AuKing Mining Limited
ABN 29 070 859 522
ANNUAL REPORT
For the year ended 31 December 2018
AuKing Mining Limited
2018 Annual Report
CORPORATE DIRECTORY
AuKing Mining Limited A.C.N 070 859 522
Board of Directors
Dr Huaisheng Peng (Chairman)
Mr Paul Williams (Managing Director)
Mr Zewen (Robert) Yang (Executive Director)
Mr Qinghai Wang (Non-Executive Director)
Head Office
Suite 11, Level 4
320 Adelaide Street
Brisbane QLD 4000
Company Secretary
Mr Paul Marshall
ASX Code: AKN
Auditors
Ernst and Young
Level 51
111 Eagle Street
Brisbane QLD 4000
Telephone:
Email:
Website:
07 3535 1208
admin@aukingmining.com
www.aukingmining.com
Share Registry
Link Market Services Limited
Level 21
10 Eagle Street
Brisbane QLD 4000
Telephone:
Fax:
Website:
07 3011 3333
07 3011 3100
www.ey.com
Telephone:
Facsimile:
Website:
1300 554 474
02 9287 0303
www.linkmarketservices.com.au
Page 2 of 40
AuKing Mining Limited
2018 Annual Report
CONTENTS
Directors’ Report
Company Overview and Strategy
Review of Operations
Directors and Officers
Financial Results
Future Developments
Remuneration Report
Auditor's Independence Declaration
Additional Stock Exchange Information
Annual Financial Report
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
4
4
6
7
8
9
15
16
17
18
19
20
21
36
37
Page 3 of 40
AuKing Mining Limited
2018 Annual Report
COMPANY OVERVIEW AND STRATEGY
The principal activities of the Company and its controlled entities during the year comprised:
Ø Conducting an initial 11 hole exploration drilling program at the La Dura gold/silver project in Mexico and assessment
of the results of that program;
Ø Disposal of the Company’s remaining mineral tenures in northern Queensland; and
Ø Ongoing Identification and assessment of copper, gold and other project opportunities for acquisition – both in
Australia and overseas.
REVIEW OF OPERATIONS
Projects
AKN’s Board continues to focus on transforming the Company into a substantial mid-tier mining group, with a primary
focus on acquiring and developing near-term copper, gold and other base metal production activities (both locally and
overseas).
Bonito Minerals - La Dura, Mexico
On 27 April 2017, the Company announced that it had entered into a binding term sheet with Bonito Minerals Pty Ltd
(“Bonito”), the holder of an option to purchase five (5) mining concessions that comprise the La Dura project in Mexico.
The La Dura project is located approximately 275kms NW of the city of Durango, Durango State and locally about 2.3km
E of the village of El Durazno. Average altitude of the project area is 2,200m above sea level. The project sits within the
famous Sierra Madre Occidental – a belt that has historically produced approximately 40 million ounces of gold and 2
billion ounces of silver over the last 400 years. The significant resources and production activities from the Sierra Madre
Occidental help Mexico to become the largest producer of silver in the world, with 189.5Moz of silver produced in 2015
(20% of world production).
Bonito’s exploration team commenced preparations for an initial exploration drilling program that was carried out at La
Dura in late November 2017 and was finalized in mid-January 2018. Approximately 1700m of reverse circulation (RC)
drilling was completed in this program. Bonito conducted the initial RC drill program based on early sampling results and
before full geological mapping or target definition was completed within the concession area. Drill sites were selected
based on existing roads, minimal site disturbance, ease of access and quickest environmental approval rather than
geological merit as the primary factor. Care had to be taken not to intersect existing workings since the survey accuracy
of the workings had not been verified. This further affected the outcome of the drilling program, with drill holes being
located at safe distances from the old mine workings, which may also have limited the goals of the program.
During the drilling program completed in early 2018, 11 drill holes were drilled at 10 drill sites. Drill hole number LD-006
was lost because of encountering bad ground condition, including historic workings that were not anticipated. LD-007
was drilled on the same drill pad but at a small offset and at a steeper angle. Both gold and silver assays were less than
anticipated. However, the zones of mineralization intersected could be in the upper levels of an epithermal system and
should be further tested by core drilling deeper into the system. Gold assays were from below detection to a high of
7.83g/t and a corresponding silver assay of 187g/t (hole LD-007). Silver values ranged from below detection to a high of
297 g/t Ag and a corresponding gold grade of 6.86 g/t Au (hole LD-011).
The drilling program at La Dura exhausted the funds previously contributed by AKN to Bonito. To carry out further
exploration activities, Bonito required additional funding. After discussions during the course of the year, no agreement
was reached between AKN and Bonito to provide additional funding. As a result, no further activities were conducted at
La Dura and the owner of the concessions lapsed the option agreement held by Bonito. There remains a chance that
discussions might be re-established with the La Dura concession owner, but there can be no certainty with this.
Corporate Activities
AKN management continued to review and assess (in conjunction with JCHX Group management) various new copper,
gold and other project opportunities for potential acquisition. These projects were situated both in Australia and overseas.
No concluded agreement has yet been achieved and the review activities are ongoing.
Page 4 of 40
AuKing Mining Limited
2018 Annual Report
DIRECTORS AND OFFICERS
The following persons were directors of AuKing Mining Limited (‘AKN’ or ‘the Company’) during the whole of the financial
period and up to the date of this report, unless stated:
Dr Huaisheng Peng
Non-Executive Chairman, BE (Mining), Executive MBA, PhD (Science)
(Appointed 6/12/2016)
Dr Peng is a Chinese citizen and professional senior mining engineer with over 25 years’ experience in the mining sector.
He was born in 1964 and obtained a Mining Engineering Bachelor degree from the Northeast University in Shenyang,
Liaoning, an EMBA degree from Tsinghua University, Beijing, and a PhD in Science from Central South University at
Changsha, China. He is also a supervisor of PhD degree applicants.
From August 1984 to December 2007, Dr.Peng served in the China Nonferrous Engineering and Research Institute
successively as Engineer, Senior Engineer, Vice Director, Vice President, and Deputy General Manager of China ENFI
Engineering Corporation (China’s top engineering firm). Between 2008 and mid-2014 Dr Peng served in various roles
with Aluminum Corp of China (“Chinalco”) including Executive Director and CEO of Hong Kong Stock Exchange-listed
Chinalco Mining International Ltd (“CMI”). During this period Dr Peng oversaw construction and development of the large
Toromocho copper mine in Peru as well as the stock market listing of CMI in Hong Kong.
Dr Peng is currently President of JCHX Group Co Ltd and a Director of Shanghai Stock Exchange-listed JCHX Mining
Management Co Ltd (‘JCMM’).
Mr Paul Williams
Managing Director, LLB, BA.
(Appointed 6/3/2013)
Mr Williams holds both Bachelor of Arts and Law Degrees from the University of Queensland and practised as a corporate
and commercial lawyer with Brisbane legal firm Hopgood Ganim for 17 years. He ultimately became an equity partner of
that firm before joining Eastern Corporation as their Chief Executive Officer in August 2004. In mid-2006 Mr Williams joined
Mitsui Coal Holdings in the role of General Counsel, participating in the supervision of the coal mining interests and business
development activities within the multinational Mitsui & Co group.
Mr Williams is well known in the Brisbane investment community as well as in Sydney and Melbourne and brings to the
AKN Board a broad range of commercial and legal expertise – especially in the context of mining and exploration
activities. He also has a strong focus on corporate governance and the importance of clear and open communication of
corporate activity to the investment markets.
Mr Williams is a founding member of Equine Learning for Futures Inc., a charitable organization based in SE Queensland
which provides horse-based workshops and programs for disadvantaged children and youths.
Mr Zewen Yang
Executive Director, BA, MComm, MAICD
(Appointed 31/7/2007)
Mr Yang has more than 25 years’ experience in mineral resources trading and project investment areas in China and
Australia. He has previously worked for China Non-Ferrous Metals Import and Export Company and has been with the
Chinalco Yunnan Copper Industry (Group) Co. Limited since March 2004.
He has a Bachelor of Arts degree majoring in Economics and specialising in International Business from Sichuan
University, China and a Masters degree of Commerce majoring in International Business from University of New South
Wales.
Mr Qinghai Wang
Non-Executive Director, MMGT and Fin
(Appointed 6/12/2016)
Mr Wang is a Chinese citizen and holds a Masters Degree in Management and Finance from the University of Bath in
the United Kingdom.
Mr Wang is currently Vice President and Director of JCMM and also the sole Director of AKN’s largest shareholder,
Bienitial International Industrial Co Ltd.
Mr. Wang previously served at JCMM in the roles of Auditor, Vice Manager of Legal & Securities Department, General
Manager of HR Management Centre, Assistant President and Vice President. In his current position Mr Wang supervises
the Operational Management and Information Technology within JCHX Mining Management Co Ltd.
Page 5 of 40
AuKing Mining Limited
2018 Annual Report
Interests in the shares and options of the Company
As at the date of this report, the interests of the Directors in the shares and options of AuKing Mining Limited are shown
in the table below:
Director
Huaisheng Peng
Qinghai Wang *
Paul Williams
Zewen Yang
Ordinary
Shares
-
349,018,230
10,707,173
-
* Shares are held by Bienitial International Industrial Co Ltd. Mr Wang is a Director of Bienitial International Industrial Co Ltd.
COMPANY SECRETARY
Mr Paul Marshall was the Secretary of AuKing Mining Limited throughout the period and until the date of this report.
Paul Marshall
Company Secretary and Chief Financial Officer, LLB, ACA
Paul Marshall is a Chartered Accountant. He holds a Bachelor of Law degree, and a post Graduate Diploma in Accounting
and Finance. He has 30 years professional experience having worked for Ernst and Young for ten years, and
subsequently twenty years spent in commercial roles as Company Secretary and CFO for a number of listed and unlisted
companies mainly in the resources sector. He has extensive experience in all aspects of company financial reporting,
corporate regulatory and governance areas, business acquisition and disposal due diligence, capital raising and company
listings and company secretarial responsibilities.
PRINCIPAL ACTIVITIES
The principal activity of the Company and its controlled entities (‘Consolidated Entity’) during the period was mineral
exploration. There were no significant changes in the nature of the Consolidated Entity’s principal activity during the
period.
DIVIDENDS PAID OR RECOMMENDED
There were no dividends paid or recommended during the period (2017: $nil).
FINANCIAL RESULTS
Capital structure
At 31 December 2018 the Company had 932,584,461 ordinary shares on issue.
Financial position
The Consolidated Entity had net liabilities of $1,067,903 and a working capital deficit of $1,117,060 at 31 December 2018.
The Consolidated Entity’s is currently reliant on funding from its major shareholder via a shareholder loan.
Treasury policy
The Consolidated Entity does not have a formally established treasury function. The Board is responsible for managing
the Consolidated Entity’s currency risks and finance facilities. The Consolidated Entity does not currently undertake
hedging of any kind.
Liquidity and funding
At 31 December 2018 the Consolidated Entity had cash reserves of $80,295. During January 2019, JCHX loan facility
of $1.0 million (fully drawn at year end) was increased by $500,000 to $1.5 million and the loan maturity date was deferred
until 31 December 2019..
Page 6 of 40
AuKing Mining Limited
2018 Annual Report
Operating Results
Revenue
As an early stage exploration company, AuKing Mining Limited does not generate any recurring income other than interest
on its cash holdings.
Expenses
The Consolidated Entity’s main expenses are as follows:
Employment and consultancy expenses
Depreciation expense
Project generation and other exploration expenditure
Administration expenses
Finance costs
Total
December 2018
$
751,872
5,867
154,576
237,959
46,673
1,196,947
Comparison with Prior Year
For the 12 months ended 31 December 2018, the loss for the Consolidated Entity after providing for income tax was
$1,248,372 (2017: $2,248,131)
After excluding the impact of the following non-recurring items from the prior year:
Ø Equity accounted share of loss on Bonito Minerals in the prior year and;
Ø Gains on disposal of equipment and exploration expenditure
the loss for the year ended December 2018 was in line with the loss for the year ended December 2017:
December 2018 December 2017
$
$
Loss after income tax
(1,248,372)
(2,238,131)
Adjustments for non-recurring items
Equity accounted share of loss on Bonito Minerals
Gains on disposal of equipment and exploration expenditure
-
-
1,000,000
(19,591)
Non-IFRS Adjusted Loss after Income Tax*
(1,248,372)
(1,257,722)
* Non- IFRS Adjusted Loss after Income Tax is a non-IFRS measure however the Directors believe that it is a readily calculated
measure that is appropriate to the circumstances of the Group.
All else being equal, the Company expects a similar level of operating costs in 2019 with additional expenditure on project
generation activities.
OPTIONS
As at the date of this report there were no options on issue.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the nature of AKN’s principal activities during the year.
Page 7 of 40
AuKing Mining Limited
2018 Annual Report
AFTER BALANCE DATE EVENTS
There have been no events since 31 December 2018 that impact upon the financial report.
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
The growth strategy of AKN is based on two key foundations:
Ø
Ø
Exploration and development of early-stage (but prospective) prospects that are secured by way of joint venture
and farm-in arrangements; and
Acquisition of interests in projects that are either in production or close to production,
both of which are aimed at AKN having significant holdings in operating (and therefore cashflow-generating) projects
within the next two years as well as a pipeline of projects capable of becoming mining operations over the medium term.
As a consequence, this growth strategy will be achieved by:
Ø
Ø
Ø
Careful management of AKN treasury;
Focus on high quality copper, gold and other mineral projects; and
Maintenance of a strong exploration and evaluation team that has been carefully recruited. AKN is maintaining
its technical resources in order to grow the business in the current environment of opportunity.
ENVIRONMENTAL ISSUES
The Company is subject to environmental regulation in relation to its exploration activities. There are no matters that
have arisen in relation to environmental issues up to the date of this report.
Page 8 of 40
AuKing Mining Limited
2018 Annual Report
REMUNERATION REPORT (AUDITED)
This report details the nature and amount of remuneration for Directors and Key Management Personnel of the Company.
Remuneration Policy
The performance of the Company depends upon the quality of its Directors and Executives. To prosper, the Company
must attract, motivate and retain highly skilled Directors and Executives.
Remuneration Committee
The Board does not have a Remuneration and Nomination Committee. The full Board is responsible for determining and
reviewing compensation arrangements for the Directors and the Executive team.
The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis
by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder
benefit from the retention of a high quality Board and Executive team.
Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe
benefits. It is intended that the manner of payments chosen will be optimal for the recipient without creating undue cost
for the Company.
Remuneration structure
It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and
Executive team by remunerating Directors and other Key Management Personnel fairly and appropriately with reference
to relevant employment market conditions for similar companies.
To assist in achieving this objective, the Board considers the nature and amount of Executive Directors’ and Officers’
emoluments alongside the Company’s operational performance, specifically considering their success in:
Ø
Ø
Ø
Ø
Ø
Ø
Ø
the identification of prospective tenements;
subsequent design and execution of exploration programs;
negotiating joint venture arrangements on terms favourable to the Company;
investigating other potential acquisition opportunities and negotiating the completion of those acquisitions;
expanding the level of mineral resources under the control of the company;
carrying out exploration programs in a timely and cost effective manner; and
liaising with stockbrokers, investment banks and market participants generally.
The expected outcomes of the remuneration structure are the retention and motivation of key Executives, the attraction
of quality management to the Company and performance incentives which allow Executives to share the rewards of the
success of the Company.
In accordance with best practice corporate governance, the structure of Non-Executive Director remuneration and
Executive Officers and Senior Management remuneration is separate and distinct.
Non-Executive Director Remuneration
The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and
retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.
The Constitution of AuKing Mining Limited and the ASX Listing Rules specify that the Non-Executive Directors are entitled
to remuneration as determined by the Company in the Annual General Meeting to be apportioned among them in such
manner as the Directors agree and, in default of agreement, equally. The maximum aggregate remuneration currently
approved by shareholders for non-executive Directors’ fees is for a total of $250,000 per annum.
If a Non-Executive Director performs extra services, which in the opinion of the Directors are outside the scope of the
ordinary duties of the Director, the Company may remunerate that Director by payment of a fixed sum determined by the
Directors in addition to or instead of the remuneration referred to above. Non-Executive Directors are entitled to be paid
travel and other expenses properly incurred by them in attending Director's or General Meetings of the Company or
otherwise in connection with the business of the Company.
Dr Peng and Mr Wang have suspended payment of their director fees until the Company’s financial position has improved.
Page 9 of 40
AuKing Mining Limited
2018 Annual Report
Executive Directors and Senior Management remuneration
The Company aims to reward the Executive Directors and Senior Management with a level and mix of remuneration
commensurate with their position and responsibilities within the Company and so as to:
Ø reward Executives for company and individual performance against targets set by reference to appropriate
benchmarks;
Ø align the interests of Executives with those of shareholders;
Ø link reward with the strategic goals and performance of the Company; and
Ø ensure total remuneration is competitive by market standards.
The remuneration of the Managing Director and Senior Management may from time to time be fixed by the Board. As
noted above, the Board’s policy is to align Executive objectives with shareholder and business objectives by providing a
fixed remuneration component and offering long-term incentives. The level of fixed remuneration is set so as to provide
a base level of remuneration which is both appropriate to the position and is competitive in the market.
Fixed remuneration is reviewed annually by the Board, and the process consists of a review of both the Company’s
operational performance and individual performance, relevant comparative remuneration in the market and where
appropriate, external advice provided by executive remuneration consultants.
In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having
regard to the overall performance of the Company and the performance of the individual.
Employment contracts
It is the Board’s policy that employment agreements are entered into with all Directors, Executives and employees.
The current employment agreement with the Managing Director has a six month notice period and in the case of the
Executive Directors and with the CFO, there is a three month notice period.
All other employment agreements have one month (or less) notice periods. No current employment contracts contain
early termination clauses.
No retirement allowances for non-executive directors are paid.
Managing Director
The Managing Director, Mr Paul Williams is employed under an executive services contract entered into in March 2013.
The contract had an initial three year period. The contract continued on the same terms and conditions for the year
ended 31 December 2017 and remains current at the date of this report. Under the terms of the current contract Mr
Williams’ current remuneration package includes the following:
Ø Base salary of $300,000 per annum, inclusive of superannuation;
From 1 January 2019, Mr Williams has elected to reduce his remuneration package by 25% to $225,000 per annum.
The remuneration package will be re-assessed when the Company’s financial position has improved.
Executive Directors
An Executive Director, Mr Zewen Yang, is employed under an executive services contract entered into in July 2008. The
contract had a service term of three years and continues to be extended pending a formal review is expected to be
completed in the first half of 2018. Under the terms of the current contract Mr Yang’s current remuneration package
includes the following:
Ø Base salary of $156,120.
From 1 January 2019, Mr Yang has elected to reduce his remuneration package by 25% to $117,090 per annum. The
remuneration package will be re-assessed when the Company’s financial position has improved.
Page 10 of 40
AuKing Mining Limited
2018 Annual Report
Mr Yang is also able to earn a bonus as determined by the Board. The bonus will be determined by the Board of the
Company at the end of each financial year. Payment of any or all of the Bonus will be at the sole discretion of the Company
acting reasonably. In exercising its discretion and in determining whether, acting reasonably, all or part of the bonus is to
be paid, the Board of the Company must consider matters including, but not limited to:-
· Whether the Executive has met performance objectives to be agreed to by the Board of the Company and the
Executive from time to time;
·
·
·
The performance of the Company’s share price on ASX that may be attributed to the Executive’s performance;
The Company’s ability to secure relevant acquisitions to be made by the Company; and
The Company’s financial performance for the preceding twelve (12) month period and specifically, whether the
Company has successfully grown revenue.
Company Secretary and CFO
The Company Secretary and CFO, Mr Paul Marshall, is engaged on an on-going consultancy style agreement for the
provision of services as company secretary and chief financial officer. Services are invoiced monthly based on services
provided. The contract provides for a three month notice period.
From 1 January 2019, Mr Marshall has elected to reduce his fees by 25% to $39,000 per annum. The fees will be re-
assessed when the Company’s financial position has improved.
Page 11 of 40
AuKing Mining Limited
2018 Annual Report
(a) Details of Directors and other Key Management Personnel
Directors
Ø Huaisheng Peng Non-Executive Chairman
Ø Qinghai Wang
Ø Paul Williams
Ø Zewen Yang
Non-Executive Director
Managing Director
Executive Director
Key Management Personnel
Ø Paul Marshall
Company Secretary and CFO
(b) Remuneration of Directors and other Key Management Personnel
Short Term
Post-Employment
Salary &
Fees
Cash
Bonus
Other
Superan-
nuation
Retirement
benefits
Share-based
Payments
Options and
performance
shares
Total
Performance
Related %
% consisting
of equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,049
-
-
20,049
-
-
-
-
-
-
-
-
-
-
-
-
36,000
30,000
300,000
156,120
52,000
574,120
-
-
-
-
-
-
-
-
-
-
-
-
From 1 April 2018, Dr Peng and Mr Wang have suspended payment of their director fees until the Company’s financial
position has improved. Director fees owing to Dr Peng and Mr Wang at 31 December 2018 are $27,000 and $22,500
respectively.
Short Term
Post-Employment
Salary &
Fees
Cash
Bonus
Other
Superan-
nuation
Retirement
benefits
Share-based
Payments
Options and
performance
shares
Total
Performance
Related %
% consisting
of equity
31 December 2018
Directors
Huaisheng Peng
Qinghai Wang
Paul Williams
Zewen Yang
36,000
30,000
279,951
156,120
Key Management Personnel
Paul Marshall
52,000
554,071
31 December 2017
Directors
Huaisheng Peng
Qinghai Wang
Paul Williams
Zewen Yang
36,000
30,000
273,973
155,520
Key Management Personnel
Paul Marshall
52,000
547,493
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,027
-
-
26,027
-
-
-
-
-
-
-
-
-
-
-
-
36,000
30,000
300,000
155,520
52,000
573,520
-
-
-
-
-
-
-
-
-
-
-
-
Page 12 of 40
AuKing Mining Limited
2018 Annual Report
(c) Shares issued on exercise of remuneration options or performance shares
There were no shares issued on the exercise of compensation options or performance shares during the period
(d) Director and Key Management Personnel Equity Holdings
Director/Key Management Personnel share holdings (number of shares)
December 2018
Directors
Huaisheng Peng
Qinghai Wang 1
Paul Williams
Zewen Yang
Opening
Balance
Granted as
remuneration
Purchased
Net change on
appointment/
resignation
-
349,018,230
10,707,173
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Closing
Balance
-
349,018,230
10,707,173
-
5,000,000
Key Management Personnel
Paul Marshall
5,000,000
1 Shares are held by Bienitial International Industrial Co Ltd. Mr Wang is a Director of Bienitial International Industrial Co Ltd.
(e) Additional Information
The factors that are considered to affect shareholder return since over the last 5 financial periods are summarised below:
Measures
Share price at end of financial period
Market capitalisation at end of financial period ($M)
December
2018
$
0.002
1.87
December
2017
$
0.006
5.60
December
2016
$
0.008
7.10
December
2015
$
0.026
12.30
June
2014
$
0.025
6.96
Loss for the financial period
1,248,372
2,238,131
5,059,394
9,112,524
11,331,155
Cash investment in exploration programs/project generation
154,570
750,000
82,561
1,431,528
2,630,260
Director and Key Management Personnel remuneration
574,120
573,520
347,996
543,520
675,296
Given that the remuneration is commercially reasonable, the link between remuneration, Company performance and
shareholder wealth generation is tenuous, particularly in the exploration and development stage of a minerals company.
Share prices are subject to the influence of international metal prices and market sentiment towards the sector and
increases or decreases may occur independently of executive performance or remuneration.
The Company may issue options to provide an incentive for directors and key management personnel which, it is believed,
is in line with industry standards and practice and is also believed to align the interests of directors and key management
personnel with those of the Company’s shareholders.
End of Remuneration Report
Page 13 of 40
AuKing Mining Limited
2018 Annual Report
INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND AUDITOR
Each Director and the Secretary of the Company has the right of access to all relevant information.
The Company has insured all of the Directors of AuKing Mining Limited. The contract of insurance prohibits the disclosure
of the nature of the liabilities covered and amount of the premium paid. The Corporations Act does not require disclosure
of the information in these circumstances.
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of
its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No
payment has been made to indemnify Ernst & Young during or since the financial year.
PROCEEDINGS ON BEHALF OF THE COMPANY
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 purposes 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.
DIRECTORS’ MEETINGS
The number of meetings of Directors (including meetings of committees of directors) held during the period and the
number of meetings attended by each Director was as follows:
Huaisheng Peng
Qinghai Wang
Paul Williams
Zewen Yang
Directors’ Meetings
A
4
4
4
4
B
4
4
4
4
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the period
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor's expertise and experience with the Company and/or the group are important.
No non-audit services were provided by the auditor of the parent entity, Ernst & Young and its related practices.
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s Independence Declaration forms part of the Directors’ Report.
Signed in accordance with a resolution of the directors.
Paul Williams
Director
28 March 2019
Page 14 of 40
AuKing Mining Limited
2018 Annual Report
ADDITIONAL STOCK EXCHANGE INFORMATION
Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as follows.
The information is current as at 20 March 2019.
(a)
Distribution of equity securities – AKN Ordinary Fully Paid Shares
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable Parcels
(b)
Twenty largest holders
Securities
No. of holders
910,750,544
19,053,609
2,250,790
494,774
34,744
932,584,461
56,586,691
269
476
276
154
131
1,306
1,187
%
20.60%
36.45%
21.13%
11.79%
10.03%
100.00%
90.89%
Rank
Name
No. Shares
%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
BIENITIAL INTERNATIONAL INDUSTRIAL CO LTD#
YUNNAN COPPER INDUSTRY (GROUP) CO LIMITED#
BILLY FLESHMAN
NETSHARE NOMINEES PTY LTD
MR PAUL ROBERT WILLIAMS & MS JILL CAROLINE STRACHAN
MR PETER GERARD TIGHE & MRS PATRICIA JOAN TIGHE
MR NORMAN JOSEPH ZILLMAN
MR BARRY EDWARD TANTON & MRS ELIZABETH MARY TANTON
ELLIOTT NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
MR ANTHONY JOHN BARBER
MR JONATHAN PAUL KERSHAW MARSHALL
MR IANAKI SEMERDZIEV
LEMUEL INVESTMENTS LIMITED
PREMAR CAPITAL NOMINEES PTY LIMITED
MR GREGORY JOHN BURTON & MRS CATHERINE BEATRICE BURTON
MR JEFFREY HOWARD LATIMER & MRS JUDITH ANN LATIMER
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR LAWRENCE CHI-YUN LEE
INDEPENDANT MILLING PTY LTD
349,018,230
299,922,326
15,163,208
13,254,108
10,357,173
10,033,333
7,980,343
7,500,000
7,150,000
6,342,557
5,353,696
5,000,000
4,750,000
4,000,000
3,633,333
3,525,000
3,500,000
3,111,016
3,069,988
3,000,000
37.42%
32.16%
1.63%
1.42%
1.11%
1.08%
0.86%
0.80%
0.77%
0.68%
0.57%
0.54%
0.51%
0.43%
0.39%
0.38%
0.38%
0.33%
0.33%
0.32%
Total
Balance of register
Grand Total
765,664,311
166,920,150
932,584,461
82.10%
17.90%
100.00%
# Substantial Shareholder
(c)
Voting Rights
All fully paid ordinary shares carry one vote per share without restriction.
(d)
Interests in Exploration Tenements
During the course of 2018, AuKing Mining Limited held in mining and exploration tenements comprising:
· ML 1631 (Pentland, Nth Qld), which was surrendered in late 2018; and
·
30% interest in Bonito Minerals, the option holder of the La Dura concessions in Mexico – which option lapsed in early
2019.
Page 16 of 40
AuKing Mining Limited
2018 Annual Report
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018
Finance income
Gain on disposal of plant and equipment
Gain on disposal of exploration expenditure
Fair value movement on available-for-sale financial assets
Employment and consultancy expenses
Depreciation expense
Project generation and other exploration costs expensed
Administration expenses
Finance costs
Share of equity accounted associate loss
Loss before income tax
Income tax expense
Loss for the period
Loss after income tax
Note
4
8
3
13
2018
$
575
-
-
(52,000)
(751,872)
(5,867)
(154,576)
(237,959)
(46,673)
-
(1,248,372)
2017
$
8,691
4,091
15,500
(1,500)
(783,058)
(19,483)
(81,500)
(380,324)
(548)
(1,000,000)
(2,238,131)
-
-
(1,248,372)
(2,238,131)
(1,248,372)
(2,238,131)
Other comprehensive income/(loss)
Other comprehensive income for the period, net of tax
-
-
Total comprehensive loss
(1,248,372)
(2,238,131)
Earnings per share
Basic and diluted loss per share
12
Cents
(0.13)
Cents
(0.25)
The Consolidated Statement of Comprehensive Income should be read in conjunction with the Notes to the Consolidated Financial Statements.
Page 17 of 40
AuKing Mining Limited
2018 Annual Report
Consolidated Balance Sheet
As at 31 December 2018
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Other receivables
Other financial assets
Equity accounted investment
Plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Employee benefit provisions
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
2
5
4
3
6
8
7
9
10
2018
$
80,295
45,246
29,464
155,005
3,850
42,000
-
3,307
49,157
2017
$
370,334
9,594
29,595
409,523
12,987
94,000
-
6,049
113,036
204,162
522,559
163,308
1,047,221
61,536
1,272,065
46,405
250,548
45,137
342,090
1,272,065
342,090
(1,067,903)
180,469
42,630,609
379,457
(44,077,969)
(1,067,903)
42,630,609
389,457
(42,839,597)
180,469
The Consolidated Balance Sheet should be read in conjunction with the Notes to the Consolidated Financial Statements.
Page 18 of 40
AuKing Mining Limited
2018 Annual Report
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Consolidated Entity
Share
Capital
$
Reserves
$
Accumulated
Losses
$
Total
Equity
$
Balance at 1 January 2017
42,380,609
379,457
(40,591,466)
2,168,600
Transactions with owners in their capacity as owners
Issue of share capital
Share issue costs
250,000
-
Comprehensive income
Loss after income tax
Other comprehensive income
-
-
-
-
-
-
-
-
250,000
-
(2,238,131)
-
(2,238,131)
-
Balance at 31 December 2017
42,630,609
379,457
(42,829,597)
180,469
Balance at 1 January 2018
42,630,609
379,457
(42,829,597)
180,469
Transactions with owners in their capacity as owners
Issue of share capital
Share issue costs
Comprehensive income
Loss after income tax
Other comprehensive income
-
-
-
-
-
-
-
-
-
-
-
-
(1,248,372)
-
(1,248,372)
-
Balance at 31 December 2018
42,630,609
379,457
(44,077,969)
(1,067,903)
The Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements.
Page 19 of 40
AuKing Mining Limited
2018 Annual Report
Consolidated Cash Flow Statement
For the year ended 31 December 2018
Note
2018
$
2017
$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Interest received
(1,046,627)
(1,238,687)
575
8,691
Net cash used in operating activities
2
(1,046,052)
(1,229,996)
CASH FLOWS FROM INVESTING ACTIVITIES
Security deposit refunds
Payments for plant & equipment
Proceeds from the disposal of plant & equipment
Payments for equity accounted investment
Net cash provided by/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Capital raising costs paid
Proceeds from borrowings - shareholder loan
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
9,137
(3,124)
-
-
6,013
-
-
750,000
750,000
4,070
-
4,091
(750,000)
(741,839)
-
-
250,000
250,000
(290,039)
370,334
(1,721,835)
2,092,169
80,295
370,334
2
2
The Consolidated Cash Flow Statement should be read in conjunction with the Notes to the Consolidated Financial Statements.
Page 20 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Introduction
This financial report covers the Consolidated Entity of AuKing Mining Limited (the “Company”) and its controlled entities
(together referred to as the “Consolidated Entity”). AuKing Mining Limited is a listed public company, incorporated and
domiciled in Australia. The Consolidated Entity is a for-profit entity for the purpose of preparing the financial statements.
Operations and principal activities
The principal activity of the Consolidated Entity is mineral exploration.
Currency
The financial report is presented in Australian dollars, which is the functional currency of the Company, and is rounded to
the nearest one dollar.
Authorisation of financial report
The financial report was authorised for issue on 28 March 2019.
Comparative figures
When required by accounting standards comparative figures have been adjusted to conform to changes in presentation
for the current financial period.
Basis of preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards, and the
Corporations Act 2001.
Compliance with IFRS
The consolidated financial statements are general purpose financial statements which have been prepared in accordance
with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the
Corporation Act 2001. The consolidated financial statements comply with International Financial Reporting Standards
(IFRSs) adopted by the International Accounting Standards Board (IASB).
Historical cost convention
The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where
applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Consolidated Entity’s accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements are disclosed below.
Key estimates – impairment
The Consolidated Entity assesses impairment at each reporting date by evaluating conditions specific to the Consolidated
Entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is
determined.
Going Concern
As at 31 December 2018, the Consolidated Entity had cash and cash equivalent of $80,295 and committed, undrawn loan
facilities with a shareholder of $500,000. The cumulative amount of this funding is regarded as sufficient to meet the
Consolidated Entity’s corporate and administrative activities for the six months to 30 June 2019. However, the available
cash and loan facility amounts are not sufficient to:
·
·
Fund for the Consolidated Entity’s corporate and administrative activities beyond 30 June 2019; or
Fund for the Consolidated Entity’s due diligence, analysis and investment in known and emerging investment
opportunities.
Moreover, the maturity date of the Consolidated Entity’s shareholder loan (refer Note 8) is 31 December 2019 at which
time the Consolidated Entity is required to repay the loan and accrued interest amounts in full.
The Consolidated Entity does not generate revenue to fund operations and ongoing investment in exploration activities.
The ability of the Consolidated Entity to continue as a going concern is dependent on its ability to raise additional equity.
Page 21 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Going Concern (continued)
These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Consolidated
Entity’s ability to continue as a going concern and therefore, the Consolidated Entity may be unable to realise its assets
and discharge its liabilities in the normal course of business.
If a project is acquired, the Consolidated Entity will need to conduct further capital raising activities, with both existing
shareholders (by way of an entitlement offer) and to new investors, to fund the acquisition and evaluation of the project.
Depending on the nature of the acquisition and project, debt financing may also be secured.
The Consolidated Entity has primarily been funded over the last year through a loan from its largest shareholder, resulting
in a net asset deficiency at 31 December 2018 of $1,067,903. Proceeds from future capital raising activities will be used
to settle this shareholder loan and return the Consolidated Entity’s net assets and working capital to a surplus.
As at the date of this report, no firm funding facilities are in place. If there are delays in sourcing equity funding for planned
activities when the need arises, the Company has plans in place to scale back its activities and budgeted expenditure until
adequate funding is obtained.
The Directors are confident of securing funds as and when necessary to meet the Consolidated Entity’s obligations as and
when they fall due. On this basis,, the Directors have prepared the financial statements on a going concern basis, which
contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the
ordinary course of business.
.
No adjustment has been made to the financial statements relating to the recoverability and classification of recorded asset
amounts or to the amounts and classification of liabilities that might be necessary should the Consolidated Entity not be
able to continue as a going concern.
Page 22 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(a)
New accounting standards and interpretations
The Consolidated Entity applied AASB 9 Financial Instruments (“AASB 9”) for the first time from 1 July 2018. The nature and effect of the changes, as a result of the adoption of the new standard,
is described below.
Other than the changes described below, the accounting policies adopted are consistent with those of the previous financial year. Several other amendments and interpretations applied for the
first time during the half-year, including AASB 15 Revenue form Contracts with Customers, but these changes did not have an impact on the Consolidated Entity’s financial statements and
hence, have not been disclosed. The Consolidated Entity has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.
AASB 9: Financial Instruments
AASB 9 which contains accounting requirements for financial instruments, replacing AASB 139 Financial Instruments: Recognition and Measurement. The standard contains requirements in
the areas of classification and measurement, impairment, hedge accounting and de-recognition.
Existing financial assets and liabilities of the Consolidated Entity were assessed in terms of the requirements for AASB 9. In this regard the adoption of AASB 9 will impact on the classification
of financial assets and liabilities:
Financial Instrument
Original measurement category under
AASB 139 (i.e. prior to 1 January 2018)
New measurement category under AASB 9 (i.e. from 1 July 2018)
Cash and cash equivalents
Loans and receivables
Trade and other receivables
Loans and receivables
Financial asset at amortised cost
Financial asset at amortised cost
Other financial assets
Available-for sale financial assets
Financial asset at fair value through profit and loss
Trade and other payables
Financial liability at amortised cost
Financial liability at amortised cost
Borrowings
Financial liability at amortised cost
Financial liability at amortised cost
The Consolidated Entity no longer has any financial assets at fair value through OCI. The changes in classification have not results in any re-measurement adjustments at 1 July 2018. The
Consolidated Entity has adopted AASB 9 retrospectively from 1 July 2018 and has elected not to restate comparative information.
Given the nature of the Group’s business and the nature of its financial assets subject to impairment assessment, there was no material impact arising from the application of the new
impairment requirements of AASB 9. As all of the Consolidated Entity’s trade and other current receivables which it measures at amortised cost are short term (i.e., less than 12 months) and
the Group’s risk management policies in place, the change to a forward-looking expected credit loss approach did not have a material impact on the amounts recognised in the financial
statements.
Page 23 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b)
New Standards and Interpretations Not Yet Adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2018 reporting periods. The Consolidated Entity has decided against early
adoption of these standards. The Consolidated Entity’s assessment of the impact of these new standards and interpretations is set out below:
Reference
IFRS 16
Title
Leases
Summary
The key features of IFRS 16 are as follows:
Lessee accounting
(cid:127)
(cid:127)
(cid:127)
(cid:127)
Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the
underlying asset is of low value.
A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other
financial liabilities.
Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes
non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in
optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option
to terminate the lease.
IFRS 16 contains disclosure requirements for lessees.
Lessor accounting
(cid:127)
(cid:127)
IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to
classify its leases as operating leases or finance leases, and to account for those two types of leases differently.
IFRS 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a
lessor’s risk exposure, particularly to residual value risk.
The new standard will be effective for annual periods beginning on or after 1 January 2019. Early application is permitted, provided
the new revenue standard, IFRS 15 Revenue from Contracts with Customers, has been applied, or is applied at the same date as
IFRS 16.
The Consolidated Entity currently only has one short-term lease for office space and consequently adoption of the above Standard is not expected to have a material impact on the Group's
financial assets or financial position, financial performance or disclosure.
Page 24 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 2 CASH AND CASH FLOW INFORMATION
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of financing and
investing activities, which are disclosed as operating cash flows.
December 2018
December 2017
$
$
Reconciliation of cash flows used in operations with loss after income tax
Loss after income tax
(1,248,372)
(2,238,131)
Non-cash items in loss after income tax
Depreciation
Interest expense
Gain on equity interest
Gain on disposal of plant and equipment
Share of equity accounted associate loss
Loss/(gain) on HMX shares
Movements in assets and liabilities
Other receivables
Other assets
Trade payables and accruals
Provisions
Cash flow from operations
Reconciliation of cash
5,867
46,673
-
-
-
52,000
(35,652)
131
116,902
16,399
19,483
548
1,500
(4,091)
1,000,000
(15,500)
5,839
(1,403)
(17,532)
19,291
(1,046,052)
(1,229,996)
Cash at the end of the financial period as shown in the statements of cash flows is reconciled to items in the balance sheet
as follows:
Cash on hand and at bank
Cash on deposit
70,295
10,000
80,295
327,446
42,888
370,334
Cash and cash equivalents include 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.
Reconciliation of cash and non-cash movements in borrowings for the year
Opening balance at 1 January
250,548
-
Cash movements in borrowings
Drawdowns
Non-cash movements in borrowings
Accrued interest
Closing balance
750,000
250,000
46,673
1,047,221
548
250,548
Page 25 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 3 EQUITY ACCOUNTED INVESTMENTS
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in
the financial and operating policy decisions of the investee, but is not control or joint control over those policies.
Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying
amount of the investment is adjusted to recognise changes in the Consolidated Entity’s share of net assets of the associate
or joint venture since the acquisition date. The statement of profit or loss reflects the Consolidated Entity’s share of the
results of operations of the associate or joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as the Consolidated
Entity. When necessary, adjustments are made to bring the accounting policies in line with those of the Consolidated Entity.
Bonito Minerals
During 2017, the Consolidated Entity entered into an agreement to acquire a 30% interest in Bonito Minerals Pty Ltd
(“Bonito”). Bonito is a private company registered in Australia. Through its wholly owned Mexican subsidiary, Bonito holds
an option to purchase the “La Dura” gold/silver project area across five mining concessions located in Durango State,
Mexico. The primary focus of Bonito is drilling and other exploration activities over the mining concessions.
AKN invested a total of $1,000,000 to acquire 30% of Bonito through a two-staged process:
Ø Payment of $350,000 cash and the issue of $125,000 AKN shares to acquire an initial 14.2% shareholding in Bonito
(completed in July 2017); and
Ø Payment of $400,000 cash and the issue of $125,000 AKN shares in AKN to acquire a further 15.8% interest in Bonito
– (completed in October 2017).
In applying the Consolidated Entity’s accounting policy for exploration costs to Bonito’s underlying financial information (to
ensure uniformity with the Consolidated Entity’s own accounting policy), it was assessed the exploration costs incurred by
Bonito were not sufficiently probable of recovery through the successful development or sale of the Bonito project to satisfy
the Consolidated Entity’s exploration asset recognition criteria.
AKN had an option to acquire additional Bonito shares with the payment of $500,000 to Bonito by 31 January 2018 in
return for a further 6.66% shareholding in Bonito. The Board of AKN has decided not to proceed with the further $500,000
option, and as such this option (and the later $1,000,000 option that was due for exercise by 31 October 2018) has lapsed.
Consistent with the Board’s decision to not proceed with the above option, the Consolidated Entity elected to reduce the
remaining carrying amount of the equity account investment to $nil during 2017.
Reconciliation to carrying amount
December 2018
December 2017
Opening balance
Investments in Bonito
Investment in Bonito - cash
Investment in Bonito – AKN shares
Total investment
Share of loss
Share of loss (30%)
Impairment of residual carrying amount
Total share of loss
Carrying value of equity accounted investment
$
-
-
-
-
-
-
-
-
$
-
750,000
250,000
1,000,000
(204,861)
(795,139)
(1,000,000)
-
Page 26 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 4 OTHER FINANCIAL ASSETS
December 2018
December 2017
$
$
Shares in Hammer Metals Limited (“HMX”)
42,000
94,000
Other financial assets are non-derivative financial assets that are either not suitable to be classified into other categories
of financial assets due to their nature, or they are designated as such by management. They comprise investments in the
equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.
Under AASB 9, the Consolidated Entity’s investment is Hammer Metals Limited is classified as at fair value through profit
and loss and such all gains and losses are reflected in the profit and loss.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair
value measurement hierarchy:
(i)
(ii)
(iii)
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices) (level 2), and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
Level 1 Investments: Quoted prices (unadjusted) in active markets for identical assets
For the year ended 31 December 2018 the value of the listed shares was based on the closing price of Hammer Metals
Limited securities as quoted on the ASX on 31 December 2018. Total unrealized gains/(losses) for the year included in
profit and loss that relate to other financial assets was ($52,000) (2017: $11,500).
NOTE 5 TRADE & OTHER RECEIVABLES
Refund receivable on project generation expenses
GST receivable
Receivables are normally settled within 30 days.
NOTE 6 TRADE & OTHER PAYABLES
Trade payables
Other payables and accrued expenses
Payable to directors *
28,029
17,217
45,246
90,427
23,381
49,500
163,308
-
9,594
9,594
26,071
20,334
-
46,405
A liability is recorded for goods and services received prior to balance date, whether invoiced to the Consolidated Entity or
not. Trade payables are normally settled within 30 days.
* From 1 April 2018, the non-executive directors agreed to suspend payment of their directors’ fees until the Consolidated
Entity’s financial position had improved.
NOTE 7 EMPLOYEE BENEFITS PROVISIONS
Employee benefits
61,536
45,137
Provision is made for the Consolidated Entity’s liability for employee benefits arising from services rendered by employees
to balance 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.
Page 27 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 8 BORROWINGS
Shareholder loan
December 2018
December 2017
$
$
1,047,221
250,548
Shareholder loan
Shareholders loans are measured at amortised cost. Amortised cost is the amount at which the financial liability is
measured at initial recognition less principal repayments and adjusted for any cumulative amortisation of the difference
between that initial amount and the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest expense over the relevant period and is equivalent to the rate that
discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts)
through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the
net carrying amount of the financial liability.
The shareholder loan is unsecured. The facility has a fixed interest rate of 8% per annum. The shareholder loan expires
31 December 2019. The fair value of the shareholder loan approximates its carrying amount at 31 December 2018.
Financing Facilities
The Consolidated Entity has access to the following lines of credit:
Total shareholder loan facility available
Accrued interest on loan
Shareholder loan facility used and accrued interest at balance date
Unused shareholder loan facility at balance date
December 2018
December 2017
$
$
1,000,000
47,221
(1,047,221)
-
1,000,000
548
(250,548)
750,000
On 29 January 2019, the shareholder loan was increased to $1,500,000 and the expiry dated extended to 31 December
2019.
Restrictions as to use or withdrawal
The shareholder loan is not subject to any covenants or restrictions.
Terms and conditions
The shareholder loan may be drawn at any time and have a remaining maturity of 1 year. The shareholder loan is
principal and interest which amortise equally over the loan period.
Page 28 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 9 SHARE CAPITAL
Issued and paid up capital is recognised at the fair value of the consideration received by the Consolidated Entity. Any
transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share
proceeds received.
Fully paid ordinary shares
Ordinary Shares
December
2018
$
December
2017
$
42,630,609
42,630,609
At the beginning of the period
Shares issue for Bonito Stage 1 at $0.053 per
share
Shares issue for Bonito Stage 2 at $0.057 per
share
Share placement at $0.010 per share
Rights issue at $0.006 per share
Share issue expenses
At reporting date
December
2018
$
December
2017
$
December
2018
Number
December
2017
Number
42,630,609
42,380,609
932,584,461
886,914,837
-
-
-
-
-
125,000
125,000
-
-
-
-
-
-
-
-
23,809,443
21,860,181
-
-
-
42,630,609
42,630,609
932,584,461
932,584,461
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of
shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
NOTE 10 RESERVES
Share based payment reserve
Foreign currency translation reserve
December 2018
December 2017
$
$
559,903
(170,446)
389,457
559,903
(170,446)
389,457
Share based payment reserve
The share based payments reserve is used to record the value of share based payments provided to directors and
employees as part of their remuneration.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
Available for sale financial asset reserve
The available for sale financial asset reserve is used to record changes in the market value of the Consolidated Entity’s
HMX shares. At 31 December 2018, the decline in market value of the Consolidated Entity’s HMX shares has been
recorded in profit and loss as an impairment.
NOTE 11 DIVIDENDS & FRANKING CREDITS
There were no dividends paid or recommended during the period. There are no franking credits available to the
shareholders of the Company.
Page 29 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 12 EARNINGS PER SHARE
The Consolidated Entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential
ordinary shares.
December 2018
December 2017
$
$
Total losses used to calculate basic and dilutive EPS
(1,248,372)
(2,248,131)
Weighted average number of ordinary shares outstanding during the period
932,584,461
901,913,097
Weighted average number of dilutive options outstanding
Weighted average number of ordinary shares outstanding during the period
used in calculating EPS and dilutive EPS
-
-
932,584,461
901,913,097
Basic and diluted loss per share - cents
(0.13)
(0.25)
2018
Number
2017
Number
December 2018
December 2017
$
$
NOTE 13 INCOME TAX
Income tax expense
The income tax expense for the period comprises current income tax expense and deferred tax expense. Current income
tax expense charged to profit or loss is the tax payable on taxable income.
A reconciliation of income tax expense/(benefit) applicable to accounting profit before income tax at the statutory income
tax rate to income tax expense at the Consolidated Entity’s effective income tax rate for the periods ended 31 December
2018 and 31 December 2017 is as follows:
Accounting loss before income tax
(1,248,372)
(2,248,131)
Tax at the Australian tax rate of 27.5% (2017: 30%)
Non-deductible/(assessable) items
Deferred tax assets not bought to account
Income tax expense
Current tax liabilities
(343,302)
899
342,403
-
(674,439)
2,031
672,408
-
Current tax liabilities are measured at the amounts expected to be paid to the relevant taxation authority. The Consolidated
Entity did not have any current tax liabilities at 31 December 2018 (2017: Nil).
Page 30 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 13 INCOME TAX (continued)
Deferred tax balances
December 2018
December 2017
$
$
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the period
as well as unused tax losses. Deferred tax is calculated at the tax rates expected to apply to the period when the asset is
realised or liability is settled. Current and deferred tax is recognised in the statement of comprehensive income except
where it relates to items that may be recognised directly in equity, in which case the deferred tax is adjusted directly against
equity. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available
against which deductible temporary differences can be utilised. Future income tax benefits in relation to tax losses have
not been brought to account at this stage as it is not probable the benefit will be utilised. The temporary differences and
tax losses do not expire under current tax legislation.
Unrecognised temporary differences and tax losses
Tax losses
31,835,541
30,590,437
Recognised temporary differences and tax losses
Deferred tax assets and liabilities are attributable to the following:
Provisions
Other
Deferred tax assets attributed to temporary differences not recognised
Tax losses carried forward
Net deferred tax liability/(asset)
Goods & Services Tax
16,922
(8,102)
(8,820)
-
-
13,541
(8,879)
(4,670)
-
-
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 Taxation Office. In these circumstances GST is recognised as part of the acquisition
of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of
GST.
NOTE 14 RELATED PARTY AND KEY MANAGEMENT PERSONNEL
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
Key management personnel compensation
Key management personnel comprise directors and other persons having authority and responsibility for planning, directing
and controlling the activities of the Consolidated Entity.
Summary
Short-term employee benefits
Post-employment benefits
Share-based payments
December 2018
December 2017
$
$
554,071
20,049
-
574,120
547,493
26,027
-
573,520
Detailed remuneration disclosures are provided in the remuneration report on pages 9 to 13.
Amounts owed to Key Management Personnel
$49,500 is owed to Directors for unpaid director fees (December 2017: $Nil). These amounts were at call and did not bear
interest.
Page 31 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 15 FINANCIAL RISK MANAGEMENT
The Consolidated Entity's financial instruments consist mainly of deposits with banks and accounts receivable and payable.
The main risk arising from the financial instruments is foreign exchange risk.
There have been no substantive changes in the Consolidated Entity's exposure to financial instrument risks, its objectives,
policies and processes for managing those risks or the methods used to measure them from previous periods unless
otherwise stated in this note.
The Board has overall responsibility for the determination of the Consolidated Entity's risk management objectives and
policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for day to day management of
these risks to the Managing Director and the Chief Financial Officer. The overall objective of the Board is to set policies
that seek to reduce risk as far as possible without unduly affecting the Consolidated Entity's competitiveness and flexibility.
Further details regarding these policies are set out below:
(a) Credit Risk
Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the
Consolidated Entity incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the
Consolidated Entity.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised
financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance
sheet and notes to the financial statements. There is no collateral held as security at 31 December 2018.
Credit risk is reviewed regularly by the Board. It arises from exposure to customers as well as through deposits with
financial institutions.
The Consolidated Entity does not have any material credit risk exposure to any single debtor or group of debtors under
financial instruments entered into by the Consolidated Entity.
The credit quality of cash and cash equivalents is considered strong. The counterparty to these financial assets are
large financial institutions with strong credit ratings.
(b) Liquidity risk
Liquidity risk is the risk that the Consolidated Entity may encounter difficulties raising funds to meet financial obligations
as they fall due.
Liquidity risk is reviewed regularly by the Board.
The Consolidated Entity manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash
resources are maintained. The Consolidated Entity did not have any financing facilities available at balance date.
The Consolidated Entity does not have any material exposure to liquidity risk.
(c) Market Risk
Market risk arises from the use of interest bearing, tradeable and foreign currency financial instruments. It is the risk that
the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate
risk), foreign exchange rates (currency risk) or other market factors (other price risk).
The Consolidated Entity does not have any material exposure to market risk.
(d) Capital Risk Management
When managing capital, the director’s objective is to ensure the entity continues as a going concern and to maintain a
structure that ensures the lowest cost of capital available and to ensure adequate capital is available for exploration and
evaluation of tenements. In order to maintain or adjust the capital structure, the Consolidated Entity may seek to issue
new shares.
Consistent with other exploration companies, the Consolidated Entity monitors capital on the basis of forecast exploration
and development expenditure required to reach a stage which permits a reasonable assessment of the existence or
otherwise of an economically recoverable reserve. The Consolidated Entity has no minimum capital requirements.
The Consolidated Entity has yet to establish a formal policy for raising capital through debt instruments. The directors will
introduce such a policy when it becomes prudent for the Consolidated Entity to consider raising funds through debt.
Page 32 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 15 FINANCIAL RISK MANAGEMENT (continued)
(e) Net Fair Values
The net fair values of financial assets and liabilities approximate their carrying value. The aggregate net fair values and
carrying amounts of financial assets and liabilities are disclosed in the balance sheet and in the notes to the financial
statements.
NOTE 16 SEGMENT REPORTING
Reportable Segments
The Consolidated Entity has identified its operating segment based on internal reports that are reviewed and used by the
executive team in assessing performance and determining the allocation of resources. The Consolidated Entity does not
yet have any products or services from which it derives an income.
Management currently identifies the Consolidated Entity as having only one reportable segment, being exploration for
minerals in Australia. The financial results from this segment are equivalent to the financial statements of the consolidated
entity. All assets are located in Australia.
NOTE 17 COMMITMENTS
The Consolidated Entity currently does not have any obligations to expend minimum amounts on either operating leases
or exploration in tenement areas.
NOTE 18 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are no contingent liabilities or contingent assets at 31 December 2018 (31 December 2017: Nil).
NOTE 19 AUDITORS’ REMUNERATION
Remuneration paid for:
Auditing and reviewing the financial report
- Ernst & Young
December 2018
December 2017
$
$
43,000
43,000
NOTE 20 EVENTS AFTER BALANCE SHEET DATE
On 29 January 2019, the shareholder loan was increased to $1,500,000 and the expiry dated extended to 31 December
2019.
Other than the above matter, there have been no other events since 31 December 2018 that impact upon the financial
report.
Page 33 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 21 PARENT ENTITY INFORMATION
The Parent Entity of the Consolidated Entity is AuKing Mining Limited.
Parent Entity Financial Information
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Share capital
Reserves
Accumulated losses
Total equity
Loss after income tax
Other comprehensive income
Total comprehensive loss
Controlled Entities of the Parent Entity
December 2018
December 2017
$
$
154,505
49,157
203,662
1,271,566
-
1,271,566
396,962
113,036
509,998
339,591
-
339,591
(1,067,904)
170,407
42,630,609
559,903
(44,258,416)
(1,067,904)
42,630,609
559,903
(43,020,105)
170,407
(1,238,311)
(2,241,320)
-
10,000
(1,238,311)
(2,231,320)
Subsidiaries are all entities (including structured entities) over which the Consolidated Entity has control. The Consolidated
Entity controls an entity when the Consolidated Entity is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are deconsolidated
from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Consolidated Entity.
Intercompany transactions, balances and unrealised gains on transactions between Consolidated Entity companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Consolidated Entity.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively.
Subsidiaries are all entities (including structured entities) over which the Consolidated Entity has control. The Consolidated
Entity controls an entity when the Consolidated Entity is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are deconsolidated
from the date that control ceases.
Page 34 of 40
AuKing Mining Limited
2018 Annual Report
NOTE 21 PARENT ENTITY INFORMATION (continued)
Percentage Owned
2018
%
2017
%
Country of Incorporation
China Yunnan Copper Australia Chile Limitada
100%
100%
Chile
China Yunnan Copper Australia Chile Limitada is currently in the process of being wound up.
Commitments, Contingencies and Guarantees of the Parent Entity
The minimum committed expenditure for future periods of the Parent Entity is the same as those for the Consolidated
Entity. The Parent Entity has no contingent assets, contingent liabilities or guarantees at balance date.
Page 35 of 40
AuKing Mining Limited
2018 Annual Report
DIRECTORS' DECLARATION
In the Directors opinion:
(a)
the attached consolidated financial statements and notes that are set out on pages 17 to 35 and the remuneration
report set out on pages 9 to 13 in the Directors’ Report are in accordance with the Corporations Act 2001 and other
mandatory professional reporting requirements, including:
(i)
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
giving a true and fair view of the Consolidated Entity's financial position as at 31 December 2018 and of its
performance for the financial period ended on that date.
the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1 to the
consolidated financial statements; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
(b)
(c)
The directors have been given the declarations by the chief executive officer and chief financial officer required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of directors.
Paul Williams
Director
28 March 2019
Page 36 of 40
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