ABN 47 149 490 353
Annual Report - 30 June 2019
Corporate Directory
Directors
Mark Gray – Chairman and Managing Director
Malcolm Carson
Larry Cook
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
Level 3, 60 Carrington Street
Sydney NSW 2000
Telephone: 1300 787 272
Facsimile: +61 2 8234 5050
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 .................................................................................................... 28
Statement of financial position .............................................................................................................. 29
Statement of changes in equity ............................................................................................................. 30
Statement of cash flows ........................................................................................................................ 32
Directors’ declaration ............................................................................................................................ 66
Auditor’s independence declaration ...................................................................................................... 67
Independent Auditor’s report ................................................................................................................. 68
Additional Securities Exchange information .......................................................................................... 73
Directors’ Report
30 June 2019
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 2019.
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:
Mark Gray (Chairman)
Malcolm Carson
Larry Cook – Appointed on 23 July 2019
Jonathan Reynolds
David Fawcett – Ceased on 3 May 2019
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
The Company’s primary focus has been on advancing the proposed Telkwa metallurgical coal project
(Telkwa Project) to production. The Telkwa Project is located on the western side of British Columbia
(BC), Canada, 375km by both rail and road to the deep water port of Prince Rupert and the Ridley
Island Coal Terminal.
The key attractions of the Telkwa Project are its:
•
•
•
•
relatively low mining strip ratio;
relatively simple mining and coal washing process;
access to rail, port, power, water, workforce and services; and
existing large database of information obtained from exploration and evaluation by present and
previous owners.
The Telkwa Project comprises three open pit areas all within close proximity of each other: Tenas,
Goathorn, and Telkwa North. The JORC Code 2012 coal resource statement across all three coal
deposits is as follows:
Coal Resource (Mt)
Tenas
Goathorn
Telkwa North
Total
Measured
27.1
59.5
15.7
102.3
Indicated
9.4
9.2
3.7
22.3
Inferred
-
0.2
1.0
1.2
Total
36.5
68.9
20.4
125.8
The Company’s initial focus is on developing the Tenas deposit (Tenas Project). Over the year, the
Company has made solid progress advancing the Tenas Project towards permitting and production.
Technical studies
On 3 July 2017, the Company announced the results of its Staged Production pre-feasibiltiy study (PFS)
and on 11 September 2017, the Company announced the results of its Stage 1 PFS which included the
results of a review of the Staged Production PFS. The Staged Production PFS assessed the viability of
Annual Report | 30 June 2019 | | Page 1 of 75
the Telkwa Project across the entire reserve base of 42.5 million tonnes of saleable coal. It assumed
the commencement of mining at 250,000 saleable tpa ramping to 1.75 million saleable tpa in four years.
The Stage 1 PFS assessed the viability of the Tenas Project at two levels:
•
•
Mining at a rate of 250,000 saleable tpa; and
Commencing mining at 250,000 saleable tpa and then increasing production to 500,000 saleable
tpa on the basis such a ramp-up would involve limited additional capital expenditure.
Following completion of the PFSs and several months of discussions with key stakeholders, the
Company finalised the terms of the Project Description for the Tenas Project (Project Description) in
July 2018. The Project Description was lodged with the relevant government agencies in the second
half of 2018, leading to the issue, in November 2018, by the BC government of the section 10 order.
The section 10 order deems the Tenas Project ready for environmental assessment, formally
commencing the permitting process.
Several important factors contributed to the Project Description:
•
A clear indication from key stakeholders for the Tenas Project to participate in the BC
environmental review process;
A desire by the Company’s shareholders that it capitalise on current strong demand and pricing
for metallurgical coal to increase planned production beyond 250,000 saleable tpa;
A preference from the local community for the transfer of saleable coal from the coal wash-plant
to the rail load-out via a dedicated private haul road rather than a public highway;
Canadian National Rail’s requirement for a 3.5km train rail loop rather than the 1.5km rail siding
incorporated into the 2017 PFSs;
The maximum operating capacity of the coal wash-plant which would have an installed capacity
of approximately 1,050,000 feed tpa;
A preference to retain a small operating footprint; and
An objective to maintain a low start-up capital expenditure requirement.
•
•
•
•
•
•
The Project Description formed the basis of a definitive feasibility study (DFS), in relation to the Tenas
Project, managed in-house by the Company with input from SRK and other mining and resources
specialists. The results of the DFS were announced in March 2019. Further, an opportunity was
identified in the DFS review to improve equipment and labour utilisation in year six when a decline in
usage emerged after completion of construction of water management infrastructure. The results of this
upside DFS were reported in July 2019. The results of both the DFS and the upside DFS are
summarised out below.
Tenas saleable coal reserves
Saleable coal per annum production years 1 to 4
Saleable coal per annum production years 5 to 6
Saleable coal per annum production years 7 to 15
Mine-life (production years)
Potential to extend mine-life from additional resources
All-in FOB cash cost (ex-port) before interest & tax
Revenue mine-life annual average
EBITDA mine-life annual average
EBITDA ratio to revenue mine-life annual average
Start-up capital expenditure
NPV8% pre-tax
IRR pre-tax
Capital payback after commencement of production
DFS
16.55Mt
750kt
750kt
750kt
22 years
35 years
US$49.7/t
US$86M
US$45M
53%
US$54.3M
US$288M
56.9%
2.5 years
Upside
16.55Mt
750kt
1.05Mt
1.35Mt
14.4 years
22 years
US$45.0/t
US$131M
US$74M
57%
US$55.8M
US$381M
60.8%
2.5 years
Significantly, the DFS concluded that the Tenas Project is likely to be one of, if not, the lowest cost
producers of metallurgical coal on the global seaborne market.
Annual Report | 30 June 2019 | | Page 2 of 75
2019 Drill Programme
The Company undertook a 40 hole drill programme comprising both sonic and rotary drill holes to collect
data for geotechinal and geochemical analysis relevant to the Company’s environmental impact
assessment, and mine plan. The data is critical to the Company’s environmental impact assessment
programme and mine infrastructure, both required for the Company’s applications for an Envronmental
Assessment Certificate and Permits to Mine.
As was the case in the 2018 drill programme, the Company took the opportunity to recover coal for
further washability and coal quality analysis.
Environmental Baseline and Environmental Impact Assessment
Following the issue of the section 10 order, the environmental impact assessment process (EA
Process), together with the permitting of the Tenas Project, have commenced. Almost two years of
environmental baseline studies critical to the EA Process and permitting have been completed. Some
environmental monitoring will continue during the EA Process, particularly in relation to water. Studies
covered included:
•
•
•
•
•
Water quality;
Fish, fish habitat and aquatic resources;
Atmospherics such as water and dust;
Terrestrial such as terrain, soils, vegetation and wildlife; and
Cultural and archaeology.
The Company is fortunate to have received an enormous amount of environmental data from
comprehensive studies undertaken by previous Tenas Project owners during the 1980s and the 1990s.
The baseline data collected by the Company has, amongst other things, been used to augment that
historical data creating, in effect, more than 20 years of environmental baseline data. Not only did this
reduce the cost to the Company of collecting environmental data, more importantly, it arms the
Company with an excellent data base of environmental information for the EA Process and permitting.
In June 2019, the BC Government Environmental Assessment Office (EAO) issued a section 11 order
in relation to the Tenas Project. The section 11 order defines the environmental assessment process
for the Company, which includes amongst other things:
•
•
The level of consultation required in relation to First Nations and the local community;
Preparation of the Valued Components document which identifies the key values that need to be
considered in the application for an EA Certificate;
Preparation of the Application Information Requirements document which provides the
foundation for the EA Certificate application; and
The EA Certificate pre-application process.
•
•
The Company has completed numerous Technical Working Group and sub-committee meetings with
the EAO and has submitted, received comments, and replied to comments, from the Technical Working
Group, on the valued components document. In addition, the Company has completed the first draft
Application Information Requirements document and is awaiting advice from the EAO as to when this
document can be lodged with the EAO.
Key Stakeholder Engagement
Over the year, meetings have been held with First Nations, the BC Ministry of Energy and Mines, the
Mayor of Telkwa’s office, and other regional special interest groups.
The Company held its second ‘Open House’ out of five planned, in Telkwa on 28 November 2018. This
followed the first Open House held on 23 May 2018. Members of the public of Telkwa, and neighbouring
communities, totalling almost 100, met with company management and consultants, and viewed and
discussed a series of story boards illustrating and explaining the many facets that make up the Tenas
Project. Sixteen story boards were on display. Each story board was managed by either a member of
the Company’s management or an independent expert in the relevant field, providing answers to
questions and issues raised by members of the public.
Annual Report | 30 June 2019 | | Page 3 of 75
In June 2019, the Company organised and funded a charity barbeque with Telkwa Village residents to
celebrate the start of summer holidays in British Columbia, with proceeds directed to the Telkwa day
care centre. Some 100 residents attended.
Interest in Telkwa Project
In 2014, The Company’s wholly owned subsidiary Telkwa Coal Ltd (TCL) acquired farm-in rights to the
Telkwa Project from a subsidiary of Altius Minerals Corporation (Altius), a TSX listed investment fund.
TCL acquired the right to earn up to 90 percent project ownership. Altius retained a free carry on its
remaining 10 percent project equity. In December 2017, TCL entered into an agreement to acquire from
Altius 100 percent ownership of all the rights to coal licences that make up the Telkwa Project
(Acquisition). Up until the Acquisition, TCL had earned 20 percent project ownership. In consideration
for the issue to Altius of 40.6 million ordinary shares in the Company and the continued performance of
the milestone obligations (as set out in the table below, which table incorporates an amendment agreed
to in the year ended 30 June 2019), Altius agreed to transfer full ownership of the Telkwa Project to
TCL. As security against the performance of the milestone obligations, TCL has provided a charge over
the Telkwa Project. The charge shall be subordinated to Project debt finance.
Milestone
File mine permit applications
Grant of small mine** permits
Sale of 100k tonnes from a small mine**
Grant of major mine** permits
Sale of 500k tonnes from a major mine**
Payment
Commitment *
C$500,000
C$500,000
C$2 million
C$2 million
C$5 million
Payable
C$300,000 upon milestone
C$200,000 18 months later
Upon milestone
Upon milestone
12 months after milestone
12 months after milestone
* payable, at Altius’ option, in cash or shares in the Company.
** a small mine is defined as one permitted to produce up to 250,000 saleable tpa and a major mine is
one permitted to produce more than 250,000 saleable tpa.
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.
Itochu Joint Venture
In November 2018, Itochu Corporation of Japan and the Company entered binding agreements to
establish the ‘Telkwa Met Coal Joint Venture” (Joint Venture), to underpin the funding and development
of the Tenas Project. The Joint Venture provides for two stages of investment. Stage 1 comprises an
investment by Itochu in TCL of C$6.6M, by way of a subscription for shares in TCL representing 20
percent of the issued share capital of TCL, as follows:
•
C$1.5M for a 5.3% interest in TCL completed in January 2019, following the issue of the section
10 order which was received by TCL in November 2018;
C$1.5M for a further 4.8% interest in TCL, following completion of a positive Tenas Project DFS,
subject to Itochu’s approval at the time, which tranche was completed in July 2019; and
C$3.6M for a further 9.9% interest in TCL, following lodgement of an application for an
Environmental Assessment Certificate, subject to Itochu’s approval at the time.
•
•
Itochu’s origins date back to 1858 and it is one of the largest commodity trading houses in the world.
As at March 2018 it had total assets of US$74 billion and annual revenue of US$46 billion. Itochu is
ranked 65 on the Fortune 500 global list of companies.
Itochu has the right to appoint two directors to the Board of TCL, including the Marketing Director, while
Allegiance has the right to appoint three directors. TCL will take responsibility for the operation of the
Tenas mine, while Itochu will take responsibility for the marketing, sale and delivery of Tenas coal.
Itochu will be the sole and exclusive sales agent for all Telkwa coal.
Annual Report | 30 June 2019 | | Page 4 of 75
The stage 1 investment was based on a value for TCL of C$33M. The stage 2 investment by Itochu
arises after all permits to mine the Tenas Project are granted. Itochu has the right to subscribe for
additional shares in TCL up to a maximum of 50% of TCL’s share capital. The valuation of TCL for the
purposes of Stage 2 investment is to be agreed between the Company and Itochu, or failing agreement,
by an independent valuation of the Tenas Project assuming all permits to mine have been granted, as
they will have been by this stage.
New Elk metallurgical coal project
In July 2019, the Company announced that it had enterered into a binding and conditional terms sheet
(Terms Sheet) to acquire all the shares in the New Elk Coal Company, LLC, (NECC), which company
owns the New Elk hard coking coal project located in southeast Colorado, United States (Mine). The
key aspects of the planned acquisition are:
•
•
The purchase price for the shares in NECC is US$1.
Completion of the purchase must take place before 14 July 2020 (Completion). The Company is
working to complete significantly earlier.
NECC is debt free, except for debt owing to Cline Mining Corporation (Cline) totalling C$55M
(Debt).
The Terms Sheet provides that the Debt will be repaid by NECC to Cline as follows:
o US$3M in cash on Completion of the acquisition of the shares in NECC;
o US$3M in shares in the Company issued on Completion;
o US$5M to replace the Colorado State Mine reclamation bond on Completion;
o The balance to be repaid from an agreed percentage of Mine operating cash flow.
The Mine is fully constructed and permitted for the production of hard coking coal.
A National Instrument 43-101 Technical Report was undertaken for NECC in July 2012, which
declared a mineral resource estimate of 656 million tonnes.
The Terms Sheet conditions to Completion are that the Company will:
o Undertake legal and financial due diligence by 14 September 2019;
o Review the geological model to the Mine by 14 October 2019;
o Undertake a feasibility study to develop a mine plan for production by 14 April 2020;
o Raise US$5M to replace the Colorado State Mine reclamation bond by 14 June 2020;
o Raise US$3M to meet the cash payment part of Debt reduction by 14 June 2020;
o By 14 June 2020, raise sufficient working capital to bring the Mine back into production;
o Obtain shareholder approval to the purchase by 14 June 2020;
o Enter into transaction documentation with Cline by 14 June 2020; and
o Completion shall be no later than 14 July 2020.
•
•
•
•
•
Investors should note that the mineral resource estimates for NECC are foreign estimates under ASX
Listing Rule 5.12 and are not reported in accordance with 2012 Edition of the “Australian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code). A competent
person has not done sufficient work to classify the foreign estimates as a mineral resource under the
JORC Code and it is uncertain that following further exploration or evaluation work that this foreign
estimate will be able to be reported as a mineral resource in accordance with the JORC Code. The
Company further cautions investors that, other than exclusivity to the planned acquisition to 14 July
2020, the material provisions in relation to the potential acquisition of NECC are and remain non-binding
and that an investment decision should not be made on the basis of this information. There can be no
certainty that any binding agreements will be reached, or that any concluding transaction will eventuate.
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 2019.
Share capital
During the year ended 30 June 2019, the Company undertook the following capital raising initiatives:
•
In September 2018, the Company completed a placement of 45.97 million ordinary shares to
sophisticated and professional investors raising $2.39 million, before costs. The capital was
raised to fund the definitive feasibility study for the Tenas Project.
Annual Report | 30 June 2019 | | Page 5 of 75
•
In June 2019, the Company completed a placement of 34.52 million ordinary shares to
sophisticated and professional investors raising $2.59 million, before costs. The capital was
raised to fund the studies and assessments required to support the Tenas Project mine permit
application process.
Loans
In April 2019, the Company issued unsecured promissory notes with a face value totalling $1,048,322
repayable on 31 March 2020, bearing an implied interest rate of 12% pa.
Board
In May 2019, David Fawcett retired as Non-executive Chairman. Mark Gray, the Company’s Managing
Director, assumed the role of Chairman.
In July 2019, Larry Cook was appointed as a Non-Executive Director of the Company with specific
responsibility to direct the feasibility study and the recommissioning and operation of the New Elk
metallurgical coal project.
Trading results
The loss for the consolidated entity after providing for income tax amounted to $1,489,242 (30 June
2018: $1,550,921).
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
In July 2019, following completion of a review of the Tenas Project definitive feasibility study to its
satisfaction, Itochu Corporation of Japan invested a further C$1.5 million in Telkwa Coal Ltd, by way of
a subscription for shares, taking its equity holding in that company to 10.1%.
In July 2019, the Company announced that it had entered a terms sheet with Cline Mining Corporation
relating to the acquisition of the New Elk metallurgical coal mine, subject to due diligence and
completion documentation.
In August 2019, following shareholder approval, 801,666 ordinary shares were issued to directors (or
their nominees) at $0.075 each to raise $60,125, before costs, under the Placement completed by the
Company in June 2019.
Likely developments and expected results of operations
The consolidated entity intends progressing development of the Telkwa and the New Elk metallurgical
coal projects 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.
Information on directors
Name:
Title:
Qualifications:
Experience and
expertise:
Mark Gray
Chairman from May 2019
Managing Director from May 2017
LLB
Mark secured the Telkwa Project and founded Telkwa Coal Limited (a wholly
owned subsidiary of the Company) 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. He has been
Annual Report | 30 June 2019 | | Page 6 of 75
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: 761,018 ordinary shares held directly (24,366,314 ordinary shares held
None
None
Interests in options No options held directly (2,000,000 options held indirectly)
indirectly)
Name:
Title:
Qualifications:
Experience and
expertise:
Malcolm Carson
Independent Non-Executive Director from March 2018
Non-Executive Chairman from August 2016 to March 2018
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)
Other current
directorships:
Former directorships
(last 3 years):
Special
responsibilities:
Interests in shares: Nil
Interests in options: No options held directly (750,000 options held indirectly)
None
None
Name:
Title:
Qualifications:
Experience and
expertise:
Larry Cook
Independent Non-Executive Director from July 2019
B.S.E.M- Mining Engineering
Larry has over 40 years of technical knowledge of underground coal mining
and methods. For the first 20 years of his career he worked in various
underground roles in coal mines primarily in West Virginia. He is highly
regarded in both the US and Australia as an extremely capable underground
coal mining engineer. Previous positions include Vice President of Operations
at Mid-Vol Mining, Madison WV; General Superintendent at Mistic Energy Inc,
Beckley WV; Mine Manager of five underground coal mines owned by Eastern
Associated Coal Corporation in Wharton WV; founding shareholder and
director of Bounty Industries Ltd providing contract mining at Ivanhoe Colliery,
NSW, for Centennial Coal and at German Creek Colliery, Central QLD, for
Anglo Coal. Most recently, Mr Cook recommissioned the Donkin underground
coal mine located in Nova Scotia, Canada.
None
None
Other current
directorships
Former directorships
(last 3 years):
Special
responsibilities
Interests in shares: Nil
Interests in options Nil
None
Annual Report | 30 June 2019 | | Page 7 of 75
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.
Director of Kalia Limited (ASX: KLH)
None
Other current
directorships:
Former directorships
(last 3 years):
Special
responsibilities:
Interests in shares: 1,745,000 ordinary shares held directly
Interests in options: 1,250,000 options held directly
None
Name:
Title:
Qualifications:
Experience and
expertise:
David Fawcett – Ceased on 3 May 2019
Non-Executive Chairman from March 2018 to May 2019
Independent Non-Executive Director from December 2016 to March 2018
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 Canada’s Award of Distinction in 2015.
None
Other current
directorships
Former directorships
(last 3 years):
Special
responsibilities
Interests in shares: No ordinary shares held directly (3,435,658 ordinary shares held indirectly)
Interests in options No options held directly (250,000 options held indirectly)
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 2019 | | Page 8 of 75
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended
30 June 2019, and the number of meetings attended by each director were:
Malcolm Carson
Mark Gray
David Fawcett
Jonathan Reynolds
Attended
4
4
3
4
Held
4
4
3
4
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
In accordance with best practice corporate governance, the structure of non-executive director and
executive remunerations are separate.
Annual Report | 30 June 2019 | | Page 9 of 75
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 2019, 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.
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM')
At the last AGM, the shareholders voted to adopt the remuneration report for the year ended 30 June
2018. The Company did not receive any specific feedback at the AGM regarding its remuneration
practices.
Annual Report | 30 June 2019 | | Page 10 of 75
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
Cash
salary and
fees
$
Bonus
$
Non-
monetary
$
Super-
annuation
$
Long-
term
benefits
Long
service
leave
$
Share-
based
payments
Equity-
settled
$
2019
Non-Executive Directors:
Malcolm Carson
David Fawcett
36,000
62,500
-
-
-
-
Executive Directors:
Mark Gray
Jonathan Reynolds
Executives:
Dan Farmer*
Angela Waterman+
341,860 50,000
-
180,000
9,475
-
227,732
-
177,125 14,760
1,025,217 64,760
-
-
9,475
* Chief Operating Officer Telkwa Coal Ltd
+ Environmental and Government Telkwa Coal Ltd
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
36,000
62,500
401,335
180,000
-
-
-
-
227,732
-
-
191,885
- 1,099,452
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-
based
payments
Cash
salary
and
fees
$
2018
Non-Executive Directors:
Malcolm Carson
David Fawcett
36,000
49,000
Executive Directors:
Mark Gray
Jonathan Reynolds
267,501
156,667
Executives:
Dan Farmer
Angela Waterman
185,708
155,825
850,701
Bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
-
-
-
-
-
-
-
-
-
11,825
-
-
-
11,825
-
-
-
-
-
-
-
-
-
-
-
-
-
15,369
15,369
51,369
64,369
40,985
25,616
320,311
182,283
30,739
30,739
216,447
186,564
158,817 1,021,343
Annual Report | 30 June 2019 | | Page 11 of 75
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Fixed remuneration
Name
Non-Executive Directors:
Malcolm Carson
David Fawcett
Executive Directors:
Mark Gray
Jonathan Reynolds
Executives:
Dan Farmer
Angela Waterman
2019
2018
100%
100%
88%
100%
100%
92%
70%
76%
87%
86%
86%
84%
Share-based compensation
At risk - STI
2019
2018
At risk - LTI
2019
2018
-%
-%
12%
-%
-%
8%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
30%
24%
13%
14%
14%
16%
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 2019 or 30 June 2018.
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:
No options were granted to directors and other key management personnel as part of compensation
during the year ended 30 June 2019 (year ended 30 June 2018: 7,750,000).
Grant date
Vesting and
exercisable date
Expiry date
Exercise
price
Fair value per
option at grant date
6 December 2017
See table below
6 December 2022
$0.075
$0.021
Vesting and
exercisable date
M Gray
M Carson
D Fawcett
J Reynolds
D Farmer
A Waterman
6 Dec
2018
a
-
-
-
250,000
-
250,000
-
-
- 250,000
- 250,000
500,000 500,000
c
d
b
6 Dec
2020
-
500,000 2,000,000
-
750,000
250,000
-
250,000
750,000
-
312,500 1,250,000
250,000
250,000 1,500,000
250,000 1,500,000
250,000
500,000 1,312,500 1,312,500 1,812,500 1,812,500 7,750,000
6 Dec
2019
500,000
250,000
250,000
312,500
250,000
250,000
500,000
-
-
312,500
250,000
250,000
500,000
-
-
312,500
250,000
250,000
Total
a The date the Tenas Project baseline studies are completed.
b The date the Tenas Project affected party agreements are completed.
c The date the Tenas Project mining permit applications are filed.
d The date the Tenas Project mining permits are issued.
Options granted carry no dividend or voting rights.
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 2019 are set out below:
Annual Report | 30 June 2019 | | Page 12 of 75
Value of
options
granted
during the
year
$
-
-
-
-
-
-
Value of
options
vested
during the
year
$
-
5,123
5,123
-
5,123
5,123
Value of
options
lapsed
during the
year
$
-
-
10,246
-
-
-
Remuneration
consisting of
options for the
year
%
-
-
-
-
-
-
Name
Mark Gray
Malcolm Carson
David Fawcett
Jonathan Reynolds
Dan Farmer
Angela Waterman
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 2018 are set out below:
Value of
options
granted
during the
year
$
40,985
15,369
15,369
25,616
30,739
30,739
Value of
options
vested
during the
year
$
-
-
-
-
-
-
Value of
options
lapsed
during the
year
$
-
-
-
-
-
-
Remuneration
consisting of
options for the
year
%
13%
30%
24%
14%
14%
16%
Name
Mark Gray
Malcolm Carson
David Fawcett
Jonathan Reynolds
Dan Farmer
Angela Waterman
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.
Name
M Gray
M Carson
D Fawcett
J Reynolds
D Farmer
A Waterman
Vesting
date
Grant date
6 Dec 2017 Note 1
6 Dec 2017 Note 1
6 Dec 2017 Note 1
6 Dec 2017 Note 1
6 Dec 2017 Note 1
6 Dec 2017 Note 1
Number of
options
granted
2,000,000
750,000
750,000
1,250,000
1,500,000
1,500,000
40,985
15,369
15,369
25,616
30,739
30,739
Value of
options
granted
$
Value of
options
vested
$
Number of
options
lapsed
-
-
-
5,123
5,123 500,000
-
5,123
5,123
-
-
-
Value of
options
lapsed
$
-
-
10,246
-
-
-
Note 1: The options vest on the dates set out in the following table:
Vesting and
exercisable date
Annual Report | 30 June 2019 | | Page 13 of 75
M Gray
M Carson
D Fawcett
J Reynolds
D Farmer
A Waterman
6 Dec
2018
a
-
-
-
250,000
-
250,000
-
-
- 250,000
- 250,000
500,000 500,000
c
d
b
6 Dec
2020
500,000 2,000,000
-
750,000
250,000
-
250,000
750,000
-
312,500 1,250,000
-
250,000 1,500,000
250,000
250,000
250,000 1,500,000
500,000 1,312,500 1,312,500 1,812,500 1,812,500 7,750,000
6 Dec
2019
500,000
250,000
250,000
312,500
250,000
250,000
500,000
-
-
312,500
250,000
250,000
500,000
-
-
312,500
250,000
250,000
Total
a The date the Tenas Project baseline studies are completed.
b The date the Tenas Project affected party agreements are completed.
c The date the Tenas Project mining permit applications are filed.
d The date the Tenas Project mining permits are issued.
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
Mark Gray
Malcolm Carson
David Fawcett
Jonathan Reynolds
Dan Farmer
Angela Waterman
22,937,362
-
2,833,333
1,333,333
2,026,666
-
27,104,028
-
-
-
-
-
-
-
* Retired as a director on 3 May 2019.
Disposals/
other
Balance
at the end of
the year
-
-
3,435,658*
-
-
-
3,435,658
24,460,666
-
-
1,610,000
2,376,780
-
26,070,666
Additions
1,523,304
-
605,325
276,667
350,114
-
2,405,296
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
Mark Gray
Malcolm Carson
David Fawcett
Jonathan Reynolds
Dan Farmer
Angela Waterman
2,000,000
750,000
750,000
1,250,000
1,500,000
1,500,000
7,750,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
-
-
-
500,000
2,000,000
750,000
250,000
1,250,000
1,500,000
1,500,000
7,250,000
Annual Report | 30 June 2019 | | Page 14 of 75
Options over ordinary shares
Mark Gray
Malcolm Carson
David Fawcett
Jonathan Reynolds
Dan Farmer
Angela Waterman
Vested and
exercisable
Unvested and
unexercisable
Balance at the
end of the year
-
250,000
250,000
-
250,000
250,000
1,000,000
2,000,000
500,000
-
1,250,000
1,250,000
1,250,000
6,250,000
2,000,000
750,000
250,000
1,250,000
1,500,000
1,500,00
7,250,000
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 2019.
Other transactions with key management personnel and their related parties
Consultancy fees paid to related parties, included in remuneration disclosures above
Gray Corporate Law Ltd, a related party of Mark Gray, totalling $200,000
•
Gray Corporate Ltd, a related party of Mark Gray, totalling $191,860
•
Mineral Resource Consultants Pty Ltd, a related party of Malcom Carson, totalling $36,000
•
Murray River Coal Ltd, a related party of David Fawcett, totalling $62,500
•
J Reynolds CA Pty Ltd, a related party of Jonathan Reynolds, totalling $180,000
•
Coalsense Consulting Inc, a related party of Dan Farmer, totalling $227,733
•
Expenses reimbursements paid to related parties:
•
•
•
Gray Corporate Law Ltd, a related party of Mark Gray, totalling $142,099
Gray Corporate Law Pty Ltd, a related party of Mark Gray, totalling $10,706
J Reynolds CA Pty Ltd, a related party of Jonathan Reynolds, totalling $11,354
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
6 December 2017
6 December 2017
Expiry date
Exercise price
Number under option
6 December 2020
6 December 2022
$0.05
$0.075
5,000,000
9,250,000
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 2019 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.
Annual Report | 30 June 2019 | | Page 15 of 75
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 67.
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
Mark Gray
Chairman
6 September 2019
Sydney
Annual Report | 30 June 2019 | | Page 16 of 75
Corporate governance statement
30 June 2019
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 2019 | | Page 17 of 75
•
•
•
•
•
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 Director
Larry Cook – Non-executive Director – Appointed 23 July 2019
David Fawcett – Non-executive Chairman – Retired 3 May 2019
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 determines the
Annual Report | 30 June 2019 | | Page 18 of 75
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.
Following the retirement of David Fawcett as independent non-executive Chairman, for the present,
given the Company’s current stage of development, the Company’s Managing Director, Mark Gray, will
assume the role of Chairman.
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.
Annual Report | 30 June 2019 | | Page 19 of 75
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.
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 the 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.
Annual Report | 30 June 2019 | | Page 20 of 75
•
•
Minutes of meetings must be approved at the next Board meeting.
Further details regarding Board meetings are set out in the Company's Constitution.
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
•
•
Annual Report | 30 June 2019 | | Page 21 of 75
•
senior management are provided with access to continuing education to update and enhance
their skills and knowledge.
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
Annual Report | 30 June 2019 | | Page 22 of 75
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.
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 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.
Annual Report | 30 June 2019 | | Page 23 of 75
ASX CORPORATE GOVERNANCE COUNCIL’S PRINCIPLES AND RECOMMENDATIONS
1.1
1.2
1.3
1.4
1.5
1.6
1.7
2.1
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 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.
Compliance
Comply
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
Annual Report | 30 June 2019 | | Page 24 of 75
2.2
2.3
2.4
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;
(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.
2.5
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.
2.6
3.1
4.1
4.2
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
Governance
Statement
Comply
Comply
Does not
comply. Refer
to “Composition
of the Board” in
the Corporate
Governance
Statement
Does not
comply. Refer
to “The Role of
the Chairman”
in the
Corporate
Governance
Statement
Comply
Comply
Does not
comply. Refer
to “Audit and
Risk
Committee” in
the Corporate
Governance
Statement
Comply
Annual Report | 30 June 2019 | | Page 25 of 75
4.3
5.1
6.1
6.2
6.3
6.4
7.1
7.2
7.3
7.4
8.1
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.
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.
Comply
Comply
Comply
Comply
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
Annual Report | 30 June 2019 | | Page 26 of 75
8.2
8.3
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
All references are to sections of this Corporate Governance Statement unless otherwise stated.
Annual Report | 30 June 2019 | | Page 27 of 75
Statement of comprehensive income
For the year ended 30 June 2019
Revenue
Expenses
Employee benefits expense
Finance costs expense
Investor relations
Legal fees
Listing expense
Net foreign exchange gain / (loss)
Travel expenses
Other expenses
Note
5
6
6
Consolidated
2019
$
7,293
2018
$
9,621
(832,745)
(55,783)
(59,468)
(21,697)
(47,839)
154,136
(220,847)
(412,292)
(722,950)
(39,307)
(89,650)
(13,588)
(36,582)
(183,542)
(134,598)
(429,975)
Loss before income tax benefit
(1,489,242)
(1,550,921)
Income tax benefit
7
-
-
Loss after income tax benefit for the year
attributable to
Equity holders of the Company
Minority interest
(1,469,137)
(20,105)
(1,550,921)
-
Loss for the year
(1,489,242)
(1,550,921)
Other comprehensive income for the year, net of tax
Foreign exchange movement
Gain on dilution of interest in subsidiary
(4,730)
952,585
(65,327)
-
Total comprehensive loss for the year attributable to
the owners of Allegiance Coal Limited
(541,387)
(1,616,248)
Basic loss per share
Diluted loss per share
30
30
Cents
(0.30)
(0.27)
Cents
(0.46)
(0.33)
* The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2019 | | Page 28 of 75
Statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Total current assets
Non-current assets
Exploration and evaluation asset
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity attributable to equity holders of the Company
Minority interest
Total equity
Consolidated
Note
2019
$
2018
$
8
9
10
2,595,626
101,475
47,438
2,744,539
2,935,188
213,349
50,829
3,199,366
11
16,508,615
9,065,712
16,508,615
9,065,712
19,253,154
12,265,078
12
13
13
14
15
16
18
1,913,538
962,761
2,876,299
735,942
-
735,942
655,533
655,533
619,378
619,378
3,531,832
1,355,320
15,721,322
10,909,758
27,423,519
243,878
22,775,212
563,641
(12,548,385) (12,429,095)
15,119,012
602,310
10,909,758
-
15,721,322
10,909,758
* The above statement of financial position should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2019 | | Page 29 of 75
Statement of changes in equity
For the year ended 30 June 2019
Consolidated
Balance at 1 July 2018
Issued
capital
$
22,775,212
Loss after income tax benefit for the year
Other comprehensive income for the year, net
of tax
Dilution of interest in subsidiary at fair value
Total comprehensive income for the year
-
-
-
-
Transactions with owners in their capacity as
owners:
Share issues for cash
Costs of share issues
Options lapsed or expired
Share based payments
Balance at 30 June 2019
4,979,141
(330,834)
-
-
27,423,519
General
reserve
$
16
-
-
-
-
-
-
-
-
16
Share based
payment
reserve
$
633,900
Foreign
currency
translation
reserve
$
(70,275)
Accumulated
losses
$
(12,429,095)
Minority
interest
$
Total equity
$
-
10,909,758
-
-
-
-
-
(1,469,137)
(20,105)
(1,489,242)
(4,730)
-
(4,730)
-
952,585
(516,552)
-
622,415
602,310
(4,730)
1,575,000
81,028
-
-
(397,262)
82,229
318,867
-
-
-
-
(75,005)
-
-
397,262
-
(12,548,385)
-
-
-
-
602,310
4,979,141
(330,834)
-
82,229
15,721,322
* The above statement of changes in equity should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2019 | | Page 30 of 75
Statement of changes in equity
For the year ended 30 June 2019 (continued)
Consolidated
Balance at 1 July 2017
Issued
capital
$
14,650,402
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
Share issues other than for cash
Costs of share issues
Share based payments
Balance at 30 June 2018
7,545,798
1,218,000
(638,988)
-
22,775,212
General
reserve
$
16
-
-
-
-
-
-
-
16
Share based
payment
reserve
$
376,770
Foreign
currency
translation
reserve
$
(4,948)
Accumulated
losses
$
(10,878,174)
Total equity
$
4,144,066
-
-
-
-
(1,550,921)
(1,550,921)
(65,327)
(65,327)
-
(1,550,921)
(65,327)
(1,616,248)
-
-
-
257,130
633,900
-
-
-
-
(70,275)
-
-
-
-
(12,429,095)
7,545,798
1,218,000
(638,988)
257,130
10,909,758
* The above statement of changes in equity should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2019 | | Page 31 of 75
Statement of cash flows
For the year ended 30 June 2019
Cash used in operating activities
Payments to suppliers (inclusive of GST)
Interest received
Interest and other finance costs paid
Consolidated
Note
2019
$
2018
$
(1,692,463)
(1,692,463)
(1,462,949)
(1,462,949)
7,293
(19,627)
9,621
(3,151)
Net cash used in operating activities
29
(1,704,797)
(1,456,479)
Cash used in investing activities
Payments for exploration and evaluation
(5,801,206)
(4,140,554)
Net cash used in investing activities
(5,801,206)
(4,140,554)
Cash used in financing activities
Share issues, net of costs
Borrowings raised
Contributions from Joint Venture partner
Repayments of borrowings
4,648,307
943,134
1,575,000
-
6,994,878
-
-
(100,000)
Net cash from financing activities
7,166,441
6,894,878
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial
year
(339,562)
1,297,845
2,935,188
1,637,343
Cash and cash equivalents at the end of the financial
year
2,595,626
2,935,188
* The above statement of cash flows should be read in conjunction with the accompanying notes.
Annual Report | 30 June 2019 | | Page 32 of 75
Notes to the financial statements
30 June 2019
Note 1. General Information
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.
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 2019 the consolidated entity reported a net loss of $1,489,242 (2018:
$1,550,921) and net operating cash outflows of $1,704,797 (2018: $1,456,479). The operating cash
outflows have been funded by cash inflows from equity raisings of $4,648,307 (2018: $6,994,878);
project participation contributions from Itochu Corporation of Japan of $1,575,000 (2018: $nil) and
borrowings of $943,134 (2018: $nil) during the year. As at 30 June 2019 the consolidated entity had net
current liabilities of $131,760 (2018: assets of $2,463,424) including cash reserves of $2,595,626 (2018:
$2,935,188).
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 2020. In order to fully implement its
exploration and evaluation strategy, the consolidated entity will require additional funds.
The existence of these conditions indicates a material uncertainty that may cast doubt on the
consolidated entity’s ability to continue as a going concern.
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
Annual Report | 30 June 2019 | | Page 33 of 75
Notes to the financial statements
30 June 2019
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, as
noted above, 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.
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.
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.
Accounting policies are selected and applied in a manner which ensures that the resulting financial
information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of
the underlying transactions or other events is reported.
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.
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 3.
Adoption of new and revised standards
In the year ended 30 June 2019, 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 2019. 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
Interpretations on the Group’s business and, therefore, no change necessary to Group accounting
policies.
Annual Report | 30 June 2019 | | Page 34 of 75
Notes to the financial statements
30 June 2019
Statement of Compliance
The financial report was authorised for issue, in accordance with a resolution of directors, on 6
September 2019. 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).
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 26.
Note 2. Significant accounting policies
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 2019 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.
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.
Annual Report | 30 June 2019 | | Page 35 of 75
Notes to the financial statements
30 June 2019
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 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.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-
current classification.
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.
Annual Report | 30 June 2019 | | Page 36 of 75
Notes to the financial statements
30 June 2019
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 cannot
exceed the amortised cost that would have been recognised had the impairment not been made and is
reversed 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
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.
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
Annual Report | 30 June 2019 | | Page 37 of 75
Notes to the financial statements
30 June 2019
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.
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.
Foreign currency translation
The functional and presentation currency of Allegiance Coal Limited and its Australian subsidiaries is
Australian dollars (A$). Foreign currency transactions are translated into the functional currency using
the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange ruling at the end of the financial reporting
period. Foreign exchange gains and losses resulting from settling foreign currency transactions, as well
as from restating foreign currency denominated monetary assets and liabilities, are recognised in profit
or loss.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rates at the date when fair value was determined.
The functional currency of the overseas subsidiary is Canadian dollars (C$). At the reporting date, the
assets and liabilities of the overseas subsidiary are translated into the presentation currency of
Allegiance Coal Limited at the closing rate at the end of the financial reporting period and income and
expenses are translated at the weighted average exchange rates for the period. All resulting exchange
differences are recognised as other comprehensive income or expense and in a separate component
of equity (foreign exchange translation reserve). On disposal of a foreign entity, the cumulative
exchange differences recognised in foreign currency translation reserves relating to that particular
foreign operation is recognised in profit or loss.
Annual Report | 30 June 2019 | | Page 38 of 75
Notes to the financial statements
30 June 2019
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.
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.
•
Annual Report | 30 June 2019 | | Page 39 of 75
Notes to the financial statements
30 June 2019
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.
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
Annual Report | 30 June 2019 | | Page 40 of 75
Notes to the financial statements
30 June 2019
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.
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.
Annual Report | 30 June 2019 | | Page 41 of 75
Notes to the financial statements
30 June 2019
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 3. 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.
Income tax
The benefit of the tax losses has not been brought to account at 30 June 2019 because the directors
do not believe it is appropriate to regard realisation of the deferred tax asset as being probable at this
point in time. These tax losses are also subject to final determination by the Taxation authorities when
the consolidated entity derives a taxable income. The benefits will only be realised if:
•
the Company and its subsidiaries derive future assessable income of a nature and of an amount
sufficient to enable the benefit of the deduction for the losses to be realised;
the Company and its subsidiaries continue to comply with the conditions for the deductibility
imposed by law; and
no changes in the tax legislation adversely affect the Company and its subsidiaries in realising
the benefit of the losses.
•
•
Australian tax losses are subject to further review by the consolidated entity to determine if they satisfy
the necessary legislative requirements under the Income Tax legislation for the carry forward and
recoupment of tax losses.
Exploration and evaluation asset
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 ultimate recoupment of capitalised expenditure in relation to each area of interest is dependent on
the successful development and commercial exploitation or, alternatively, sale of the respective areas
the results of which are still uncertain.
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. Whilst the project is not
currently generating cash flow, the Company is of the view that the area of interest will contribute
significant value in the future and that this value will be in excess of the current value of the capitalised
costs. 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.
Annual Report | 30 June 2019 | | Page 42 of 75
Notes to the financial statements
30 June 2019
The Directors have used their experience to conclude that no impairment adjustment is required in the
current year ended 30 June 2019 (refer to note 11).
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.
Note 4. Segment reporting
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, which is the Board of Directors, is responsible for the allocation of resources to operating
segments and assessing their performance.
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 principal business and geographical segment of the consolidated entity is mineral exploration within
British Columbia, Canada. The consolidated entity has its head office, which represents a non-
reportable business segment, in Australia.
Major customers
During the year ended 30 June 2019 there were no major customers who derive more than 10% of the
consolidated entity's revenue (2018: none derived from major customers). Interest from cash deposits
in banking institutions account for $7,293 (2018: $9,621).
Note 5. Revenue
Interest
Other revenue
Revenue
Consolidated
2018
$
9,621
-
9,621
2019
$
7,293
-
7,293
Annual Report | 30 June 2019 | | Page 43 of 75
Notes to the financial statements
30 June 2019
Note 6. Expenses
Loss before income tax includes the following specific expenses:
Finance costs
Interest and finance charges expense
Rental expense relating to operating leases
Minimum lease payments
Employee benefits expense
Superannuation expense
Employee benefits expense
Share based payment
Total employee benefits expense
Consolidated
2019
$
2018
$
55,783
39,307
79,712
47,704
750,516
82,229
832,745
-
553,887
169,063
722,950
The weighted average interest rate on the Company’s borrowings is 9.6% (2018: 5.995%).
Note 7. Income tax
The income tax expense or benefit for the period is the tax payable on the current period's taxable
income based on the national income tax rate for each jurisdiction, adjusted by changes in deferred tax
assets and liabilities attributable to temporary differences between the tax base of assets and liabilities
and their carrying amounts in the financial statements and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences, between carrying amounts
of assets and liabilities for financial reporting purposes and their respective tax bases, 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 for each jurisdiction. Exceptions are made for certain temporary
differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than
a business combination, that at the time of the transaction did not affect their accounting profit or taxable
profit.
Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if
it is probable that future taxable amounts will be available to utilise those temporary differences and
losses.
Annual Report | 30 June 2019 | | Page 44 of 75
Notes to the financial statements
30 June 2019
Note 7. Income tax (continued)
Deferred tax assets and liabilities are not recognised for temporary differences between the carrying
amount and tax bases of investments in subsidiaries, associates and interests in joint ventures where
the parent entity is able to control the timing of the reversal of the temporary differences and it is
probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances relating to amounts recognised directly in equity are also recognised
directly in equity.
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.
Income tax benefit
Current Tax
Aggregate income tax benefit
Consolidated
2019
$
2018
$
-
-
-
-
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
(1,489,242)
(1,550,921)
Tax at the statutory tax rate of 27.5%
(409,542)
(426,503)
Tax effect amounts which are not deductible in calculating taxable income:
Impairment of assets
-
-
(409,542)
(426,503)
Current year tax losses not recognised
409,542
426,503
Income tax benefit
-
-
Annual Report | 30 June 2019 | | Page 45 of 75
Notes to the financial statements
30 June 2019
Note 7. Income tax (continued)
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 27.5%
Tax losses have been adjusted for prior income tax returns lodged.
Note 8. Current assets - cash and cash equivalents
Cash at bank
Note 9. Current assets - trade and other receivables
GST recoverable
Receivables are neither past due nor impaired.
Note 10. Current assets - other
Prepayments
Consolidated
2019
$
2018
$
11,406,067
10,338,468
3,136,668
2,843,079
Consolidated
2019
$
2,595,626
2,595,626
2018
$
2,935,188
2,935,188
Consolidated
2019
$
101,475
101,475
2018
$
213,349
213,349
Consolidated
2019
2018
$
47,438
47,438
$
50,829
50,829
Annual Report | 30 June 2019 | | Page 46 of 75
Notes to the financial statements
30 June 2019
Note 11. Non-current assets - exploration and evaluation
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.
Exploration and evaluation - at cost and fair value
Less: Impairment
Consolidated
2019
$
20,047,731
(3,539,116)
16,508,615
2018
$
12,604,828
(3,539,116)
9,065,712
The value of the consolidated entity’s interest in exploration and evaluation expenditure is dependent
upon:
•
•
•
the continuance of the consolidated entity’s rights to tenure of the areas of interest;
the results of future exploration and evaluation; and
the recoupment of costs through successful development and exploitation of the areas of
interest, or alternatively, by their sale.
Annual Report | 30 June 2019 | | Page 47 of 75
Notes to the financial statements
30 June 2019
Note 11. Non-current assets - exploration and evaluation (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 2017
Acquisition of additional interest in Telkwa metallurgical coal project,
at cost and fair value
Additions – Telkwa metallurgical coal project
Foreign exchange movement
Balance at 30 June 2018
Additions – Telkwa metallurgical coal project
Foreign exchange movement
Exploration and
evaluation
$
3,218,003
1,263,617
4,605,821
(21,729)
9,065,712
7,023,147
419,756
Total
$
3,218,003
1,263,617
4,605,821
(21,729)
9,065,712
7,023,147
419,756
Balance at 30 June 2019
16,508,615
16,508,615
In December 2017, the consolidated entity entered into an agreement to acquire from Altius Minerals
Corporation (Altius), 100 percent ownership of all the rights to coal licences that make up the Telkwa
metallurgical coal project (Project) (Acquisition). Up until the Acquisition, the consolidated entity had
earned 20 percent Project ownership, and had the right to earn up to 90 percent Project ownership
upon satisfaction of several milestones. The remaining 10 percent Project ownership would be retained
by Altius who had a free carry on its Project equity. In consideration for the issue to Altius of 40.6 million
ordinary shares in the Company and the continued performance of the milestone obligations (as set out
in the table below, which table incorporates an amendment agreed to in the year ended 30 June 2019),
Altius agreed to transfer full ownership of the Telkwa Project to the consolidated entity. As security
against the performance of the milestone obligations, the consolidated entity has provided a charge
over the Telkwa Project. The charge shall be subordinated to Project debt finance.
Milestone
File mine permit applications
Grant of small mine** permits
Sale of 100k tonnes from a small mine**
Grant of major mine** permits
Sale of 500k tonnes from a major mine**
Payment
Commitment *
C$500,000
C$500,000
C$2 million
C$2 million
C$5 million
Payable
C$300,000 upon milestone
C$200,000 18 months later
Upon milestone
Upon milestone
12 months after milestone
12 months after milestone
* payable, at Altius’ option, in cash or shares in the Company.
** a small mine is defined as one permitted to produce up to 250,000 saleable tpa and a major mine is
one permitted to produce more than 250,000 saleable tpa.
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 2019.
Annual Report | 30 June 2019 | | Page 48 of 75
Notes to the financial statements
30 June 2019
Note 12. Current liabilities - trade and other payables
Trade payables – other entities
Other payables
Refer to note 19 for further information on financial instruments.
Note 13. Borrowings
Current
Promissory Notes
Interest accrued
Non-Current
Loan - Gullewa Limited
Less : Present value discount of Gullewa Ltd loan
Add : Unwinding of present value discount of Gullewa Ltd loan
Consolidated
2019
$
1,022,189
891,349
1,913,538
2018
$
715,192
20,750
735,942
Consolidated
2019
$
2018
$
943,134
19,627
962,761
-
-
-
659,000
(108,466)
104,999
655,533
659,000
(108,466)
68,844
619,378
Refer to note 19 for further information on financial instruments.
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.
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 $104,999 represents the unwinding of the present value discount up
to 30 June 2019 (30 June 2018 : $68,844).
In April 2019, the Company issued unsecured promissory notes with a face value totalling $1,048,322
repayable on 31 March 2020, bearing an implied interest rate of 12% pa.
Annual Report | 30 June 2019 | | Page 49 of 75
Notes to the financial statements
30 June 2019
Note 14. Equity – Issued Capital
Issued capital
Ordinary shares - fully paid
Consolidated
Balance at 1 July
Shares issued for cash in October 2017
Less costs
Shares issued for acquisition of 100%
ownership of Telkwa Project
Less costs
Shares issued for cash in April 2018
Less costs
Shares issued for cash in September 2018
Less costs
Shares issued for cash in June 2019
Less costs
Balance at 30 June
Consolidated
2019
$
27,423,519
2018
$
22,775,212
2019
Number
2018
Number
2019
$
2018
$
465,195,159
225,995,235 22,775,212 14,650,402
3,576,298
119,209,924
(348,242)
40,600,000
79,390,000
1,218,000
(6,474)
3,969,500
(284,272)
45,970,287
34,515,814
545,681,260
2,390,455
(135,000)
2,588,686,
(195,834)
465,195,159 27,423,519 22,775,212
In September 2018, the Company completed a placement of 45.97 million ordinary shares to
sophisticated and professional investors raising $2.39 million, before costs. The capital was raised to
fund the definitive feasibility study for the Tenas Project.
In June 2019, the Company completed a placement of 34.52 million ordinary shares to sophisticated
and professional investors raising $2.59 million, before costs. The capital was raised to fund the studies
and assessments required to support the Tenas Project mine permit application process.
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.
Annual Report | 30 June 2019 | | Page 50 of 75
Notes to the financial statements
30 June 2019
Note 14. Equity – Issued Capital (continued)
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 2019 are 14,250,000
(2018: 14,070,000).
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 2018 Annual Report.
Note 15. Equity - reserves
General reserve
Share-based payments reserve
Foreign currency translation reserve
Consolidated
2019
$
16
318,867
(75,005)
243,878
2018
$
16
633,900
(70,275)
563,641
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.
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.
Annual Report | 30 June 2019 | | Page 51 of 75
Notes to the financial statements
30 June 2019
Note 15. Equity – reserves (continued)
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 2017
Grant of options
Foreign exchange movement
Balance at 30 June 2018
Grant of options
Options lapsed or expired
Foreign exchange movement
Balance at 30 June 2019
Share-based
payment
$
376,770
257,130
Foreign
currency
translation
$
(4,948)
-
Total
$
371,838
257,130
-
(65,327)
(65,327)
633,900
82,229
(397,262)
-
(70,275)
-
-
(4,730)
563,641
82,229
(397,262)
(4,730)
318,867
(75,005)
243,878
General
$
16
-
-
16
-
-
-
16
Note 16. Equity - accumulated losses
Accumulated losses at the beginning of the financial year
Loss after income tax benefit for the year attributable to equity
holders of the Company
Gain on dilution of interest in subsidiary
Employee share options lapsed or expired
Accumulated losses at the end of the financial year
Consolidated
2019
$
(12,429,095)
2018
$
(10,878,174)
(1,469,137)
952,585
397,262
(12,548,385)
(1,550,921)
-
-
(12,429,095)
Note 17. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial
year.
Annual Report | 30 June 2019 | | Page 52 of 75
Notes to the financial statements
30 June 2019
Note 18. Minority interest
Minority interest at the beginning of the financial year
Dilution of interest in subsidiary at fair value
Loss after income tax benefit for the year attributable to minority
interest
Minority interest at the end of the financial year
Consolidated
2019
$
-
622,415
(20,105)
602,310
2018
$
-
-
-
-
Note 19. 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.
Annual Report | 30 June 2019 | | Page 53 of 75
Notes to the financial statements
30 June 2019
Note 19. Financial instruments (continued)
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:
Consolidated
Cash and cash equivalents
Loans
Net exposure to cash flow interest
rate risk
2019
2018
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$
Balance
$
0.1%
9.6%
2,595,626
(1,618,294)
0.5%
6.0%
2,935,188
(619,378)
977,332
2,315,810
Consolidated – 2019
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
51,913
(32,366)
19,547
51,913
(32,366)
19,547
200
200
(51,913)
32,366
(19,547)
(51,913)
32,366
(19,547)
Consolidated – 2018
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
58,704
(12,388)
46,316
58,704
(12,388)
46,316
200
200
(58,704)
12,388
(46,316)
(58,704)
12,388
(46,316)
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.
Annual Report | 30 June 2019 | | Page 54 of 75
Notes to the financial statements
30 June 2019
Note 19. Financial instruments (continued)
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.
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
$
Consolidated – 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - fixed
Loans
-% 1,022,189
891,349
-%
12% 1,048,322
-
-
-
-
-
-
-
-
-
-
1,022,189
891,349
-
1,048,322
742,846
742,846
-
-
742,846
3,704,706
Interest-bearing - variable
Loans
Total non-derivatives
5.995%
-
2,961,860
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 – 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
-% 715,192
20,750
-%
Interest-bearing - variable
Loans
Total non-derivatives
5.995%
-
735,942
-
-
-
-
-
-
742,846
742,846
-
-
-
-
715,192
20,750
742,846
1,478,788
Annual Report | 30 June 2019 | | Page 55 of 75
Notes to the financial statements
30 June 2019
Note 19. Financial instruments (continued)
Credit risk
The cash flows in the maturity analysis above are not expected to occur significantly earlier than
contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 20. 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 21. Key management personnel disclosures
Directors
The following persons were directors of Allegiance Coal Limited during the financial year:
•
•
•
•
Mark Gray (Managing Director and Chairman)
Malcolm Carson (Non-executive Director)
Jonathan Reynolds (Finance Director)
David Fawcett (Non-executive Chairman, retired 3 May 2019)
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
2019
$
1,089,977
-
-
1,089,977
2018
$
850,701
-
158,817
1,009,518
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 2019.
Annual Report | 30 June 2019 | | Page 56 of 75
Notes to the financial statements
30 June 2019
Note 21. Key management personnel disclosures (continued)
Other transactions with key management personnel and their related parties
Consultancy fees paid to related parties, included in remuneration disclosures above
Gray Corporate Law Ltd, a related party of Mark Gray, totalling $200,000
•
Gray Corporate Ltd, a related party of Mark Gray, totalling $191,860
•
Mineral Resource Consultants Pty Ltd, a related party of Malcom Carson, totalling $36,000
•
Murray River Coal Ltd, a related party of David Fawcett, totalling $62,500
•
J Reynolds CA Pty Ltd, a related party of Jonathan Reynolds, totalling $180,000
•
Coalsense Consulting Inc, a related party of Dan Farmer, totalling $227,733
•
Expenses reimbursements paid to related parties:
•
•
•
Gray Corporate Law Ltd, a related party of Mark Gray, totalling $142,099
Gray Corporate Law Pty Ltd, a related party of Mark Gray, totalling $10,706
J Reynolds CA Pty Ltd, a related party of Jonathan Reynolds, totalling $11,354
Note 22. 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
2019
$
24,000
24,000
2018
$
23,000
23,000
Note 23. Contingent liabilities
The consolidated entity has no contingent liabilities as at 30 June 2019 and 30 June 2018.
Annual Report | 30 June 2019 | | Page 57 of 75
Notes to the financial statements
30 June 2019
Note 24. Commitments
Operating leases
Within one year
One to five years
Later than five years
Consolidated
2019
$
48,983
40,294
-
89,277
2018
$
53,419
87,028
-
140,447
Operating lease commitments include contracted amounts for various offices and equipment under
non-cancellable operating leases expiring within one to three years.
Capital commitments - exploration and evaluation
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$
2018
$
200,000
800,000
1,000,000
200,000
800,000
1,000,000
The consolidated entity acquired the Telkwa Project from a subsidiary of Altius Minerals Corporation
(Altius). The remaining payment commitments are summarised in the table below.
Milestone
File mine permit applications
Grant of small mine** permits
Sale of 100k tonnes from a small mine**
Grant of major mine** permits
Sale of 500k tonnes from a major mine**
Payment Commitment *
Payable
C$500,000 C$300,000 upon milestone
C$200,000 18 months later
Upon milestone
Upon milestone
12 months after milestone
12 months after milestone
C$500,000
C$2 million
C$2 million
C$5 million
* payable, at Altius’ option, in cash or shares in the Company.
** a small mine is defined as one permitted to produce up to 250,000 saleable tpa and a major mine is
one permitted to produce at more than 250,000 saleable tpa.
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.
As security for its performance of the above milestone payments, the consolidated entity has provided
a charge over the Telkwa Project in favour of Altius. The charge shall be subordinated to Telkwa Project
debt finance.
Annual Report | 30 June 2019 | | Page 58 of 75
Notes to the financial statements
30 June 2019
Note 24. Commitments (continued)
Under the terms sheet entered with Cline Mining Corporation relating to the acquisition of the New Elk
metallurgical coal mine, the Company is required to contribute US$150,000 per month, with effect from1
August 2019 to care and maintenance costs until such time as the acquisition completes or the terms
sheet is terminated.
As the Kilmain and Back Creek projects are currently under review, no exploration and evaluation
expenditure has been recognised as a commitment or liability payable, in relation to permits EPC1297,
EPC1298 and EPC1917.
Note 25. Related party transactions
Parent entity
Allegiance Coal Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 27.
Key management personnel
Disclosures relating to key management personnel are set out in note 21 and the remuneration report
in the directors' report.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Annual Report | 30 June 2019 | | Page 59 of 75
Notes to the financial statements
30 June 2019
Note 26. 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
2019
$
(1,067,599)
(1,067,599)
2018
$
(1,264,271)
(1,264,271)
Parent
2019
$
2,592,358
2018
$
2,812,711
Total non-current assets
21,154,815
16,248,141
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
23,747,173
19,060,852
1,047,029
23,646
1,047,029
23,646
22,700,144
19,037,207
27,423,519
318,867
(5,042,242)
22,775,213
633,901
(4,371,906)
22,700,144
19,037,207
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 2019 and
30 June 2018 aside from the loans from Gullewa Ltd of $659,000 (2018: 659,000).
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019
and 30 June 2018.
Annual Report | 30 June 2019 | | Page 60 of 75
Notes to the financial statements
30 June 2019
Note 26. 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 2, 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 27. 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 2:
Name
Telkwa Coal Limited
Mineral & Coal Investments Pty Limited
Principal place of
business / Country of
incorporation
Canada
Australia
Ownership interest
2018
2019
%
%
100%
95%
100%
100%
Note 28. Events after the reporting period
In July 2019, following completion of a review of the Tenas Project definitive feasibility study to its
satisfaction, Itochu Corporation of Japan invested a further C$1.5 million in Telkwa Coal Ltd, by way of
a subscription for shares, taking its equity holding in that company to 10.1%.
In July 2019, the Company announced that it had entered a terms sheet with Cline Mining Corporation
relating to the acquisition of the New Elk metallurgical coal mine, subject to due diligence and
completion documentation.
In August 2019, following shareholder approval, 801,666 ordinary shares were issued to directors (or
their nominees) at $0.075 each to raise $60,125, before costs, under the Placement completed by the
Company in June 2019.
Annual Report | 30 June 2019 | | Page 61 of 75
Notes to the financial statements
30 June 2019
Note 29. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax benefit for the year
Adjustments for:
Share-based payments
Present value discount of Gullewa Ltd loan
Change in operating assets and liabilities:
Decrease / (increase) in trade and other receivables
Increase in trade and other payables
Net cash used in operating activities
Note 30. Loss per share
Consolidated
2019
$
(1,489,242)
2018
$
(1,550,921)
82,229
36,155
169,063
36,156
10,297
(344,236)
(1,704,797)
(19,933)
(90,844)
(1,456,479)
Consolidated
2019
$
2018
$
Loss after income tax attributable to the owners of Allegiance Coal
Limited
(1,489,242)
(1,550,921)
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
Number
Number
501,538,477 336,319,257
545,681,260 465,195,159
Cents
Cents
(0.30)
(0.46)
(0.27)
(0.33)
Options have been excluded from the above calculation as their inclusion would be anti-dilutive.
Annual Report | 30 June 2019 | | Page 62 of 75
Notes to the financial statements
30 June 2019
Note 31. 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 expired on 27 November 2018, unexercised.
Lead Manager Options
The Company engaged Bell Potter Securities Limited (BPSL) as the Lead Manager for the October
2017 Placement. As part of the mandate, the Company was required to issue to BPSL a total of 5 million
Options on successful completion of the Placement, which issue was approved at the Company’s 2017
annual general meeting.
Each option entitles BPSL to subscribe for and be allotted one fully paid ordinary share. The Options
are personal to BPSL and may not be exercised by another person, or transferred, disposed of or
otherwise dealt with, unless the prior written consent of the Company is obtained. The Optionholder
has no rights to participate in new issues of capital offered to shareholders. However, the Company will
give BPSL notice of the proposed issue prior to the date for determining entitlements to participate in
any such issue. The Options were issued for no consideration, as they were issued in consideration for
services provided in connection with the Placement.
The options were granted for a fixed period and will expire on 6 December 2020, if not exercised on or
before that date.
2017 Participants Securities Incentive Plan
The 2017 Participants Securities Incentive Plan ('PSIP') was approved at the Company’s 2017 AGM.
The objective of the PSIP is to attract, motivate and retain key Directors, employees and consultants
and it is considered that issue of Securities under the PSIP will provide participants with the opportunity
to participate in the future growth of the Company.
Under the PSIP, the Board may in its discretion offer options to eligible participants. Offers must be
made under an offer document, which complies with applicable laws. Eligible participants may accept
such offers by completing and returning to the Company an application form within the timeframe
specified in the offer document.
Annual Report | 30 June 2019 | | Page 63 of 75
Notes to the financial statements
30 June 2019
Note 31. Share-based payments (continued)
Each Option held by participant entitles them to subscribe for and be allotted one fully paid ordinary
share. Participant options are personal to the participant and may not be exercised by another person,
or transferred, disposed of or otherwise dealt with, except with the prior written approval of the
Company. 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 ten 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. Participant Options are issued under the PSIP for no consideration.
Options will lapse if:
i)
the conditions of exercise of the Options have not been met, or where the participant ceases to
render services to the consolidated entity;
the conditions of exercise of the Options are unable to be met; or
five years, or any other lapsing period specified in the offer document, has passed after the grant
of the Options;
ii)
iii)
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 plans:
2019
Exercise
price
Grant date Expiry date
27/11/2013 27/11/2018* $0.2475
6/12/2017 6/12/2020**
$0.05
6/12/2017 6/12/2022*** $0.075
Balance at
the start of
the year
Expired/
forfeited/
other
820,000
Balance at
the end of
the year
-
820,000
5,000,000
-
8,250,000 2,000,000
14,070,000 2,000,000
Granted Exercised
-
-
-
- 5,000,000
- 1,000,000 9,250,000
- 1,820,000 14,250,000
Weighted average exercise price
* Director Option Scheme
** Lead Manager Options
*** 2017 Participants Securities Incentive Plan
$0.0662
Annual Report | 30 June 2019 | | Page 64 of 75
Notes to the financial statements
30 June 2019
Note 31. Share-based payments (continued)
2018
Exercise
price
Balance at
the start of
the year
Grant date Expiry date
27/11/2013 27/11/2018* $0.2475
6/12/2017 6/12/2020**
$0.05
6/12/2017 6/12/2022*** $0.075
820,000
-
- 5,000,000
- 8,250,000
820,000 13,250,000
Granted Exercised
-
-
-
-
Weighted average exercise price
* Director Option Scheme
** Lead Manager Options
*** 2017 Participants Securities Incentive Plan
Set out below are the options exercisable at the end of the financial year:
Expired/
forfeited/
other
Balance at
the end of
the year
-
820,000
- 5,000,000
- 8,250,000
- 14,070,000
$0.0762
Grant date
27/11/2013
6/12/2017
6/12/2017
Expiry date
27/11/2018 *
6/12/2020**
6/12/2022***
* Director Option Scheme
** Lead Manager Options
*** 2017 Participants Securities Incentive Plan
2019
Number
-
5,000,000
9,250,000
14,250,000
2018
Number
820,000
5,000,000
8,250,000
14,070,000
The weighted average share price during the financial year was $0.0614 (2018: $0.0439).
The weighted average remaining contractual life of options outstanding at the end of the financial year
was 2.8 years (2018: 3.5 years).
Annual Report | 30 June 2019 | | Page 65 of 75
Directors’ declaration
30 June 2019
1.
In the opinion of the directors of Allegiance Coal Limited (the ‘Company’):
a)
the financial report and the Remuneration Report included in the Directors’ Report,
designated as audited, of the consolidated entity are in accordance with the Corporations
Act 2001, including:
i) giving a true and fair view of the consolidated entity’s financial position as at 30
June 2019 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; and
b)
there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable; and
2. The financial statements and notes comply with International Financial Reporting Standards, as
discussed in Note 1; and
3. This declaration has been made after receiving the declarations required by section 295A of the
Corporations Act 2001 from the chief executive officer and chief financial officer for the financial
year ended 30 June 2019.
Signed in accordance with a resolution of the Board of Directors made pursuant to section 295(5) of the
Corporation Act 2001. This declaration is made in accordance with a resolution of the directors.
Mark Gray
Chairman
6 September 2019
Sydney
Annual Report | 30 June 2019 | | Page 66 of 75
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 Allegiance Coal Limited for the financial year ended 30 June 2019, 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
6 September 2019
Annual Report | 30 June 2019 | | Page 67 of 75
Independent Auditor’s report
30 June 2019
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 2019, 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
2019 and of its consolidated performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Matters of Emphasis
I.
Material uncertainty related to going concern:
Without qualifying our above opinion, we draw attention to Note 1 of the financial report – going concern,
which indicates that the Group incurred a loss from continuing operations after tax of $1,489,242. The
matters detailed in Note 1 describe events and / or conditions which indicate the existence of a material
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.
II.
Carrying values of non-current Assets:
At 30 June 2019 the Group had capitalised exploration and valuation expenditure of $16,508,615. The
recoverability of the Group’s carrying value of capitalised exploration and acquisition costs is dependent
on the successful commercial exploitation of the assets and/or sale of the assets to generate profits at
amounts in excess of the book values. In the event that the Group is not successful in commercial
exploitation and/ or sale of the assets, the realisable value of the Group’s assets may be significantly
different than their current carrying values. Our opinion is not modified in respect of this matter.
Annual Report | 30 June 2019 | | Page 68 of 75
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited (continued)
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 confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors at the time
of this Auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
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 Exploration and evaluation assets
Why significant
How our audit addressed the key audit matter
The Group has incurred significant exploration
and evaluation expenditures which has been
capitalised. As the carrying value of exploration
and evaluation expenditures represents a
significant asset of the Group, we considered it
necessary
facts and
to assess whether
circumstances existed to suggest that the
carrying amount of this asset may exceed its
recoverable amount.
Our audit procedures included:
• Obtaining independent searches that the Group
the areas
has valid
represented by the capitalised exploration and
evaluation expenditure;
to explore
rights
in
• Confirming that the rights to tenure of the areas
of interest remained current at the reporting date
as well as confirming that the rights to tenure are
expected to be renewed.
Annual Report | 30 June 2019 | | Page 69 of 75
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited (continued)
2 Carrying value of the capitalised exploration and evaluation assets
Why significant
How our audit addressed the key audit matter
resources
AASB 6: Exploration for and evaluation of
mineral
detailed
requirements with respect to both the initial
recognition of such assets and ongoing
requirements to continue to carry forward the
assets.
contains
Note 11 to the financial statements contains the
accounting policy and disclosures in relation to
exploration and evaluation expenditures.
• Reviewing the directors’ assessment of the
carrying value of the exploration and evaluation
costs, ensuring
that management have
considered the effect of impairment indicators,
commodity prices and the stage of the Group’s
project;
• Reviewing budgets and challenging assumptions
made by the Group to ensure that substantive
for and
expenditure on
evaluation of the mineral resources in the areas
of interest are planned;
further exploration
• Reviewing ASX announcements and minutes of
directors’ meetings to ensure that the Group had
not decided to discontinue activities in any of its
areas of interest.
3 Going concern
Why significant
How our audit addressed the key audit matter
For the year ended 30 June 2019 the Group
reported a net loss of $1,489,242 and net
operating cash outflows of $1,704,797. As at 30
June 2019 the Group had net current liabilities
reserves of
of $131,760
including cash
the
indicate
$2,595,626. These matters
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
the
to operate as a going concern
continue
foreseeable future. In obtaining sufficient audit evidence
we:
for
•
considered the Group’s budget for the 2020
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.
•
• Considered the need for Joint Venture partners.
Refer to Note 1 – 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 2019 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.
Annual Report | 30 June 2019 | | Page 70 of 75
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited (continued)
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.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website http://www.auasb.gov.au/auditiors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Annual Report | 30 June 2019 | | Page 71 of 75
Independent Auditor’s Report to the shareholders of Allegiance Coal Limited (continued)
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 15 of the Directors’ Report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Allegiance Coal Limited for the year ended 30 June 2019,
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 6 September 2019
Annual Report | 30 June 2019 | | Page 72 of 75
Additional Securities Exchange information
As at 16 August 2019
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
29
172
64
228
249
742
-
-
-
-
9
9
Equity security holders
The names of the twenty largest security holders of Ordinary Shares listed on the share register are:
% of Units
Name
10.50
Units
57,378,211
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JA ASHTON NOMINEES (QLD) PTY LTD
GFT NOMINEES (QLD) PTY LTD
TELKWA HOLDINGS LTD
COMODALE PTY LTD
BERNARD LAVERTY PTY LTD
DGSF PTY LTD
JOHN WARDMAN & ASSOCIATES PTY LTD
FRANKLIN CIVIL PTY LTD
NEQUAM PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
DRYCA PTY LTD
NETWEALTH INVESTMENTS LIMITED
PETER CROKE HOLDINGS PTY LTD
MCGEE CONSTRUCTIONS PTY LTD
MR CLIVE THOMAS
JASON ROBERT POWELL
RACT SUPER PTY LTD
JOHN BERTRAND MAGUIRE
30,301,761
25,184,633
23,884,797
23,884,797
21,631,564
21,556,394
19,495,639
16,000,000
15,627,289
12,000,000
11,425,123
11,000,000
10,438,700
9,600,000
7,100,000
7,000,000
6,000,000
5,870,743
5,492,684
5.54
4.61
4.37
4.37
3.96
3.94
3.57
2.93
2.86
2.20
2.09
2.01
1.91
1.76
1.30
1.28
1.10
1.07
1.01
Unquoted equity securities
There are no unquoted equity securities, other than the following options over ordinary shares: 5 million
Lead Manager Options granted to Bell Potter Securities Limited; and 9,250,000 2017 PSIP Options.
Unmarketable parcels
There are 165 holders holding less than a marketable parcel of the entity’s quoted equity securities.
Annual Report | 30 June 2019 | | Page 73 of 75
On-Market Buyback
There is no current on-market buyback.
Substantial Holders
Substantial holders in the Company are set out below:
Rank
Name
ALTIUS RESOURCES
INC
1.
Address
SUITE 202 66 KENMOUNT ROAD
ST JOHNS NL A1B 3V7 CANADA
Voting rights
The voting rights attached to ordinary shares are set out below:
Units
55,208,376
% of
Units
10.1
Ordinary shares
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.
Options over ordinary shares
There are no voting rights attached to the options over ordinary shares.
There are no other classes of equity securities.
Restricted securities
There are no restricted securities.
Tenements
Description
Telkwa Coal Limited
Telkwa Project – British Columbia, Canada
Mineral and Coal Investments Pty Limited
Back Creek - Surat Basin
Kilmain - Bowen Basin
Kilmain – Bowen Basin
Tenement number
Interest owned
%
Note 1
EPC 1297
EPC 1917
EPC 1298
100
100
100
100
Note 1, List of tenements the subject of the Telkwa Project:
DL 230 PID - 014-958-724; DL 237 PID - 014-958-732; DL 389 PID - 014-965-666; DL 391 PID - 014-
965-674; DL 401 PID - 014-965-682; 353440; 334059; 327972; 327836; 327837; 327838; 327839;
327845; 328672; 327834; 327840; 327865; 327866; 327936; 327944; 327951; 327952; 327953;
327954; 327964; 327965.
Resources and reserves
The Company’s JORC Code 2012 coal resource statement for the Telkwa Project is as follows:
Coal Resource (Mt)
Tenas
Goathorn
Telkwa North
Total
Measured
27.1
59.5
15.7
102.3
Indicated
9.4
9.2
3.7
22.3
Inferred
-
0.2
1.0
1.2
Total
36.5
68.9
20.4
125.8
In July 2017 the Company completed a pre-feasibility study (PFS) declaring 42.5Mt of saleable coal
reserves across the resource base as follows:
Annual Report | 30 June 2019 | | Page 74 of 75
Reserve (Mt)
Proven
ROM coal
Clean coal
Saleable coal
Probable
ROM coal
Clean coal
Saleable coal
Total
ROM coal
Clean coal
Saleable coal
Tenas
Goathorn
Telkwa North
Total
29.1
20.6
21.0
-
-
-
29.1
20.6
21.0
22.1
12.6
13.8
0.2
0.1
0.1
22.3
12.7
13.9
10.8
6.4
7.0
0.7
0.4
0.5
11.5
6.8
7.5
62.9
39.5
41.8
0.9
0.5
0.6
62.9
40.1
42.5
In March 2019, the Company completed a definitive feasibility study focussed solely on the Tenas
deposit, as part of which the Tenas reserve was updated and declared to be :
Reserve (Mt)
Proven
ROM coal
Saleable coal
Probable
ROM coal
Saleable coal
Total
ROM coal
Saleable coal
Tenas
17.1
12.9
4.9
3.7
22.0
16.5
The coal resources referred to above were first reported in the Company’s release of its updated
geological model on 18 June 2018, supplemented by its 26 June 2018 announcement (together the
June 2018 Announcement). The coal reserves referred to above were first reported in the Company’s
release of its Telkwa PFS results on 3 July 2017 (July 2017 Announcement), updated in the Tenas DFS
on 18 March 2019 (March 2019 Announcement). The Company confirms that it is not aware of any
new information or data that materially affects the information included in the July 2017 Announcement,
the June 2018 Announcement or the March 2019 Announcement (together the Announcements), and
that all material assumptions and technical parameters underpinning the estimates in the
Announcements continue to apply and have not materially changed.
Competent Person Statement
The information above that relates to Mineral Resources and Reserves, unless otherwise stated, is
based on information reviewed and compiled by Mr Dan Farmer, a registered professional engineer
with the Association of Professional Engineers and Geoscientists of British Columbia. Mr Farmer is
engaged by the Company on a full-time basis and has sufficient experience which is relevant to the
style of mineralisation and the type of deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the JORC Code (2012 Edition of the
“Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”). Mr
Farmer has consented to the inclusion of the information in the form and context in which it appears
above.
Annual Report | 30 June 2019 | | Page 75 of 75