14,571
972
12,394
27,937
75,939
75,939
103,876
76
A L K A N E R E S O U R C E S LT D
23 PARENT ENTITY FINANCIAL INFORMATION
(a) SUMMARY FINANCIAL INFORMATION
The individual financial statements for the Parent Entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Issued capital
Reserves
Accumulated losses
Total equity
Statement of Comprehensive Income
(Loss)/profit for the period after income tax
Total comprehensive (loss)/income
30 JUNE
2017
$'000
3,517
162,339
165,856
(1,514)
(345)
(1,859)
219,948
1,330
(57,281)
163,997
(32,685)
(32,685)
30 JUNE
2016
$'000
10,086
181,679
191,765
(807)
(181)
(988)
213,791
1,582
(24,596)
190,777
7,559
7,559
The parent entity provided a guarantee in respect of the working capital facilities entered into by subsidiary Tomingley Gold Operations Pty Ltd. Refer to
note 22 for details.
(b) DETERMINING THE PARENT ENTITY FINANCIAL INFORMATION
The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements, except as set out below.
(i)
Tax consolidation legislation
Alkane Resources Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. Refer to note 24 for
further details.
(ii) Share-based payments rights
The grant by the company of rights to equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital
contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant date fair value, is
recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.
24 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of all significant accounting policies adopted in the preparation of the consolidated financial statements that have not been
disclosed previously. The policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the
Group consisting of Alkane Resources Ltd and its subsidiaries. Comparatives presented are for the 12 month period to 30 June 2016.
(a) BASIS OF PREPARATION
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board and the Corporations Act 2001. Alkane Resources Ltd is considered a for-profit entity for the purpose of preparing
the financial statements.
(i)
Compliance with IFRS
The consolidated financial statements of the Group also comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
(ii) Historical cost convention
The financial statements have been prepared under the historical cost basis, except for certain financial assets and liabilities which are measured at
fair value.
A N N U A L R E P O R T 2 0 1 7
77
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F
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A
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P
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G
O
V
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N
A
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E
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E
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E
M
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N
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S
C
H
E
D
U
L
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
24 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) PRINCIPLES OF CONSOLIDATION
Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of the impairment of the transferred asset. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income,
statement of comprehensive income, statement of changes in equity and balance sheet respectively.
(c) FOREIGN CURRENCY TRANSLATION
(i)
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in
which the entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars, which is Alkane
Resources Ltd's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in statement of comprehensive income.
All other foreign exchange gains and losses are presented in the consolidated statement of comprehensive income on a net basis within other
income or other expenses.
(d)
INVESTMENTS AND OTHER FINANCIAL ASSETS
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is
impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on
the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
(e) EARNINGS PER SHARE
(i)
Basic earnings per share
Basic earnings per share is calculated by dividing:
■ the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares; and
■ by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares
issued during the year and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
■ the profit attributable to owners of the Company, excluding any costs of servicing equity, by
■ the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
78
A L K A N E R E S O U R C E S LT D
24 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) GOODS AND SERVICES TAX (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation
authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the
taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from,
or payable to the taxation authority, are presented as operating cash flows.
(g) PARENT ENTITY FINANCIAL INFORMATION
The financial information for the Parent Entity, Alkane Resources Ltd, disclosed in note 23 has been prepared on the same basis as the consolidated
financial statements, except as set out below.
Tax consolidation legislation
Alkane Resources Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Alkane Resources Ltd, and the controlled entities in the Tax Consolidated Group 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, Alkane Resources Ltd also recognises the current tax liabilities (or assets) and the deferred tax
assets arising from unused tax losses and unused tax credits assumed from controlled entities in the Tax Consolidated Group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Alkane Resources Ltd for any current
tax payable assumed and are compensated by Alkane Resources Ltd for any current tax receivable and deferred tax assets relating to unused tax losses or
unused tax credits that are transferred to Alkane Resources Ltd under the tax consolidation legislation. The funding amounts are determined by reference
to the amounts recognised in the wholly-owned entities financial statements.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable
to other entities in the Group.
A N N U A L R E P O R T 2 0 1 7
79
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C O N T I N U E D
30 JUNE 2017
24 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2017 reporting periods and have not been
early adopted by the Group. The Group's assessment of the impact of these new standards and interpretations is set out below.
MANDATORY APPLICATION
DATE/DATE OF ADOPTION BY GROUP
Mandatory for financial years
commencing on or after
1 January 2018. Expected date
of adoption by the Group:
1 July 2018.
Mandatory for financial years
commencing on or after
1 January 2019. Expected date
of adoption by the Group:
1 July 2019.
Must be applied for financial
years commencing on or after
1 July 2018.
TITLE OF STANDARD
NATURE OF CHANGE
IMPACT
AASB 15
Revenue from
Contracts with
Customers
AASB 16
Leases
AASB 9
Financial
Instruments
At this stage, the Group does not foresee any
material impact based on its current revenue
sources.
The AASB has issued a new standard for the
recognition of revenue. This will replace
AASB 118 which covers contracts for goods
and services and AASB 111 which covers
construction contracts. The new standard is
based on the principle that revenue is
recognised when control of a good or
service transfers to a customer - so the
notion of control replaces the existing
notion of risks and rewards. The standard
permits a modified retrospective approach
for the adoption. Under this approach
entities will recognise transitional
adjustments in retained earnings on the date
of initial application (eg 1 July 2018), ie
without restating the comparative period.
They will only need to apply the new rules
to contracts that are not completed as of the
date of initial application.
The AASB requires a lessee to recognise
assets and liabilities for all leases with a
term of more than 12 months, unless the
underlying asset is of low value.
At this stage, the Group does not foresee any
material impact given the term and values of
current leases as there are no material long
term operating leases.
AASB 9 addresses the classification,
measurement and derecognition of financial
assets and financial liabilities and
introduces new rules for hedge accounting
and new impairment model for financial
assets.
The Group does not expect any impact from
the new classification, measurement and
derecognition rules on the Group’s financial
assets and financial liabilities. There will also
be no impact on the Group’s accounting for
financial liabilities, as the new requirements
only affect the accounting for financial
liabilities that are designated at fair value
through profit or loss and the Group does not
have any such liabilities. The new hedging
rules align hedge accounting more closely
with the Group’s risk management practices.
As a general rule it will be easier to apply
hedge accounting going forward as the
standard introduces a more principles-based
approach. The new standard also introduces
expanded disclosure requirements and
changes in presentation.
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting
periods and on foreseeable future transactions.
80
A L K A N E R E S O U R C E S LT D
DIRECTORS' DECLARATION
30 JUNE 2017
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 43 to 80 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and
(ii)
giving a true and fair view of the consolidated entity's financial position as at 30 June 2017 and of its performance for the year ended on that date,
and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
Note 24(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting
Standards Board.
The Directors' have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act
2001.
This declaration is made in accordance with a resolution of Directors.
D I Chalmers
Director
Perth
29 August 2017
A N N U A L R E P O R T 2 0 1 7
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E
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS
82
A L K A N E R E S O U R C E S LT D
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A
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I
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P
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G
O
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N
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E
A N N U A L R E P O R T 2 0 1 7
83
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS C O N T I N U E D
84
A L K A N E R E S O U R C E S LT D
C
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P
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I
N
F
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N
I
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U
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N
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S
S
R
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V
I
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F
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A
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C
A
L
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P
O
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S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
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M
A
T
I
O
N
C
O
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P
O
R
A
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G
O
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A N N U A L R E P O R T 2 0 1 7
85
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS C O N T I N U E D
86
A L K A N E R E S O U R C E S LT D
C
O
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F
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P
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S
H
A
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H
O
L
D
E
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I
N
F
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M
A
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I
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N
C
O
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P
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G
O
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A N N U A L R E P O R T 2 0 1 7
87
S H A R E H O L D E R I N F O R M A T I O N
SHARE HOLDING AT 29 SEPTEMBER 2017 - ALK
(a) DISTRIBUTION OF SHAREHOLDERS
SHARE HOLDING
1 -1,000
1,001 -
5,000
5,001 - 10,000
10,001 - 100,000
over
100,001 -
NUMBER OF HOLDERS OF
FULLY PAID ORDINARY SHARES
752
1,936
1,125
2,211
475
6,499
(b) UNMARKETABLE PARCELS
There are 1,016 shareholders who hold less than a marketable parcel.
(c) VOTING RIGHTS
Voting rights are one vote per fully paid ordinary share
(d) NAMES OF THE SUBSTANTIAL HOLDERS AS DISCLOSED IN SUBSTANTIAL HOLDING NOTICES:
SHAREHOLDER
Abbotsleigh Pty Ltd
FIL Limited
NUMBER OF SHARES
109,869,451
29,813,399
TOP TWENTY SHAREHOLDERS AT 29 SEPTEMBER 2017
SHAREHOLDER
Abbotsleigh Pty Ltd
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
Choice Investments Dubbo Pty Ltd
Funding Securities Pty Ltd
Mandel Pty Ltd
BNP Paribas Noms Pty Ltd
National Nominees Limited
Leefab Pty Ltd
Milford Park Superannuation Pty Ltd
Pebadore Pty Ltd
BNP Paribas Nominees Pty Ltd
Mr David Hanbury Edmonds
Mrs Pamela Julian Sargood
Mr Richard Mitchell Dimond + Mrs Denise Rosslyn Dimond
Ms Jillanne Homewood
Zenith Business Pty Ltd
Mrs Kathryn Jane Swan
NUMBER
OF SHARES
102,669,451
43,750,539
34,183,644
22,544,847
11,587,565
6,724,695
3,550,000
3,150,000
3,103,909
2,798,014
2,752,456
2,750,000
2,600,000
2,519,006
2,489,521
2,300,000
2,250,000
2,170,252
2,091,573
2,000,000
257,985,472
% ISSUED
CAPITAL
20.30
8.65
6.76
4.46
2.29
1.33
0.70
0.62
0.61
0.55
0.54
0.54
0.51
0.50
0.49
0.45
0.44
0.43
0.41
0.40
51.01
88
A L K A N E R E S O U R C E S LT D
SHAREHOLDER INFORMATION (continued)
RESTRICTED SECURITIES
As at the date of this report, there were no securities subject to restriction under the Listing Rules of ASX Limited.
ON MARKET BUY-BACK
As at the date of this report, there was no current on market buy-back
A N N U A L R E P O R T 2 0 1 7
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S
R
E
V
I
E
W
F
I
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A
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C
A
L
I
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P
O
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S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
C O R P O R A T E G O V E R N A N C E
CORPORATE GOVERNANCE STATEMENT
The Company’s annual Corporate Governance Statement has been published and released to ASX separately. It is available on the Company’s
website at alkane.com.au/company/governance/
90
A L K A N E R E S O U R C E S LT D
T E N E M E N T S C H E D U L E
AT 29 SEPTEMBER 2017
PROJECT/LOCALITY
TENEMENT
INTEREST
NATURE OF INTEREST
Peak Hill, NSW
GL 5884 (Act 1904)
ML 6036
ML 6042
ML 6277
ML 6310
ML 6389
ML 6406
ML 1351
ML 1364
ML 1479
EL 6319
EL 5548
EL 7631
ML 1724
EL 6320
EL 5675
EL 5830
EL 5942
EL 6085
ELA 5555
ML 1684
EL 7020
EL 8340
EL 8170
EL 8194
EL 8527
EL 4022
EL 6209
EL 8261
EL 8550
EL 8442
Dubbo, NSW
Wellington, NSW
Tomingley, NSW
Cudal, NSW
Rockley, NSW
Northern Molong Porphyry Project
Bodangora, NSW
Kaiser, NSW
Finns Crossing, NSW
Elsienora, NSW
Orange East, NSW
Nullagine, WA
E 46/522-I & 523-I
E 46/928
M 46/515, 522 & 523
Miranda Well, WA
M 36/303
McDonough Lookout, WA
M 36/329 & 330
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
0%
0%
0%
19.4%
19.4%
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity (Australian Strategic Materials Ltd)
Equity (Australian Strategic Materials Ltd)
Equity (Australian Strategic Materials Ltd)
Equity
Equity
Equity
Equity
Equity
Application
Equity (Tomingley Gold Operations Pty Ltd)
Equity
Equity
Equity
Equity
Equity
Equity
Equity (subject to royalty of 2% net smelter return)
Equity
Equity
Right to earn 60% to 80%
60% retained interest in diamond potential
60% retained interest in diamond potential
60% retained interest in diamond potential
Equity – diluting
Equity – diluting
A N N U A L R E P O R T 2 0 1 7
91
C
O
M
P
A
N
Y
I
N
F
O
R
M
A
T
I
O
N
I
B
U
S
N
E
S
S
R
E
V
I
E
W
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
T
E
N
E
M
E
N
T
S
C
H
E
D
U
L
E
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A L K A N E R E S O U R C E S LT D