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Annual Report 2017

Plain-text annual report

Annual Report 2017 Alto Metals Limited ABN 62 159 819 173 Alto Metals Limited Contents Chairman’s Letter ..................................................................................................................................1 Review of Operations ............................................................................................................................2 Directors’ Report .................................................................................................................................11 Auditor’s Independence Declaration ...................................................................................................23 Consolidated Statement of Profit or Loss and Other Comprehensive Income ...................................24 Consolidated Statement of Financial Position ....................................................................................25 Consolidated Statement of Changes in Equity ....................................................................................26 Consolidated Statement of Cash Flows ...............................................................................................27 Notes to the Financial Statements ......................................................................................................28 Directors’ Declaration ..........................................................................................................................57 Independent Auditor’s Report.............................................................................................................58 Additional ASX Information ................................................................................................................62 Tenement Report ................................................................................................................................64 Corporate Directory Directors Auditor Dr Jingbin Wang - Non-Executive Chairman Grant Thornton Audit Pty Ltd Dermot Ryan - Executive Director Level 1 Terry Wheeler - Non-Executive Director Stephen Stone - Non-Executive Director Company Secretary Sam Middlemas Email: smiddlemas@altometals.com.au Principal Registered Office Suite 9, 12-14 Thelma Street, WEST PERTH, WA, 6005 Telephone: 08 9381 2808 Facsimile: 08 9321 6084 Website: www.altometals.com.au Email: admin@altometals.com.au 10 Kings Park Road West Perth WA 6005 Telephone 08 9480 2000 Facsimile 08 9322 7787 Website: www.grantthornton.com.au Email: admin@grantthornton.com.au Share Registry Computershare Registry Services Level 2, 45 St Georges Terrace PERTH WA 6000 Australian Securities Exchange: ASX Code – AME Chairman’s Letter Dear Shareholders, Following a transformational period in which Alto Metals shifted its commodity focus from uranium to gold, the 2017 financial year saw the Company start exploration at the highly prospective Sandstone Gold Project in Western Australia and make excellent progress towards its ultimate goal of defining a 5 million ounce-plus resource in the region that can support a profitable mining operation over 10–20 years. To reiterate the rationale behind the Sandstone acquisition, the project has favourable Archaean geology, an established history of mining high grade mineralisation and excellent access to infrastructure. Our technical team also considered that the region had been relatively underexplored compared to other greenstone belts in WA, which are the structures that host the state’s major gold deposits. From June 2016 when we acquired the Sandstone Project, our exploration team has continued to compile valuable historical exploration data for the Sandstone area from the WA Department of Mines Open File system. This system contains detailed reports and data on the approximate A$20 million that has been spent at Sandstone over many years by previous explorers. The majority of this data relates to shallow drilling (average depth less than 40 metres) because previous explorers were seeking shallow soft oxide resources for the small local gold plant. Alto recognises that many of the shallow low-grade gold drill intersections achieved by previous explorers, although not economic, potentially provide the clues to the discovery of high grade primary gold deposits at depth. Following the grant of our tenements in late September 2016, Alto has flown high-resolution magnetic and radiometric surveys and undertaken a detailed interpretation of the data to identify favourable geological domains and structures for the emplacement of major gold deposits. The “Alpha Domain” was identified by our team as a 21 km long favourable host unit, which contains the previously known Indomitable, Piper, Tigermoth, and Vanguard prospects. These prospects were targeted for initial aircore drill testing. High grade gold results were returned from Indomitable, Vanguard North and Vanguard prospects. Following these results, Alto undertook reverse circulation drilling at these prospects, with numerous high grade gold intersections being achieved. To date, Alto has drilled 120 AC holes for 10,989m, and 36 RC holes for 4,858m. There is much work still to be done, but results to date have given us no reason to question the acquisition. Indeed, we are extremely encouraged and excited by what lies ahead. This includes the prospect of restarting mining operations at Sandstone in the near-term through a profit sharing agreement with one of the companies operating a gold treatment plant in the region. Such an agreement would likely be applied to the Lord Henry and Lord Nelson deposits, both of which have JORC 2012-compliant resources and Mining Lease Applications pending. The macroeconomic environment continues to be favourable for gold, and despite the prospect of an increase in the royalty paid to the Western Australian State Government on gold production, in our eyes WA still represents one of the best jurisdictions in the world for mineral exploration. In July 2016, Alto raised $1.7 million through a fully subscribed Share Purchase Plan. This was followed by a private placement of shares to professional and sophisticated investors in October 2016 that raised a further $1 million. The money raised through these two initiatives was used to fund exploration activities at Sandstone throughout the year and for working capital. In August-September 2017, Alto sold on market 25,573,183 shares in ASX-listed Antipa Minerals Ltd shares for gross proceeds of $631,445. Alto has maintained an interest of 2,500,000 shares in ASX-listed Enterprise Metals, currently worth approximately $50,000. This investment is reviewed on a regular basis. In finishing, I would like to thank all shareholders and staff for their ongoing support. It has been crucial in getting to the point where we believe we are excellently placed to experience more exploration success and move towards production. Yours sincerely, Dr Jingbin Wang - Chairman 19 October 2017 1 Annual Report 2017 In October 2016, Alto raised a further $1 million for its second drilling program in 2017 from professional and sophisticated investors via a share placement of 7,407,404 ordinary fully paid shares at 13.5 cents per share. Alto presently has 151,882,819 shares on issue and 100% ownership of the Sandstone Gold Project. The Company’s objective at Sandstone is to discover high grade mineral deposits containing five million ounces of gold which will support profitable mining operations over a 10 – 20 year period. Alto has an experienced Board of Directors with extensive skills in exploration, mining, accounting, corporate governance and provision of corporate advice. The Company currently has approximately 800 km2 under granted title at Sandstone for gold, and a further 945km2 under title for uranium at four prospects. The Company has also established an External Research Advisory Committee (ERAC) chaired by Emeritus Professor David Groves, who is a world renowned expert in Archaean orogenic gold deposits. The Company is also funding a PhD student at the University of Western Australia (UWA), to undertake an “Assessment of the potential orogenic gold endowment of the Sandstone Greenstone Belt using a mineral systems approach”. This research is being co-supervised by Professors Allan Trench and Michael Dentith of the Centre for Exploration Targeting, (UWA). In support of Alto’s short-term strategy to undertake early stage mining of known resources to provide an early cashflow, two Mining Lease Applications (MLA’s) were lodged with the WA Department of Mines, Industry Regulation and Safety (DMIRS) in June 2017. The Lord Nelson MLA57/640 covers ~286 hectares, and the Lord Henry MLA57/639 covers ~185 hectares. The two MLA’s are large enough to accommodate possible extensions to the open pits, existing and future waste dumps, and infrastructure that may be required for the resumption of mining. Review of Operations Introduction Alto Metals Limited (ASX: AME) is an Australian public company which listed on the Australian Securities Exchange on the 20 December 2012 as Enterprise Uranium Limited (ASX: ENU). Between 2013 and 2014, uranium was the primary exploration target and a portfolio of projects prospective for sand hosted uranium deposits was assembled and explored. On 23 March 2016, an agreement was signed to purchase Sandstone Exploration Pty Ltd, the owner of the Sandstone Gold Project, located 600km northeast of Perth in Western Australia. Shareholders subsequently approved a company name change from Enterprise Uranium Limited to Alto Metals Limited, and in June 2016 Alto completed the purchase of Sandstone Exploration Pty Ltd. In July 2016, Alto raised $1.703 million for its first Sandstone drilling program via a Shareholder Purchase Plan (“SPP”) at 5.9 cents/share which closed fully subscribed, and issued 28,779,603 new shares to eligible shareholders. Sandstone Gold Project In June 2016, Alto’s Sandstone Gold Project covered approximately 80% of the Archaean Sandstone Greenstone Belt and comprised five Exploration Licence applications [E57/1029 – 1031, E57/1033 & E57/1041] and two Prospecting Licences [P57/1377-1378] for a total landholding of ~723km². The tenements were subsequently granted on 23 September 2016, and during the year, Alto has added further tenements bringing the total area under title to approximately 800km2. Alto’s short-term strategy is to delineate at least 1 million ounces of gold in shallow deposits (Vanguard, Indomitable, Lord Nelson, Lord Henry, and others) that can be mined profitably and supply cash to fund ongoing exploration and discovery of new gold deposits. Alto is also investigating opportunities to enter into 50:50 profit share mining agreements with mining companies which have operating gold treatment facilities within a 200km radius of Sandstone. To support Alto’s main objective, since the grant of the tenements in late 2016, it has undertaken: acquisition and interpretation of high-resolution airborne magnetic and radiometric data, litho-structural interpretation of the geology of the greenstone belt and gold deposit targeting, Induced Polarisation (IP) surveys where appropriate (to detect large deep sulphide systems) estimation of remaining Mineral Resources at Lord Nelson and Lord Henry deposits to JORC (2012) standard by Snowden Mining Industry Consultants (Snowden), aircore (AC) drill testing of seven prospects and reverse circulation (RC) drill testing of five prospects. • • • • • 2 Alto Metals LimitedReview of Operations Alto envisages developing the Lords Project under a 50:50 profit-sharing mining agreement with one of several gold producers in the region that have surplus milling capacity. These types of arrangements are relatively common in the WA Goldfields as they allow for the development of smaller gold deposits at minimal capital cost. Alto’s Mineral Resource inventory estimated by Snowden Mining Industry Consultants is shown in Tables 1 & 2. Lord Nelson Resource Model 3 Annual Report 2017Review of Operations Lord Henry Resource Model 4 Alto Metals LimitedSandstone Mineral Resources JORC (2012) Prospect Category Lord Nelson Lord Henry Lord Henry Total TOTAL (JORC 2012) Inferred Indicated Inferred Sandstone Mineral Resources JORC (2004) Prospect Category Indicated Inferred Inferred Inferred Indicated Inferred Inferred Inferred Inferred Inferred Indicated Havilah Bull Oak Reefs Vanguard Ladybird Maninga Marley Sandstone North Oroya Underground Tigermoth Piper TOTAL (JORC 2004) Total Indicated Total Inferred TOTAL (JORC 2004) Review of Operations Kt 983 1,238 110 1,348 2,331 Kt 285 41 390 330 118 40 80 77 63 561 91 2,076 494 1,582 2,076 Grade 2.2 1.6 1.3 1.6 1.8 Grade 1.7 2.1 1.5 1.6 2.5 2.1 3.1 2.0 5.3 1.7 1.4 1.9 1.8 1.9 1.9 KOz 68 65 4 69 137 KOz 15.5 2.8 18.8 16.7 9.6 2.7 8.0 4.9 10.7 31.2 4.0 125 29 96 125 Note 1. JORC (2012) Mineral Resources estimated by Snowden in 2017 for Alto Metals Ltd. Full details of the 2017 Lord Nelson & Lord Henry Mineral Resource Estimates are available from the Alto Website: http://www.asx.com.au/asxpdf/20170428/pdf/43htcqvxrlmp2w.pdf http://www.asx.com.au/asxpdf/20170516/pdf/43j8w1mhq5290t.pdf Note 2: JORC (2004) Mineral Resources estimated by Snowden in 2007 for Troy Resources NL. A Competent Person has not completed sufficient work to accurately classify the JORC 2004 estimates as Mineral Resources under the JORC 2012 Code. Historic exploration and drilling data and Mineral Resources (JORC 2004) were reported in Snowden Mining Industry Consultants, June 2007, “National Instrument 43-101 Technical Report-Sandstone, for Troy Resources NL.” TRY: ASX release 10 December 2007, Page 139. Alto understands that this information has not been updated since to comply with the JORC Code 2012, and Alto is not aware of any new information or data that materially affects the information provided in the Snowden 2007 NI43-101 Report, and considers that all of the previous assumptions and technical parameters underpinning the estimates in the previous reports have not materially changed. Note 3: There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the conversion of Inferred Mineral Resources to Indicated Mineral Resources. 5 Annual Report 2017                            Review of Operations Initial Drill Testing of Sandstone Gold Targets In the nine months following the grant of the Sandstone Project tenements, Alto has undertaken aircore drilling (120 holes for 10,989m) at the following prospects: Indomitable, Piper, Tigermoth, Bulchina, Vanguard North and Vanguard to test for shallow oxide hosted gold mineralisation. High grade assay results were returned from Indomitable, Vanguard North and Vanguard prospects. Following these encouraging assay results, Alto undertook RC drilling at these prospects, with numerous high grade gold intersections being attained. To date, Alto has drilled 36 RC holes for 4,858m. Significant gold assay results are shown in Tables 3–6. At Vanguard, the primary mineralisation is hosted in dolerite, which is considered a favourable host rock for larger gold deposits in Western Australia. Alto has re-appraised the broader Sandstone Greenstone Belt, and re-prioritised its exploration strategy to focus on the “Alpha Mafic Volcanic Domain”. This zone encompasses the 20km long mafic volcanic sequence from Indomitable to Maninga Marley. Alto is now designing a drilling program to extend the Vanguard mineralisation to the southwest and northeast, and to test the dolerite unit hosting Maninga Marley. Multiple Programs of Work have been lodged with a view to this RC drilling commencing in the latter half of 2017. Sandstone Geology Interpretation – Alpha Domain 1st Priority 6 Alto Metals LimitedRC Drilling at Vanguard 2017 See Tables 3–6 below. Table 3. Vanguard North Prospect – Significant Aircore Assay Results Hole SAC105 incl. SAC107 SAC108 incl. SAC109 incl. SAC112 SAC113 SAC115 incl. SAC116 SAC117 and incl. SAC118 SAC119 and East North Hole Depth From (m) To (m) Interval (m) Grade (g/t Au) 740495 6884952 740563 740543 6884979 6884951 740515 6884916 740576 740551 740632 740606 740578 6884928 6884893 6884929 6884895 6884864 740616 740598 6884850 6884825 72 71 63 73 65 72 67 71 72 76 82 64 66 30 45 45 65 66 34 63 28 28 47 50 65 65 56 71 74 68 67 31 48 46 67 67 35 64 31 29 50 51 69 66 57 77 75 4 1 1 3 1 2 1 1 1 3 1 3 1 4 1 1 6 1 5.2 18.4 2.1 8.8 22.2 4.9 8 4.8 2.2 8.2 21.7 2.1 2.4 5.4 19.4 2.2 3.4 17.8 7 Annual Report 2017Review of Operations                                          Table 4. Vanguard Prospect – Significant Aircore Assay Results East North Hole Depth From (m) To (m) Interval (m) Grade (g/t Au) 740697 6884154 740747 6884214 740773 6884247 740800 6884224 740831 6884188 740853 6884216 74 79 76 58 61 64 27 29 52 54 33 36 9 16 17 40 42 47 53 56 57 Table 5. Significant Vanguard RC Assay Result East Local 29900 30084 North Local 9312 9290 120 132 Hole Depth From (m) 30119 9291 150 30150 9291 30113 9248 30051 29920 29956 9329 9092 9089 180 156 138 96 90 30 30 58 56 37 37 10 26 18 49 43 48 61 59 58 To (m) 61 56 24 58 55 55 36 99 98 97 108 105 108 130 125 128 56 55 140 138 128 131 135 135 80 137 31 47 43 46 59 56 54 3 1 6 2 4 1 1 10 1 9 2 1 8 3 1 3.9 9.7 2.8 5.7 3.6 12.6 8.5 2.2 6.1 2.0 3.2 8.0 2.6 5.2 9.5 Interval (m) Grade (g/t Au) 7 1 1 6 2 1 4 12 4 1 5 1 1 11 1 1 2 1 18 12 1 1 2 1 11 1 1 8 1 2 7 3 1 2.3 5.8 4.5 5.3 9.2 11.1 2.7 3.0 5.8 11.1 4.8 5.8 8.6 2.4 6.6 7.6 5.5 8.9 4.3 5.6 10.6 7.5 12.2 14.7 2.2 3.5 6.3 3.6 5.3 7.2 5.9 11.6 26.8 54 55 23 52 53 54 32 87 94 96 103 104 107 119 124 127 54 54 122 126 127 130 133 134 69 136 30 39 42 44 52 53 53 Hole SAC090 incl. SAC092 incl. SAC093 incl. SAC096 and incl. SAC098 incl. and SAC099 incl. incl. Hole SRC012 incl. SRC013 and incl. incl. SRC014 and incl. incl. and incl. and SRC015 incl. and SRC016 incl. and incl. incl. and and incl. SRC017 and SRC018 SRC019 incl. and and incl. incl. 8 Alto Metals LimitedReview of Operations                                                      “the oxide gold deposits are the geochemical anomalies that lead to the discovery of the million ounce deposits at depth...” Drilling at Indomitable Table 6. Indomitable Prospect – Significant Aircore Assay Results Hole AHMAC009 incl. AHMAC010 incl. and AHMAC015 and incl. and AHMAC019 incl. and incl. AHMAC025 East North Hole Depth 733180 6892295 733220 6892295 138 113 733180 6892260 126 733280 6892180 136 734660 6892460 80 From (m) 120 121 60 65 94 44 48 44 100 64 64 77 79 52 To (m) 123 122 104 73 104 51 49 50 111 73 67 82 81 56 Interval (m) Grade (g/t Au) 3 1 44 7 10 7 1 2 11 9 3 5 2 4 3.7 6.1 2.0 3.8 3.1 4.0 13.3 5.8 2.3 4.1 10.2 6.4 14.4 2.9 9 Annual Report 2017Review of OperationsOTHER PROJECTS Competent Persons Statement The Company holds granted tenements and tenement applications in Western Australia over three project areas (Yalgoo, Gascoyne and Marmion) prospective for sand hosted “in situ recovery” style (ISR) and calcrete hosted uranium deposits. The current strategy is to maintain this uranium exploration portfolio while the Company seeks an opportunity to divest the projects. However, as no active exploration is being carried out at present on these properties the tenements may be surrendered or tenement applications may be withdrawn as appropriate. The information in this Report that relates to Exploration Targets and Exploration Results is based on information compiled by Mr Dermot Ryan, who is an employee of Xserv Pty Ltd and a Director and security holder of the Company. Mr Ryan is a Fellow of the Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Geoscientists and has sufficient experience of relevance to the styles of mineralisation and the types of deposits under consideration, and to the activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Ryan consents to the inclusion in this report of the matters based on information in the form and context in which it appears. 10 Alto Metals LimitedReview of OperationsDirectors’ Report Your Directors present their report on Alto Metals Limited (“Alto” or “Company”) and its controlled entities (“Group”) for the financial year ended 30 June 2017. Directors The names of Directors in office at any time during or since the end of the period are: Dr Jingbin Wang (appointed 12 October 2016) Mr Dermot Ryan Mr Stephen Stone Mr Terry Wheeler (appointed 2 December 2016) Ms Anna Mao (resigned 12 October 2016) Mr William Robertson (resigned 2 December 2016) Directors have been in office since the start of the financial period to the date of this Report unless otherwise stated. Information on Directors Dr Jingbin Wang — Non-Executive Chairman, appointed 12 October 2016 Experience — Dr Wang is a geologist with extensive international minerals experience, and has been Chairman since 2004 of Sinotech Minerals Exploration Co. Ltd. He has a B.Sc in Mineral Prospecting and Exploration from Central-South University of Technology Changsha, China, and an MSc and PhD in magmatic petrology and economic geology from the same university. He has been President of the prestigious Beijing Institute of Geology for Mineral Resources since 2002, and is an accomplished mining team leader with a track record of discovering major deposits around the world. Dr Wang has also held the title of Vice-President of the China Nonferrous Metals Industry Association since 2008 and was Executive Director of China Nonferrous Metals Resource Geological Survey from 2003 -2015. Dr Wang is a leader in the non-ferrous metals industry in China with over 30 years’ experience in mineral exploration and mining. Special Responsibilities — Member of the Remuneration & Nomination Committee and Member of the Audit & Risk Committee. Directorships held in — Enterprise Metals Ltd (July 2011 – 12 October 2016) other listed entities East Africa Metals Limited (TSX) (June 2013 – present) Orca Gold Inc (TSX) (June 2009 – present) Nickel North Exploration Corp. (TSX) (August 2012 – present) Mr Dermot Ryan — Executive Director, appointed 8 August 2012 Experience — Mr Ryan spent 20 years with CRA Ltd from 1977-1996, including 10 years as Chief Geologist for CRA Exploration in various states of Australia. He was GM Exploration for Great Central Mines Ltd (later Normandy Yandal Operations Ltd) from late 1996-2001, and for the past 10 years has run a private mineral exploration consulting Company (XServ Pty Ltd). He is a Fellow of the AusIMM, (CP), a Fellow of the AIG, and holds a BApSc (Geol). Acting CEO since 26 June 2013. Special Responsibilities — Member of the Remuneration & Nomination Committee Directorships held in — Legend Mining Limited (May 2005 – October 2013) other listed entities Enterprise Metals Limited (October 2008 – present). There have been no other listed entity directorships in the last 3 years. 11 Annual Report 2017Directors’ Report Mr Stephen Stone — Non-Executive Director, appointed 23 June 2016 Experience — Mr Stone is currently Managing Director of the ASX Listed Azumah Resources Limited. He graduated with honours in Mining Geology from University of Wales, Cardiff and has since gained more than 30 years’ operating, project evaluation, executive management and corporate development experience in the international mining and exploration industry. Mr Stone worked for several years at the large open pit and underground copper mines of the Zambian Copperbelt. He came to Australia in 1986 and since then has been involved in the formation and management of several junior ASX listed exploration companies. Mr Stone is a Member of the Australasian Institute of Mining and Metallurgy, a Fellow of the Australian Institute of Company Directors and a member of the Editorial Board of International Mining Magazine. Special Responsibilities — Chairman of the Remuneration & Nomination Committee and Chairman of the Audit & Risk Committee. Directorships held in — Managing Director of Azumah Resources Limited since November 2006 other listed entities Director of Castle Minerals Limited since 18 January 2016. Mr Terry Wheeler — Independent Non-Executive Director, appointed 9 September 2016 Experience — Mr Wheeler commenced employment as a laboratory assistant at the DSIR (Department of Scientific & Industrial Research) in London in 1958 and achieved his academic qualifications whilst gaining excellent practical work experience. He migrated to Perth, Western Australia, in 1967 and joined Western Mining Corporation, where his mineral analysis experience was gained, and with further study and qualifications he was promoted to Chief Chemist of the Kambalda Nickel Operation in the Eastern Goldfields. Terry and his wife Christina established Genalysis Laboratory Services in 1975, and grew the company into one of the largest and most successful analytical companies in the southern hemisphere with over 300 technical staff. In 2007, Genalysis Laboratory Services was purchased by Intertek Group plc. Terry is a Fellow of the Royal Australian Chemical Institute, a Member of the Australasian Institute of Mining and Metallurgy Inc., a Member of the Association of Exploration Geochemists, and an Associate Member of the International Association of Geoanalysts. Special Responsibilities — Member of the Remuneration & Nomination Committee and Member of the Audit & Risk Committee. Directorships held in — Nil other listed entities Ms Anna Mao resigned from the board on 12 October 2016, and Mr William Robertson resigned from the board on 2 December 2016. Company Secretary The following persons held the position of Company Secretary during or since the end of the financial period: Mr Sam Middlemas was appointed Company Secretary and Chief Financial Officer on 15 July 2016. Sam is a chartered accountant with more than 15 years’ experience in various financial and company secretarial roles with a number of listed public companies operating in the resources sector. He is the principal of a corporate advisory company which provides financial and secretarial services specialising in capital raisings and initial public offerings. Previously Mr Middlemas worked for an international accountancy firm. His fields of expertise include corporate secretarial practice, financial and management reporting in the mining industry, treasury and cash flow management and corporate governance. Ms Susan Hunter resigned as Company Secretary 15 July 2016. 12 Alto Metals LimitedDirectors’ Report Principal Activities The principal activities of the Group during the financial period were the exploration of a number of gold and uranium tenements in Western Australia. Significant Changes in State of Affairs At the end of 2016 financial year, the Group acquired the Sandstone gold project and refocused its activities on the gold sector, and changed its name from Enterprise Uranium Limited to Alto Metals Limited. During the current year the Company raised $2.6 million in funds through a Share Purchase Plan in July 2016 and a placement in October 2016, to sophisticated investors to fund exploration on the Sandstone project. Exploration activities will continue at the Sandstone Gold project to increase the current Mineral Resource inventory. Operating Results The consolidated loss of the Group after providing for income tax amounted to $1,482,442 (2016: $1,921,795). The consolidated loss includes an amount of $450,526 (2016: $1,942,656) related to exploration expenses which have been written off during the year following a detailed exploration review. Dividends Paid or Recommended No dividend has been recommended. REVIEW OF OPERATIONS SANDSTONE GOLD PROJECT On 23rd June 2016, Alto announced that it had completed the acquisition of all of the issued capital of Sandstone Exploration Pty Ltd (Sandstone), whose only asset was the Sandstone Gold Project located approximately 600km northeast of Perth in the East Murchison Mineral Field of Western Australia. The Company issued 19 million ordinary fully paid Alto shares to the vendors, and a sum of $500,000 cash, to complete the acquisition. The vendors have retained a 2% gross royalty, the right to fossick down to 2m below the surface for all minerals and metals including gold nuggets, and were issued 25 million performance shares. The performance shares convert on a one-for- one basis into Alto fully paid ordinary shares upon Alto confirming total combined Inferred and / or Indicated Mineral Resources and / or Ore Reserves of at least 500,000oz gold (or equivalent for other minerals or metals) in aggregate, on one or more of the Tenements. The Sandstone Gold Project tenure at that stage covered approximately 80% of the Archaean Sandstone Greenstone Belt and comprised five Exploration Licence applications [E57/1029 – 1031, E57/1033 & E57/1044] and two Prospecting Licences [P57/1377-1378] for a total landholding of ~723km². The tenements were subsequently granted on 23 September 2016, and during the year, Alto has added further tenements bringing the total area under title to approximately 800km2. Alto’s ultimate objective is to discover 5 million ounces in high-grade gold deposits which will support profitable mining operations over a 10 – 20 year period at Sandstone. Its short term strategy is to delineate at least 1 million ounces of gold in shallow deposits (Vanguard, Indomitable, Lord Nelson, Lord Henry, and others) that can be mined profitably and supply cash to fund ongoing exploration and discovery of new gold deposits. Alto is also investigating opportunities to enter into 50:50 profit share mining agreements with mining companies which have operating gold treatment facilities within a 200km radius of Sandstone. 13 Annual Report 2017Directors’ Report To support Alto’s main objective, since the grant of the tenements in late 2016, it has undertaken: • acquisition and interpretation of high-resolution airborne magnetic and radiometric data, • • litho-structural interpretation of the geology of the greenstone belt and gold deposit targeting, Induced Polarisation (IP) surveys where appropriate (to detect large deep sulphide systems) • estimation of remaining Mineral Resources at Lord Nelson and Lord Henry deposits to JORC (2012) standard by Snowden Mining Industry Consultants (Snowden), • aircore (AC) drill testing of seven prospects and • reverse circulation (RC) drill testing of five prospects. The Company has also established an External Research Advisory Committee (ERAC) chaired by Emeritus Professor David Groves, who is a world renowned expert in Archaean orogenic gold deposits. The Company is also funding a PhD student at the University of Western Australia (UWA), to undertake an “Assessment of the potential orogenic gold endowment of the Sandstone Greenstone Belt using a mineral systems approach”. This research is being co-supervised by Professors Allan Trench and Michael Dentith of the Centre for Exploration Targeting (UWA). In support of Alto’s short term strategy to undertake early stage mining of known resources to provide an early cashflow, two Mining Lease Applications (MLA’s) were lodged with the WA Department of Mines, Industry Regulation and Safety (DMIRS) in June 2017. The Lord Nelson MLA57/640 covers ~286 hectares, and the Lord Henry MLA57/639 covers ~185 hectares. The two MLA’s are large enough to accommodate possible extensions to the open pits, existing and future waste dumps, and infrastructure that may be required for the resumption of mining. Alto envisages developing the Lords Project under a 50:50 profit-sharing mining agreement with one of several gold producers in the region that have surplus milling capacity. These types of arrangements are relatively common in the WA Goldfields as they allow for the development of smaller gold deposits at minimal capital cost. 14 Alto Metals Limited Alto’s Mineral Resource inventory estimated by Snowden Mining Industry Consultants is shown in Tables 1 & 2 below. Directors’ Report Table 1. Sandstone Gold Project - Mineral Resources JORC (2012)* Prospect Lord Nelson Lord Henry Lord Henry Total TOTAL (JORC 2012) Category Inferred Indicated Tonnes (,000) 983 1,238 1,348 2,331 Table 2. Sandstone Gold Project - Mineral Resources JORC (2004)** Category Indicated Inferred Inferred Inferred Indicated Inferred Inferred Indicated Inferred Inferred Inferred Prospect Havilah Maninga Marley Vanguard Ladybird Tigermoth Piper Bull Oak Reefs Sandstone North Oroya Underground TOTAL (JORC 2004) Total Indicated Total Inferred TOTAL (JORC 2004) Tonnes (,000) 285 41 80 330 118 40 561 91 390 77 63 2,076 494 1,582 2,076 Grade (g/t) 2.2 1.6 1.6 1.8 Grade (g/t) 1.7 2.1 3.1 1.6 2.5 2.1 1.7 1.4 1.5 2.0 5.3 1.9 1.8 1.9 1.9 Ounces (,000) 68 65 69 137 Ounces (,000) 15.5 2.8 8.0 16.7 9.6 2.7 31.2 4.0 18.8 4.9 10.7 125 29 96 125 *Note 1. JORC (2012) Mineral Resources estimated by Snowden in 2017 for Alto Metals Ltd. Full details of the 2017 Lord Nelson & Lord Henry Mineral Resource Estimates are available from the Alto Website: http://www.asx.com.au/asxpdf/20170428/pdf/43htcqvxrlmp2w.pdf http://www.asx.com.au/asxpdf/20170516/pdf/43j8w1mhq5290t.pdf **Note 2: JORC (2004) Mineral Resources estimated by Snowden in 2007 for Troy Resources NL. A Competent Person has not completed sufficient work to accurately classify the JORC 2004 estimates as Mineral Resources under the JORC 2012 Code. Historic exploration and drilling data and Mineral Resources (JORC 2004) were reported in Snowden Mining Industry Consultants, June 2007, “National Instrument 43-101 Technical Report-Sandstone, for Troy Resources NL.” TRY: ASX release 10 December 2007, Page 139. Alto understands that this information has not been updated since to comply with the JORC Code 2012, and Alto is not aware of any new information or data that materially affects the information provided in the Snowden 2007 NI43-101 Report, and considers that all of the previous assumptions and technical parameters underpinning the estimates in the previous reports have not materially changed. Note 3: There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the conversion of Inferred Mineral Resources to Indicated Mineral Resources. 15 Annual Report 2017                          Directors’ Report Initial Drill Testing of Sandstone Project Targets In the nine months since the Sandstone Project tenements were granted, Alto has undertaken aircore (AC) drilling (120 holes for 10,989m) at the following prospects: Indomitable, Piper, Tigermoth, Bulchina, Vanguard North and Vanguard to test for shallow oxide hosted gold mineralisation. High grade assay results were returned from Indomitable, Vanguard North and Vanguard. See Tables 3 – 5 of the 2017 Annual Report. Following these encouraging assay results, Alto undertook RC drilling at these prospects, with numerous high grade gold intersections being attained. To date, Alto has drilled 36 RC holes for 4,858m. Significant RC gold assay results returned from Vanguard are shown in Table 6 of the 2017 Annual Report. From the Vanguard RC results, it is apparent that the primary mineralisation at Vanguard is hosted in dolerite, which is considered a favourable host rock for larger gold deposits in Western Australia. Alto has re-appraised the broader Sandstone Greenstone Belt, and re-prioritised its exploration strategy to focus on the “Alpha Mafic Volcanic Domain”. This zone encompasses the 20km long mafic volcanic sequence from Indomitable to Maninga Marley. Alto is now designing a drilling program to extend the Vanguard mineralisation to the southwest and northeast, and to test the dolerite unit hosting Maninga Marley. Multiple Programs of Work have been lodged with a view to this RC drilling commencing in the latter half of 2017. URANIUM PROJECTS The Company holds granted tenements and tenement applications in Western Australia over three project areas (Yalgoo, Gascoyne and Marmion) prospective for sand hosted “in situ recovery” style (ISR) and calcrete hosted uranium deposits. The current strategy is to maintain this uranium exploration portfolio while the Company seeks an opportunity to divest the projects. However, as no active exploration is being carried out at present on these properties the tenements may be surrendered or tenement applications may be withdrawn as appropriate. Competent Persons Statement The information in this Report that relates to Exploration Targets and Exploration Results is based on information compiled by Mr Dermot Ryan, who is an employee of Xserv Pty Ltd and a Director and security holder of the Company. Mr Ryan is a Fellow of the Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Geoscientists and has sufficient experience of relevance to the styles of mineralisation and the types of deposits under consideration, and to the activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Ryan consents to the inclusion in this report of the matters based on information in the form and context in which it appears. Financial Position The net assets of the Group at 30 June 2017 are $7,883,936 (2016: $7,117,768). After Reporting Date Events There has not arisen since the end of the financial year any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial years. Future developments, prospects and business strategies The next year exploration activities will be focussed on building up the gold resource at the Sandstone Gold Project. Exploration Risk Mineral exploration and development are high-risk undertakings, and there is no assurance that exploration of the Tenements will result in the discovery of an economic deposit. Even if an apparently viable deposit is identified there is no guarantee that it can be economically exploited. The future exploration activities of the Company may be affected by a range of factors including geological conditions, limitations on activities due to permitting requirements, availability of appropriate exploration equipment, exploration costs, seasonal weather patterns, unanticipated operational and technical difficulties, industrial and environmental accidents and many other factors beyond the control of the Company. 16 Alto Metals LimitedMeetings of Directors During the financial period, six meetings of Directors (including committees of Directors) were held. Attendances by each Director during the period were as follows: Directors’ Report DIRECTORS’ MEETINGS REMUNERATION & NOMINATION COMMITTEE AUDIT & RISK COMMITTEE Number eligible to attend Number Attended Number eligible to attend Number Attended Number eligible to attend Number Attended 4 6 6 3 2 3 4 6 6 3 2 3 1 1 1 1 0 0 1 1 1 1 0 0 1 2 2 1 1 1 1 2 2 1 1 1 Dr Jingbin Wang (1) Dermot Ryan Stephen Stone Terry Wheeler (2) Anna Mao (3) William Robertson (4) (1) Appointed 12 October 2016 (2) Appointed 2 December 2016 (3) Resigned 12 October 2016 (4) Resigned 2 December 2016 Indemnifying Officers or Auditor During or since the end of the financial period the Company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums as follows: • • The Company has entered into agreements to indemnify all Directors and provide access to documents, against any liability arising from a claim brought by a third party against the Company. The agreement provides for the Company to pay all damages and costs which may be awarded against the Directors. The Company has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Director of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium was $6,577 (2016: $6,742). • No indemnity has been given to the Company’s auditors. Options/Performance Shares At the date of this report, there are nil options on issue over ordinary shares of Alto Metals Limited (2016 – Nil). No person entitled to exercise the option has or has any right by virtue of the option to participate in any share issue of any other body corporate. The Company issued 25,000,000 performance shares for nil consideration to the vendors of Sandstone Exploration Pty Ltd following approval at a shareholders meeting on 20 May 2016. These performance shares will convert into 25,000,000 fully paid ordinary shares once an announcement of an inferred JORC 2012 Mineral Resource is made of a tonnage and grade to establish contained metal of at least 500,000 ounces of gold (or other metal equivalent) on the Sandstone tenements any time prior to 23 June 2021. 17 Annual Report 2017Directors’ Report The Company issued 10,750,000 performance rights to Directors and employees on 9 December 2016 following approval at the Annual General Meeting of shareholders on 30 November 2016. The Performance rights were issued in four tranches with the following hurdle rates: Performance Rights granted to Directors and Staff Class Expiry Date Performance Condition A B C D 2,687,500 9 December 2017 2,687,500 9 December 2018 the Company’s announcing to the ASX of an Inferred Mineral Resource (as defined by a Competent Person in accordance with JORC Code 2012) of at least 500,000 oz Au of at least 1.5g/t the Company’s announcing to the ASX of an Inferred Mineral Resource (as defined by a Competent Person in accordance with JORC Code 2012) of at least 1,000,000 oz Au of at least 1.5g/t 2,687,500 2,687,500 9 June 2019 the Company’s announcing to the ASX of a 20,000 oz Au sold 9 December 2019 the Company’s announcing to the ASX 50,000 oz Au sold Environmental Regulations The Company is subject to significant environmental regulation in respect to its exploration activities. The Company aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the period under review. Non-audit Services The following nonaudit services were provided by the entity’s auditor, Grant Thornton Audit Pty Ltd, or associated entities. The directors are satisfied that the provision of nonaudit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. Grant Thornton Audit Pty Ltd, or associated entities, received or are due to receive the following amounts for the provision of nonaudit services: Tax compliance services Proceedings on Behalf of Company 2017 $ 3,900 2016 $ 5,150 No person has applied for leave of Court to bring proceedings on behalf of the Company or 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 any part of those proceedings. The Company was not a party to any such proceedings during the period. 18 Alto Metals LimitedDirectors’ Report REMUNERATION REPORT (AUDITED) This report details the nature and amount of remuneration for each Director of Alto Metals Limited and other key management personnel. A. Remuneration Policy The remuneration policy of Alto Metals Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component, and offering specific long-term incentives based on key performance areas affecting the Company’s financial results. The Board of Alto Metals Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best management and directors to run and manage the Company, as well as create goal congruence between directors, executives and shareholders. The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives of the Company is as follows: The remuneration policy, setting the terms and conditions for the executive Directors and other senior executives, was developed by the Remuneration & Nomination Committee and approved by the Board. All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, and options as performance incentives. The Remuneration & Nomination Committee reviews executive packages annually by reference to the Company’s performance, executive performance, and comparable information from industry sectors and other listed companies in similar industries. Executives are also entitled to participate in the employee share and option arrangements. All remuneration paid to Directors and executives is valued at the cost to the Company and expensed. Options given to Directors and employees are valued using the Black-Scholes methodology. The Board policy is to remunerate Non-Executive Directors at the lower end of market rates for comparable companies for time, commitment, and responsibilities. The Remuneration & Nomination Committee determines payments to the Non-Executive Directors and reviews their remuneration annually based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-Executive Directors are not linked to the performance of the Company. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company. There is no relationship between KMP remuneration and the performance of the Company. The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and Directors’ and executives’ performance. The Company believes this policy will be effective in increasing shareholder wealth. No options have been issued to Directors in the period under review to the date of this report. Use of remuneration consultants The Company did not employ the services of any remuneration consultants during the financial period ended 30 June 2017. Voting and comments made at the Company’s 2017 Annual General Meeting The Company received approximately 99% of “yes” votes based on the number of proxy votes received on its remuneration report for the 2016 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. B. Details of Remuneration for Period Ended 30 June 2017 There were no cash bonuses paid during the period and there are no set performance criteria for achieving cash bonuses. The following table of benefits and payment details, in respect to the financial period, the components of remuneration for each member of the key management personnel of the Company. 19 Annual Report 2017Directors’ Report Table of Benefits and Payments for the Period Ended 30 June 2017 Key Management Personnel 2017 Jingbin Wang – Chairperson (1) Dermot Ryan – Managing Director (2) Stephen Stone – Non-Executive Director (3) Terry Wheeler – Non-Executive Director (4) Anna Mao – former Chairperson (5) William Robertson – Non-Executive Director (6) Sam Middlemas – Company Secretary (7) Total 2016 Dermot Ryan – Managing Director (2) Dr Zhen Huang – Non-Executive Director (5) William Robertson – Non-Executive Director (6) Stephen Stone – Non-Executive Director (3) Susan Hunter – Company Secretary (8) Short-term benefits Salary, fees and leave Cash from other activities Post- employment benefits Equity-settled share-based payments Superannuation Equity $ $ $ Total $ 9,308 51,306 Remuneration performance based % 18.2 – – – – – – – – 2,024 – 46,541 274,401 16.9 6,981 46,981 14.6 – – 23,328 14,000 – – $ 41,998 227,860 40,000 21,304 14,000 15,221 10,020 1,446 11,635 38,322 30.3 65,571 – – 9,308 74,879 – 425,954 10,020 3,470 83,774 523,217 14.4 Anna Mao – Chairperson (5) 49,000 148,577 10,000 – – – – – – 7,000 – – 56,000 148,577 10,000 31,530 5,400 3,470 5,000 45,400 765 32,968 – – – – – – 765 32,968 – – – – – – – Total 272,840 5,400 3,470 12,000 293,710 (1) Dr Jingbin Wang was appointed to the board on 12 October 2016. (2) The amount shown above is the amount paid for services provided by Dermot Ryan through his private company Xserv Pty Ltd. (3) Fees paid to Stephen Stone are paid to his private company Westone Pty Ltd. (4) Terry Wheeler was appointed to the board on 2 December 2016. (5) The amounts shown above are the amounts paid for services provided by Anna Mao and Zhen Huang through their private company Mega Capital Resources Ltd. Anna Mao resigned from the board on 12 October 2016, Zhen Huang resigned from the Board on 1 October 2015 The amounts shown above for William Robinson includes $10,020 (2016-5,400) paid to his private company Value Added Resources Pty Ltd for geophysical consulting services. Mr Robinson resigned from the Board on 2 December 2016. Sam Middlemas was appointed Company Secretary on 15 July 2016. All fees are paid to his private company Sparkling Investments Pty Ltd Fees paid to Susan Hunter were paid to her private company Hunter Corporate Pty Ltd. Susan resigned as Company Secretary on 15 July 2016. (6) (7) (8) 20 Alto Metals LimitedDirectors’ Report Equity instrument disclosures relating to KMP (i) Option holdings No options are held by Key Management Personnel. (ii) Shareholdings and performance rights The number of ordinary shares and performance rights in Alto Metals Limited held by each KMP of the Company during the financial period is as follows: Balance at the start of the period Received during the period as compensation Other changes during the period Balance at the end of the period Performance Rights issued during the period and held at the end of the period 2017 KMP Ordinary Shares Jingbin Wang (1) Dermot Ryan Stephen Stone Terry Wheeler (2) Anna Mao (3) – 2,415,000 9,500,000 – 318,182 William Robertson (4) 2,137,794 Sam Middlemas (5) – Total 14,370,976 – 3,508,474 (712,500) – 5,923,474 8,787,500 20,832,639 20,832,639 (318,182) (2,137,794) 263,500 – – 263,500 21,436,137 35,807,113 – – – – – – – 2016 Anna Mao Dermot Ryan William Robertson Susan Hunter (6) Stephen Stone – 318,182 2,415,000 1,874,521 – 227,273 – – – – – – 36,000 – 318,182 2,415,000 2,137,794 – 9,500,000 9,500,000 Total 4,289,521 545,455 9,536,000 14,370,976 (1) Appointed 12 October 2016 (2) Appointed 2 December 2016 (3) Resigned 12 October 2016 (4) Resigned 2 December 2016 (5) Appointed 15 July 2016 (6) Resigned on 15 July 2016 Loans to KMP 1,000,000 5,000,000 750,000 – – 1,250,000 1,000,000 9,000,000 – – – – – – There are no loans made to KMP as at 30 June 2017, nor were any made during the reporting period. C. Service Agreements Mr Ryan commenced as a Non-Executive Director on 8th October 2012, and on 26th June 2013 was appointed Executive Director and Acting CEO. Mr Ryan is remunerated at normal commercial rates pursuant to the terms of an ongoing Consultancy Agreement with Xserv Pty Ltd to fulfil the duties of Director and Acting CEO. Fees attributable to Mr Ryan’s services for the year ended 30 June 2017 were charged at the rate of $1,039 per day and totalled $227,860 (2016 - $148,577). The agreement may be terminated (other than for gross misconduct) by either party on three months’ written notice. 21 Annual Report 2017Annual Report 2017 Alto Metals Limited Directors’ Report D. Share-based compensation Incentive Option Scheme Options, where appropriate, may be granted under the Alto Metals Limited Employee Share Option Plan (ESOP) adopted on the 5th of October 2012. Options are granted under the plan for no consideration on terms and conditions considered appropriate by the Board at the time of issue. Options are granted for up to a five year period. Options granted under the plan carry no dividend or voting rights. The ability for the employee to exercise the options is restricted in accordance with the terms and conditions detailed in the ESOP. Each option will automatically lapse if not exercised within five years of the date of issue. The exercise period may also be affected by other events as detailed in the terms and conditions in the ESOP. The options vest as specified when the options are issued. No options have been issued under the ESOP in the current period. Director and Key Management Personnel Options There were no options issued to Directors and Key Management Personnel during the 2017 financial period. Performance Rights The Company issued 10,750,000 performance rights to Directors and employees on 9 December 2016 following approval at the Annual General Meeting of shareholders on 30 November 2016. 9,000,000 of these rights were issued to KMP. The Performance rights were issued in four tranches with the following performance conditions and expiry dates: Performance Rights granted to KMP Class Expiry Date Performance Condition A B C D TOTAL 2,250,000 9 December 2017 2,250,000 9 December 2018 the Company’s announcing to the ASX of an Inferred Mineral Resource (as defined by a Competent Person in accordance with JORC Code 2012) of at least 500,000 oz Au of at least 1.5g/t the Company’s announcing to the ASX of an Inferred Mineral Resource (as defined by a Competent Person in accordance with JORC Code 2012) of at least 1,000,000 oz Au of at least 1.5g/t 2,250,000 2,250,000 9,000,000 9 June 2019 the Company’s announcing to the ASX of a 20,000 oz Au sold 9 December 2019 the Company’s announcing to the ASX 50,000 oz Au sold End of Audited Remuneration Report Auditor’s Independence Declaration The lead auditor’s independence declaration for the period ended 30 June 2017 has been received and can be found on the following page. This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors. Dermot Ryan Executive Director Dated this 27th day of September 2017 2222 23 Alto Metals LimitedAlto Metals Limited Annual Report 2017 Auditor’s Independence Declaration Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 West Perth WA 6872 Level 1 T +61 8 9480 2000 10 Kings Park Road F +61 8 9322 7787 West Perth WA 6005 E info.wa@au.gt.com W www.grantthornton.com.au Correspondence to: PO Box 570 West Perth WA 6872 T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration to the Directors of Alto Metals Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Alto Metals Limited for the year ended 30 June 2017, I declare that, to the best of Auditor’s Independence Declaration my knowledge and belief, there have been: to the Directors of Alto Metals Limited a no contraventions of the auditor independence requirements of the Corporations Act 2001 in In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor relation to the audit; and for the audit of Alto Metals Limited for the year ended 30 June 2017, I declare that, to the best of no contraventions of any applicable code of professional conduct in relation to the audit. b my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants GRANT THORNTON AUDIT PTY LTD Chartered Accountants M P Hingeley Partner - Audit & Assurance Perth, 27 September 2017 M P Hingeley Partner - Audit & Assurance Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 Perth, 27 September 2017 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Grant Thornton Audit Pty Ltd ACN 130 913 594 Liability limited by a scheme approved under Professional Standards Legislation. a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 16 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. 23 Liability limited by a scheme approved under Professional Standards Legislation. 16 22 Alto Metals Limited Annual Report 2017 Consolidated Statement Of Profit Or Loss And Other Comprehensive Income For the Year Ended 30 June 2017 Other Income Accounting and Audit Fees Share Registry and Listing Fees Employee Benefits Expense Corporate and Consulting expense Computers and Software Depreciation Insurance Investor Relations Legal Fees Office Rental and Occupation Expenses Travel and Accommodation Impairment of AFS Financial Asset Share Based payments Impairment of Exploration and Evaluation Expenses Other Expenses Loss before income tax Income tax (expense) / benefit Loss from operations Other comprehensive income, net of tax Items that may be reclassified to profit or loss Transfer to profit or loss on disposal of AFS financial assets Revaluation of financial asset Total comprehensive income / (loss) for the period Notes 2 3 3 10 19 3 4 16 2017 $ 35,172 (33,358) (38,373) (299,856) (117,163) (29,830) (34,083) (15,524) (65,253) (9,743) (34,978) (36,200) – (100,064) (450,526) (41,684) 2016 $ 312,641 (31,920) (33,598) (40,765) (233,750) (13,833) (36,089) (14,660) (46,517) (15,650) (30,625) (15,937) (42,500) – (1,942,656) (50,432) (1,271,463) (2,236,291) (210,979) 314,496 (1,482,442) (1,921,795) – (523,716) (523,716) (294,286) 662,858 388,572 Total comprehensive loss attributable to members of the parent entity (2,006,158) (1,533,223) Overall Operations Basic loss per share (cents per share) Diluted loss per share (cents per share) 7 7 (1.0) (1.0) (2.4) (2.4) The accompanying notes form part of these financial statements. 2424 25 Alto Metals LimitedAlto Metals Limited Annual Report 2017 Consolidated Statement of Financial Position As At 30 June 2017 Current Assets Cash and cash equivalents Trade and other receivables Available for sale financial assets Total Current Assets Non-Current Assets Available for sale financial assets Plant and equipment Intangible assets Exploration and evaluation Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Total Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Issued capital Reserves Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements. Notes 8 9 10 10 11 12 13 14 15 16 2017 $ 928,446 134,580 681,256 Restated 2016 $ 1,122,691 56,918 – 1,744,282 1,179,609 – 1,415,952 91,314 39,770 6,360,816 6,491,900 8,236,182 22,034 8,269 4,816,377 6,262,632 7,442,241 352,246 352,246 352,246 324,473 324,473 324,473 7,883,936 7,117,768 18,680,470 16,008,208 257,671 681,323 (11,054,205) (9,571,763) 7,883,936 7,117,768 24 25 Alto Metals Limited Annual Report 2017 Consolidated Statement Of Changes In Equity For the Period Ended 30 June 2017 Notes Issued Capital $ Reserves $ Restated Accumulated Losses $ Total $ Balance at 1 July 2015 11,044,157 292,751 (7,649,968) 3,686,940 Loss attributable to members of the entity for the period Other comprehensive income, net of tax 16 Total comprehensive loss for the period Transaction with owners, directly in equity – – – – (1,921,795) (1,921,795) 388,572 – 388,572 388,572 (1,921,795) (1,533,223) Shares issued during the period Share issue transaction costs Share based payments Balance at 30 June 2016 4,981,010 (16,959) 16 – – – – – – – 4,981,010 (16,959) – 16,008,208 681,323 (9,571,763) 7,117,768 Balance at 1 July 2016 16,008,208 681,323 (9,571,763) 7,117,768 Notes Issued Capital $ Reserves $ Accumulated Losses $ Total $ Loss attributable to members of the entity for the period Revaluation of AFS Assets 16 Other comprehensive income, net of tax Total comprehensive loss for the period Transaction with owners, directly in equity Shares issued during the period Share issue transaction costs Share based payments Balance at 30 June 2017 – – – (523,716) – (523,716) – (1,482,442) (1,482,442) (523,716) (1,482,442) (2,006,158) 2,698,000 (25,738) – – 16 – 100,064 – – – 2,698,000 (25,738) 100,064 18,680,470 257,671 (11,054,205) 7,883,936 The accompanying notes form part of these financial statements. 26 27 Alto Metals Limited Annual Report 2017 Consolidated Statement Of Cash Flows For the Period Ended 30 June 2017 CASH FLOWS FROM OPERATING ACTIVITIES Interest received Payments to suppliers and employees Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of available-for-sale financial assets Proceeds from sale of available for sale asset Purchase of plant and equipment Payments for exploration and evaluation expenditure Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares during the period Costs associated with shares issued during the period Net cash provided by financing activities Net increase / (decrease) in cash and cash equivalents held Cash and cash equivalents at beginning of the period Cash acquired from subsidiary purchased Cash and cash equivalents at 30 June The accompanying notes form part of these financial statements. Notes 2017 $ 2016 $ 35,172 (796,637) (761,465) 17,808 (553,912) (536,104) 17a – – (135,149) (1,969,893) (2,105,042) (255,734) 425,314 – (602,005) (432,425) 2,697,997 1,141,010 (25,735) (16,959) 2,672,262 1,124,051 (194,245) 1,122,691 – 155,522 965,197 1,972 8 928,446 1,122,691 26 27 Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial report includes the consolidated financial statements and notes of Alto Metals Limited (“the Company”) and controlled entities (“the Consolidated Group” or “the Group”). Alto Metals Limited is a listed public company, incorporated and domiciled in Australia. The financial information is presented in Australian dollars. Basis of Preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Alto Metals Limited is a for-profit entity for the purpose of preparing the financial statements. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated. The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The financial statements were authorised for issue by the Directors. The Directors have the power to amend and reissue the financial statements. Going Concern The financial report has been prepared on the basis of accounting principles applicable to a going concern, which assumes the commercial realisation of the future potential of the Company’s assets and the discharge of their liabilities in the normal course of business. As disclosed in the financial report, the Group recorded an operating loss of $1,482,442 (2016: $1,921,795) and a cash outflow from operating activities of $761,465 (2016: $536,104) for the year ended 30 June 2017 and at reporting date, had a net current asset balance of $1,392,035 (2016: $855,136). The Board considers that the Company is a going concern and recognises that selling some of the investments or farming out some of its tenements or additional funding will be required to ensure that the Company can continue to fund its operations for the 12 month period from the date of this financial report. The Directors believe it is appropriate to prepare the financial report on a going concern basis because: • • • The Company has the ability to issue additional equity under the Corporations Act 2001 and ASX Listing Rule 7.1 or otherwise and has had historical success in doing so; The Company’s commitment to exploration expenditure is discretionary and other expenditure requirements are minimal; and The Company owns $681,256 in available-for-sale financial assets (see note 10) and is able to discretionarily liquidate those share for cash in order to meet its obligations. These are shares held in listed companies on the ASX. Accordingly, the Directors believe that the Company will have sufficient resources to meet its debts and obligations as they fall due to enable it to continue as a going concern for the foreseeable future and that it is appropriate to adopt that basis of accounting in the preparation of the financial report. 28 29 Alto Metals Limited Annual Report 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (a) Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent Alto Metals Limited and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity when it 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 over the entity. A list of the subsidiaries is provided in Note 18. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. (b) Income Tax The income tax expense (revenue) for the period comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the period as well unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. 28 29 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (c) Property, Plant, and Equipment Each class of property, plant, and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the historical cost basis. The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs, and an appropriate proportion of fixed and variable overheads. Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis over their useful lives to the Company commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Plant and equipment Computers and software Depreciation Rate 25% 25–33% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the profit or loss. (d) Intangible assets Recognition of intangible assets Acquired intangible assets Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and install the specific software. Subsequent measurement All intangible assets, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing. The following useful lives are applied: software: 4 years Amortisation has been included within depreciation, amortisation and impairment of non-financial assets. Subsequent expenditures on the maintenance of computer software are expensed as incurred. When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the asset, and is recognised in profit or loss within other income or other expenses. 30 31 Alto Metals Limited Annual Report 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (e) Exploration and Evaluation Expenditure Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the period in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. The Company receives R&D grants from the Australian Taxation Office. Where an R&D rebate can be directly attributable to an area of interest the R&D rebate is applied against the area of interest. For any amounts that cannot be directly attributable to an existing area of interest the amount will be recognised as grant income in the statement of comprehensive income. (f) Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the Group are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the Group will obtain ownership of the asset or over the term of the lease. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. (g) Financial Instruments Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss immediately. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. (All other loans and receivables are classified as non-current assets.) 30 31 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (g) Financial Instruments (Cont.) Available-for-sale “AFS” financial assets AFS financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Company’s AFS financial assets include listed securities. AFS financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and reported within the AFS reserve within equity, except for permanent impairment losses and foreign exchange differences on monetary assets, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income. Interest calculated using the effective interest method and dividends are recognised in profit or loss within ‘finance income’. Reversals of impairment losses are recognised in other comprehensive income, except for financial assets that are debt securities which are recognised in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognised. Financial assets at fair value through profit or loss Financial assets are classified at ‘fair value through profit or loss’ when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss. Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Derivative instruments Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to the profit or loss unless they are designated as hedges. Impairment At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income. Derecognition Financial assets are derecognised where the contractual rights to cash flow expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. 32 33 Alto Metals Limited Annual Report 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (h) Impairment of Non-Financial Assets At each the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. (i) Employee Benefits Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to reporting date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Equity-settled compensation The Company operates an Incentive Option Scheme share-based compensation plan. The bonus element over the exercise price of the employee services rendered in exchange for the grant of shares and options is recognised as an expense in the statement of comprehensive income. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares of the options granted. (j) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will results and that outflow can be reliably measured. (k) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position. (l) Revenue and Other Income Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Rental income is recognised on an accrual basis. Management fees are recognised on portion of completion basis. All revenue is stated net of the amount of goods and services tax (GST). (m) Trade and Other Payables Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the Group during the reporting period which remains unpaid. The balance is recognised as a current liability with the amount being normally paid within 30 days of recognition of the liability. 32 33 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (n) Goods and Services Tax (GST) Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of financing activities, which are disclosed as operating cash flow. (o) Equity and reserves Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share capital, net of any related income tax benefits. Other components of equity include the following: • AFS financial assets reserves – comprises gains and losses relating to these types of financial instruments Retained earnings include all current and prior period retained profits. • Performance rights reserves – comprises expenses recorded for share based payments. (p) Earnings Per Share i. Basic earnings per share Basic earnings per share is determined by dividing the profit attributable to equity holders of the company, excluding any costs of service equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the period. ii. Diluted earnings per share Diluted earnings per share adjusts the figure used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financial 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. (q) Performance rights The Company measures the value of its performance rights using the listed price of the Company’s shares at the date of granting of the rights, as the rights convert to ordinary shares at a ratio of 1:1. The Company then determines the probability that performance conditions attaching to the rights will be met and the rights will convert. Where the probability is greater than 50%, the full value is assigned to the rights. Where the probability is less than 50%, no value is assigned to the rights. The value of the rights are then amortised into expense evenly over the service period to the date of expiry, resulting in a share based payment expense in the Statement of Profit or Loss and Other Comprehensive Income and accumulating in the Performance rights reserves in Equity on the Statement of Financial Position. 34 35 Alto Metals Limited Annual Report 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (r) Critical Accounting Estimates and Judgments The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key Estimates — Impairment The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. No impairment has been recorded for the period, except for in relation to exploration and evaluation expenditure Key Estimates – Performance Share Probability In the fiscal 2016 reporting period, the Company completed an asset acquisition of the Sandstone Project. As part of the Share Sale Agreement, the Company issued 25m Performance Shares to the vendors, which will convert on a one-for-one basis into fully paid ordinary shares upon the Group confirming a combined inferred and /or indicated mineral resource and/or reserve of at least 500,000oz gold in aggregate, on one or more of the Sandstone Tenements. Management and the Board have assessed the probability of the Group meeting these triggers as greater than 50% and accordingly the full value of the performance shares were booked. Key Estimates – Performance Rights Probability In the fiscal 2017 report period, the Company issued 10,750,000 (2016: nil) performance rights to its key management personnel and employees. The rights convert on a one-to-one basis into fully paid ordinary shares as specified by the performance conditions outlined in note 15. Where management has estimated that the performance condition has a greater than 50% probability of being achieved, the full value of the relevant performance shares has been recorded. Key Judgments – Exploration and Evaluation Expenditure The Group capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the Directors are of the continued belief that such expenditure should not be written off since feasibility studies in such areas have not yet concluded. Such capitalised expenditure is carried at the end of the reporting period at $6,360,816 (2016: 4,816,377). An impairment of $450,526 was recognised during the period ended 30 June 2017 (2016: 1,942,656). (s) New and amended standards adopted by the Group in this financial report The Group has adopted all of the new and revised Standards and Interpretations issued by the Australia Accounting Standards Board (AASB) that are relevant to its operations and effective for the current reporting period. The adoption of these new and revised Standards and Interpretations has not resulted in any changes to the Group’s accounting policies and has had no effect on the amounts reported for the current or prior periods. 34 35 Notes To The Financial StatementsFor the Period Ended 30 June 2017Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (t) Impact of standards issued but not yet applied by the Group There are a number of new standards, amendments to standards and interpretations issued by the AASB which are applicable to future reporting periods. The Group has not early adopted any of these standards or interpretations. The new or revised accounting standard that is currently issued for future reporting periods and relevant to the Group is as follows: Annual Report 2017 Likely impact on initial application The entity is yet to undertake a detailed assessment of the impact of AASB 9. However, based on the entity’s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2019. New/revised pronouncement Superseded pronouncement Nature of change AASB 9 Financial Instruments AASB 139 Financial Instruments: Recognition and Measurement AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities and includes a forward- looking ‘expected loss’ impairment model and a substantially-changed approach to hedge accounting. Effective date (annual reporting periods beginning on or after…) 1 January 2018 These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are: a. Financial assets that are debt instruments will be classified based on: (i) the objective of the entity’s business model for managing the financial assets; and (ii) the characteristics of the contractual cash flows. b. Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income (instead of in profit or loss). Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument. c. Introduces a ‘fair value through other comprehensive income’ measurement category for particular simple debt instruments. d. Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. 36 37 Alto Metals Limited Annual Report 2017 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) (t) Impact of standards issued but not yet applied by the Group (Cont.) New/revised pronouncement Superseded pronouncement Nature of change Effective date (annual reporting periods beginning on or after…) Likely impact on initial application AASB 9 Financial Instruments (cont.) e Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows: - - the change attributable to changes in credit risk are presented in Other Comprehensive Income (OCI) the remaining change is presented in profit or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss. Otherwise, the following requirements have generally been carried forward unchanged from AASB 139 into AASB 9: - classification and measurement of financial liabilities; and - derecognition requirements for financial assets and liabilities. AASB 9 requirements regarding hedge accounting represent a substantial overhaul of hedge accounting that enable entities to better reflect their risk management activities in the financial statements. Furthermore, AASB 9 introduces a new impairment model based on expected credit losses. This model makes use of more forward-looking information and applies to all financial instruments that are subject to impairment accounting. 36 37 Notes To The Financial StatementsFor the Period Ended 30 June 2017 Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 2: OTHER INCOME Interest received from other parties Gain on disposal of AFS assets Total Other Income NOTE 3: LOSS FOR THE PERIOD (a) Expenses Depreciation of plant and equipment Office rental and occupation expenses Defined benefit superannuation expense (b) Significant Revenues and Expenses Notes 2017 $ 35,172 – 35,172 34,083 34,978 – 2016 $ 17,808 294,833 312,641 36,089 30,625 3,470 The following significant revenue and expense items are relevant in explaining the financial performance: Exploration and Evaluation expenditure written off 13 450,526 1,942,656 NOTE 4: INCOME TAX (a) Income tax (benefit)/expense Current tax Deferred tax – 210,979 210,979 – (314,496) (314,496) (b) Reconciliation of income tax expense to prima facie tax payable The prima facie tax payable on profit from ordinary activities before income tax is reconciled to the income tax expense as follows: Prima facie tax on operating loss at 27.5% (2016: 30%) (349,652) (670,887) Add / (Less) tax effect of: Other non-deductible/ (assessable) items Deferred tax asset not brought to account Income tax benefit attributable to operating loss 29,883 530,748 210,979 6,738 349,653 (314,496) The applicable weighted average effective tax rates are as follows: nil% nil% (c) Deferred tax assets Tax Losses Provisions and Accrual Other - Equity Set-off deferred tax liabilities Net deferred tax assets 4(c) 653,257 5,087 12,712 671,056 (671,056) - 391,866 6,900 26,521 425,287 (425,287) - 38 39 Alto Metals Limited Annual Report 2017 NOTE 4: INCOME TAX (Cont.) (d) Deferred tax liabilities Exploration expenditure Financial asset Other – P&L Set-off deferred tax assets Net deferred tax liabilities (e) Tax losses Notes 2017 $ 2016 $ (593,323) (77,309) (424) (671,056) 671,056 – (110,281) (314,496) (510) (425,287) 425,287 – Unused tax losses for which no deferred tax asset has been recognised Temporary differences for which no deferred tax asset has been recognised – Equity 1,367,881 1,904,942 8,938 34,500 Potential deferred tax assets attributable to tax losses and exploration expenditure carried forward have not been brought to account at 30 June 2017 because the Directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this point in time. These benefits will only be obtained if: • • • the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the loss and exploration expenditure to be realised; the Company continues to comply with conditions for deductibility imposed by law; and no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the loss and exploration expenditure. NOTE 5: KEY MANAGEMENT PERSONNEL COMPENSATION (a) Key management personnel (KMP) compensation Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid to each member of the Company’s KMP for the period ended 30 June 2017. The totals of remuneration paid to KMP during the period are as follows: Short-term employee benefits Post-employment benefits Share based payments Total 2017 $ 435,974 3,470 83,774 523,218 2016 $ 289,340 3,470 – 292,810 38 39 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 6: AUDITORS’ REMUNERATION Remuneration of the auditor of the parent entity for: – Auditing or reviewing the financial report by Grant Thornton Audit Pty Ltd 27,020 27,020 2017 $ 2016 $ Remuneration of the auditor, or associated entities, of the parent entity for non-audit services: – Tax compliance services NOTE 7: LOSS PER SHARE (a) Reconciliation of earnings to loss Earnings used in the calculation of basic EPS (b) Weighted average number of ordinary shares outstanding during the period used in calculation of basic EPS 5,150 5,150 2017 $ 2016 $ (1,482,442) (1,921,795) 147,694,882 79,019,962 Basic / Diluted loss per share (cents per share) (1.0) (2.4) As at 30 June 2017, the Company did not have any options outstanding. NOTE 8: CASH AND CASH EQUIVALENTS Cash at bank Reconciliation of cash Cash at the end of the financial period as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows: 2017 $ 928,446 928,446 2016 $ 1,122,691 1,122,691 Cash and cash equivalents 928,446 1,122,691 Cash at bank earns an effective interest rate of 1.65%. Included in cash and cash equivalents is an amount of $nil (2016: nil) that is restricted cash in relation to a security deposit. 40 41 Alto Metals Limited Annual Report 2017 NOTE 9: TRADE AND OTHER RECEIVABLES CURRENT GST receivable Trade and other receivables Interest receivable Prepayments 2017 $ 83,519 46,601 620 3,840 134,580 2016 $ 22,188 29,889 1,098 3,743 56,918 There are no balances within trade and other receivables that contain assets that are impaired and are past due. The trade receivables relate to reimbursed expenditures receivable and interest receivable. It is expected these balances will be received when due. Refer to note 21 related party transactions for receivable balances with related parties. NOTE 10: AVAILABLE-FOR-SALE FINANCIAL ASSETS Current Non-Current 2017 $ 681,256 – 681,256 2016 $ – 1,415,952 1,415,952 There was a re-classification of a portion of AFS financial assets from non-current assets to current assets on 30 June 2017 when the Company made a decision to sell a portion of the assets within the next 12 months. Those shares were sold post year end. Movement for the period: Opening balance Additions Disposals Revaluations Impairment 1,415,952 – – (734,696) – 502,814 383,598 (425,314) 997,354 (42,500) 681,256 1,415,952 Available-for-sale financial assets are shares held in an ASX listed entities. Fair value as per note 23 (i) is determined by reference to the quoted market price at reporting date. 40 41 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 11: PLANT AND EQUIPMENT NON-CURRENT Plant and equipment – cost Accumulated depreciation Property – cost Accumulated depreciation Total property, plant and equipment a) Reconciliation of Carrying Amounts Plant and Equipment Opening balance - Additions - Depreciation expense Carrying amount at the end of the period Land and Buildings Opening balance – Additions – Depreciation expense Carrying amount at the end of the period Totals Opening balance – Additions – Depreciation expense Carrying amount at the end of period 2017 $ 120,610 (117,004) 3,606 87,708 – 87,708 91,314 22,034 9,850 (28,278) 3,606 – 87,708 – 87,708 22,034 97,558 (28,278) 91,314 2016 $ 110,761 (88,727) 22,034 – – – 22,034 48,712 – (26,678) 22,034 – – – – 48,712 – (26,678) 22,034 42 43 Alto Metals Limited Annual Report 2017 NOTE 12: INTANGIBLE ASSETS NON-CURRENT Software – cost Accumulated amortisation Formation Expenses Total a) Reconciliation of Carrying Amounts Opening balance – Additions – Disposals – Amortisation expense Carrying amount at the end of the period NOTE 13: EXPLORATION AND EVALUATION 2017 $ 75,137 (35,367) 39,770 – 39,770 7,984 37,592 – (5,806) 39,770 2016 $ 37,545 (29,561) 7,984 285 8,269 17,395 – – (9,411) 7,984 Exploration and evaluation phases – at cost 6,360,816 4,816,377 Note 2017 $ 2016 $ (a) Exploration and evaluation Opening balance Exploration expenditure Purchase of Sandstone exploration properties 18 Impairment of exploration and evaluation expenses Closing balance 4,816,377 1,994,965 – 2,074,419 481,981 4,202,633 (450,526) (1,942,656) 6,360,816 4,816,377 Impairment losses have been recognised in relation to a number of projects given drilling and exploration expenditure has not resulted in a discovery of significance. The Directors believe that given the continued difficult market conditions, it is prudent to impair the carrying values of a number of projects. The Directors’ assessment of the carrying amount for the Group’s exploration properties was after consideration of prevailing market conditions; previous expenditure for exploration work carried out on the tenements; and the potential for mineralisation based on the Group’s and independent geological reports. The ultimate value of these assets is dependent upon recoupment by commercial development or the sale of the whole or part of the Group’s interests in these exploration properties for an amount at least equal to the carrying value. There may exist on the Group’s exploration properties, areas subject to claim under Native Title or containing sacred sites or sites of significance to Aboriginal people. As a result, the Group’s exploration properties or areas within the tenements may be subject to exploration and mining restrictions. 42 43 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 14: TRADE AND OTHER PAYABLES CURRENT – unsecured liabilities Trade and other payables Accrued expenses Deferred payment on purchase of Sandstone Exploration Pty Ltd 18 Note 2017 $ 291,748 60,498 – 352,246 2016 $ 101,209 23,264 200,000 324,473 All amounts in trade and other payables are short term and the carrying values are considered a reasonable approximation of fair value. Refer to note 21 related party transactions for payable balances with related parties. NOTE 15: ISSUED CAPITAL 151,882,819 (2016: 115,695,812) fully paid ordinary shares at no par value 25,000,000 (2016: 25,000,000) performance shares Note 2017 $ 2016 $ 16,505,470 13,833,208 2,175,000 2,175,000 18,680,470 16,008,208 Fully paid ordinary shares have no par value, carry one vote per share and carry the right to dividends. (a) Ordinary shares At the beginning of the reporting period Ordinary shares issued during the period • 28,779,603 on 25 July 2016 at $0.059 Share Purchase Plan • 7,407,404 on 27 October 2016 at $0.135 – Sophisticated Investors • 545,455 on 9 December 2015 at $0.022 for settlement of consultancy fees • 19,339,160 on 2 June 2016 at $0.059 – Sophisticated Investors • Costs associated with equity raisings • 19,000,000 on 24 June 2016 purchase Sandstone at $0.087 (1) 13,833,208 11,044,157 1,697,997 1,000,000 – – (25,735) – 12,000 1,141,010 (16,959) 1,653,000 At reporting date 16,505,470 13,833,208 44 45 Alto Metals Limited Annual Report 2017 NOTE 15: ISSUED CAPITAL (Cont.) At the beginning of the reporting period Ordinary shares issued during the period: 2017 No. 2016 No. 115,695,812 76,811,197 • 28,779,603 on 25 July 2016 at $0.059 Share Purchase Plan • 7,407,404 on 27 October 2016 at $0.135 – Placement to 28,779,603 7,407,404 – – Sophisticated Investors • 545,455 on 9 December 2015 at $0.022 for settlement of third party consultancy fees • 19,339,160 on 2 June 2016 at $0.059 – Placement to Sophisticated Investors • 19,000,000 on 24 June 2016 to Purchase Sandstone Project at $0.087 (1) At reporting date (b) Performance shares At the beginning of the reporting period Performance shares issued during the period • 25,000,000 Performance Shares at $0.087(1) At reporting date At the beginning of the reporting period Performance shares issued during the period: 25,000,000 Performance Shares at $0.087(1) At reporting date – – – 545,455 19,339,160 19,000,000 151,882,819 115,695,812 Note 2017 $ 2016 $ 2,175,000 – – 2,175,000 2,175,000 2,175,000 2017 No. 2016 No. 25,000,000 – – 25,000,000 25,000,000 25,000,000 (1) On 24 June 2016, the Company finalised the purchase of the investment in Sandstone Exploration Pty Ltd (“the Entity”) through the issue of 19,000,000 Fully Paid Ordinary Shares and 25,000,000 Performance Shares. These Ordinary Shares and the Performance Shares (refer (b) below for additional information and conversion conditions), were valued at the Share Price of 8.7 cents per share on the date the Company gained control of the Entity in accordance with the Accounting Standards. These Performance Shares will convert into 25,000,000 fully paid ordinary shares once an announcement of an Inferred JORC 2012 Mineral Resource is made of a tonnage and grade to establish contained metal of at least 500,000 Ounces of Gold (or other metal equivalent) on the Sandstone tenements any time prior to 23 June 2021. 44 45 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 15: ISSUED CAPITAL (Cont.) (c) Performance rights on issue Performance rights At the beginning of the reporting period Performance rights issued during the period 10,750,000 Performance Shares at $0.087(1) At reporting date Note 2017 No. – 10,750,00 10,750,00 2016 No. – – – (1) During the financial year, the Company issued 10,750,000 (2016: nil) in performance rights to directors and employees as follows: Class A B C D Performance Rights granted to Directors and Staff 2,687,500 Expiry Date 9 December 2017 Performance Condition the Company’s announcing to the ASX of an Inferred Mineral Resource (as defined by a Competent Person in accordance with JORC Code 2012) of at least 500,000 oz Au of at least 1.5g/t 2,687,500 2,687,500 2,687,500 9 December 2018 the Company’s announcing to the ASX of an Inferred Mineral Resource (as defined by a Competent Person in accordance with JORC Code 2012) of at least 1,000,000 oz Au of at least 1.5g/t 9 June 2019 the Company’s announcing to the ASX of a 20,000 oz Au sold 9 December 2019 the Company’s announcing to the ASX 50,000 oz Au sold The issuance of these performance rights resulted in a share based payment expense recorded in the Statement of Profit or Loss and Other Comprehensive Income. See Note 19. (d) Capital Management The Directors’ objectives when managing capital are to ensure that the Company can fund its operations and continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders. The Company has no debt therefore has no externally imposed capital restrictions. Due to the nature of the Company’s activities, being mineral exploration, the Company does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Company’s capital risk management is the current working capital position against the requirements of the Company to meet exploration programmes and corporate overheads. The Company’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Company at 30 June 2016 is as follows: Cash and cash equivalents Trade and other receivables Trade and other payables Working capital position 2017 $ 928,446 134,580 (352,246) 710,780 2016 $ 1,122,691 56,918 (324,473) 855,136 46 47 Alto Metals Limited Annual Report 2017 NOTE 16: RESERVES AFS Financial Asset Reserve Performance Share Reserve (a) Movement in Reserves AFS Financial Asset Reserve At the beginning of the reporting period Add revaluation increments, net of tax Less disposal of AFS shares transferred to profit or loss At reporting date Performance Rights Reserve At the beginning of the reporting period Add performance rights issued At reporting date NOTE 17: CASH FLOW INFORMATION 2017 $ 157,607 100,064 257,671 681,323 (523,716) – 157,607 – 100,064 100,064 2016 $ 681,323 – 681,323 292,751 682,858 (294,286) 681,323 – – – (a) Reconciliation of Cash Flow from Operations with loss after Income Tax Loss after income tax (1,482,442) (1,921,795) Cash flows excluded from loss attributable to operating activities Non-cash flows in loss from ordinary activities: Gain on disposal of AFS asset Impairment of AFS asset Tax expense Depreciation Share based payment Impairment of Exploration and Evaluation Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: (Increase)/Decrease in receivables (Increase)/Decrease in other assets Increase/(Decrease) in payables Cash flow used in operations (b) Credit Standby Facilities The Group had no credit standby facilities as at 30 June 2017. (c) Non-Cash Financing and Investing Activities Share Issues – no movements for the year ended 30 June 2017 For the period ended 30 June 2016 – – 210,979 34,083 100,064 450,526 (51,768) – (22,907) (761,465) (252,333) – (314,496) 36,089 – 1,942,656 (5,517) 6,610 (27,318) (536,104) On 9 December 2015, 545,455 ordinary shares were issued at $0.022 each for the settlement of third party consultancy fees. On 24 June 2016, 19,000,000 ordinary shares and 25,000,000 Performance Shares were issued for $0.087 each for settlement of the purchase of Sandstone Exploration Pty Ltd. 46 47 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 18: CONTROLLED ENTITIES Details of Controlled Entities Cue Metals Pty Ltd (1) Sandstone Exploration Pty Ltd (2) Country of Incorporation Class of Shares Australia Australia Ordinary Ordinary Percentage Owned % 2017 100 100 2016 100 100 (1) Cue Metals Pty Ltd was incorporated on 14 September 2015 as a wholly owned subsidiary of Alto Metals Limited. (2) Alto Metals Limited acquired 100% of the issued capital of Sandstone Exploration Pty Ltd (“the Entity”) following shareholder approval on 24 June 2016. NOTE 19: SHARE-BASED PAYMENTS A share based payment expense of $100,064 (2016: nil) was recorded in the period based on management’s estimate of the value of the performance rights issued in fiscal 2017 as outlined below and detailed further in note 15. Despite that share based payments occurred in 2016 as detailed below, there was no share based payment expense recorded given that the transactions met the criteria of capitalised exploration and evaluation. The following share based payments took place during the 2017 financial year: On 9 December 2016, 10,750,000 performance rights were issued to key management personnel and employees of the company. Refer Note 15. The following share based payments On 9 December 2015, 545,455 ordinary shares were issued at $0.022 each for the settlement of third party consultancy fees. On 24 June 2016, 19,000,000 ordinary shares and 25,000,000 Performance Shares were issued for $0.087 each for settlement of the purchase of Sandstone Exploration Pty Ltd. Refer Note 15. NOTE 20: EVENTS SUBSEQUENT TO REPORTING DATE There has not arisen since the end of the financial year any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial years, other than: Subsequent to balance date the Company has sold part of the available for sale financial assets realising a total of $632,156 compared to the carrying value of those available for sale financial assets of $613,756 at the end of the financial year. This sale will be reflected in the 2017/18 financial year accounts. 48 49 Alto Metals Limited Annual Report 2017 NOTE 21: RELATED PARTY TRANSACTIONS XServ Pty Ltd Mr Ryan is a Director and Shareholder of Xserv Pty Ltd. Mr Ryan’s company provides geological consulting services to Alto Metals Limited as Managing Director. Included in the payments to Xserv Pty Ltd are payments for field equipment and vehicles at commercial rates equating to $21,246 (2016 - $Nil) in the current financial year. As at 30 June 2017 $22,966 (2016: $Nil) was payable to Xserv Pty Ltd Mega Capital Resources Ltd Ms Mao was a sole director of Mega Capital Resources Ltd. Mega Capital Resources Ltd provides consulting services to Alto Metals Limited. 2017 $ 2016 $ 249,106 148,577 Consulting Services 14,000 66,000 As at 30 June 2017, $Nil (2016: $28,000) was payable to Mega Capital Resources Ltd. Enterprise Metals Ltd Enterprise Metals Ltd is a significant shareholder in the Company and provides office space in which the Company operates as well as accounting and office administration services including telephone, electricity and office equipment. Reimbursement of shared costs of staff and office premises charged to Enterprise Metals Ltd. Rental of office space, purchase of plant and equipment and office administration expenses charged to Alto Metals Ltd. Total 92,993 61,289 154,282 – 44,256 44,256 As at 30 June 2017 $9,474 (2016: $11,939) was receivable and $3,811 (2016: $12,546) was payable to Enterprise Metals Ltd. At reporting date the Company holds 2,500,000 ordinary shares in Enterprise Metals Limited at a fair value of $37,500 (2016 - $35,000). Value Adding Resources Pty Ltd Mr Robertson is a Director and Shareholder of Value Adding Resources Pty Ltd. Mr Robertson’s company provides director’s fee and geophysical consulting services to Alto Metals Limited. As at 30 June 2017 $nil (2016: $nil) was payable to Value Adding Resources Pty Ltd 10,000 40,000 48 49 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 22: CAPITAL AND LEASING COMMITMENTS Expenditure commitments The Group is planning exploration work on its exploration tenements in order to retain the rights of tenure. These obligations will be met, subject to availability of funds and can be reduced by selective relinquishment of exploration tenure or application for expenditure exemptions. Due to the nature of the Group’s operations in exploring and evaluating areas of interest, it is very difficult to forecast the nature and amount of future expenditure. The Group’s planned exploration and expected commitments, subject to available funds – refer note 1, for the next year are as follows: Australian tenements 385,320 404,320 In addition, under the acquisition agreement, Sandstone has granted the Vendors of the Company a 2% gross revenue royalty on all minerals produced from the Tenements and the right to fossick down to 2m below surface for all minerals and metals including gold nuggets. At the date of this report this has not been recognised given the timing and amount cannot be determined. The Group also agreed to incur a minimum $300,000 per annum on exploration expenditure on the Sandstone tenements in the first two years following completion, of which $264,320 (2016 – $271,320) is included in the expenditure commitments above for Australian tenements. The expenditure will be subject to future drilling success. Operating lease commitments: Operating lease commitments contracted for Rental of the Company’s Registered Office Amounts payable: - not later than 12 months - between 12 months and 5 years 2017 $ 2016 $ 74,724 157,488 232,212 24,312 – 24,312 50 51 Alto Metals Limited Annual Report 2017 NOTE 23: FINANCIAL INSTRUMENT The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, and accounts receivable and payable. The main purpose of non-derivative financial instruments is to raise finance for Group operations. The Group does not speculate in the trading of derivative instruments. A summary of the Group’s financial assets and liabilities is shown below using level inputs measured at fair value or a recurring basis. 2017 Floating Interest Rate $ Financial Assets Cash and cash equivalents 928,446 Loans and receivables Available for sale financial assets Total Financial Assets Weighted ave int rate – cash Financial Liabilities at cost Trade and other payables Total Financial Liabilities – – 928,446 1.65% – – Net financial assets 928,446 2016 Financial Assets Floating Interest Rate $ Cash and cash equivalents 1,122,691 Loans and receivables Total Financial Assets Weighted ave int rate – cash Financial Liabilities at cost Trade and other payables Total Financial Liabilities – 1,122,691 2.00% – – Net financial assets 1,122,691 (i) Fair value measurement hierarchy Fixed Int maturing in 1 year or less Fixed Int maturing over 1 to 5 years Non-interest bearing $ – – – – – – – $ – – – – – – – Fixed Int maturing in 1 year or less Fixed Int maturing over 1 to 5 years $ – – – – – – $ – – – – – – $ – 134,580 681,256 815,836 Total $ 928,446 134,580 681,256 1,744,282 (352,246) (352,246) (352,246) (352,246) 463,590 1,392,036 Non–interest bearing $ Total $ – 1,122,691 56,918 56,918 56,918 1,179,609 (124,173) (124,173) (124,173) (124,173) (67,255) 1,055,436 50 51 AASB 13 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (a) Level 1 – the instrument has quoted prices (unadjusted) in active markets for identical assets and liabilities; (b) Level 2 – a valuation technique is used using inputs other than quoted priced within Level 1 that are observable for the financial instrument, either directly (i.e. as prices), or indirectly (i.e. derived from prices); or (c) Level 3 – a valuation technique is sued using inputs that are not based on observable market data (unobservable inputs). Notes To The Financial StatementsFor the Period Ended 30 June 2017Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 23: FINANCIAL INSTRUMENT (Cont.) The table below classifies financial instruments recognised in the consolidated Statement of Financial Position according to the fair value measurement hierarchy stipulated in AASB 13 Financial Instruments: Disclosures. Level 1 Level 2 Level 3 Year ended 30 June 2017 Financial assets Available for sale financial assets Year ended 30 June 2016 Financial assets $ 681,256 Available for sale financial assets 1,415,952 $ – – $ – – Total $ 681,256 1,415,952 Valuation techniques used to derive level 2 and level 3 fair values The fair value of financial instruments traded in active markets is based upon quoted market prices at the end of the reporting period. The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group makes a number of assumptions based upon observable market data existing at each reporting period. The Group does not have any level 3 assets or liabilities. Specific Financial Risk Exposures and Management The main risk the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate, foreign currency risk and equity price risk. a. Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. The Group does not have any material credit risk exposure to any single receivable or Company of receivables under financial instruments entered into by the Group. Credit risk exposures The maximum exposure to credit risk is that to its alliance partners and that is limited to the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. There are no other material amounts of collateral held as security at 30 June 2017. Trade and other receivables are expected to be settled within 30 days. Credit risk related to balances with banks and other financial institutions is managed by the Group in accordance with approved Board policy. Such policy requires that surplus funds are only invested with counterparties with a Standard and Poor’s rating of at least AA-. The following table provides information regarding the credit risk relating to cash and money market securities based on Standard and Poor’s counterparty credit ratings. Note 2017 $ 2016 $ 8 928,446 1,122,691 Cash and cash equivalents - AA Rated 52 Annual Report 2017 53   Alto Metals Limited Annual Report 2017 NOTE 23: FINANCIAL INSTRUMENT (Cont.) b. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board of Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future funding requirements, with a view to initiating appropriate capital raisings as required. Any surplus funds are invested with major financial institutions. The financial liabilities of the Group are confined to trade and other payables as disclosed in the statement of financial position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date. c. Market risk The Board meets on a regular basis to analyse currency and interest rate exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. i. Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group is also exposed to earnings volatility on floating rate instruments. Interest rate risk is managed by closely monitoring the interest rates at various financial institutions. The Group has no debt and as such the interest rate risk is limited to the Group’s investments in term deposits and other interest bearing investments. Sensitivity Analysis The following table illustrates sensitivities to the Group’s exposures to changes in interest rates. The table indicates the impact on how profit and equity values reported at reporting date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. Period ended 30 June 2017 Profit $ Equity $ +/-1% in interest rates +/- 9,284 +/- 9,284 Period ended 30 June 2016 $ $ +/-1% in interest rates +/- 11,227 +/- 11,227 52 53 Notes To The Financial StatementsFor the Period Ended 30 June 2017Annual Report 2017 Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 23: FINANCIAL INSTRUMENT (Cont.) d. Price risk on AFS assets The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified on the balance sheet as available for sale. Listed investments have been valued at the quoted market bid price at the end of reporting period, adjusted for transaction costs expected to be incurred. At 30 June 2017, the effect on profit and equity as a result of changes in listed equity prices, with all other variables remaining constant would be as follows: Carrying amount Net loss Equity Net loss Equity Listed equity price -10% Listed equity price +10% 30 June 2017 681,256 (68,125) (68,125) 68,125 68,125 30 June 2016 1,415,952 (141,595) (141,595) 141,595 141,595 e. Net Fair Values 2017 2017 2016 2016 Carrying Amount $ Net Fair Value $ Carrying Amount $ Net Fair Value $ Financial Assets Cash and cash equivalents Loans and receivables Available for sale financial assets 928,446 134,580 681,256 928,446 134,580 681,256 Total Financial Assets 1,744,282 1,744,282 1,122,691 1,122,691 56,918 1,415,952 2,595,561 56,918 1,415,952 2,595,561 Financial Liabilities at amortised cost Trade and other payables Total Financial Liabilities 352,246 352,246 352,246 352,246 324,473 324,473 324,473 324,473 Cash and cash equivalents, trade and other receivables, and trade and other payables are short-term investments in nature whose carrying value is equivalent to fair value. 54 55 Alto Metals Limited Annual Report 2017 NOTE 24: PARENT ENTITY DISCLOSURES (a) Financial Position of Alto Metals Limited CURRENT ASSETS Cash and cash equivalents Trade and other receivables Available for sale financial assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Available for sale financial assets Plant and equipment Intangible assets Exploration and evaluation Other financial assets Other assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY (b) Financial Performance of Alto Metals Limited Loss for the year Unrealised gain on revaluation of AFS asset Total comprehensive loss 2017 $ 2016 $ 928,442 134,580 681,256 1,120,718 56,445 - 1,744,278 1,177,163 - 1,415,952 91,314 39,770 - - 6,364,273 6,495,357 8,239,635 352,247 352,247 352,247 22,034 7,984 367,602 37,730 3,261,863 5,113,165 6,290,328 124,474 124,474 124,474 7,887,388 6,165,854 18,680,470 14,973,620 46,692 970,426 (10,839,774) (9,778,192) 7,887,388 6,165,854 (1,268,011) (2,236,291) - 25,394 (1,268,011) (2,210,897) 54 55 Notes To The Financial StatementsFor the Period Ended 30 June 2017Alto Metals Limited Notes To The Financial Statements For the Period Ended 30 June 2017 NOTE 25: CONTINGENT LIABILITIES As at 30 June 2017 the Group has bank guarantees to the value of $26,366 (2016: $9,300) to secure a credit card facility and in 2016 a rental bond. NOTE 26: OPERATING SEGMENTS The Directors have considered the requirements of AASB 8 – Operating Segments and the internal reports that are reviewed by the chief operating decision maker (the Board) in allocating resources and have concluded that at this time there are no separately identifiable segments. The Group remains focused on mineral exploration over areas of interest solely in Western Australia. NOTE 27: COMPANY DETAILS The registered office and principal place of business of the Company is: Alto Metals Limited Level 2, Suite 9 12-14 Thelma Street WEST PERTH WA 6005 Annual Report 2017 56 57 Alto Metals Limited Annual Report 2017 Directors’ Declaration The directors of the Company declare that: 1. The financial statements and notes, as set out on pages 24 to 56, are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards; and (b) are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in note 1 to the financial statements; and (c) give a true and fair view of the financial position as at 30 June 2017 and of the performance for the period ended on that date of the Company; 2. The Chief Executive Officer and Chief Finance Officer have each declared that: (a) the financial records of the Company for the financial period have been properly maintained in accordance with s 286 of the Corporations Act 2001; and (b) the financial statements and notes for the financial period comply with the Accounting Standards; and (c) the financial statements and notes for the financial period give a true and fair view; and (d) they have given the declarations required by Section 295A of the Corporations Act, 2001 for the financial period ended 30 June 2017. 3. In the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Dermot Ryan Executive Director Dated 27th September 2017, Perth WA 56 57 Independent Auditor’s Report Independent Auditor’s Report to the Members of Alto Metals Limited Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 Level 1 West Perth WA 6872 10 Kings Park Road West Perth WA 6005 T +61 8 9480 2000 F +61 8 9322 7787 Correspondence to: E info.wa@au.gt.com PO Box 570 W www.grantthornton.com.au West Perth WA 6872 Level 1 10 Kings Park Road West Perth WA 6005 T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au Correspondence to: PO Box 570 West Perth WA 6872 Report on the audit of the financial report Independent Auditor’s Report to the Members of Alto Metals Limited Opinion We have audited the financial report of Alto Metals Limited (the Company) and its subsidiaries (the Report on the audit of the financial report Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes Opinion to the consolidated financial statements, including a summary of significant accounting policies, We have audited the financial report of Alto Metals Limited (the Company) and its subsidiaries (the and the directors’ declaration. Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement In our opinion, the accompanying financial report of the Group, is in accordance with the of changes in equity and consolidated statement of cash flows for the year then ended, and notes Corporations Act 2001, including: to the consolidated financial statements, including a summary of significant accounting policies, and the directors’ declaration. In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor a Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its Auditor’s Independence Declaration to the Directors of Alto Metals Limited T +61 8 9480 2000 F +61 8 9322 7787 E info.wa@au.gt.com W www.grantthornton.com.au b a relation to the audit; and performance for the year ended on that date; and performance for the year ended on that date; and no contraventions of any applicable code of professional conduct in relation to the audit. for the audit of Alto Metals Limited for the year ended 30 June 2017, I declare that, to the best of In our opinion, the accompanying financial report of the Group, is in accordance with the my knowledge and belief, there have been: Corporations Act 2001, including: b Complying with Australian Accounting Standards and the Corporations Regulations 2001. no contraventions of the auditor independence requirements of the Corporations Act 2001 in a Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its 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 b Complying with Australian Accounting Standards and the Corporations Regulations 2001. Financial Report section of our report. We are independent of the Group in accordance with the independence requirements of the Corporations Act 2001 and the ethical requirements of the Basis for Opinion Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have under those standards are further described in the Auditor’s Responsibilities for the Audit of the also fulfilled our other ethical responsibilities in accordance with the Code. Financial Report section of our report. We are independent of the Group in accordance with the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a independence requirements of the Corporations Act 2001 and the ethical requirements of the basis for our opinion. Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. GRANT THORNTON AUDIT PTY LTD Chartered Accountants M P Hingeley Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 Partner - Audit & Assurance Perth, 27 September 2017 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In Grant Thornton Audit Pty Ltd ACN 130 913 594 the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the 45 member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In Grant Thornton Audit Pty Ltd ACN 130 913 594 the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. 58 Liability limited by a scheme approved under Professional Standards Legislation. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. 45 Liability limited by a scheme approved under Professional Standards Legislation. 16 Alto Metals Limited Independent Auditor’s Report Material Uncertainty Related to Going Concern We draw attention to Note 1 “Going Concern” in the financial statements, which indicates that the Group incurred a net loss of $1,482,442 during the year ended 30 June 2017. As stated in Note 1, these events or conditions, along with other matters as set forth in the notes, indicate that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matter How our audit addressed the key audit matter Exploration and Evaluation Assets – valuation Note 1(e) and Note 13 At 30 June 2017, the carrying value of Exploration and Evaluation Assets was $6.4 million. In accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, the Group is required to assess at each reporting date if there are any triggers for impairment which may suggest the carrying value is in excess of the recoverable value. The process undertaken by management to assess whether there are any impairment triggers in each area of interest involves an element of management judgement. This area is a key audit matter due to the valuation of exploration and evaluation assets being a significant risk. Our procedures included, amongst others: • obtaining the management prepared reconciliation of capitalised exploration and evaluation expenditure and agreeing to the general ledger; reviewing management’s area of interest considerations against AASB 6; • - • conducting a detailed review of management’s assessment of trigger events prepared in accordance with AASB 6 including; - tracing projects to statutory registers, exploration licenses and third party confirmations to determine whether a right of tenure existed; enquiry of management regarding their intentions to carry out exploration and evaluation activity in the relevant exploration area, including review of managements’ budgeted expenditure; understanding whether any data exists to suggest that the carrying value of these exploration and evaluation assets are unlikely to be recovered through development or sale; • assessing the accuracy of impairment recorded for the year as it pertained to exploration interests; and reviewing the appropriateness of the related disclosures within the financial statements. - • 59 46 Annual Report 2017Independent Auditor’s Report Performance rights – valuation Note 1(q), Note 15(c) and Note 19 During the year ended 30 June 2017, the Group issued performance rights resulting in the recording Performance rights – valuation of a share based payment expense of $0.1 million. Note 1(q), Note 15(c) and Note 19 During the year ended 30 June 2017, the Group The Group records the issuance of its performance issued performance rights resulting in the recording rights in accordance with AASB 2 Share based of a share based payment expense of $0.1 million. payments, which, for the conditions underlying the issuance, requires management to determine a value The Group records the issuance of its performance of the transaction based on the probability that the rights in accordance with AASB 2 Share based conditions will be met. payments, which, for the conditions underlying the issuance, requires management to determine a value This area is a key audit matter given that of the transaction based on the probability that the management exercises its judgments and estimates conditions will be met. in determining the probability that the relevant conditions will be met, which impacts the amounts This area is a key audit matter given that recorded. management exercises its judgments and estimates in determining the probability that the relevant conditions will be met, which impacts the amounts recorded. Our procedures included, amongst others: • • Our procedures included, amongst others: • • • assessing management’s estimates and reviewing the conditions of the performance rights and tracing the conditions to agreements signed by all parties and to related ASX announcements; testing the mathematical accuracy of reviewing the conditions of the performance rights management’s valuation and tracing the conditions to agreements signed by all parties and to related ASX announcements; judgments around the probabilities applied to each testing the mathematical accuracy of condition by discussing with employees of the management’s valuation Group that sit outside of the Group’s finance department and obtaining further corroborating judgments around the probabilities applied to each evidence through review of source documents; condition by discussing with employees of the and Group that sit outside of the Group’s finance • assessing the appropriateness of the related department and obtaining further corroborating disclosures within the financial statements. evidence through review of source documents; and • assessing management’s estimates and • assessing the appropriateness of the related Information Other than the Financial Report and Auditor’s Report Thereon disclosures within the financial statements. The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2017, but does not Information Other than the Financial Report and Auditor’s Report Thereon include the financial report and our auditor’s report thereon. The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2017, but does not Our opinion on the financial report does not cover the other information and we do not express any include the financial report and our auditor’s report thereon. form of assurance conclusion thereon. Our opinion on the financial report does not cover the other information and we do not express any In connection with our audit of the financial report, our responsibility is to read the other information form of assurance conclusion thereon. 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. 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 If, based on the work we have performed, we conclude that there is a material misstatement of this report or our knowledge obtained in the audit or otherwise appears to be materially misstated. other information, we are required to report that fact. We have nothing to report in this regard. If, based on the work we have performed, we conclude that there is a material misstatement of this Responsibilities of the Directors’ for the Financial Report other information, we are required to report that fact. We have nothing to report in this regard. 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 Responsibilities of the Directors’ for the Financial Report 2001 and for such internal control as the Directors determine is necessary to enable the The Directors of the Company are responsible for the preparation of the financial report that gives preparation of the financial report that gives a true and fair view and is free from material a true and fair view in accordance with Australian Accounting Standards and the Corporations Act misstatement, whether due to fraud or error. 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 In preparing the financial report, the Directors are responsible for assessing the Group’s ability to misstatement, whether due to fraud or error. continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or In preparing the financial report, the Directors are responsible for assessing the Group’s ability to to cease operations, or have no realistic alternative but to do so. continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or Auditor’s Responsibilities for the Audit of the Financial Report to cease operations, or have no realistic alternative but to do so. 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 Auditor’s Responsibilities for the Audit of the Financial Report includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee Our objectives are to obtain reasonable assurance about whether the financial report as a whole is that an audit conducted in accordance with the Australian Auditing Standards will always detect a free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that material misstatement when it exists. Misstatements can arise from fraud or error and are includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee considered material if, individually or in the aggregate, they could reasonably be expected to that an audit conducted in accordance with the Australian Auditing Standards will always detect a influence the economic decisions of users taken on the basis of this financial report. material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. 60 47 47 Alto Metals Limited Independent Auditor’s Report A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 19 to 22 of the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Alto Metals Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. GRANT THORNTON AUDIT PTY LTD Chartered Accountants M P Hingeley Partner - Audit & Assurance Perth, 27 September 2017 61 48 Annual Report 2017Alto Metals Limited Additional ASX Information The following additional information is required by the Australian Securities Exchange. The information is current as at 6 October 2017. (a) Distribution schedule and number of holders of equity securities as at 6 October 2017 Fully Paid Ordinary Shares Number of Holders Number of Shares 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,000 and over Total 336 484 221 297 158 1,496 161,296 1,289,847 1,785,692 10,957,341 137,688,643 151,882,819 The number of holders with less than a marketable parcel of 5,495 fully paid ordinary shares as at 6 October 2017 is 836. (b) 20 Largest holders of quoted equity securities as at 6 October 2017 The names of the twenty largest holders of fully paid ordinary shares (ASX code: AME) as at 6 October 2017 are: Rank Holder WINDSONG VALLEY PTY LTD SINOTECH (HONG KONG) CORPORATION LIMITED ENTERPRISE METALS LTD MR STEPHEN STONE CROWNLUXE INVESTMENT LTD MR BRUCE ROBERT LEGENDRE OSSART HOLDINGS PTY LTD MR DERMOT MICHAEL RYAN + MRS VIVIENNE ELEANOR RYAN CITICORP NOMINEES PTY LIMITED MR ROBERT WILMOT CREASY MR DERMOT MICHAEL RYAN + MRS VIVIENNE ELEANOR RYAN PETER ERMAN PTY LIMITED MR CHRISTOPHER CLEGG + MRS TAMARA FRANCIS CLEGG MR DERMOT MICHAEL RYAN + MRS VIVIENNE ELEANOR RYAN AM-AUSTRALIAN MINERALS EXPLORATION PTY LTD MR PETER ROSS BILBE + MRS JANET CHRISTINE BILBE GANDRIA CAPITAL PTY LTD PYC INVESTMENTS PTY LIMITED RICH CHANCE DEVELOP LIMITED Top 20 Shareholders Shares 21,788,531 15,900,000 12,000,000 8,787,500 7,500,000 3,548,500 3,000,000 3,000,000 2,727,747 2,506,904 1,669,237 1,500,000 1,425,000 1,254,237 1,239,200 1,000,000 1,000,000 1,000,000 1,000,000 % 14.35 10.47 7.90 5.79 4.94 2.34 1.98 1.98 1.80 1.65 1.10 0.99 0.94 0.83 0.82 0.74 0.66 0.66 0.66 0.66 92,976,690 61.22 MR WILLIAM JOHN ROBERTSON + MRS JUNE DIANE ROBERTSON 1,129,834 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 62 Annual Report 2017 63 Alto Metals Limited Annual Report 2017 Additional ASX Information (c) Substantial shareholders Substantial shareholders in Alto Metals Limited and the number of equity securities over which the substantial shareholder has a relevant interest as disclosed in substantial holding notices provided to the Company are listed below: Holder WINDSONG VALLEY PTY LTD SINOTECH (HONG KONG) CORPORATION LIMITED ENTERPRISE METALS LTD MR STEPHEN STONE (d) Unquoted Securites Shares 21,788,531 15,900,000 12,000,000 8,787,500 % 14.35 10.47 7.90 5.79 The Company issued 25,000,000 performance shares for nil consideration to the vendors of Sandstone Exploration Pty Ltd following approval at a shareholders meeting on 20 May 2016.  These performance shares will convert into 25,000,000 fully paid ordinary shares once an announcement of an inferred JORC 2012 Mineral Resource is made of a tonnage and grade to establish contained metal of at least 500,000 ounces of gold (or other metal equivalent) on the Sandstone tenements any time prior to 23 June 2021. The Company issued 10,750,000 performance rights to Directors and staff on 9 December 2016 following approval at the Annual General Meeting of shareholders on 30 November 2016.  The Performance rights were issued in four tranches with the following hurdle rates: Class Performance Rights granted to Directors and Staff Expiry Date Performance Condition A B C D 2,687,500 9 December 2017 the Company’s announcing to the ASX of an Inferred Mineral Resource (as defined by a Competent Person in accordance with JORC Code 2012) of at least 500,000 oz Au of at least 1.5g/t 2,687,500 9 December 2018 the Company’s announcing to the ASX of an Inferred Mineral Resource (as defined by a Competent Person in accordance with JORC Code 2012) of at least 1,000,000 oz Au of at least 1.5g/t 2,687,500 2,687,500 9 June 2019 the Company’s announcing to the ASX of a 20,000 oz Au sold 9 December 2019 the Company’s announcing to the ASX 50,000 oz Au sold (e) Restricted Securities as at 6 October 2017 There were no restricted securities on issue as at 6 October 2017 (f) Voting Rights All fully paid ordinary shares carry one vote per ordinary share without restriction. Unquoted options have no voting rights. (g) Corporate Governance The Board of Alto Metals Limited is committed to achieving and demonstrating the highest standards of Corporate Governance. The Board is responsible to its Shareholders for the performance of the Company and seeks to communicate extensively with Shareholders. The Board believes that sound Corporate Governance practices will assist in the creation of shareholder wealth and provide accountability. In accordance with ASX Listing Rule 4.10.3, the Company has elected to disclose its Corporate Governance policies and its compliance with them on its website, rather than in the Annual Report. Accordingly information about the Company’s Corporate Governance practices is set out on the Company’s website at www.altometals.com.au 62 63 Alto Metals Limited Tenement Report As at 30 June 2017 Project Sandstone Sandstone Sandstone Sandstone Sandstone Sandstone Sandstone Sandstone Gascoyne Marmion Yalgoo Yalgoo Tenement Interest Held State Lease Status Holder E57/1029 E57/1030 E57/1031 E57/1033 E57/1044 E57/1054 P57/1377 P57/1378 E09/2204 E29/980 E59/2180 E59/2060 100%** 100%** 100%** 100%** 100%** 100%** 100% 100% 100% 100% 100% 100% WA WA WA WA WA WA WA WA WA WA WA WA Granted Granted Granted Granted Granted Sandstone Exploration Pty Ltd Sandstone Exploration Pty Ltd Sandstone Exploration Pty Ltd Sandstone Exploration Pty Ltd Sandstone Exploration Pty Ltd Application Sandstone Exploration Pty Ltd Granted Granted Granted Granted Granted Granted Sandstone Exploration Pty Ltd Sandstone Exploration Pty Ltd Alto Metals Limited Alto Metals Limited Alto Metals Limited Alto Metals Limited Annual Report 2017 64 PB www.altometals.com.au 

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