More annual reports from Allegiance Coal Limited:
2021 ReportABN 47 149 490 353
Annual Report - 30 June 2017
Corporate Directory
Directors
Malcolm Carson - Chairman
Mark Gray
David Fawcett
Jonathan Reynolds
Company secretary
Jonathan Reynolds
Registered office and
Principal place of
business
Suite 107
109 Pitt Street
Sydney NSW 2000
Telephone: +61 2 9233 5579
Facsimile: +61 2 9233 1349
Share register
Auditor
Solicitors
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
Telephone: 1300 787 272
Facsimile: +61 3 9473 2500
SCS Audit & Corporate Services Pty Ltd
Suite 802
309 Pitt Street
Sydney 2000
Bellanhouse
Level 19, Alluvion
58 Mounts Bay Road
Perth WA 6000
Stock exchange listing
Allegiance Coal Limited shares are listed on the Australian Securities
Exchange
(ASX code: AHQ)
Website
www.allegiancecoal.com.au
Email address
info@allegiancecoal.com.au
Contents
Directors’ Report ..................................................................................................................................... 1
Corporate governance statement ......................................................................................................... 17
Statement of comprehensive income .................................................................................................... 27
Statement of financial position .............................................................................................................. 28
Statement of changes in equity ............................................................................................................. 29
Statement of cash flows ........................................................................................................................ 30
Directors’ declaration ............................................................................................................................ 64
Auditor’s independence declaration ...................................................................................................... 65
Independent Auditor’s report ................................................................................................................. 66
Shareholder information ........................................................................................................................ 71
Directors’ Report
30 June 2017
The directors present their report, together with the financial statements, on the consolidated entity
(referred to hereafter as the 'consolidated entity') consisting of Allegiance Coal Limited (referred to
hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the
year ended 30 June 2017.
Directors
The following persons were directors of Allegiance Coal Limited during the whole of the financial year
and up to the date of this report, unless otherwise stated:
Malcolm Carson (Chairman) – Appointed on 11 August 2016
Mark Gray – Appointed on 29 May 2017
David Fawcett – Appointed on 9 December 2016
Jonathan Reynolds – Appointed on 11 August 2016
David Deitz – Ceased on 29 May 2017
Anthony Howland-Rose – Ceased on 25 August 2016
Peter Donkin – Ceased on 25 August 2016
Principal activities
The continuing principal activity of the consolidated entity during the financial year was the
acquisition, exploration and development of coal tenements.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial
year.
Review of operations
Acquisition of Telkwa Coal Limited
On 23 November 2016, shareholders approved the acquisition of all the shares in Telkwa Coal
Limited (TCL) in consideration for the issue of 50 million shares equating to a purchase price of
$1,250,000 at a deemed share price of $0.025, on a post consolidation basis.
Farm-in Agreement
TCL acquired farm-in rights to the Telkwa metallurgical coal project (Project) from a subsidiary of
Altius Minerals Corporation (Altius), a TSX listed investment fund that acquired the Project as part of
the acquisition of producing mines from Sherritt Corporation in April 2013.
TCL has the right to earn up to 90 percent Project ownership. Altius has a free carry on its remaining
10 percent Project equity in relation to a small mine only (i.e. producing up to 250,000 tcpa). Altius will
be required to contribute its pro-rata share of the costs of a major mine. The farm-in obligations and
payments are summarised in the table below.
Milestone
1 Deliver NI 43-101 JORC compliant report
Complete internal scoping studies
Up-grade geo-model to a PFS standard
Incur C$1M of expenditure
Completion
20 Mar 2015
20 Mar 2016
20 Mar 2016
No time limit
Milestone Completions
Completed
Completed
Completed
Pay C$200k for 20% project
equity - Completed
2 Complete baseline studies
Complete affected party agreements
File small mine permit applications
10 December 2018
10 December 2018
10 December 2018 Pay C$300k for further 30%
3 Grant of small mine permits
No time limit
project equity
Pay C$500k for further 40%
Annual Report | 30 June 2017 | Page 1 of 72
4 Sale of 100k tonnes from a small mine
5 Grant of major mine permits
6 Sale of 500k tonnes from a major mine
No time limit
No time limit
No time limit
project equity
Pay C$2M
Pay C$2M
Pay C$5M
In addition to the above, Altius will receive a 3% gross sales royalty on coal sold where the
benchmark coal price is less than US$100 per tonne; 3.5% where the benchmark coal price is
US$100-US$109.99 per tonne; 4% where the benchmark coal price is US$110-US$119.99 per tonne;
and 4.5% where the benchmark coal price is greater than US$120 per tonne.
Project Background
Located on the western side of British Columbia, the Project enjoys simple access to rail and port and,
from the Ridley Island Coal Terminal (RICT), it is a comparatively short shipping distance to the Asian
steel mills. The Project has been the subject of a significant amount of exploration and evaluation,
estimated in today’s dollars to be in the order of $40 million. As a result, the Company has had to do
no drilling for exploration or resource upgrade, though it will need to do some for the permiting
process. Its focus therefore, is to undertake largely desktop work to assess the most prudent and
efficient way to develop the Project, and to get it permitted.
The Project enjoys exceptional location, situated immediately adjacent to Canadian National Rail’s
railway line. Whereas the majority of northeast and southeast British Columbia’s coal, and Alberta’s,
experiences geographical challenges connecting to the railway line and must then be hauled in
excess of 1,000 km to RICT, the Project has simple access and just a 360 km rail haul. This is a very
significant capital and operating cost advantage.
A total of 828 holes (more than 90,000 m) have been drilled from 1979 to 1998, of which 507 were
rotary and 321 were core. Coal samples were gathered from all coal seam intersections recovered
from core drilling, and two bulk samples (219 ton in 1983 and 80 ton in 1996). Coal samples were
sent to several laboratories for testing and analysis during this period. Analytical testing included
individual seam analysis, product testing, complete washability analysis, and burn tests.
The Project has already been the subject of several separate feasibility studies* by Shell in 1992 and
Manalta Coal Limited in 1993, 1996, and the last in 1997. Each study expanded the recoverable coal
based on additional drilling which increased both the modelled annual rate of production and the life
of mine.
* Not compliant with the 2012 JORC Code.
The final study completed in 1997 contemplated recovering 29.7 Mt of coal at a strip ratio of 5.7:1
BCM/ROMt, and focused on mining 1.2 Mtpa of clean coal for a life of mine of 18 years. The 1997
study did not include all mineable areas focussing on two of three allowing the third area to be
developed in the future. The life of mine therefore at that planned rate of production would likely be
well in excess of 20 years.
In January 2017, the Company located nine groundwater wells installed over 20 years ago by past
Project owners. Seven of the nine wells were in good operating condition and field water samples
were obtained from three. Locating the historical groundwater wells, and finding a number in good
operating condition, will reduce baseline study costs associated with drilling new wells. In total, the
Company is aware of the existence of some 40 historical groundwater wells. The Company intends to
locate these in due course, and presuming a majority of them are found to be operating, further and
greater cost savings to the Project would be made.
Staged Production Pre-feasibility Study
During the year, the Company completed a staged production Pre-feasibility Study (PFS) over the
Project. The PFS was undertaken by SRK Consulting (Canada) Inc. (SRK) assisted by other mining
and resources specialists including Sedgman Canada, and was completed and delivered to the
Annual Report | 30 June 2017 | Page 2 of 72
Company on 30 June 2017. The results of the PFS were comprehensively summarised in the
Company’s ASX announcement dated 3 July 2017 (PFS Release).
The staged approach to permitting and production is pivotal to the objective of putting a safe and
environmentally sustainable mine into production quickly, that is both affordable and achievable for
the Company.
The PFS assumes production commences at 250,000 tonnes per annum of saleable coal, ramping in
year three to 750,000 saleable tonnes per annum, and in year four to 1,750,000 saleable tonnes per
annum. 250,000 tonnes per annum is relevant because to mine at that rate or less, under British
Columbia mining and environmental legislation, involves a potentially quicker permitting process, and
as the PFS Release disclosed, has a low start up capital expenditure requirement. The PFS
confirmed therefore, that the Company’s approach is very much achievable.
The table below, summarises the key highlights.
PFS Key Highlights
Proven and probable reserves of saleable coal (Reserves)
Average life of mine strip ratio to recover the Reserves
Clean all metallurgical coal yield for the Tenas pit (50% of Reserves)
Clean all metallurgical coal yield for all three pits
Stage one start-up capital expenditure
Stage two start-up capital expenditure
All in FOB cash cost (pre-corporate taxes)
Assumed average sales price over 30 years for a Telkwa PCI delivered
product
EBITDA margin ratio
FOB cash cost plus sustaining capital breakeven point
Post-tax net present value @ 10%
Post-tax internal rate of return
Units
Mt
BCM/PRODt
%
%
US$M
US$M
US$
US$
%
US$
US$M
%
42.5
8.5:1
75
68
51
162
55
110
50
60
243
30
The PFS confirmed that at whatever level of production the Project adopts, it will be one of the lowest
cost producers of seaborne metallurgical coal. The Company intentionally tested this assumption by
assessing the mine at a very low production level, alongside a mine at a significantly greater
production level. The all-in FOB cash cost difference, was only US$2 per tonne.
The Company’s immediate focus is to undertake and deliver a pre-feasibility study based solely on
stage one production, assuming that 250,000 tonnes per annum of saleable coal is all that the
consolidated entity is permitted to mine. The stage one pre-feasibility study (Stage 1 PFS) is due for
delivery prior to the end of September 2017.
The Stage 1 PFS is planned to be the blueprint for commencement of mine development. It is the
study that will form the basis of the Company’s project description in discussions with the British
Columbia Ministry of Energy, Mines and Petroleum Resources (MEM) and other Government
Departments, with First Nations, with the local community, and ultimately the basis for the
consolidated entity’s applications for permits to operate a mine.
Baseline studies and environmental monitoring
During the year, the Company commenced its baseline studies and environmental monitoring. The
baseline studies will run until the middle of 2018, the results of which will form the basis of an affects
assessment of the Project to support the consolidated entity’s applications for permits to mine.
Environmental monitoring is ongoing.
Baseline studies, and environmental monitoring, form a critical part to the permitting and development
of any mine, in almost any jurisdiction. Studies cover a wide area of matters including: Hydrogeology;
Meteorology and Air Quality; Surface Hydrology; Surface Water Quality; Fish and Fish Habitat;
Annual Report | 30 June 2017 | Page 3 of 72
Terrain and Soils; Wetland Systems; Terrestrial and Aquatic Life; Rare and Invasive Plant Surveys;
Forestry Inventory; and Culture and Archaeology.
The Company has settled on its team of environmental consultants, who, in addition to gathering new
data, are reviewing and undertaking a GAP analysis of the massive body of historical environmental
data that the Project already has from work done by previous Project owners. The Company’s
strategy is to get the environmental consultants to develop their baseline studies by augmenting that
historical data so that they can utilise the benefit of that information to make their own studies more
robust. The cost savings arising from this approach are expected to be significant.
Key Stakeholder Engagement
In December 2016, the Company commenced dialogue and engagement with the indigenous peoples
in whose territory the Project is located. On 27 April 2017, following several months of consultation,
the consolidated entity entered into a Communication and Engagement Agreement with the Office of
the Wet’suwet’en, representing the first step in developing and progressing a working relationship with
the Wet’suwet’en people, in relation to the Project. The Office of the Wet’suwet’en represents the title
rights and interests of over 7,000 members belonging to the five Clans, twelve House Groups of the
Wet’suwet’en First Nations group, in whose territory the Project is located.
The town of Telkwa, near which the Project is located, has a population of less than 2,000 people
most of whom work in surrounding towns such as Smithers, 12 km to the north. The town has a long
history in coal mining dating back to the 1920s when coal was mined in the Project area, for domestic
power consumption, up until the late 1960s. The town and neighbouring areas also support the local
forestry industry which has a large industrial footprint in the region, as well as the greater interior of
British Columbia. In April 2017, Company staff-members met with and presented to the Office of the
Mayor of Telkwa, and undertook, with the assistance of the Mayor’s Office, to commence wider
consultation with the Telkwa community.
MEM is a key organisation in the mine permitting process. MEM recently established the ‘Major Mine
Permitting Office’ (MMPO) to manage the entire permitting process for new projects. This was driven,
to a large degree, by delays that many proponents were experiencing with their mine permitting
applications. It is a welcome initiative supported by the Company.
In December 2016, Company staff-members also met with key MEM officials, including those from
within the MMPO, to introduce the Project and the consolidated entity, and importantly, to outline the
Company’s planned schedule and timetable to the lodging of mine permit applications in second half
calendar 2018.
Kilmain and Back Creek Projects
Both the Kilmain and Back Creek Projects in Queensland remain under review. There were no
activities of note during the year ended 30 June 2017.
Share capital
In November 2016, shareholders approved a consolidation of the Company’s capital on a one for five
basis.
In November 2016, in connection with the acquisition of TCL, the Company’s shareholders approved
the following share issues:
To the vendors of TCL, 50,000,000 ordinary shares for a deemed consideration of $1,250,000.
To Altius, in connection with payments amounting to $410,861 due to it by TCL under the
Farm-in Agreement (as is set out above), 10,956,282 ordinary shares.
To a consultant to TCL, in consideration for $47,250 of outstanding invoices due it by TCL,
1,260,000 ordinary shares.
Annual Report | 30 June 2017 | Page 4 of 72
During the year ended 30 June 2017, the Company undertook the following capital raising initiatives:
In September 2016, the Company placed (on a post consolidation basis) 5,280,000 ordinary
shares at $0.025 per share with sophisticated investors raising $132,000, before costs.
In November 2016, the Company placed 66,666,671 ordinary shares at $0.0375 per share with
sophisticated investors raising $2,500,000, before costs.
In May 2017, the Company completed a 1 for 3 non-renounceable rights issue at $0.025 per
share issuing 56,498,932 new ordinary shares and raising $1,412,473, before costs.
Loans
C. Randall & Associates Pty Ltd was paid $220,000 on 14 July 2016 in full discharge of its loan of
$370,535.
In 2011, the consolidated entity entered loan facility agreements with Gullewa Ltd. On 4 August 2016
the parties entered a deed of loan variation, whereby Gullewa was paid $1,104,000 in partial
satisfaction of the amount owed to it under the 2011 agreements. The balance outstanding of
$659,000, which is unsecured, may be satisfied by the issue and allotment of shares in the Company
at a price of $0.025 per share (subject to any share reconstruction and shareholders’ approval) or by
repayment in cash, subject to Gullewa’s agreement. The loan will be interest free until 4 August 2019,
after which interest will accrue daily and be capitalised monthly, at a rate of BBSW + 4%, on any
unpaid balance. The loan must be repaid in full, whether in cash or by the issue and allotment of
shares, by 4 August 2021.
Prior to acquisition, TCL had issued promissory notes with a face value of $100,000. The notes, which
are unsecured and repayable on demand, bear interest at 7.5% pa.
In the first half of financial year 2017, the Company issued and repaid promissory notes with a face
value of $200,000. The notes, which were unsecured and repayable on demand, bore interest at
7.5% pa.
Trading results
The loss for the consolidated entity after providing for income tax amounted to $979,673 (30 June
2016: $3,263,070).
Significant changes in the state of affairs
Significant changes in the state of the consolidated affairs during the current year are reflected under
the review of operations above.
Matters subsequent to the end of the financial year
No matters or circumstances have arisen since 30 June 2017 that have significantly affected, or may
significantly affect the consolidated entity’s operations, the results of those operations, or the
consolidated entity’s state of affairs in future financial years.
Likely developments and expected results of operations
The consolidated entity intends progressing development of the Telkwa metallurgical coal project as
reflected under the review of operations above.
Environmental regulation
The consolidated entity is subject to and compliant with all aspects of environmental regulations of its
exploration activities. Management is not aware of any environmental law that has not been complied
with.
Annual Report | 30 June 2017 | Page 5 of 72
Malcolm Carson
Non-Executive Chairman
MSc, BSc, MAusIMM, AIG
Malcolm has over 40 years’ experience in the resource sector including field
exploration geologist and commercial evaluation of resources and project
finance. He has held senior positions in exploration and mining companies,
the West Australian Government, investment banks and executive roles in
ASX and TSX publicly listed companies. He was appointed to the Board on
11 August 2016.
Chairman of Dampier Gold Limited (ASX: DAU), Director Pacific Wildcat
Corp (TSX), Director Compass Gold Corporation (TSX)
Information on directors
Name:
Title:
Qualifications:
Experience and
expertise:
Other current
directorships:
Former directorships
(last 3 years):
Special
responsibilities:
Interests in shares: Nil
Interests in options: Nil
None
None
Name:
Title:
Qualifications:
Experience and
expertise:
Mark Gray
Managing Director
LLB
Mark founded Telkwa Coal Limited (a wholly owned subsidiary of the
Company) and secured the farm-in rights to the Telkwa metallurgical coal
project in September 2014. He is a corporate lawyer with 30 years’
transactional experience gained as a lawyer with Herbert Smith in London, a
partner with Bell Gully in New Zealand, and as a director of the London
based investment bank Barclays de Zoette Wedd. For the last 12 years he
has been an advisor to and company executive of mining companies and
operations including underground coal in Australia and open pit mining in
Africa, as well as exploration and development projects in several minerals
including coal. He was appointed to the Board on 29 May 2017.
None
Other current
directorships
Former directorships
(last 3 years):
Special
responsibilities
Interests in shares: 50,000 ordinary shares held directly (20,013,696 ordinary shares held
None
None
Interests in options Nil
indirectly)
Name:
Title:
Qualifications:
Experience and
expertise:
David Fawcett
Independent Non-Executive Director
BSc. Eng, Pr. Eng.
David is a mining engineer with over 40 years’ experience in the coal
industry, primarily in Western Canada. During his career he has had a broad
range of responsibilities from early stage geology and exploration, through
feasibility and regulatory processes, to operations, management and
executive positions for major, intermediate and start-up companies. He was
a co-founder and president of Western Canadian Coal Corp. from 1997 to
2003 which company was subsequently taken over by US based Walter
Energy Inc. for C$3.5 billion. He was chief operating officer of NEMI Northern
Energy & Mining Inc. from 2003 to 2004 and senior vice president of
Hillsborough Resources Limited from 2005 to 2009. He has been the
recipient of several coal industry awards including the Coal Association of
Annual Report | 30 June 2017 | Page 6 of 72
Canada’s Award of Distinction in 2015. He was appointed to the Board on 9
December 2016.
None
Other current
directorships
Former directorships
(last 3 years):
Special
responsibilities
Interests in shares: No ordinary shares held directly (2,000,000 ordinary shares held indirectly)
Interests in options Nil
Jameson Resources Limited (ASX: JAL)
None
Name:
Title:
Qualifications:
Experience and
expertise:
Jonathan Reynolds
Finance Director
B.Com (Hons), CA, F Fin
Jonathan is a chartered accountant with more than 25 years’ experience
across many sectors spent mostly in financial management roles. Most
recently, he has been finance director of a resource investment house,
managing investments across a range of commodities, including coal. Prior
to that he held the position of chief financial officer with a number of listed
entities and before that was a senior manager with an international firm of
chartered accountants. He is a member of Chartered Accountants Australia
and New Zealand, a fellow of Financial Services Institute of Australia and
holds a Bachelor of Commerce (Honours) degree. He was appointed to the
Board on 11 August 2016.
None
None
Other current
directorships:
Former directorships
(last 3 years):
Special
responsibilities:
Interests in shares: 400,000 ordinary shares held directly
Interests in options: Nil
None
Name:
Title:
Qualifications:
Experience and
expertise:
David Deitz – Ceased on 29 May 2017
Non-Executive Director
B.Com, MAusIMM, CPA
David joined Allegiance Mining NL in 1996 and became a Director in August
2000. As Chief Financial Officer he was part of the team with Anthony
Howland-Rose that discovered and brought into production the Avebury
Nickel Mine in Tasmania. Allegiance Mining NL was taken over in 2008 for
approximately $860 million.
Director of Gullewa Limited (ASX: GUL)
Other current
directorships:
Former directorships
(last 3 years):
Special
responsibilities:
Interests in shares: No ordinary shares held directly (177,77 ordinary shares held indirectly)
Interests in options: 100,000 options over ordinary shares held directly
None
None
Name:
Title:
Qualifications:
Experience and
expertise:
Anthony Howland-Rose – Ceased on 25 August 2016
Non-Executive Chairman
MSc, DIC, FGS, FIMMM, FAusIMM, FAIG, CEng
Anthony has over 50 years' experience
in exploration, discovery,
development and corporate activity worldwide in the junior exploration sector.
He has been involved in a number of mineral discoveries, the most recent of
which was the Avebury Nickel Project for which he was co-recipient of the
Annual Report | 30 June 2017 | Page 7 of 72
Association of Mining and Exploration Companies Prospector of the Year
Award in 2007. Anthony, for the years 1996 to 2008 as a Director and
Chairman of Allegiance Mining NL, together with David Deitz, presided over
the discovery, drill out, financing and building of the $180 million Avebury
Nickel Mine and processing facility. Allegiance Mining NL was acquired by a
hostile takeover by Zinifex Limited in 2008 for approximately $860 million.
Executive Chairman of Gullewa Limited (ASX: GUL) and Director of Central
Iron Ore Limited, listed on the Toronto Stock Exchange - Venture
Other current
directorships:
Former directorships
(last 3 years):
Special
responsibilities:
Interests in shares: 100,000 ordinary shares held directly (151,334 ordinary shares held
None
None
Interests in options: 100,000 options over ordinary shares held directly
indirectly)
Name:
Title:
Qualifications:
Experience and
expertise:
Peter Donkin – Ceased on 25 August 2016
Independent Non-Executive Director
BEc, LLB, FFIN, MAICD
Peter has 29 years’ experience in investment banking, the majority of which
involved a primary focus on the mining and resources sector. He completed
his career in investment banking as the Managing Director of the Mining
Finance Division of Societe Generale in Australia, having worked for that
bank for 21 years in both their Sydney and London offices. Prior to joining
Societe Generale he was with the corporate and international banking
division of the Royal Bank of Canada. He currently works as a financial
consultant to the minerals sector. Peter’s experience in investment banking
involved structuring and executing transactions for mining companies, both in
Australia and internationally. This included advising on and arranging
transactions in a wide variety of financial products covering mining project
finance, corporate finance, acquisition finance, pre-export finance, and early
stage investment capital.
Director of Paladin Energy Ltd (ASX: PDN)
Other current
directorships:
Former directorships
(last 3 years):
Special
responsibilities:
Interests in shares: 2,000 ordinary shares held directly (66,667 ordinary shares held indirectly)
Interests in options: 100,000 options over ordinary shares held directly
None
None
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships in all other
types of entities, unless otherwise stated.
'Former directorships (in the last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships in all other types of entities, unless otherwise stated.
Company secretary Jonathan Reynolds
Information on Jonathan Reynolds is included in 'Information on directors' above.
Annual Report | 30 June 2017 | Page 8 of 72
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended
30 June 2017, and the number of meetings attended by each director were:
Malcolm Carson
Mark Gray
David Fawcett
Jonathan Reynolds
David Deitz
Anthony Howland-Rose
Peter Donkin
Attended
4
1
3
4
3
-
-
Held
4
1
3
4
3
-
-
Held: represents the number of meetings held during the time the director held office.
The roles of the Remuneration and Nomination Committee and Audit and Risk Committee are
performed by the full Board.
Remuneration report (audited)
The remuneration report, which has been audited, outlines the director and executive remuneration
arrangements for the consolidated entity and the Company, in accordance with the requirements of
the Corporations Act 2001 and its Regulations.
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
Details of remuneration
Share-based compensation
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's and Company's executive reward framework is to ensure
reward for performance is competitive and appropriate for the results delivered. The framework aligns
executive reward with the achievement of strategic objectives and the creation of value for
shareholders, and conforms with the market best practice for delivery of reward. The Board of
Directors ('the Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Board is responsible for determining and reviewing remuneration arrangements for Directors and
executives. The performance of the consolidated entity and Company depends on the quality of its
directors and executives. The remuneration philosophy is to attract, motivate and retain high
performance and high quality personnel.
Alignment to shareholders' interests:
has economic profit as a core component of plan design
focuses on sustained growth in shareholder wealth and delivering constant or increasing return
on assets
attracts and retains high calibre executives
Alignment to program participants' interests:
rewards capability and experience
reflects competitive reward for contribution to growth in shareholder wealth
provides a clear structure for earning rewards
Annual Report | 30 June 2017 | Page 9 of 72
In accordance with best practice corporate governance, the structure of non-executive director and
executive remunerations are separate.
Non-executive directors’ remuneration
Fees and payments to non-executive directors reflect the demands which are made on, and the
responsibilities of, the directors. Non-executive directors receive a fixed fee for time, commitment and
responsibilities and may be paid remuneration as the directors determine where the director performs
services outside the scope of the ordinary duties of the director. Non-executive directors may also be
paid expenses properly incurred in attending meetings or otherwise in connection with the Company’s
business.
The Company’s constitution provides that the non-executive directors as a whole may be paid or
provided fees or other remuneration for their services as a director of the Company, the total amount
or value of which must not exceed $500,000 (excluding mandatory superannuation) per annum or
such other maximum amount periodically determined by the Company in a general meeting.
Fees for non-executive directors are not linked to individual performance. Given the Company is at an
early stage of development and the financial restrictions placed on it, the Company may consider it
appropriate to issue individual options to non-executive directors, subject to obtaining relevant
shareholder approvals.
Executive remuneration
The consolidated entity and Company aim to reward executives with a level and mix of remuneration
based on their position and responsibility, which is both fixed and variable.
The executive remuneration and reward framework has four components:
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits are
reviewed annually by the Board, based on individual and business unit performance, the overall
performance of the consolidated entity and comparable market remuneration.
Executives can receive their fixed remuneration in the form of cash or other fringe benefits (for
example motor vehicle benefits) where it does not create any additional costs to the consolidated
entity and adds additional value to the executive.
The short-term incentives ('STI') include bonus arrangements as may be approved by the Board.
The long-term incentives ('LTI') includes long service leave and share-based payments.
Consolidated entity performance and link to remuneration
There is no link between the consolidated entity's performance and remuneration.
Use of remuneration consultants
During the financial year ended 30 June 2017, the Company did not engage remuneration consultants
to review its existing remuneration policies and provide recommendations on how to improve both the
short-term incentives ('STI') and long-term incentives ('LTI') programs of the Company and
consolidated entity.
Annual Report | 30 June 2017 | Page 10 of 72
Voting and comments made at the Company's 2016 Annual General Meeting ('AGM')
At the last AGM, the shareholders voted to adopt the remuneration report for the year ended 30 June
2016. The Company did not receive any specific feedback at the AGM regarding its remuneration
practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of the directors and key management personnel are set out in the
following tables. Key management personnel are defined as those who have the authority and
responsibility for planning, directing and controlling the major activities of the consolidated entity.
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-
based
payments
Cash
salary
and
fees
$
2017
Non-Executive Directors:
Malcolm Carson
David Deitz
David Fawcett
Anthony Howland-
Rose
Peter Donkin
43,800
49,149
23,153
1,667
1,529
-
-
-
-
-
Executive Directors:
Mark Gray*
Jonathan Reynolds
150,000 15,000
106,452
-
375,750 15,000
Bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
-
-
-
-
-
-
-
-
-
145
-
-
145
-
-
290
-
-
-
-
-
-
-
-
Total
$
43,800
49,294
23,153
1,667
1,674
165,000
106,452
391,040
-
-
-
-
-
-
-
-
* Managing Director of Telkwa Coal Ltd from date of acquisition to 29 May 2017 and Managing
Director of the consolidated entity from 29 May 2017.
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-
based
payments
Cash
salary
and
fees
$
2016
Non-Executive Directors:
Anthony Howland-
Rose
David Deitz
Peter Donkin
Malcolm Carson
26,667
24,465
24,465
-
Executive Directors:
Jonathan Reynolds
Colin Randall
-
-
75,597
Bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,324
2,324
-
-
-
4,648
-
-
-
-
-
-
-
Total
$
26,667
26,789
26,789
-
-
-
80,245
-
-
-
-
-
-
-
Annual Report | 30 June 2017 | Page 11 of 72
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Fixed remuneration
Name
Non-Executive Directors:
Malcolm Carson
David Deitz
David Fawcett
Anthony Howland-
Rose
Peter Donkin
Executive Directors:
Mark Gray
Jonathan Reynolds
Colin Randall
2017
2016
100%
100%
100%
100%
100%
91%
100%
-
-
100%
-
100%
100%
-
-
100%
Share-based compensation
At risk - STI
2017
2016
At risk - LTI
2017
2016
-%
-%
-%
-%
-%
9%
-%
-
-
-%
-
-%
-%
-
-
-%
-%
-%
-%
-%
-%
-%
-%
-
-
-%
-
-%
-%
-
-
-%
Issue of shares
There were no shares issued to directors and other key management personnel as part of
compensation during the year ended 30 June 2017 or 30 June 2016.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of
directors and other key management personnel in this financial year or future reporting years are as
follows:
Grant date
Vesting date and
exercisable date
Expiry date
Exercise
price
Fair value per option
at grant date
27 November 2013
27 November 2013 27 November 2018
$0.2475
$0.075
Options granted carry no dividend or voting rights.
There were no options granted to directors and other key management personnel as part of
compensation during the year ended 30 June 2017 or 30 June 2016.
Values of options over ordinary shares granted, vested and lapsed for directors and other key
management personnel as part of compensation during the year ended 30 June 2017 are set out
below:
Value of
options
granted
during the
year
$
-
-
-
-
-
-
-
Value of
options
vested
during the
year
$
-
-
-
-
-
-
-
Value of
options
lapsed
during the
year
$
-
-
-
-
-
-
-
Remuneration
consisting of
options for the
year
%
-
-
-
-
-
-
-
Name
Malcolm Carson
Mark Gray
David Deitz
David Fawcett
Jonathan Reynolds
Anthony Howland-Rose
Peter Donkin
Annual Report | 30 June 2017 | Page 12 of 72
Details of options over ordinary shares granted, vested and lapsed for directors and other key
management personnel as part of compensation during the year ended 30 June 2016 are set out
below:
Value of
options
granted
during the
year
$
-
-
-
-
-
-
Value of
options
vested
during the
year
$
-
-
-
-
-
-
Value of
options
lapsed
during the
year
$
-
-
-
-
-
-
Remuneration
consisting of
options for the
year
%
-
-
-
-
-
-
Name
Malcolm Carson
David Deitz
Jonathan Reynolds
Anthony Howland-Rose
Peter Donkin
Colin Randall
Service agreements
Key management personnel have no entitlements to termination payments in the event of removal for
misconduct.
Additional disclosures relating to key management personnel
In accordance with Class Order 14/632, issued by the Australian Securities and Investments
Commission, relating to 'Key management personnel equity instrument disclosures', the following
disclosure relates only to equity instruments in the Company or its subsidiaries.
Grant date Vesting date
Name
Anthony
Howland-Rose 27 Nov 2013 27 Nov 2013
27 Nov 2013 27 Nov 2013
David Deitz
27 Nov 2013 27 Nov 2013
Peter Donkin
Number
of
options
granted
Value of
options
granted
$
Value of
options
vested
$
Number
of
options
lapsed
Value of
options
lapsed
$
100,000
100,000
100,000
7,500
7,500
7,500
7,500
7,500
7,500
-
-
-
-
-
-
Shareholding
The number of shares in the Company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related
parties, is set out below:
Balance at the
start of the
year+
Received as
part of
remuneration
Ordinary shares
Malcolm Carson
Mark Gray
David Fawcett
Jonathan Reynolds
David Deitz – ceased
Anthony Howland-Rose –
ceased
Peter Donkin – ceased
-
20,013,696
-
-
177,779
251,334
68,669
20,511,478
-
-
-
-
-
-
-
-
Disposals/
other
Balance
at the end of the
year++
-
-
-
-
-
-
-
-
-
20,013,696
2,000,000
400,000
177,779
251,334
68,669
22,911,478
Additions
-
-
2,000,000
400,000
-
-
-
2,400,000
+ or on appointment (number adjusted for effect of November 2016 share consolidation)
++ or on resignation
Annual Report | 30 June 2017 | Page 13 of 72
Option holding
The number of options over ordinary shares in the Company held during the financial year by each
director and other members of key management personnel of the consolidated entity, including their
personally related parties, is set out below:
Balance at the
start of the
year+
Granted
Exercised
Expired/
forfeited/
other
Balance at the
end of the
year++
Options over ordinary
shares
Malcolm Carson
Mark Gray
David Fawcett
Jonathan Reynolds
David Deitz – ceased
Anthony Howland-
Rose – ceased
Peter Donkin – ceased
-
-
-
-
100,000
100,000
100,000
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
100,000
100,000
300,000
+ or on appointment (number adjusted for effect of November 2016 share consolidation)
++ or on resignation
Options over ordinary shares
Malcolm Carson
Mark Gray
David Fawcett
Jonathan Reynolds
David Deitz – ceased
Anthony Howland-Rose – ceased
Peter Donkin – ceased
++ or on resignation
Vested and
exercisable
Vested and
unexercisable
Balance at the
end of the
year++
-
-
-
-
100,000
100,000
100,000
300,000
-
-
-
-
-
-
-
-
-
-
-
-
100,000
100,000
100,000
300,000
Loans to key management personnel and their related parties
There were no loans made to key management personnel and their related parties during the financial
year ended 30 June 2017.
Other transactions with key management personnel and their related parties
Service, administration fees and reimbursements paid to former ultimate parent entity, Gullewa
Limited totalling $31,477.
Consultancy fees paid to related parties, included in remuneration disclosures above
Mineral Resource Consultants Pty Ltd, a related party of Malcom Carson, totalling $43,800
Gray Corporate Law Pty Ltd, a related party of Mark Gray, totalling $165,000
Jabiru Quill Pty Ltd, a related party of David Deitz, totalling $47,620
Murray River Coal Ltd, a related party of David Fawcett, totalling $23,153
J Reynolds CA Pty Ltd, a related party of Jonathan Reynolds, totalling $106,452
Expenses reimbursements paid to related parties:
Gray Corporate Law Pty Ltd, a related party of Mark Gray, totalling $43,040
Jabiru Quill Pty Ltd, a related party of David Deitz, totalling $1,439
J Reynolds CA Pty Ltd, a related party of Jonathan Reynolds, totalling $3,164
Annual Report | 30 June 2017 | Page 14 of 72
Loan from former ultimate parent entity, Gullewa Limited totalling $659,000,
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Allegiance Coal Limited under option at the date of this report are as
follows:
Grant date
Expiry date
Exercise price
Number under
option
27 November 2013
27 November 2018
$0.2475
820,000
No person entitled to exercise the options had or has any right by virtue of the option to participate in
any share issue of the Company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Allegiance Coal Limited issued on the exercise of options during the
year ended 30 June 2017 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their
capacity as a director or executive, for which they may be held personally liable, except where there is
a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors
and executives of the Company against a liability to the extent permitted by the Corporations Act
2001. The contract of insurance prohibits disclosure of the nature of liability and the amount of the
premium.
Indemnity and insurance of auditor
The Company has not, during or since the financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the
auditor of the Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a
party for the purpose of taking responsibility on behalf of the Company for all or part of those
proceedings.
Non-audit services
There were no non-audit services provided during the financial year by the auditor.
Officers of the Company who are former audit directors of SCS Audit & Corporate Services Pty
Ltd
There are no officers of the Company who are former audit directors of SCS Audit & Corporate
Services Pty Ltd.
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 65.
Annual Report | 30 June 2017 | Page 15 of 72
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
On behalf of the directors
Malcolm Carson
Chairman
8 September 2017
Sydney
Annual Report | 30 June 2017 | Page 16 of 72
Corporate governance statement
30 June 2017
The Company is committed to the pursuit of creating value for shareholders, while at the same time
meeting shareholders’ expectations of sound corporate governance practices. As with all its business
activities, the Company is proactive in respect of corporate governance and puts in place those
arrangements which it considers are in the best interests of shareholders, and consistent with its
responsibilities to other stakeholders.
THE BOARD OF DIRECTORS
The Board determines the corporate governance arrangements of the Company.
This statement discloses the Company’s adoption of the Corporate Governance Principles and
Recommendations (3rd edition) (the Principles) released by the Australian Securities Exchange
Corporate Governance Council in March 2014, effective 1 July 2014. The Principles can be viewed at
www.asx.com.au. The Principles are not prescriptive; however, listed entities (including the Company)
are required to disclose the extent of their compliance with the Principles, and to explain why they
have not adopted a Principle (the ‘if not, why not’ approach). The Principles have operated throughout
the year unless otherwise indicated.
The table at the end of this statement provides cross references between the disclosures and
statements in this Corporate Governance Statement and the relevant Principles.
ROLE OF THE BOARD
The Directors must act in the best interest of the Company and in general are responsible for, and
have the authority to determine, all matters relating to the policies, management and operations of the
Company.
The Board’s responsibilities, in summary, include:
providing strategic direction and reviewing and approving corporate strategic initiatives;
overseeing and monitoring organisational performance and the achievement of the Company’s
strategic goals and objectives;
appointing, monitoring the performance of, and, if necessary, removing the Managing Director;
ratifying the appointment or removal, and contributing to the performance assessment of the
members of the senior management team;
planning for Board and executive succession;
ensuring there are effective management processes in place and approving major corporate
initiatives;
adopting an annual budget and monitoring management and financial performance and plans;
monitoring the adequacy, appropriateness and operation of internal controls;
identifying significant business risks and reviewing how they are managed;
considering and approving the Company’s Annual Financial Report and the interim financial
and activities reports;
enhancing and protecting the reputation of the Company;
reporting to, and communicating with, shareholders; and
setting business standards and standards for social and ethical practices.
Day to day management of the Company and implementation of Board policies and strategies has
been formally delegated to senior executives and management. It is the responsibility of the Board to
oversee the activities of management in executing delegated tasks. In particular, the Board has
delegated management responsibility for:
Annual Report | 30 June 2017 | Page 17 of 72
delivering key objectives and milestones in accordance with market expectation as are set by
the Board;
developing project budgets for capital and operating expenditure for Board review and if
appropriate, approval;
developing and maintaining an effective risk management framework and keeping the Board
and the market fully informed about risk;
the prudent management of the Company’s cash reserves in accordance with the approved
annual operating budget;
regulatory compliance across all jurisdictions in which the Company undertakes business
covering amongst other things health and safety, tax, accounting and company reporting.
COMPOSITION OF THE BOARD
The Board currently comprises two non-executive Directors and two executive Directors with a broad
range of skills, expertise and experience, and all of whom add value to the operation of the Board.
Given the Company’s current stage of development, the Board considers its structure effectively and
efficiently meets the Company’s requirements.
In considering new candidates, the nomination committee (presently the full Board) evaluates the
range of skills, experience and expertise of the existing Board in accordance the Company’s Board
skills matrix. In particular, the nomination committee identifies the particular skills that will best
increase the Board's effectiveness. Consideration is also given to the balance of independent
Directors on the Board. Reference is made to the Company’s size and operations as they evolve from
time to time.
All Directors are required to consider the number and nature of their directorships and calls on their
time from other commitments.
The following directors are considered by the Board to be independent directors:
Malcolm Carson – Non-executive Chairman, appointed 11 August 2016
David Fawcett – Non-executive Director, appointed 9 December 2016
The independence of Directors is important to the Board. Independence is determined by objective
criteria acknowledged as being desirable to protect investor interests and optimise value to investors.
The Board regularly assesses the independence of its Directors. In determining the status of a
Director, the Company considers that a Director is independent when he or she is independent of
management and free of any business or other relationship (for example a significant shareholding)
that could materially interfere with, or could reasonably be perceived to interfere with the exercise of
unfettered and independent judgement. The Company’s criteria for assessing independence are in
line with standards set by the Principles.
The appointment and removal of Directors is governed by the Company’s constitution. Under the
Constitution the Board must comprise of a minimum of three Directors. The nomination committee is
responsible for selecting and approving candidates to fill any casual vacancies that may arise on the
Board from time to time.
Directors who have been appointed to fill casual vacancies, other than the Managing Director, must
offer themselves for re-election at the next annual general meeting of the Company. In addition, at
each annual general meeting, at least one Director, other than the Managing Director, must be a
candidate for re-election and no Director, other than the Managing Director, shall serve more than
three years without being a candidate for re-election.
In making decisions regarding the appointment of Directors, the Board assesses the appropriate mix
of skills, experience and expertise required by the Board and assesses the extent to which the
required skills and experience are represented on the Board. When a vacancy exists, the Board
Annual Report | 30 June 2017 | Page 18 of 72
determines the selection criteria based on the skills deemed necessary. The Board identifies potential
candidates, and if appropriate, will utilise an external consultant to assist in identifying potential
candidates. The Board then appoints the most suitable candidate.
The composition of the Board is to be reviewed regularly against the Company’s Board skills matrix
prepared and maintained by the Board to ensure the appropriate mix of skills and expertise is present
to facilitate successful strategic direction.
The Board will undertake appropriate background checks and screening checks prior to nominating a
Director for election by shareholders and provides to shareholders all material information in its
possession concerning the Director standing for election or re-election in the explanatory notes to
accompany the notice of meeting. New Directors will participate in an induction program to assist
them to understand the Company’s business and the particular issues it faces.
The Board collectively has the right to seek independent professional advice as it sees fit. Each
Director individually has the right to seek independent professional advice, subject to the approval of
the Chairman. All Directors have direct access to the Company Secretary.
Directors also have complete access to the senior management team. In addition to regular reports by
senior management to the Board meetings, Directors may seek briefings from senior management on
specific matters and are entitled to request additional information at any time when they consider it
appropriate.
THE ROLE OF THE CHAIRMAN
The Chairman is responsible for the leadership of the Board, ensuring it is effective, setting the
agenda of the Board, conducting the Board meetings, ensuring then approving that an accurate
record of the minutes of board meetings is held by the Company and conducting the
shareholder meetings.
Where practical, the Chairman should be a non-executive Director. If a Chairman ceases to be
an independent Director then the Board will consider appointing a lead independent Director.
Where practical, the Managing Director should not be the Chairman of the Company during his
term as Managing Director or in the future.
The Chairman must be able to commit the time to discharge the role effectively.
The Chairman should facilitate the effective contribution of all Directors and promote
constructive and respectful relations between Board members and management.
BOARD COMMITTEES
The Board generally operates as a whole across the range of its responsibilities but, to increase its
effectiveness, uses committees where closer attention to particular matters is required given the
nature and scale of the Company’s operations.
The Board maintains two Board Committees covering Remuneration and Nomination, and Audit and
Risk. Details regarding the number of Board and committee meetings held during the year and the
attendance of each member is set out in the Annual Report.
The charter of each Board Committee must be approved by the Board and reviewed following any
applicable regulatory changes.
Remuneration and Nomination Committee
As and when it is required a Remuneration and Nomination Committee will be established by
resolution of the Board. Given the Company’s size and stage of development, the Remuneration and
Nomination Committee is comprised of the Board as a whole.
Annual Report | 30 June 2017 | Page 19 of 72
The Remuneration Committee advises the Board on remuneration and incentive policies and
practices. It makes specific recommendations on remuneration packages and other terms of
employment for Non-Executive and Executive Directors and senior executives.
Any increase in the maximum remuneration of Non-Executive Directors is the subject of shareholder
resolution in accordance with the Company’s constitution, the Corporations Act and the ASX Listing
Rules, as applicable. The apportionment of Non-Executive remuneration within that maximum will be
made by the Board having regard to the inputs and value to the Company of the respective
contributions by each Non-Executive Director.
The Board may award additional remuneration to Non-Executive and Executive Directors called upon
to perform extra services or undertake special duties on behalf of the Company.
Audit and Risk Committee
As and when it is required an Audit and Risk Committee will be established by resolution of the Board.
Given the Company’s size and stage of development, the Audit and Risk Committee is comprised of
the Board as a whole.
The main responsibilities of the Audit and Risk Committee are to:
review and report to the Board on the periodic reports and financial statements;
provide assurance to the Board that it is receiving adequate, timely and reliable information;
assist the Board in reviewing effectiveness of the Company’s internal control environment
covering compliance with applicable laws and regulations and reliability of financial reporting;
liaise with the external auditors and ensure that the annual audit and half-year review are
conducted in an efficient manner; and
ensure that the Company has an effective risk management system and that major risks to the
Company are reported to the Board and are appropriately managed.
The Committee reviews the performance of the external auditors on an annual basis. A representative
of the committee meets with the auditors during the year to discuss the external audit plan, any
significant problems that may arise, and to review the fees proposed for the audit work to be
performed.
Any written matters raised by the auditors are discussed and dealt with at full Board meetings. The
auditors, by request, may attend committee and Board meetings to discuss any matter that they
believe warrants attention by the Board. The auditors also attend shareholder meetings of the
Company.
BOARD MEETINGS
The Directors may determine the quorum necessary for the transaction of business at a
meeting, however, until otherwise determined, there must be two Directors present at a meeting
to constitute a quorum.
The Board will schedule formal Board meetings at least quarterly and hold additional meetings,
including by telephone, as may be required.
Non-executive Directors may confer at scheduled times without management being present.
The minutes of each Board meeting shall be prepared by the Company Secretary, approved by
the Chairman and circulated to Directors after each meeting.
The Company Secretary shall ensure that the business at Board and committee meetings is
accurately captured in the minutes.
The Company Secretary shall co-ordinate the timely completion and distribution of Board and
committee papers for each meeting of the Board and any committee.
Minutes of meetings must be approved at the next Board meeting.
Further details regarding Board meetings are set out in the Company's Constitution.
Annual Report | 30 June 2017 | Page 20 of 72
COMPANY SECRETARY
When requested by the Board, the Company Secretary will facilitate the flow of information of
the Board, between the Board and its Committees and between senior executives and non-
executive Directors.
The Company Secretary is accountable directly to the Board, through the Chair, on all matters
to do with the proper functioning of the Board.
The Company Secretary is to facilitate the induction and professional development of Directors.
The Company Secretary is to facilitate and monitor the implementation of Board policies and
procedures.
The Company Secretary is to provide advice to the Board on corporate governance matters,
the application of the Company's Constitution, the ASX Listing Rules and applicable other laws.
All Directors have access to the advice and services provided by the Company Secretary.
The Board has the responsibility for the appointment and removal, by resolution, of the
Company Secretary.
PERFORMANCE EVALUATION AND REMUNERATION
Performance Evaluation
The Company has a documented performance evaluation policy. The Chairman has undertaken a
formal performance evaluation of the Board, its Committees and its individual Directors. At an informal
level, the Chairman frequently consults in each reporting period with the other Directors seeking
guidance on ways in which the Board as a whole, as well as each individual Director, can improve its
contribution and performance to the execution by the Board of its responsibilities.
The performance of the Managing Director is reviewed by the Chairman in consultation with other
non-executive directors.
The performance of the Company’s senior executives is reviewed by the Managing Director as part of
the annual remuneration review process and reported to the Remuneration Committee.
Director and Executive Remuneration
Remuneration levels are competitively set to attract and retain appropriately qualified and
experienced personnel.
Performance, duties and responsibilities, market comparison and independent advice are all
considered as part of the remuneration process. The total remuneration paid to Directors and key
management personnel for the reporting period is set out in the Remuneration Report.
Directors’ fees are reviewed annually and are benchmarked against fees paid to Directors of similar
organisations. Directors are not provided with retirement benefits other than statutory superannuation
and do not participate in employee incentive schemes although they may be granted options as set
out in the Directors’ Report of the Annual Report.
To ensure that the Company’s senior executives properly perform their duties, the following
procedures are in place:
performance is formally assessed each year as part of the Company’s formal employee
performance review process;
all senior management are assessed in terms of their achievement of agreed KPIs (both
financial and non-financial) for the period;
there is a strong link between the outcomes of this performance review process and the
subsequent remuneration review as outlined in the Remuneration Report; and,
senior management are provided with access to continuing education to update and enhance
their skills and knowledge.
Annual Report | 30 June 2017 | Page 21 of 72
RISK MANAGEMENT AND INTERNAL CONTROLS
The Company presently does not have an internal audit function. The Company has a formalised risk
management framework encompassing market, financial, liquidity and corporate governance risk,
which it employs for evaluating and continually improving the effectiveness of its risk management
and internal control processes. The identification and effective management of risk, including
calculated risk taking is viewed as an essential part of the Company’s approach to creating long term
shareholder value. Compliance with risk management policies is monitored by the Board.
GOVERNANCE POLICIES
Integrity, ethical standards and compliance
The Company has adopted a formal Code of Conduct for its Directors and employees. The Code
seeks to set the standards for dealing ethically with employees, investors, customers, regulatory
bodies and the financial and wider community, and the responsibility and accountability of individuals
for reporting and investigating reports of unethical behaviour.
The Company is committed to being a good corporate citizen within all jurisdictions that it undertakes
its business activities, and the Board has undertaken to ensure that the Company implements:
practices necessary to maintain confidence in the Company’s integrity;
practices necessary to take into account its legal obligations and the reasonable expectations
of its stakeholders; and
responsibility and accountability of individuals for reporting and investigating reports of
unethical practices.
Directors are provided with Board reports in advance of Board meetings which contain sufficient
information to enable informed discussion of all agenda items.
The Board has the responsibility for the integrity of the Company’s financial reporting. To assist the
Board in fulfilling its responsibility, the processes discussed above have been adopted with a view to
ensuring that the Company’s financial reporting is a truthful and factual presentation of the Company’s
financial performance and position.
Dealing in Securities
The Company has in place a formal Securities Trading Policy which regulates the manner in which
Directors and staff involved in the management of the Company can deal in Company securities. It
requires that they conduct their personal investment activities in a manner that is lawful and avoids
conflicts between their own interests and those of the Company and contains all contents suggested
in the ASX Corporate Governance Principles and Recommendations.
The policy specifies trading blackouts as the periods during which trading securities cannot occur.
Trading is always prohibited if the relevant person is in possession of non-public price sensitive
information regarding the Company. A copy of the current Security Trading Policy is available on the
Company’s website.
Diversity
The Board has adopted a Diversity Policy which describes the Company's commitment to ensuring a
diverse mix of skills and talent exists amongst its directors, officers and employees, to enhance
Company performance. The Diversity Policy addresses equal opportunities in the hiring, training and
career advancement of directors, officers and employees. The Diversity Policy outlines the process by
which the Board may set measurable objectives to achieve the aims of its Diversity Policy. The Board
is responsible for monitoring Company performance in meeting the Diversity Policy requirements,
including the achievement of any diversity objectives.
Annual Report | 30 June 2017 | Page 22 of 72
The Company actively values and embraces the diversity of its employees and is committed to
creating an inclusive workplace where everyone is treated equally and fairly and where discrimination,
harassment and inequity is not tolerated. The Company is committed to fostering diversity at all levels.
However, due to the Company’s current stage of development, measurable objectives have yet to be
set.
Health, safety and environment
The Company has continued its emphasis on health and safety in the workplace with the aim of
ensuring that people achieve outcomes in a safe manner, thereby contributing to operational
effectiveness and business sustainability.
During the reporting period there were no reported environmental incidents and no Lost Time Injuries
(LTIs).
CONTINUOUS DISCLOSURE AND COMMUNICATIONS WITH SHAREHOLDERS
The Company is committed to providing relevant and timely information to its shareholders and to the
broader market, in accordance with its obligations under the ASX continuous disclosure regime.
The Board complies with the following processes to ensure that information is communicated to
shareholders and the wider market:
the Company’s website is updated regularly with business activity information and is linked to
all announcements published on the ASX www.allegiancecoal.com.au;
the Annual Report is distributed to eligible shareholders. The Board ensures that the Annual
Report includes relevant information about the operations of the group during the year,
changes in the state of affairs of the group and details of future developments, in addition to
other disclosures required by Corporations Act 2001;
quarterly reports and half-yearly financial statements are lodged with the ASX and copies are
sent to any shareholder upon request;
any proposed major changes in the group which may impact on the share ownership rights
would be submitted to a vote of shareholders;
the Board ensures that the continuous disclosure requirements of the ASX are fully complied
with, ensuring that shareholders are kept informed on significant events affecting the group;
and
investor roadshows are held periodically throughout Australia and internationally. Where they
contain new information, investor and roadshow presentations are released to the ASX and
included on the Company’s website.
CONTINUOUS REVIEW OF CORPORATE GOVERNANCE
Directors consider, on an ongoing basis, how management information is presented to them and
whether such information is sufficient to enable them to discharge their duties as Directors of the
Company. Such information must be sufficient from time to time in light of changing circumstances
and economic conditions. The Directors recognise that mineral exploration is an inherently risky
business and that operational strategies adopted should, notwithstanding, be directed towards
improving or maintaining the net worth of the Company.
ASX CORPORATE GOVERNANCE COUNCIL’S PRINCIPLES AND RECOMMENDATIONS
1.1
ASX Corporate Governance Council Principle
Principle 1: Lay solid foundation for management and oversight
A listed entity should disclose:
(a) the respective roles and responsibilities of its Board and management;
and
(b) those matters expressly reserved to the Board and those delegated to
Compliance
Comply
Annual Report | 30 June 2017 | Page 23 of 72
1.2
1.3
1.4
1.5
1.6
1.7
2.1
management.
A listed entity should:
(a) undertake appropriate checks before appointing a person, or putting
forward to security holders a candidate for election, as a Director; and
(b) provide security holders with all material information in its possession
relevant to a decision on whether or not to elect or re-elect a Director.
A listed entity should have a written agreement with each Director and
senior executive setting out the terms of their appointment.
The Company Secretary of a listed entity should be accountable directly to
the Board, through the Chair, on all matters to do with the proper
functioning of the Board.
A listed entity should:
(a) have a diversity policy which includes requirements for the Board or a
relevant committee of the Board to set measurable objectives for achieving
gender diversity and to assess annually both the objectives and the entity’s
progress in achieving them;
(b) disclose that policy or a summary of it; and
(c) disclose as at the end of each reporting period the measurable
objectives for achieving gender diversity set by the Board or a relevant
Committee of the Board in accordance with the entity’s diversity policy and
its progress towards achieving them, and either:
(1) the respective proportions of men and women on the Board, in senior
executive positions and across the whole organisation (including how the
entity has defined “senior executive” for these purposes); or
(2) if the entity is a “relevant employer” under the Workplace Gender
Equality Act, the entity’s most recent “Gender Equality Indicators”, as
defined in and published under that Act.
A listed entity should:
(a) have and disclose a process for periodically evaluating the
performance of the Board, its committees and individual Directors; and
(b) disclose, in relation to each reporting period, whether a performance
evaluation was undertaken in the reporting period in accordance with that
process.
A listed entity should:
(a) have and disclose a process for periodically evaluating the
performance of its senior executives; and
(b) disclose, in relation to each reporting period, whether a performance
evaluation was undertaken in the reporting period in accordance with that
process.
Principle 2: Structure the Board to add value
The Board of a listed entity should have a nomination committee which:
(a) has at least three members, a majority of whom are independent
Directors; and
(b) is chaired by an independent Director, and disclose:
(i) the charter of the committee;
(ii) the members of the committee; and
(iii) as at the end of each reporting period, the number of times the
committee met throughout the period and the individual attendances of the
members at those meetings.
2.2
2.3
A listed entity should have and disclose a Board skills matrix setting out
the mix of skills and diversity that the Board currently has or is looking to
achieve in its membership.
A listed entity should disclose:
(a) the names of the Directors considered by the Board to be independent
Directors;
Comply
Comply
Comply
Does not
comply. Refer
to “Diversity” in
the Corporate
Governance
Statement
Comply
Comply
Does not
comply. Refer
to “Composition
of the Board”
and
“Remuneration
and Nomination
Committee” in
the Corporate
Governance
Statement
Comply
Comply
Annual Report | 30 June 2017 | Page 24 of 72
(b) if a Director has an interest, position, association or relationship of the
type described in Box 2.3 but the Board is of the opinion that it does not
compromise the independence of the Director, the nature of the interest,
position, association or relationship in question and an explanation of why
the Board is of that opinion; and
(c) the length of service of each Director.
A majority of the Board of a listed entity should be independent Directors.
The chair of the Board of a listed entity should be an independent Director
and, in particular, should not be the same person as the CEO of the entity.
A listed entity should have a program for inducting new Directors and
provide appropriate professional development opportunities for Directors to
develop and maintain the skills and knowledge needed to perform their
role as Directors effectively.
Principle 3: Act ethically and responsibly
A listed entity should:
(a) have a code of conduct for its Directors, senior executives and
employees; and
(b) disclose that code or a summary of it.
Principle 4: Safeguard integrity in corporate reporting
The Board of a listed entity should have an Audit Committee which:
(1) has at least three members, all of whom are non-executive Directors
and a majority of whom are independent Directors; and
(2) is chaired by an independent Director, who is not the chair of the
Board, and disclose:
(i) the charter of the committee;
(ii) the relevant qualifications and experience of the members of the
committee; and
(iii) in relation to each reporting period, the number of times the committee
met throughout the period and the individual attendances of the members
at those meetings.
The Board of a listed entity should, before it approves the entity’s financial
statements for a financial period, receive from its CEO and CFO a
declaration that, in their opinion, the financial records of the entity have
been properly maintained and that the financial statements comply with the
appropriate accounting standards and give a true and fair view of the
financial position and performance of the entity and that the opinion has
been formed on the basis of a sound system of risk management and
internal control which is operating effectively.
A listed entity that has an AGM should ensure that its external auditor
attends its AGM and is available to answer questions from security holders
relevant to the audit.
Principle 5: Make timely and balanced disclosure
A listed entity should:
(a) have a written policy for complying with its continuous disclosure
obligations under the Listing Rules; and
(b) disclose that policy or a summary of it.
Principle 6: Respect the rights of security holders
A listed entity should provide information about itself and its governance to
investors via its website.
A listed entity should design and implement an investor relations program
to facilitate effective two-way communication with investors.
Does not
comply. Refer
to “Composition
of the Board” in
the Corporate
Governance
Statement
Comply
Comply
Comply
Does not
comply. Refer
to “Audit and
Risk
Committee” in
the Corporate
Governance
Statement
Comply
Comply
Comply
Comply
Comply
2.4
2.5
2.6
3.1
4.1
4.2
4.3
5.1
6.1
6.2
Annual Report | 30 June 2017 | Page 25 of 72
6.3
6.4
7.1
7.2
7.3
7.4
8.1
8.2
8.3
A listed entity should disclose the policies and processes it has in place to
facilitate and encourage participation at meetings of security holders.
A listed entity should give security holders the option to receive
communications from, and send communications to, the entity and its
security registry electronically.
Principle 7: Recognise and manage risk
The Board of a listed entity should have a committee or committees to
oversee risk, each of which:
(a) has at least three members, a majority of whom are independent
Directors; and
(b) is chaired by an independent Director, and disclose:
(i) the charter of the committee;
(ii) the members of the committee; and
(iii) as at the end of each reporting period, the number of times the
committee met throughout the period and the individual attendances of the
members at those meetings.
The Board or a committee of the Board should:
(a) review the entity’s risk management framework at least annually to
satisfy itself that it continues to be sound; and
(b) disclose, in relation to each reporting period, whether such a review
has taken place.
A listed entity should disclose:
(a) if it has an internal audit function, how the function is structured and
what role it performs; or
(b) if it does not have an internal audit function, that fact and the processes
it employs for evaluating and continually improving the effectiveness of its
risk management and internal control processes.
A listed entity should disclose whether it has any material exposure to
economic, environmental and social sustainability risks and, if it does, how
it manages or intends to manage those risks.
Principle 8: Remunerate fairly and responsibly
The Board of a listed entity should have a remuneration committee which:
(a) has at least three members, a majority of whom are independent
Directors; and
(b) is chaired by an independent Director, and disclose:
(i) the charter of the committee;
(ii) the members of the committee; and
(iii) as at the end of each reporting period, the number of times the
committee met throughout the period and the individual attendances of the
members at those meetings.
A listed entity should separately disclose its policies and practices
regarding the remuneration of non-executive Directors and the
remuneration of executive Directors and other senior executives.
A listed entity which has an equity-based remuneration scheme should:
(a) have a policy on whether participants are permitted to enter into
transactions (whether through the use of derivatives or otherwise) which
limit the economic risk of participating in the scheme; and
(b) disclose that policy or a summary of it.
Comply
Comply
Does not
comply.
Currently risk
and risk
mitigation is
managed by
the Board as a
whole.
Comply
Comply
Comply
Does not
comply. Refer
to
“Remuneration
and Nomination
Committee” in
the Corporate
Governance
Statement
Comply
Comply
All references are to sections of this Corporate Governance Statement unless otherwise stated.
Annual Report | 30 June 2017 | Page 26 of 72
Statement of comprehensive income
For the year ended 30 June 2017
Revenue
Expenses
Employee benefits expense
Depreciation and amortisation expense
Impairment of assets
Finance costs credit / (expense)
Legal fees
Listing expense
Net foreign exchange gain / (loss)
Travel expenses
Other expenses
Note
4
5
5
5
5
Consolidated
2017
$
9,734
2016
$
67,945
(393,078)
-
(218,410)
71,432
(108,606)
(33,618)
(62,856)
(66,357)
(177,914)
(97,919)
(5,626)
(3,032,858)
34,778
(61,416)
(25,388)
-
(3,900)
(138,686)
Loss before income tax benefit
(979,673)
(3,263,070)
Income tax benefit
6
-
-
Loss after income tax benefit for the year attributable
to the owners of Allegiance Coal Limited
(979,673)
(3,263,070)
Other comprehensive income for the year, net of tax
Foreign exchange movement
(4,948)
-
Total comprehensive loss for the year attributable to
the owners of Allegiance Coal Limited
Basic loss per share
Diluted loss per share
(984,621)
(3,263,070)
32
32
Cents
(0.80)
(0.43)
Cents
(9.25)
(9.25)
* The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2017 | Page 27 of 72
Statement of financial position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Total current assets
Non-current assets
Property, plant and equipment
Exploration and evaluation
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Employee benefits
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets / (liabilities)
Equity
Issued capital
Reserves
Accumulated losses
Total equity / (deficit)
Consolidated
Note
2017
$
2016
$
7
8
9
1,637,343
94,832
127,120
1,859,295
1,418,192
5,536
5,373
1,429,101
10
12
-
3,218,003
-
250,000
3,218,003
250,000
5,077,298
1,679,101
13
14
15
14
245,115
104,895
-
64,561
1,994,631
3,823
350,010
2,063,015
583,222
583,222
-
-
933,232
2,063,015
4,144,066
(383,914)
16
17
18
14,650,402
371,838
(10,878,174)
9,137,801
376,786
(9,898,501)
4,144,066
(383,914)
* The above statement of financial position should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2017 | Page 28 of 72
Statement of changes in equity
For the year ended 30 June 2017
Consolidated
Issued
capital
$
General
reserve
$
Share based
payment
reserve
$
Foreign
currency
translation
reserve
$
Balance at 1 July 2016
9,137,801
16
376,770
Loss after income tax benefit
for the year
Other comprehensive
income for the year, net of
tax
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
-
-
-
Share issues for cash
4,502,584
Share issues other than for
cash
1,250,000
-
-
-
-
-
-
-
-
-
-
Accumulated
losses
$
Total equity
$
(9,898,501)
(383,914)
(979,673)
(979,673)
-
-
(4,948)
-
(4,948)
(4,948)
(979,673)
(984,621)
-
-
-
4,502,584
-
1,250,000
Costs of share issues
Balance at 30 June 2017
(239,983)
14,650,402
-
16
-
376,770
-
-
(4,948) (10,878,174)
(239,983)
4,144,066
Consolidated
Issued capital Reserves
$
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2015
9,137,801
376,786
(6,635,431)
2,879,156
Loss after income tax benefit for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity
as owners:
Share-based payments
Balance at 30 June 2016
-
-
-
-
-
-
(3,263,070)
(3,263,070)
-
-
(3,263,070)
(3,263,070)
-
9,137,801
-
376,786
-
(9,898,501)
-
(383,914)
* The above statement of changes in equity should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2017 | Page 29 of 72
Statement of cash flows
For the year ended 30 June 2017
Cash used in operating activities
Payments to suppliers (inclusive of GST)
Other receipts
Interest received
Interest and other finance costs paid
Consolidated
Note
2017
$
2016
$
(1,056,559)
-
(1,056,559)
(314,733)
214,173
(100,560)
9,734
(4,346)
28,860
(34,778)
Net cash used in operating activities
31
(1,051,171)
(106.478)
Cash used in investing activities
Payments for property, plant and equipment
Payments for exploration and evaluation
Contribution from Joint Venture
-
(1,697,479)
31,590
-
(603,104)
550,406
Net cash used in investing activities
(1,665,889)
(52,698)
Cash used in financing activities
Share issues, net of costs
Loans raised
Repayments of borrowings
4,262,601
200,000
(1,526,390)
-
-
(25,391)
Net cash from / (used in) financing activities
2,936,211
(25,391)
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial
year
219,151
(184,567)
1,418,192
1,602,759
Cash and cash equivalents at the end of the financial
year
1,637,343
1,418,192
* The above statement of cash flows should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2017 | Page 30 of 72
Notes to the financial statements
30 June 2017
Note 1. Significant accounting policies
The financial statements cover Allegiance Coal Limited as a consolidated entity consisting of
Allegiance Coal Limited and its subsidiaries.
Allegiance Coal Limited is a listed public company whose shares are publicly traded on the Australian
Securities Exchange, limited by shares, incorporated and domiciled in Australia. Its registered office
and principal place of business is:
Suite 107, 109 Pitt Street
Sydney NSW 2000
A description of the nature of the consolidated entity's operations and its principal activities are
included in the directors' report, which is not part of the financial statements.
The principal accounting policies adopted in the preparation of the financial statements are set out
below.
Basis of Preparation
The financial report is a general-purpose financial report, which has been prepared in accordance
with the requirements of the Corporations Act 2001, Australian Accounting Standards and
interpretations and complies with other requirements of the law.
The accounting policies detailed below have been consistently applied to all of the years presented
unless otherwise stated. The financial statements are for the Group consisting of Allegiance Coal
Limited and its subsidiaries.
The financial report is presented in Australian dollars, which is Allegiance Coal Limited's functional
and presentation currency.
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the consolidated
entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial statements, are disclosed in note 2.
Adoption of new and revised standards
In the year ended 30 June 2017, the Directors have reviewed all of the new and revised Standards
and Interpretations issued by the AASB that are relevant to the Group’s operations and effective for
the current annual reporting period.
It has been determined by the Directors that there is no impact, material or otherwise, of the new and
revised Standards and Interpretations on the Group’s business and, therefore, no change is
necessary to Group accounting policies.
The Directors have also reviewed all new Standards and Interpretations that have been issued but
are not yet effective for the year ended 30 June 2017, As a result of this review the Directors have
determined that there is no impact, material or otherwise, of the new and revised Standards and
Annual Report | 30 June 2017 | Page 31 of 72
Notes to the financial statements
30 June 2017
Interpretations on the Group’s business and, therefore, no change necessary to Group accounting
policies.
Statement of Compliance
The financial report was authorised for issue, in accordance with a resolution of directors, on 8
September 2017. The directors have the power to amend and reissue the financial statements.
The financial report complies with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures
that the financial report comprising the financial statements and notes thereto, complies with
International Financial Reporting Standards (IFRS).
Going concern
The consolidated entity is involved in the exploration and evaluation of mineral tenements. Further
expenditure will be required upon these tenements to finally ascertain whether they contain
economically recoverable reserves and can be commercially developed.
For the year ended 30 June 2017 the consolidated entity reported a net loss of $979,673 (2016:
$3,263,070) and net operating cash outflows of $1,051,171 (2016: $106,478). The operating cash
outflows have been funded by cash inflows from equity raisings of $4,262,601 (2016: Jogmec
contributions of $550,406) during the year. As at 30 June 2017 the consolidated entity had net current
assets of $1,509,285 (2016: deficit of $633,914) including cash reserves of $1,637,343 (2016:
$1,418,192).
The balance of these cash reserves may not be sufficient to meet the consolidated entity’s planned
expenditure and evaluation budget, including exploration activities, evaluation, operating and
administrative expenditure, for the 12 months to 30 September 2018. In order to fully implement its
exploration and evaluation strategy, the consolidated entity will require additional funds.
Notwithstanding the above, the financial statements have been prepared on a going concern basis
which contemplates the continuity of normal business activities and the realisation of assets and
settlement of liabilities in the ordinary course of business.
To continue as a going concern, the consolidated entity requires additional funding to be secured from
sources including but not limited to:
Further equity capital raisings;
The potential farm-out of participating interests in the consolidated entity’s tenements and
rights; and / or
Other financing arrangements.
Having carefully assessed the uncertainties relating to the likelihood of securing additional funding,
the consolidated entity’s ability to effectively manage its expenditures and cash flows from operations
and the opportunity to farm-out participating interests in existing permits and rights, the Directors
believe that the consolidated entity will continue to operate as a going concern for the foreseeable
future. Therefore, the Directors consider it appropriate to prepare the financial statements on a going
concern basis.
In the event that the assumptions underpinning the basis of preparation do not occur as anticipated,
there is material uncertainty that may cast significant doubt whether the consolidated entity will
continue to operate as a going concern. If the consolidated entity is unable to continue as a going
concern it may be required to realise its assets and extinguish its liabilities other than in the normal
course of business and at amounts different to those stated in the financial statements.
Annual Report | 30 June 2017 | Page 32 of 72
Notes to the financial statements
30 June 2017
No adjustments have been made to the financial report relating to the recoverability and classification
of the asset carrying amounts or the classification of liabilities that might be necessary should the
consolidated entity not continue as a going concern.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the
consolidated entity only. Supplementary information about the parent entity is disclosed in note 27.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of
Allegiance Coal Limited ('Company' or 'parent entity') as at 30 June 2017 and the results of all
subsidiaries for the year then ended. Allegiance Coal Limited and its subsidiaries together are
referred to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated
entity controls an entity when the consolidated entity 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 consolidated entity. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the
consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the consolidated
entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change
in ownership interest, without the loss of control, is accounted for as an equity transaction, where the
difference between the consideration transferred and the book value of the share of the non-
controlling interest acquired is recognised directly in equity attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including
goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative
translation differences recognised in equity. The consolidated entity recognises the fair value of the
consideration received and the fair value of any investment retained together with any gain or loss in
profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information
presented is on the same basis as the internal reports provided to the Chief Operating Decision
Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments
and assessing their performance.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated
entity and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received or receivable.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a
method of calculating the amortised cost of a financial asset and allocating the interest income over
Annual Report | 30 June 2017 | Page 33 of 72
Notes to the financial statements
30 June 2017
the relevant period using the effective interest rate, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the net carrying amount of the
financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income
based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax
assets and liabilities attributable to temporary differences, unused tax losses and the adjustment
recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected
to apply when the assets are recovered or liabilities are settled, based on those tax rates that are
enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an
asset or liability in a transaction that is not a business combination and that, at the time of the
transaction, affects neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or
joint ventures, and the timing of the reversal can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if
it is probable that future taxable amounts will be available to utilise those temporary differences and
losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each
reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable
that future taxable profits will be available for the carrying amount to be recovered. Previously
unrecognised deferred tax assets are recognised to the extent that it is probable that there are future
taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset
current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities;
and they relate to the same taxable authority on either the same taxable entity or different taxable
entities which intend to settle simultaneously.
Allegiance Coal Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed
an income tax consolidated group under the tax consolidation regime. The head entity and each
subsidiary in the tax consolidated group continue to account for their own current and deferred tax
amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in
determining the appropriate amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity 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.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-
current classification.
Annual Report | 30 June 2017 | Page 34 of 72
Notes to the financial statements
30 June 2017
An asset is current when: it is expected to be realised or intended to be sold or consumed in the
normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least 12 months after the reporting period. All
other assets are classified as non-current.
A liability is current when: it is expected to be settled in the normal operating cycle; it is held primarily
for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is
no unconditional right to defer the settlement of the liability for at least 12 months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions,
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.
Trade and other receivables
Other receivables are recognised at amortised cost, less any provision for impairment.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are
included as part of the initial measurement, except for financial assets at fair value through profit or
loss. They are subsequently measured at either amortised cost or fair value depending on their
classification. Classification is determined based on the purpose of the acquisition and subsequent
reclassification to other categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the consolidated entity has transferred substantially all the
risks and rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They are carried at amortised cost using the effective interest rate
method. Gains and losses are recognised in profit or loss when the asset is derecognised or impaired.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective
evidence that a financial asset or group of financial assets is impaired. Objective evidence includes
significant financial difficulty of the issuer or obligor; a breach of contract such as default or
delinquency in payments; the lender granting to a borrower concessions due to economic or legal
reasons that the lender would not otherwise do; it becomes probable that the borrower will enter
bankruptcy or other financial reorganisation; the disappearance of an active market for the financial
asset; or observable data indicating that there is a measurable decrease in estimated future cash
flows.
The amount of the impairment allowance for loans and receivables carried at amortised cost is the
difference between the asset's carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. If there is a reversal of impairment, the reversal
Annual Report | 30 June 2017 | Page 35 of 72
Notes to the financial statements
30 June 2017
cannot exceed the amortised cost that would have been recognised had the impairment not been
made and is reversed to profit or loss.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property,
plant and equipment over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Computer equipment
Office equipment
4 years
4 years
4 years
4 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate,
at each reporting date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired
period of the lease or the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future
economic benefit to the consolidated entity. Gains and losses between the carrying amount and the
disposal proceeds are taken to profit or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent
on the use of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to ownership of leased assets, and operating leases,
under which the lessor effectively retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the
leased assets, or if lower, the present value of minimum lease payments. Lease payments are
allocated between the principal component of the lease liability and the finance costs, so as to
achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the
shorter of the asset's useful life and the lease term if there is no reasonable certainty that the
consolidated entity will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss
on a straight-line basis over the term of the lease.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially
measured at their fair value at the date of the acquisition. Intangible assets acquired separately are
initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently
measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost
less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the
Annual Report | 30 June 2017 | Page 36 of 72
Notes to the financial statements
30 June 2017
derecognition of intangible assets are measured as the difference between net disposal proceeds and
the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets
are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted
for prospectively by changing the amortisation method or period.
Exploration and evaluation assets
Exploration and evaluation expenditure in relation to separate areas of interest for which rights of
tenure are current is carried forward as an asset in the statement of financial position where it is
expected that the expenditure will be recovered through the successful development and exploitation
of an area of interest, or by its sale; or exploration activities are continuing in an area and activities
have not reached a stage which permits a reasonable estimate of the existence or otherwise of
economically recoverable reserves. Where a project or an area of interest has been abandoned, the
expenditure incurred thereon is written off in the year in which the decision is made.
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to
explore, studies, exploratory drilling, trenching and sampling and associated activities and an
allocation of depreciation and amortisation of assets used in exploration and evaluation activities.
General and administrative costs are only included in the measurement of exploration and evaluation
costs where they are related directly to operational activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances
suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable
amount. The recoverable amount of the exploration and evaluation asset (or the cash-generating
unit(s) to which it has been allocated, being no larger than the relevant area of interest) is estimated
to determine the extent of the impairment loss (if any). Where an impairment loss subsequently
reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable
amount but only to the extent that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset in
previous years.
Where a decision is made to proceed with development in respect of a particular area of interest, the
relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified
to development.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more frequently if events or changes in circumstances
indicate that they might be impaired. Other non-financial assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The
value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-
tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that
do not have independent cash flows are grouped together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to
the end of the financial year and which are unpaid. Due to their short-term nature they are measured
at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30
days of recognition.
Annual Report | 30 June 2017 | Page 37 of 72
Notes to the financial statements
30 June 2017
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of
transaction costs. Subsequent to initial recognition, borrowings are stated at amortised cost with any
difference between cost and redemption being recognised in the Statement of Comprehensive
Income over the period of the borrowings on an effective interest basis.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the
reporting date, the loans or borrowings are classified as non-current.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance
costs are expensed in the period in which they are incurred, including interest on short-term and long-
term borrowings.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service
leave expected to be settled within 12 months of the reporting date are recognised in current liabilities
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.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the
reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer
settlement of the liability. The liability is measured as the present value of expected future payments
to be made in respect of services provided by employees up to the reporting date using the projected
unit credit method. Consideration is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are discounted using market
yields at the reporting date on national government bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
Superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they
are incurred.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits may be provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to
employees in exchange for the rendering of services. Cash-settled transactions are awards of cash
for the exchange of services, where the amount of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is
independently determined using either the Binomial or Black-Scholes option pricing model that takes
into account the exercise price, the term of the option, the impact of dilution, the share price at grant
date and expected price volatility of the underlying share, the expected dividend yield and the risk free
interest rate for the term of the option, together with non-vesting conditions that do not determine
whether the consolidated entity receives the services that entitle the employees to receive payment.
No account is taken of any other vesting conditions.
Annual Report | 30 June 2017 | Page 38 of 72
Notes to the financial statements
30 June 2017
The cost of equity-settled transactions are recognised as an expense with a corresponding increase
in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the
grant date fair value of the award, the best estimate of the number of awards that are likely to vest
and the expired portion of the vesting period. The amount recognised in profit or loss for the period is
the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by
applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms
and conditions on which the award was granted. The cumulative charge to profit or loss until
settlement of the liability is calculated as follows:
during the vesting period, the liability at each reporting date is the fair value of the award at that
date multiplied by the expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value
of the liability at the reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled
transactions is the cash paid to settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject
to market conditions are considered to vest irrespective of whether or not that market condition has
been met, provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification
has not been made. An additional expense is recognised, over the remaining vesting period, for any
modification that increases the total fair value of the share-based compensation benefit as at the date
of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to
satisfy the condition is treated as a cancellation. If the condition is not within the control of the
consolidated entity or employee and is not satisfied during the vesting period, any remaining expense
for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and
any remaining expense is recognised immediately. If a new replacement award is substituted for the
cancelled award, the cancelled and new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or
disclosure purposes, the fair value is based on the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement
date; and assumes that the transaction will take place either in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair
value measurement is based on its highest and best use. Valuation techniques that are appropriate in
the circumstances and for which sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Annual Report | 30 June 2017 | Page 39 of 72
Notes to the financial statements
30 June 2017
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of
whether equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred,
equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and
the amount of any non-controlling interest in the acquiree. For each business combination, the non-
controlling interest in the acquiree is measured at either fair value or at the proportionate share of the
acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and
liabilities assumed for appropriate classification and designation in accordance with the contractual
terms, economic conditions, the consolidated entity's operating or accounting policies and other
pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its
previously held equity interest in the acquiree at the acquisition-date fair value and the difference
between the fair value and the previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair
value. Subsequent changes in the fair value of contingent consideration classified as an asset or
liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any
non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair
value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration
transferred and the pre-existing fair value is less than the fair value of the identifiable net assets
acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in
profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification
and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the
consideration transferred and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively
adjusts the provisional amounts recognised and also recognises additional assets or liabilities during
the measurement period, based on new information obtained about the facts and circumstances that
existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months
from the date of the acquisition or (ii) when the acquirer receives all the information possible to
determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Allegiance
Coal Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial year, adjusted for bonus elements
in ordinary shares issued during the financial year.
Annual Report | 30 June 2017 | Page 40 of 72
Notes to the financial statements
30 June 2017
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 after income tax effect of interest and other financing costs associated with
dilutive potential ordinary shares and the weighted average number of shares assumed to have been
issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the
GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost
of the 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 tax authority is included in other receivables or
other payables in the statement of financial position.
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 tax authority, are presented as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or
payable to, the tax authority.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually
evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue
and expenses. Management bases its judgements, estimates and assumptions on historical
experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and
estimates will seldom equal the related actual results. The judgements, estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities (refer to the respective notes) within the next financial year are discussed below.
Exploration and evaluation costs
The consolidated entity capitalises expenditure relating to exploration and evaluation where it is
considered likely to be recoverable or where the activities have not reached a stage that permits
reasonable assessment of the existence of reserves.
The Telkwa metallurgical coal project has yet to reach a stage of development where a determination
of the technical feasibility or commercial viability can be finally assessed. In these circumstances,
whether there is any indication that the asset has been impaired is a matter of judgement, as is the
determination of the quantum of any required impairment adjustment. The Directors have used their
experience to conclude that no impairment adjustment is required in the current year ended 30 June
2017 (refer to note 12).
The Kilmain and Back Creek projects in Queensland have yet to reach a stage of development where
a determination of the technical feasibility or commercial viability can be assessed. In these
circumstances, whether there is any indication that the assets have been impaired is a matter of
judgment, as is the determination of the quantum of any required impairment adjustment. The
Directors have resolved that it is not appropriate to capitalise any further exploration expenditure in
Annual Report | 30 June 2017 | Page 41 of 72
Notes to the financial statements
30 June 2017
relation to the Kilmain and Back Creek projects. In addition they have, in the current period, resolved
to fully impair exploration expenditure incurred in respect of these permit areas in an amount of
$218,410 (2016: $3,032,858). (Refer to note 12).
Share-based payment transactions
The consolidated entity 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 is
determined by using either the Binomial or Black-Scholes model taking into account the terms and
conditions upon which the instruments were granted. 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 profit or loss and equity.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other
indefinite life intangible assets at each reporting date by evaluating conditions specific to the
consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger
exists, the recoverable amount of the asset is determined. This involves fair value less costs of
disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity is organised into one operating segment being the acquisition, exploration
and evaluation of coal tenements. The operating segment information is as disclosed in the
statements and notes to the financial statements throughout the report.
The Chief Operating Decision Maker ('CODM') is the Board of Directors.
Major customers
During the year ended 30 June 2017 there were no major customers who derive more than 10% of
the consolidated entity's revenue (30 June 2016: none derived from major customers). Interest from
cash deposits in banking institutions account for $9,734 (2016: $28,680).
Note 4. Revenue
Interest
Other revenue
Revenue
Consolidated
2016
$
28,680
39,265
67,945
2017
$
9,734
-
9,734
Annual Report | 30 June 2017 | Page 42 of 72
Notes to the financial statements
30 June 2017
Note 5. Expenses
Loss before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Total depreciation
Amortisation
Software
Total depreciation and amortisation
Impairment
Exploration and evaluation
Finance costs
Interest and finance charges expense / (credit)
Rental expense relating to operating leases
Minimum lease payments
Employee benefits expense
Superannuation expense
Employee benefits expense
Total employee benefits expense
Consolidated
2017
$
2016
$
-
-
-
-
-
1,189
3,553
4,742
884
5,626
218,410
3,032,858
(71,432)
(34,778)
28,962
8,235
291
392,787
393,078
4,562
93,357
97,919
The weighted average interest rate on the Company’s borrowings is 6.19%.
As per Note 14, during the reporting period an agreement for cash settlement was made with a
borrowing party. The balance of the borrowing, being the non-cash settlement portion together with
the interest free portion is shown as a credit to financing costs.
Annual Report | 30 June 2017 | Page 43 of 72
Notes to the financial statements
30 June 2017
Note 6. Income tax benefit
Income tax benefit
Current Tax
Aggregate income tax benefit
Consolidated
2017
$
2016
$
-
-
-
-
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
(979,673)
(3,263,070)
Tax at the statutory tax rate of 27.5% (2016 : 30%)
(269,410)
(978,921)
Tax effect amounts which are not deductible in calculating taxable income:
Impairment of assets
60,063
909,857
(209,347)
(69,064)
Current year tax losses not recognised
209,347
69,064
Income tax benefit
-
-
Consolidated
2017
$
2016
$
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 27.5% (2016 : 30%)
9,599,713
8,838,450
2,639,921
2,651,535
The above potential tax benefit for tax losses has not been recognised in the statement of financial
position. These tax losses can only be utilised in the future if the continuity of ownership test is
passed, or failing that, the same business test is passed.
Note 7. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
Consolidated
2017
$
1,637,343
-
1,637,343
2016
$
418,192
1,000,000
1,418,192
Annual Report | 30 June 2017 | Page 44 of 72
Notes to the financial statements
30 June 2017
Note 8. Current assets - trade and other receivables
GST recoverable
Receivables are neither past due nor impaired.
Note 9. Current assets - other
Prepayments
Security deposits
Note 10. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
Total
Consolidated
2017
$
94,832
94,832
2016
$
5,536
5,536
Consolidated
2017
$
127,120
-
127,120
2016
$
-
5,373
5,373
Consolidated
2016
$
2017
$
-
-
-
-
-
-
-
-
-
-
-
-
-
1,188
(1,188)
-
3,299
(3,299)
-
884
(884)
-
255
(255)
-
-
Annual Report | 30 June 2017 | Page 45 of 72
Notes to the financial statements
30 June 2017
Note 10. Non-current assets - property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:
Consolidated
Balance at 1 July 2015
Additions
Depreciation expense
Leasehold
improvements
$
1,188
-
(1,188)
Plant and
equipment
$
3,299
-
(3,299)
Computer
equipment
$
Office
equipment
$
884
-
(884)
255
-
(255)
Total
$
5,626
-
(5,626)
Balance at 30 June 2016
Additions
Disposals
Depreciation expense
Balance at 30 June 2017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 11. Non-current assets - intangibles
Software - at cost
Less: Accumulated amortisation
Note 12. Non-current assets - exploration and evaluation
Exploration and evaluation - at cost
Less: Impairment
Consolidated
2017
$
2016
$
10,200
(10,200)
-
-
-
-
Consolidated
2017
$
6,757,119
(3,539,116)
3,218,003
2016
$
3,570,706
(3,320,706)
250,000
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:
Annual Report | 30 June 2017 | Page 46 of 72
Notes to the financial statements
30 June 2017
Note 12. Non-current assets - exploration and evaluation (continued)
Consolidated
Balance at 1 July 2015
Additions – Kilmain Project
Additions – Other
Joint Venture – JOGMEC
Impairment of assets
Balance at 30 June 2016
Acquisition of Telkwa metallurgical coal project, at fair value
Additions – Telkwa metallurgical coal project
Recovery from JOGMEC
Impairment of assets
Foreign exchange movement
Exploration and
evaluation
$
3,279,425
598,850
6,305
(601,722)
(3,032,858)
250,000
1,507,538
1,697,479
(31,590)
(218,410)
12,986
Total
$
3,279,425
598,850
6,305
(601,722)
(3,032,858)
250,000
1,507,538
1,679,479
(31,590)
(218,410)
12,986
Balance at 30 June 2017
3,218,003
3,218,003
Impairment
The Telkwa metallurgical coal project has yet to reach a stage of development where a final
determination of the technical feasibility or commercial viability can be assessed. In these
circumstances, whether there is any indication that the asset has been impaired is a matter of
judgement, as is the determination of the quantum of any required impairment adjustment. The
Directors have used their experience to conclude that no impairment adjustment is required in the
current year ended 30 June 2017.
The Kilmain and Back Creek projects have yet to reach a stage of development where a
determination of the technical feasibility or commercial viability can be assessed. In these
circumstances, whether there is any indication that the assets have been impaired is a matter of
judgment, as is the determination of the quantum of any required impairment adjustment. The
Directors have resolved that it is not appropriate to capitalise any further exploration expenditure in
relation to the Kilmain and Back Creek projects. In addition they have, in the current period, resolved
to fully impair exploration expenditure incurred in respect of these permit areas in an amount of
$218,410 (2016: $3,032,858).
Note 13. Current liabilities - trade and other payables
Trade payables – former ultimate parent entity
Trade payables – other entities
Other payables
Refer to note 20 for further information on financial instruments.
2017
$
Consolidated
2016
$
62,470
2,091
-
64,561
-
165,343
79,772
245,115
Annual Report | 30 June 2017 | Page 47 of 72
Notes to the financial statements
30 June 2017
Note 14. Borrowings
Current
Loan - Gullewa Limited
Promissory Notes
Interest accrued
Loan - C. Randall & Associates Pty Ltd
Loan - HCA
Non-Current
Loan - Gullewa Limited
Less : Present value discount of Gullewa Ltd loan
Add : Unwinding of present value discount of Gullewa Ltd loan
Consolidated
2017
$
2016
$
-
100,000
4,895
-
-
104,895
1,775,240
-
-
220,000
(609)
1,994,631
659,000
(108,466)
32,688
583,222
-
-
-
-
Refer to note 20 for further information on financial instruments.
Loan repayment
C. Randall & Associates Pty Ltd was paid $220,000 on 14 July 2016 in full discharge of its loan of
$370,535.
In 2011, the consolidated entity entered loan facility agreements with Gullewa Ltd. On 4 August 2016
the parties entered a deed of loan variation, whereby Gullewa was paid $1,104,000 in partial
satisfaction of the amount owed to it under the 2011 agreements. The balance outstanding of
$659,000, which is unsecured, may be satisfied by the issue and allotment of shares in Allegiance
Coal Ltd at a price of $0.025 per share (subject to any share reconstruction and shareholders’
approval) or by repayment in cash, subject to Gullewa’s agreement. The loan will be interest free until
4 August 2019, after which interest will accrue daily and be capitalised monthly, at a rate of BBSW +
4%, on any unpaid balance. The loan must be repaid in full, whether in cash or by the issue and
allotment of shares, by 4 August 2021.
Further, as the loan contains an interest-free period, AASB 9 Financial Instruments requires the full
amount of $659,000 to be discounted back to present value. Using prevailing market interest rates for
an equivalent loan of 5.995%, the fair value of the loan at 4 August 2016 is estimated at $550,534.
The difference of $108,466 is the benefit derived from the interest-free period of the loan and is
recognised as a deferred expense. A total of $32,688 represents the unwinding of the present value
discount up to 30 June 2017.
Note 15. Current liabilities - employee benefits
Employee benefits
Consolidated
2017
$
-
2016
$
3,823
Annual Report | 30 June 2017 | Page 48 of 72
Notes to the financial statements
30 June 2017
Note 16. Equity – Issued Capital
Issued capital
Ordinary shares - fully paid
Consolidated
Balance at 1 July
Shares issued for cash in September 2016
Less costs
Share consolidation, one for five
Shares issued for acquisition of TCL
Share issued to settle liabilities of TCL
Shares issued for cash in November 2016
Less costs
Shares issued for cash in May 2017
Less costs
Balance at 30 June
Consolidated
2017
$
14,650,402
2016
$
9,137,801
2017
Number
2016
Number
2017
$
2016
$
176,666,674 176,666,674 9,137,801 9,137,801
-
-
-
132,000
(10,067)
26,400,000
(162,453,324)
-
40,613,350 176,666,674
50,000,000
12,216,282
66,666,671
56,498,932
- 1,250,000
-
458,111
- 2,500,000
(171,352)
- 1,412,473
(58,564)
-
-
-
-
-
-
225,995,235 176,666,674 14,650,402 9,137,801
In September 2016, the Company completed a placement of 5.28 million ordinary shares (on a post-
consolidation basis) to sophisticated investors raising $132,000, before costs.
Contemporaneously with the acquisition of Telkwa Coal Ltd (TCL), in November 2016, shareholders
approved a consolidation of the Company’s share capital on a 1 for 5 basis, and the issue of 66.667
million shares by way of a private placement to sophisticated investors, raising $2.5 million, before
costs. The capital raised enabled the Company to commit to and expedite its PFS programme for the
Telkwa Project, and to commence the permitting process towards mine development and production.
In addition, the Telkwa Project tenement owner, Altius Minerals Corporation, agreed to convert
payments due to it under the Farm-in Agreement, into shares in the Company acquiring 10.956 million
shares in consideration for $410,861. Furthermore, a consultant to TCL elected to be allotted 1.26
million shares in consideration for $47,250 of outstanding invoices.
In May 2017, the Company completed a one for three rights issue raising $1.4 million, before costs,
through the allotment of 56.5 million shares. The capital raised enabled the Company to commence
its environmental baseline studies at its Telkwa Project.
Annual Report | 30 June 2017 | Page 49 of 72
Notes to the financial statements
30 June 2017
Note 16. Equity – Issued Capital (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of
the Company in proportion to the number of shares held. The ordinary shares have no par value and
the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote
and upon a poll each share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Options
Unissued ordinary shares of Allegiance Coal Limited under option at 30 June 2017 are 820,000
(2016: 820,000 on a post-consolidation basis).
Capital risk management
The consolidated entity's objectives when managing capital are to safeguard its ability to continue as
a going concern so that it can provide returns for shareholders and benefits for other stakeholders
and to maintain an optimum capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to
reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or
company was seen as value adding relative to the current parent entity's share price at the time of the
investment.
There are no externally imposed capital requests. The capital risk management policy remains
unchanged from the 30 June 2016 Annual Report.
Note 17. Equity - reserves
General reserve
Share-based payments reserve
Foreign currency translation reserve
Consolidated
2017
$
16
376,770
(4,948)
371,838
2016
$
16
376,770
-
376,786
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as
part of their remuneration, and other parties as part of their compensation for services.
Annual Report | 30 June 2017 | Page 50 of 72
Notes to the financial statements
30 June 2017
Note 17. Equity – reserves (continued)
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign currency differences arising from the
translation of the financial statements of foreign operations.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2015
General
$
Share-based
payment
$
Foreign
currency
translation
$
Total
$
16
376,770
-
376,786
Balance at 30 June 2016
Foreign exchange movement
Balance at 30 June 2017
16
-
16
376,770
-
-
(4,948)
376,786
(4,948)
376,770
(4,948)
371,838
Note 18. Equity - accumulated losses
Accumulated losses at the beginning of the financial year
Loss after income tax benefit for the year
Accumulated losses at the end of the financial year
Consolidated
2017
$
(9,898,501)
(979,673)
(10,878,174)
2016
$
(6,635,431)
(3,263,070)
(9,898,501)
Note 19. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial
year.
Annual Report | 30 June 2017 | Page 51 of 72
Notes to the financial statements
30 June 2017
Note 20. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including
foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated
entity'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 consolidated entity.
The consolidated entity may use derivative financial instruments such as forward foreign exchange
contracts to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e.
not as trading or other speculative instruments. The consolidated entity uses different methods to
measure different types of risk to which it is exposed. These methods include sensitivity analysis in
the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and
beta analysis in respect of investment portfolios to determine market risk.
Risk management is carried out by senior finance executives ('Finance') under policies approved by
the Board of Directors ('the Board'). These policies include identification and analysis of the risk
exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance
identifies, evaluates and hedges financial risks within the consolidated entity's operating units.
Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The consolidated entity undertakes transactions denominated in foreign currency and is exposed to
foreign currency risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and
financial liabilities denominated in a currency that is not the entity's functional currency. The risk is
measured using sensitivity analysis and cash flow forecasting.
Commodity price risk
The consolidated entity’s main commodity price risk is an adverse movement in the price of
metallurgical coal.
Interest rate risk
The consolidated entity's main interest rate risk arises from cash and cash equivalents and third party
loans.
The sensitivity analyses have been determined based on the exposure to interest rates and the
stipulated change taking place at the beginning of the financial year and held constant throughout the
reporting period.
As at the reporting date, the consolidated entity had the following variable rate borrowings and cash
and cash equivalents:
Annual Report | 30 June 2017 | Page 52 of 72
Notes to the financial statements
30 June 2017
Note 20. Financial instruments (continued)
Consolidated
Cash and cash equivalents
Loans
Net exposure to cash flow interest
rate risk
2017
2016
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$
Balance
$
0.6%
6.19%
1,637,343
(683,222)
2.80%
5.64%
1,418,192
(1,994,631)
954,121
(576,439)
Consolidated – 2017
Basis points increase
Basis
points
change
Effect on
profit
before tax
Effect on
equity
Basis points decrease
Effect on
profit
before tax
Basis
points
change
Effect on
equity
Cash and cash equivalents
Loans
200
200
32,747
(13,664)
19,083
32,747
(13,664)
19,083
200
200
(32,747)
13,664
(19,083)
(32,747)
13,664
(19,083)
Consolidated - 2016
Basis points increase
Basis
points
change
Effect on
profit before
tax
Effect on
equity
Basis points decrease
Effect on
profit
before tax
Basis
points
change
Effect on
equity
Cash and cash equivalents
Loans
200
200
28,364
(43,128)
(14,764)
28,364
(43,128)
(14,764)
200
200
(28,364)
43,128
14,764
(28,364)
43,128
14,764
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including
obtaining agency credit information, confirming references and setting appropriate credit limits. The
consolidated entity obtains guarantees where appropriate to mitigate credit risk.
The consolidated entity's maximum exposure to credit risk at the reporting date in relation to each
class of recognised financial assets is the carrying amount as disclosed in the statement of financial
position and notes to the financial statements. The consolidated entity does not hold any collateral.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets
(mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and
when they become due and payable.
Annual Report | 30 June 2017 | Page 53 of 72
Notes to the financial statements
30 June 2017
Note 20. Financial instruments (continued)
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available
borrowing facilities by continuously monitoring actual and forecast cash flows and matching the
maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial
instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the financial liabilities are required to be paid.
The tables include both interest and principal cash flows disclosed as remaining contractual maturities
and therefore these totals may differ from their carrying amount in the statement of financial position.
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
Remaining
contractual
maturities
$
-% 165,343
79,772
-%
5.995%
-
7.5% 107,500
352,615
-
-
-
-
-
-
-
742,846
-
742,846
-
-
-
-
-
165,343
79,772
742,846
107,500
1,095,461
Weighted
average
interest
rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
Remaining
contractual
maturities
$
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Loans
Interest-bearing – fixed
Loans
Total non-derivatives
Consolidated – 2016
Non-derivatives
Non-interest bearing
Trade payables
Other payables
-%
-%
62,470
2,091
Interest-bearing - variable
Loans
Total non-derivatives
5.64%
1,994,631
2,059,192
Credit risk
-
-
-
-
-
-
-
-
-
-
-
-
62,470
2,091
1,994,631
2,059,192
The cash flows in the maturity analysis above are not expected to occur significantly earlier than
contractually disclosed above.
Annual Report | 30 June 2017 | Page 54 of 72
Notes to the financial statements
30 June 2017
Note 20. Financial instruments (continued)
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 21. Fair value measurement
The carrying amounts of trade and other receivables and trade and other payables are assumed to
approximate their fair values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at
the current market interest rate that is available for similar financial liabilities.
Note 22. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of
the consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2017
$
390,750
290
-
391,040
2016
$
80,245
-
-
80,245
Note 23. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by SCS Audit &
Corporate Services Pty Ltd, the auditor of the Company, and unrelated firms:
Audit and review of the financial statements – SCS Audit & Corporate
Services Pty Ltd
Consolidated
2017
$
20,000
20,000
2016
$
20,000
20,000
Note 24. Contingent liabilities
The consolidated entity has no contingent liabilities as at 30 June 2017 and 30 June 2016.
Annual Report | 30 June 2017 | Page 55 of 72
Notes to the financial statements
30 June 2017
Note 25. Commitments
Capital commitments - exploration and evaluation
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2017
$
2016
$
200,000
800,000
1,000,000
50,000
500,000
550,000
As the Kilmain and Back Creek projects are currently under review, no exploration and evaluation
expenduiture has been recognised as a commitment or liability payable, in relation to permits
EPC1297, EPC1298 and EPC1917.
The consolidated entity has acquired farm-in rights to the Telkwa metallurgical coal project (Project)
from a subsidiary of Altius Minerals Corporation (Altius). The consolidated entity has the right to earn
up to 90 percent Project ownership. Altius has a free carry on its remaining 10 percent Project equity
in relation to a small mine only (i.e. producing up to 250,000 tcpa). Altius will be required to contribute
its pro-rata share of the costs of a major mine. The remaining farm-in and payment commitments are
summarised in the table below.
Milestone
Complete baseline studies
Complete affected party agreements
File small mine permit applications
Completion date Milestone Completions
10 December 2018
10 December 2018
10 December 2018 Pay C$300k for further 30% project
equity
Grant of small mine permits
No time limit Pay C$500k for further 40% project
Sale of 100k tonnes from a small mine
Grant of major mine permits
Sale of 500k tonnes from a major mine
equity
No time limit Pay C$2M
No time limit Pay C$2M
No time limit Pay C$5M
In addition to the above, Altius will receive a 3% gross sales royalty on coal sold where the
benchmark coal price is less than US$100 per tonne; 3.5% where the benchmark coal price is
US$100-US$109.99 per tonne; 4% where the benchmark coal price is US$110-US$119.99 per tonne;
and 4.5% where the benchmark coal price is greater than US$120 per tonne.
Note 26. Related party transactions
Parent entity
Allegiance Coal Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Key management personnel
Disclosures relating to key management personnel are set out in note 22 and the remuneration report
in the directors' report.
Annual Report | 30 June 2017 | Page 56 of 72
Notes to the financial statements
30 June 2017
Note 26. Related party transactions (continued)
Transactions with related parties
The following transactions occurred with related parties:
Payment for other expenses:
Service, administration fees and reimbursements paid to former ultimate
parent entity, Gullewa Ltd
Consolidated
2017
$
2016
$
31,477
79,888
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related
parties:
Current receivables:
Trade receivables from other related party
Consolidated
2017
$
-
2016
$
-
Current payables:
Service, administration fees and reimbursements payable to former ultimate
parent entity, Gullewa Limited
-
62,470
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Borrowings:
Loan from Gullewa Ltd
Loan from C. Randall & Associates Pty Ltd
Loan to HCA
Refer to Note 14
Borrowings include capitalised interest.
Consolidated
2017
$
2016
$
583,222
-
-
583,222
1,775,240
220,000
(609)
1,994,631
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Annual Report | 30 June 2017 | Page 57 of 72
Notes to the financial statements
30 June 2017
Note 27. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Loss after income tax
Total comprehensive loss
Statement of financial position
Total current assets
Parent
2017
$
(776,894)
(776,894)
2016
$
(232,045)
(232,045)
Parent
2017
$
1,609,780
2016
$
1,418,918
Total non-current assets
10,375,754
5,839,175
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
11,985,534
7,258,093
65,997
74,263
65,997
74,263
11,919,537
7,183,830
14,650,402
376,770
(3,107,635)
9,137,801
376,770
(2,330,741)
11,919,537
7,183,830
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2017 and
30 June 2016 aside from the loans from Gullewa Ltd of $659,000 (2016: $1,775,240) and to C
Randall & Associates Pty Ltd of $nil (2016: $220,000). The parent entity had guaranteed the
performance of Mineral & Coal Investments Pty Limited in the Joint Venture with JOGMEC.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2017 and 30 June 2016.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017
and 30 June 2016.
Annual Report | 30 June 2017 | Page 58 of 72
Notes to the financial statements
30 June 2017
Note 27. Parent entity information (continued)
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as
disclosed in note 1, except for the following:
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and
its receipt may be an indicator of an impairment of the investment.
Note 28. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following
subsidiaries in accordance with the accounting policy described in note 1:
Name
Telkwa Coal Limited
Mineral & Coal Investments Pty Limited
Echidna Coal Pty Limited
Moreton Coal Pty Limited
Principal place of
business / Country of
incorporation
Canada
Australia
Australia
Australia
Ownership interest
2016
2017
%
%
-%
100%
100%
100%
100%
-%
100%
-%
Annual Report | 30 June 2017 | Page 59 of 72
Notes to the financial statements
30 June 2017
Note 29. Acquisition of subsidiary undertakings
Under a share purchase agreement the Company acquired the entire issued share capital of Telkwa
Coal Limited, a company incorporated in British Columbia, Canada and which holds the farm-in rights
to the Telkwa metallurgical coal project.
The consideration for the acquisition was settled by the issue of 50 million ordinary shares in the
Company to the vendors at a deemed price of $0.025 per share for a total consideration of
$1,250,000.
Assets and liabilities acquired at fair value:
Assets
Trade and other receivables
Exploration and evaluation
Liabilities
Trade and other payables
Loan advances payable
Net assets
Consideration
Issue of ordinary shares
Consolidated
2017
$
11,622
1,507,538
1,519,160
169,160
100,000
269,160
1,250,000
1,250,000
Note 30. Events after the reporting period
No matters or circumstances have arisen since 30 June 2017 that have significantly affected, or may
significantly affect the consolidated entity’s operations, the results of those operations, or the
consolidated entity’s state of affairs in future financial years.
Annual Report | 30 June 2017 | Page 60 of 72
Notes to the financial statements
30 June 2017
Note 31. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax benefit for the year
Adjustments for:
Depreciation and amortisation
Share-based payments
Employee entitlement provisions
Impairment of exploration and evaluation assets
Present value discount of Gullewa Ltd loan
Change in operating assets and liabilities:
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Increase in other operating liabilities
Net cash used in operating activities
Note 32. Loss per share
Loss after income tax attributable to the owners of Allegiance Coal
Limited
Weighted average number of ordinary shares used in calculating basic
loss per share
Weighted average number of ordinary shares used in calculating diluted
loss per share
Basic loss per share
Diluted loss per share
+ on a post-consolidation basis
Consolidated
2017
$
(979,673)
2016
$
(3,263,070)
-
-
(3,823)
218,410
(75,778)
5,626
-
-
3,029,425
-
(222,665)
12,358
-
(1,051,171)
171,014
(52,676)
3,203
(106,478)
Consolidated
2017
$
2016
$
(979,673)
(3,263,070)
Number
Number+
122,939,974 176,666,674
225,995,235 176,666,674
Cents
Cents
(0.80)
(9.25)
(0.43)
(9.25)
Options have been excluded from the above calculation as their inclusion would be anti-dilutive.
Annual Report | 30 June 2017 | Page 61 of 72
Notes to the financial statements
30 June 2017
Note 33. Share-based payments
Director Option Scheme
A Director Option Scheme ('DOS') was approved at the Company’s 2013 annual general meeting
(2013 AGM). The purpose of the DOS was to attract, motivate and retain directors of the Company
through ownership of shares.
Under the DOS a specific award of options was made to the four directors of the Company serving at
the date of the 2013 AGM.
Each option held by a participant entitles them to subscribe for and be allotted one fully paid ordinary
share. Director options are personal to the participant and may not be exercised by another person, or
transferred, disposed of or otherwise dealt with, except in certain limited circumstances. An
optionholder has no rights to participate in new issues of capital offered to shareholders. However, the
Company will ensure that for the purposes of determining entitlements to such an issue, the record
date will be at least ten business days after the issue is announced. The rights of an optionholder may
be changed to the extent necessary to comply with the ASX listing rules in respect of a reorganisation
of capital. Options were issued under the DOS for no consideration.
The options were granted for a fixed period and will expire on 27 November 2018, if not exercised on
or before that date.
Consultant Option Scheme
A Consultant Option Scheme ('COS') was established on 9 May 2011 by the Company, in accordance
with a resolution of the Board. The purpose of the COS is to attract and motivate consultants or
contractors that provide goods or services to the consolidated entity through ownership of shares.
Under the COS the Board may in its discretion offer options to eligible consultants. Offers must be
made under an offer document, which complies with applicable laws. Eligible consultants may accept
such offers by completing and returning to the Company an application form within the timeframe
specified in the offer document.
Each consultant option held by a consultant or contractor entitles them to subscribe for and be allotted
one fully paid ordinary share. Consultant options are personal to the participant and may not be
exercised by another person, or transferred, disposed of or otherwise dealt with, except in certain
limited circumstances. A participant has no rights to participate in new issues of capital offered to
shareholders. However, the Company will ensure that for the purposes of determining entitlements to
such an issue, the record date will be at least seven business days after the issue is announced. The
rights of a participant may be changed to the extent necessary to comply with the ASX listing rules in
respect of a reorganisation of capital. Consultant options are issued under the COS for no
consideration.
Consultant options will lapse if:
i)
ii)
iii)
iv)
the conditions of exercise of the consultant options have not been met, or where the participant
ceases to render services to the consolidated entity;
the conditions of exercise of the consultant options are unable to be met;
five years, or any other lapsing period specified in the offer document, has passed after the
grant of the consultant options; or
the conditions of exercise of the consultant options have been met, and the participant does not
exercise his or her consultant options within 28 days after ceasing to render services to the
consolidated entity.
Annual Report | 30 June 2017 | Page 62 of 72
Notes to the financial statements
30 June 2017
Note 33. Share-based payments (continued)
All of a participant’s rights in respect of consultant options are immediately lost if the consultant
options lapse.
Set out below are summaries of options granted under the plan:
2017
Grant date Expiry date
27/11/2013 27/11/2018 * $0.2475
Exercise
price
Balance at
the start of
the year Granted Exercised
-
-
820,000
820,000
-
-
Weighted average exercise price
* Director Option Scheme
2016 +
Exercis
e price
Grant date Expiry date
09/05/2011 09/05/2016 ** $1.2500
09/05/2011 09/05/2016 ** $1.2500
27/11/2013 27/11/2018 * $0.2475
Weighted average exercise price
+ on a post-consolidation basis
* Director Option Scheme
** Consultant Option Scheme
Balance at
the start of
the year Granted Exercised
-
-
-
-
980,000
150,000
820,000
1,950,000
-
-
-
-
Set out below are the options exercisable at the end of the financial year:
Grant date
27/11/2013
Expiry date
27/11/2018 *
+ on a post-consolidation basis
* Director Option Scheme
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
820,000
820,000
$0.2475
Expired/
forfeited/
other
980,000
150,000
-
1,130,000
Balance at
the end of
the year
-
-
820,000
820,000
$0.2475
2017
Number
820,000
820,000
2016
Number +
820,000
820,000
The weighted average share price during the financial year was $0.02488 (2016: $0.055 on a post-
consolidation basis).
The weighted average remaining contractual life of options outstanding at the end of the financial year
was 1.5 years (2016: 2.5 years).
Annual Report | 30 June 2017 | Page 63 of 72
Directors’ declaration
30 June 2017
1.
In the opinion of the directors of Allegiance Coal Limited (the ‘Company’):
a)
the accompanying
Corporations Act 2001, including:
financial statements and notes are
in accordance with
the
i) giving a true and fair view of the Group’s financial position as at 30 June 2017
and of its performance for the year ended on that date; and
ii) complying with Australian Accounting Standards, the Corporations Regulations
2001, professional reporting requirements and other mandatory requirements,
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.
c)
the financial statements and notes thereto are in accordance with International Financial
Reporting Standards issued by the International Accounting Standards Board.
2. This declaration has been made after receiving the declarations required to be made to the
directors in accordance with Section 295A of Corporations Act 2001 for the financial year ended
30 June 2017.
This declaration is signed in accordance with a resolution of the Board of Directors.
Malcolm Carson
Chairman
8 September 2017
Sydney
Annual Report | 30 June 2017 | Page 64 of 72
Auditor’s independence declaration
LEAD AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO : The Directors of Allegiance Coal Limited
In accordance with Section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence.
As Audit Director for the audit of the financial statements of Allegiance Coal Limited for the financial
year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been no
contraventions of :
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
any applicable code of professional conduct in relation to the audit.
Yours faithfully
SCS Audit & Corporate Services Pty Ltd
(An Authorised Audit Company)
________________
Brian Taylor
Director
Sydney
8 September 2017
Annual Report | 30 June 2017 | Page 65 of 72
Independent Auditor’s report
30 June 2017
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Allegiance Coal Limited (“the Company”) and its subsidiaries
(“the Group”), which comprises the consolidated statement of financial position as at 30 June 2017,
the consolidated statement of comprehensive income, the consolidated statement of cash flows and
the consolidated statement of changes in equity for the year ended on that date, notes comprising a
statement of accounting policies and selected explanatory notes and the directors’ declaration.
In our opinion:
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated financial position of the Group as at 30
June 2017 and of its consolidated performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Matter of Emphasis
Without qualifying our above opinion, we draw attention to Note 1 of the financial report, Significant
Accounting Policies – going concern, which indicates that the Group incurred a loss from continuing
operations after tax of $979,673. The matters detailed in Note 1 indicate the existence of a significant
uncertainty which may cast doubt as to the ability of the Group to continue as a going concern. The
Group may be unable to realise its assets and discharge its liabilities in the normal course of
business, at the amounts stated in the financial report. The financial statements do not include the
adjustments that would result if the group was unable to continue as a going concern.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Annual Report | 30 June 2017 | Page 66 of 72
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited (continued)
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon. For each matter
below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
1 Fair Value of Telkwa metallurgical coal project (Project), on acquisition
Why significant
How our audit addressed the key audit matter
The Company acquired the Project through the
allotment of ordinary shares. The value
attributed to the shares forms a fundamental
component of the carrying value of the Project
in the consolidated balance sheet. Accordingly,
the fair value of the assets at acquisition is a
key audit matter.
Refer to Note 29 – acquisition of subsidiary
undertakings to the financial statements for the
amounts held on the consolidated statement of
financial position as at 30 June 2017 and
related disclosure.
We evaluated the Group’s assessment of the fair value
of the shares issued as consideration. In obtaining
sufficient audit evidence we considered:
to
the
relating
documentation
relevant
acquisition.
the volume weighted average market price
(VWAP) of the shares on the ASX at the time
the acquisition was announced.
the findings of an independent technical review
and fair market valuation report prepared for the
directors of the Company as part of their due
diligence.
2 Carrying value of the capitalised exploration and evaluation assets
Why significant
How our audit addressed the key audit matter
The carrying value of exploration and
evaluation assets is subjective, based on the
Group’s ability and intention to continue to
explore and evaluate the asset. The carrying
value may also be impacted by the results of
exploration and evaluation work indicating that
the mineral reserves may not be commercially
viable
the
recoverability of the assets is a key audit
matter.
extraction. Accordingly,
for
Refer to Note 12 – exploration and evaluation
assets to the financial statements for the
amounts held on the consolidated statement of
financial position as at 30 June 2017 and
related disclosure.
We evaluated the Group’s assessment of the carrying
value of exploration and evaluation assets. In obtaining
sufficient audit evidence we considered :
the Group’s right to explore and evaluate in the
relevant exploration and evaluation area which
included obtaining and assessing supporting
documentation such as agreements.
the Group’s intention to carry out exploration
and evaluation activity
relevant
exploration and evaluation area which included
assessment of the Group’s budget and enquiries
with directors of
the
intentions and strategy of the Group.
the findings of independent reports relating to
the exploration and evaluation activity carried
out to date.
the Company as
the
to
in
Annual Report | 30 June 2017 | Page 67 of 72
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited (continued)
3 Going concern
Why significant
How our audit addressed the key audit matter
For the year ended 30 June 2017 the Group
reported a net loss of $979,673 and net
operating cash outflows of $1,051,171. As at
30 June 2017 the Group had net current
assets of $1,509,285 including cash reserves
of $1,637,343. These matters indicate the
existence of an uncertainty which may cast
doubt as to the ability of the Group to continue
as a going concern. The Group may be unable
to realise its assets and discharge its liabilities
in the normal course of business, and at the
amounts stated in the financial report.
We evaluated the Group’s assessment of its ability to
continue
the
to operate as a going concern
foreseeable future. In obtaining sufficient audit evidence
we:
for
considered the Group’s budget for the 2018
financial year.
made enquiries with directors of the Company
as to the intentions and strategy of the Group.
considered the adequacy of the disclosures
made by the Group in note 1 to the financial
statements.
to Note 1 – significant accounting
Refer
policies, going concern.
Information other than the financial statements and auditor’s report
The directors of the Company are responsible for the other information. The other information
included in the Group’s annual report for the year ended 30 June 2017 comprises the Director’s
Report (but does not include the financial report and our auditor’s report thereon), which we obtained
prior to the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon with the exception of the Remuneration Report.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors of the Company for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors of the Company are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going
concern and using the going concern basis of accounting unless the directors of the Company either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Annual Report | 30 June 2017 | Page 68 of 72
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited (continued)
Auditor’s responsibilities for the audit of the financial report
Our responsibility is to express an opinion on the financial report base on our audit. Our objectives are
to obtain reasonable assurance about whether the financial report as a whole is free of material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement that
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercised professional
judgment and maintain a professional scepticism throughout the audit. We also:
identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors of the Company as well as
evaluating the overall presentation of the financial report.
conclude on the appropriateness of the directors of the Company’s use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial report or, if
such disclosures are inadequate, to modify our auditor’s report. However, future events and
conditions may cause the Group to cease to continue as a going concern.
evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors of the Company regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including significant deficiencies in internal
controls that identify during our audit.
Annual Report | 30 June 2017 | Page 69 of 72
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited (continued)
The auditing standards require that we comply with relevant ethical requirements relating to audit
engagements. We also provide the directors of the Company with a statement that we have complied
with relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and
where appropriate, related safeguards.
From the matters communicated with the directors of the Company, we determine those matters that
were of most significance in the audit of the financial report of the current year and are therefore are
key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure of the matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the Directors’ Report for the year ended 30
June 2017.
In our opinion, the Remuneration Report of Allegiance Coal Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
SCS Audit & Corporate Services Pty Ltd
(An Authorised Audit Company)
____________________
Brian Taylor
Director
Sydney
Dated 8 September 2017
Annual Report | 30 June 2017 | Page 70 of 72
Shareholder information
The shareholder information set out below was applicable as at 31 August 2017.
Distribution of securities
Analysis of number of security holders by size of holding:
Number of holders
Ordinary shares
Number of holders
Options
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
20
178
45
103
105
451
-
-
-
3
1
4
Equity security holders
The names of the twenty largest security holders of Ordinary Shares listed on the share register are:
% of Units
Name
13.23
TELKWA HOLDINGS LTD
SALISBURY AUSTRALIA HOLDINGS PTY LTD
BERNARD LAVERTY PTY LTD
FRANKLIN CIVIL PTY LTD
27,466,665
15,967,307
Units
29,906,666
12.15
7.07
CITICORP NOMINEES PTY LIMITED
GFT NOMINEES (QLD) PTY LTD
JA ASHTON NOMINEES (QLD) PTY LTD
DGSF PTY LTD
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