ACN 116 221 740 Annual Report 30 June 2016 Australian Vanadium Limited 2016 Annual Report Contents Corporate Directory Letter from the Chairman Directors’ Report Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Auditors’ Independence Declaration Independent Auditors’ Report Annual Mineral Resource Statement ASX Additional Information 2 3 4 24 25 26 27 28 46 47 48 50 54 1 Australian Vanadium Limited 2016 Annual Report Corporate Directory Directors Vincent Algar (Managing Director) Leslie Ingraham (Executive Director) Brenton Lewis (Non-executive Chairman) Company Secretary Neville Bassett Registered Office 129 Edward Street Perth WA 6000 Telephone 08 9228 3333 Facsimile 08 6268 2699 Share Registry Computershare Investor Services Pty Ltd Level 11 172 St Georges Terrace Perth WA 6000 Telephone 08 9323 2000 08 9323 2033 Facsimile Auditors Abbott Audit Services Pty Ltd 3 Alvan Street Mount Lawley WA 6050 Securities Exchange Listing Australian Vanadium Limited shares (AVL) and options (2 cents/expiring 31 December 2018) (AVLO) are listed on the Australian Securities Exchange (ASX). 2 Australian Vanadium Limited 2016 Annual Report Letter from the Chairman Dear Fellow Shareholders, On behalf of your Board of Directors, I have pleasure in presenting the 2016 Annual Report and Financial Statements of Australian Vanadium Limited (“AVL” or the “Company”) for the 30 June 2016 financial year. The last 12 months have seen the beginning of a significant transformation in Australian Vanadium Limited. Commencing with the successful completion of a key drilling program at the end of the previous financial year the small and energetic team, led by Managing Director Vincent Algar, produced drilling results from our flagship Gabanintha project that put the project, and the Company, firmly on the vanadium world map. Following on from the drilling success, the team and our consultants produced the first Measured and Indicated quality resources at Gabanintha. This significant step forward was made possible by the close-spaced, highly accurate and professionally conducted drilling program. Reverse circulation and diamond drilling supplied us with excellent information for the revised mineral resource estimation and a raft of mineralogy and metallurgical test work. The results of these tests further support our view that Gabanintha is one of the most promising hard rock vanadium projects being considered globally at the present time. We look forward to seeing the progress at Gabanintha during the coming year as our project studies advance. The global interest in vanadium began to accelerate during the year, particularly in the area of vanadium in energy storage. Australian Vanadium Limited developed its vertical integration strategy in late 2015, and rapidly established this value-adding strategy in the 2016 calendar year. Essentially, the strategy hinges on three pillars of activity; development of the Gabanintha vanadium project towards production; development of vanadium electrolyte production skills and capacity, and development of vanadium redox flow battery sales in Australia through the Company’s 100% owned subsidiary VSUN Pty Limited. The small AVL team has worked tirelessly to advance the various MOU’s, distribution agreements and sales leads to enable the vanadium storage strategy to come to life in 2016. Society’s interest in energy storage has increased rapidly, with vanadium redox flow batteries receiving more and more attention from investors and the broader community. The Company was able to end the financial year on a high note, with the share price up significantly since reporting in 2015, and having completed a successful $3 million capital raising from shareholders and new investors. I wish to thank shareholders for their continuing support throughout the year and extend my sincere thanks to the Board, all our employees and consultants for their contributions and efforts. Australian Vanadium Limited enters financial year 2017 with a strong balance sheet and excellent projects and prospects across its portfolio of activities, with vanadium and energy storage at its centre. Yours faithfully Brenton Lewis Chairman 3 Australian Vanadium Limited 2016 Annual Report Directors’ Report CORPORATE HIGHLIGHTS The past financial year has seen Australian Vanadium Limited make significant progress towards its strategic objectives. A summary of events follows: Gabanintha Vanadium Project Update of Mineral Resource Statement containing Measured, Indicated and Inferred Mineral Resources of Release of results from the 2015 diamond drilling program. Completion of key mineralogy studies by the University of WA’s Centre for Exploration Targeting. Release of outcomes of detailed metallurgical studies. 91.4Mt @ 0.82% V2O5. Vanadium in Energy Storage Announcement of vertical integration strategy focusing on vanadium in energy storage. Appointment of Emeritus Professor Maria Skyllas-Kazacos as a consultant to the Company for vanadium electrolyte production. Signed strategic MOU’s with GILDEMEISTER Energy Storage GMBH and Sun Connect Pty Ltd. Entered into a Dealership Agreement with GILDEMEISTER Energy Storage GMBH for the Australian sale of CellCube vanadium redox flow batteries. The Company achieved its first sale of a CellCube system in Western Australia. Signed an MOU with C-Tech Innovation Limited for the development of vanadium electrolyte and procurement of a pilot vanadium electrolyte mixing plant. Corporate Matters The Company received a Research and Development Tax Incentive Scheme refund of A$410,000 for research related work conducted in the 2014-2015 tax year. Completion of a Rights Issue successfully raised A$3,066,500. CHANGE OF COMPANY NAME On 2 December 2015 the Company changed its name to Australian Vanadium Limited (new ASX Code AVL) replacing the previous company name and ASX Code, Yellow Rock Resources Limited (YRR). The change was approved by shareholders at a meeting held on 20 November 2015. The new name reflects the Company’s current focus on vanadium. APPOINTMENT OF MANAGING DIRECTOR Mr Vincent Algar was appointed as Managing Director of the Company on 29 April 2016. The promotion of Mr Algar to the Board reflects his strong contribution to implementing the Company’s vertical integration strategy since being appointed Chief Executive Officer in November 2014. RETIREMENT OF CHAIRMAN On 29 April 2016 Mr Brian Davis retired as non-executive chairman of the Company. Mr Davis made a significant contribution to the Company since his appointment to the board in 2014, in particular with respect to the Gabanintha Vanadium Project. Mr Davis’ valuable geological expertise has been retained, as he remains a technical consultant to the Company. 4 Australian Vanadium Limited 2016 Annual Report RIGHTS ISSUE The Company completed a non-renounceable pro-rata rights issue and shortfall placement raising $1,704,361 (before costs) in the 2016 financial year. A total of 131,104,656 fully paid ordinary shares at $0.013 per share and 131,104,656 listed options exercisable at $0.02 each on or before 31 December 2018 were issued. Subsequently, the Company completed the rights issue shortfall placement by the issue of 104,779,901 shares and 104,779,901 listed options exercisable at $0.02 each on or before 31 December 2018, raising a further $1,362,139. Total funds raised under the Rights Issue and shortfall were $3,066,500. During the year, 3,521,750 unlisted options exercisable at 1.5 cents each on or before 31 December 2017 were exercised, raising a further $52,826. Subsequent to year end, a further 73,996,773 unlisted 1.4712 cents options were exercised, raising a further $1,088,641. The Company is well funded to complete exploration and development programs in the near term. REVIEW OF OPERATIONS GABANINTHA PROJECT The Gabanintha Project is located 43km south of Meekatharra within the northern Murchison region of Western Australia. Access from Perth is via the Great Northern Highway and the Meekatharra - Sandstone Road (Figure 1). Figure 1: Location of Gabanintha Project and adjacent vanadium deposits 5 Australian Vanadium Limited 2016 Annual Report The following is a summary of activities undertaken on the Gabanintha Vanadium Project during the period up to the date of this report: assay results from the diamond drilling program were received and evaluated; an updated Mineral Resource Estimation was completed; a mineralogy and petrology study of diamond drill core was completed; a series of metallurgical tests on drilling samples was completed to establish process plant options; a pit optimisation study was commenced on the updated Mineral Resource, and negotiations for the grant of M51/878 were commenced with the Traditional Owners affected by the Mining Lease application. Diamond Drilling Program A diamond drilling program of 8 holes for 932 metres was completed in mid-2015. This followed the earlier completion of a Reverse Circulation (RC) drilling program of 63 holes for 5,957 metres. The diamond and RC drilling allowed the Company to update and upgrade its Mineral Resource estimate at Gabanintha. Large diameter diamond drilling was used to collect the highest quality core samples for analysis and metallurgical test work and also provided a check on the earlier Reverse Circulation (RC) drilling results. Two diamond drill holes were drilled to twin earlier RC holes. Correlation between the diamond and RC drilling assay results was excellent. Assay results identified consistent intervals greater than 20 metres down hole width containing significant grades of V2O5. Assay grades confirmed the presence of exceptional high grade zones above 1.3% V2O5 within the high grade magnetite-vanadium-titanium rich horizon. Individual grades up to 2.2% V2O5 and intersections above 1.5% V2O5 were encountered in the core and complement the intersections seen in the RC drilling results. Diamond drilling intersections greater than 0.5% V2O5 include: 30m at 0.99 % V2O5 from 115m in GDH913 including 14m at 1.44 % V2O5 from 131m (this zone includes assays up to 2.20% V2O5 and 7m at 1.76% V2O5 from 135m) (see Figure 2). 28m at 0.99% V2O5 from 132m in GDH916 including 18m at 1.24% V2O5 from 139m (this zone includes 6m at 1.35% V2O5 from 139m and 6m at 1.32% V2O5 from 146m). 27.2m at 0.87% V2O5 from 86m in GDH911 including 13.4m at 1.12 % V2O5 from 98.9m (this zone includes 7m at 1.29% V2O5 from 104m). 25m at 0.90% V2O5 from 119m in GDH912 including 17m at 1.07% V2O5 from 124m (this includes a zone of 6m at 1.21% V2O5 from 128m), and 21m at 0.94% V2O5 from 100m in GDH914 including 12m at 1.19% V2O5 from 109m. Highlights and key information from the drilling results are summarised below: Drilling has identified extensive areas of +1.3% V2O5 in the basal “massive” magnetite zone which is identified along 2km of strike drilled. These “sweet spots” indicate areas where the vanadium replacement into the magnetite structure during the igneous crystallization process has been very efficient. The resulting grades are comparable to world-class magnetite vanadium operations which display similar physical and chemical characteristics. The consistent “massive” magnetite zone occurs as the lowermost mineralization horizon in all drillholes. It consists of a massive vanadium-titanium-magnetite rock. The gabbro sequence immediately above the high grade zone consists of up to four sequences of iron-vanadium-titanium mineralization grading above 0.4% V2O5 with consistent bands of lower grade between them. The mineralisation is hosted in magnetite banded gabbro, with massive magnetite bands from centimetre to metre scale, as well as gabbro containing grains of vanadium rich magnetite scattered throughout. Drilling also identified variable levels of transported cover, some of which contains high levels of iron and vanadium mineralisation. 6 Australian Vanadium Limited 2016 Annual Report Figure 2 shows a schematic drill section. Further information relating to the drill program including the 2012 JORC Code Table 1 disclosures are included in the ASX announcement of 9 July 2015. Mineral Resource Estimate Figure 2: Cross Section GDH913 to GRC0172 In November 2015, the Company announced a revised Mineral Resource estimate, reported in compliance with the 2012 JORC Code. The total Measured, Indicated and Inferred Mineral Resource in both low and high grade domains is 91.4Mt @ 0.82% V2O5 containing 750,000 tonnes of V2O5. This includes a high-grade zone of 56.8Mt @ 1.00% V2O5 for 563,000 tonnes of V2O5. The mineral resource estimation was completed by independent consultants Australian Mining Consultants Pty Ltd (AMC) and is tabulated in the Annual Mineral Resource Statement contained on Page 50. Figure 3 shows the distribution of the Mineral Resource zones with the most intensive drilling being completed in the Northern Resource Area. 7 Australian Vanadium Limited 2016 Annual Report Figure 3: Diagram of the Gabanintha Project showing Mineral Resource location Mineralogy and Petrology Study A mineralogy and petrology study of samples of diamond drill core from Gabanintha was conducted by the Centre for Exploration Targeting (CET) at the University of WA during the year. 19 core samples were examined and analysed in detail by petrologists from the CET. Key findings were: results show magnetic separation techniques will be applicable for both high-grade and low-grade ores. titano-magnetite is dominant as the ore mineral and oxidises to martite (hematite) in the weathering profile, maintaining the same crystal structure and all its associated vanadium. the oxidised materials, contain significant relict magnetite remaining partially magnetic, making magnetic separation techniques applicable in the high grade oxide material; and magnetite particles in the low grade samples (magnetite gabbro) show high vanadium content, supporting the view that magnetic separation of low grade ores may yield significant additional vanadium units. 8 Australian Vanadium Limited 2016 Annual Report The high quality and very detailed mineralogy information gives the Company an important micro-level understanding of the mineralised material at Gabanintha. The findings provided confirmation that the project demonstrates favourable mineral characteristics for vanadium extraction. Metallurgical Test Work Following the completion of the drilling programs, the Company completed a series of detailed tests on composite RC samples comprised of oxide, transition and fresh material from low grade (disseminated) and high grade (massive) mineralisation at Gabanintha. The tests reported outstanding results, returning high recovery rates from the fresh, transitional and oxide material, further demonstrating the project’s strong potential for both low capital and operating costs. The test results also show that the silica content of the material was easily removed and there were strong recovery rates for titanium, a potentially valuable by-product. The metallurgical tests involved crushing and grinding samples to various parameters and analysis of recoveries from all material types using gravity and magnetic separation methods, in order to establish suitable processing plant options. The tests performed included Grind Size Distribution, Davis Tube Recovery (DTR), Low Intensity Magnetic Separation (LIMS), Wet High Intensity Magnetic Separation (WHIMS), Heavy Liquid Separation (HLS) and Wilfley Table techniques. Key technical findings of the test work include: magnetic separation tests indicate that both Low Grade (LG) and High Grade (HG) partly oxidised and fresh samples can be effectively upgraded to concentrates of up to 1.5% V2O5. totally oxidised samples yield a high quality iron-vanadium-titanium concentrate when using high intensity magnetic separation (mass recovery ranges between 30% and 85% and V2O5 recovery ranges between 30% to 90%). magnetic recovery of LG samples is impressive with 32% to 62% of mass recovered and 70% to 85% of the V2O5 reporting to concentrate at a coarse grind size, and magnetic recovery from HG samples is excellent at 75% to 82% of mass recovered and 82% to 95% of the V2O5 reporting to concentrate at a coarse grind size using low intensity magnetic separation. Pit Optimisation Study The revised Mineral Resource block model is the subject of a pit optimisation study, with a review of the mining costs being conducted. The purpose of the study is to identify the mining potential and development opportunities using internally generated economic parameters. The study is investigating the economic potential for mining the deposit within the Northern Resource Area (refer to Figure 3) using open-cut methods and applying the most current economic inputs, selling prices, recoveries, operating costs and associated parameters. Mining Lease Application During the year, AVL representatives met with representatives of the Traditional Owner groups at Meekatharra to commence discussions relating to the development of the project and advancing the Mining Lease Application (MLA51/ 878). A Mining Agreement is currently being drawn up in consultation with the Yamitji Marlpa Aboriginal Corporation and Traditional Owners as the final part in the Mining Lease application process. The successful progress of the Mining Lease application is a significant step forward for the project. 9 Australian Vanadium Limited 2016 Annual Report VANADIUM IN ENERGY STORAGE Vertical Integration Strategy AVL has recognised the potential for involvement in the energy storage market and explored the growth of demand for vanadium redox flow batteries (“VRFB”). Vanadium electrolyte is a key component in the operation of vanadium redox flow batteries. It is on this basis that the Company launched its vertical integration strategy in September 2015, alongside its progression of the high-grade Gabanintha Vanadium Project. The strategy is focused on marketing and selling VRFB systems and establishing a vanadium electrolyte production plant in Australia. The Gabanintha Project will allow AVL to supply high-quality vanadium feedstock to electrolyte producers worldwide, as well as its own electrolyte plant in Australia. The vertical integration strategy offers shareholders exposure to the potential of early cash flows coming from the expected sales of VRFB. These batteries will be imported by AVL and its 100% owned subsidiary, VSUN Pty Ltd. Australia is reliant on non-renewable resources to sustain its society. The increasing use of renewable energy in everyday lives represents a shift towards more energy efficient behaviour by individuals, businesses, utilities and governments. Storage technologies such as VRFB systems present the Company with an opportunity to participate in this shift, whilst improving its bottom line. Businesses and networks need energy storage assets that are durable and perform efficiently over the long term life of the asset. Vanadium Market. The intermittent nature of renewable energy generation such as solar and wind power is driving demand for energy storage solutions. VRFB systems are an option for consumers, having favourable characteristics such as a long life cycle, high charge retention and scalability. In Australia the amount of renewable energy generated needs to more than double if the country is to meet the Government’s mandated 23 per cent renewable energy target by 2020. (Australian Government, Department of the Environment, RET). It is a worldwide trend, according to the REN21 Renewables 2015 Global Status Report, renewables represented approximately 58.5 per cent of net additions to global power capacity in 2014. By early 2015, 164 countries had defined renewable energy targets. Alongside this growth, energy storage is also set to increase, with capacity reaching 185 GWh in the next few years (Lux Research; Grid Storage and TTP Squared Inc.) with vanadium batteries having potential to account for around 30 per cent of this future capacity growth – equating to a capacity of 62 GWh of storage. The 62 GWh capacity growth over the next few years alone equates to new demand for 300,000 tonnes of vanadium – more than three times what is currently produced (TTP Squared Inc.). The Company is well positioned to take advantage of this opportunity having recently entered into key agreements for future co-operation in developing the Australian VRFB technology and installations. Recruitment of International Battery Expert In November 2015, AVL took a key step in its strategy to become a major supplier of vanadium feedstock to the high-technology battery market by appointing an internationally-renowned expert in the field as a consultant. Emeritus Professor Maria Skyllas-Kazacos of the University of NSW will play a leading role in AVL’s program to establish vanadium electrolyte production from the Gabanintha project for use in the emerging battery industry. 10 Australian Vanadium Limited 2016 Annual Report Prof Skyllas-Kazacos will assist AVL in assessing the global market for the vanadium electrolyte used in the batteries and to identify the optimum method of processing Gabanintha vanadium for this market. She will also assist with AVL’s studies aimed at determining the extent to which the cost of manufacturing vanadium batteries could be reduced by using a mine-quality vanadium product. Memoranda of Understanding (MOU) AVL and its subsidiary VSUN Pty Ltd signed three important MOU’s during 2016 as key actions in the implementation of AVL’s overall vertical integration strategy for vanadium. These agreements are with: GILDEMEISTER Energy Storage GmbH (GILDEMEISTER) of Germany, one of the world’s foremost VRFB manufacturers; Sun Connect Pty Ltd (Sun Connect), an Australian-based commercial renewable energy, solar power and battery installer, and C-Tech Innovation Limited (C-Tech), a research, technology and innovation organisation based in the UK. GILDEMEISTER Energy Storage GmbH GILDEMEISTER manufactures the CellCube VRFB system. The company has put over 15 years of research and development into its battery systems, which have been commercially available for seven years. GILDEMEISTER has installed more than 100 systems, establishing itself as the provider of the world’s most commercially advanced flow battery. The MOU allows the companies to collaborate on a number of key strategic initiatives in Australia including; the completion of a Dealership Agreement (subsequently finalised in April 2016) for distribution of CellCube energy storage systems in Australia; collaborating on and finalisation of VRFB sales leads; joint marketing of VRFB technologies and CellCube products as the preferred solution to large-scale energy storage across the energy consumer market, and securing long-term local vanadium electrolyte supply for the Australian market through the development of AVL’s high-grade Gabanintha Vanadium Project. Working with GILDEMEISTER forms a key part of AVL’s vertical integration strategy, which involves the production of high-purity vanadium electrolyte – a core component of flow batteries. Sun Connect Pty Ltd Sun Connect is a well-established national company which has been providing renewable energy solutions for Australia’s commercial and residential sectors since 2008. Sun Connect has implemented more than 3,000 solar systems nationwide, ranging from households and large industrial sites, to government departments and schools. The Sun Connect MOU offers a framework for strategic alliance, including cooperation and development of opportunities involving the marketing and sale of VRFB systems in the Australian region. Key points of the MOU include: collaboration on energy storage leads; investigation and implementation of Power Purchase Agreements (PPA’s); joint marketing opportunities, and collaboration on the specification of the renewable component of power requirements for the Gabanintha Vanadium Project. 11 Australian Vanadium Limited 2016 Annual Report C-Tech Innovation Limited C-Tech has developed technologies for electrochemical preparation of vanadium electrolyte as well as many other chemical and electrochemical technologies. C-Tech has developed a proprietary electrochemical process for the production of vanadium electrolyte suitable for use in VRFB. Approximately 20% to 30% of the total cost of a VRFB battery can be attributed to the vanadium electrolyte. Key objectives of the agreement include; the contract supply and installation of a pilot-scale electrolyte mixing plant to Perth, Australia. The plant will allow testing of various vanadium sources with the aim of producing vanadium electrolyte of a suitable standard for use in commercial VRFB units; design and supply of key components of a full-scale production electrolyte plant; collaboration with other AVL consultants on design and specification of a mine-attached electrolyte purification and production facility as part of the Gabanintha Vanadium Project, and AVL to act as the exclusive agent for C-Tech electrolyte cell technology in Australia, New Zealand and South East Asia. Electrolyte Pilot Plant Purchase In June 2016, AVL purchased a vanadium electrolyte pilot plant from C-Tech. This purchase will enable AVL to develop unique vanadium electrolyte production expertise and capability in Australia. The equipment purchased from C-Tech is an experimental vanadium electrolyte production system, consisting of an electrochemical cell and complete balance of plant, to facilitate investigations into the commercial production of vanadium electrolyte. The pilot system will be the first of its kind in Australia. Skid-mounted and self-contained, the unit has all the necessary components, (electrochemical cells, pumps, instrumentation, safety and process control mechanisms), to produce high quality vanadium electrolyte in a single operation, without the need for chemical reductants. The process creates a mixture of V3+ and V4+ ions in solution, used as the “fuel” in VRFB systems. The plant is capable of managing the ionic ratio of V3+ to V4+ according to the specific battery requirements. The management of impurities in the feed is also a key indicator of VRFB performance, and the system will be used to assess and optimise different raw materials. 12 Figure 4. C-Tech Electrochemical Pilot Plant Australian Vanadium Limited 2016 Annual Report AVL will locate the test plant in a laboratory facility in the Perth metropolitan area and, on its arrival and commissioning, will commence testing a variety of vanadium source materials in the plant. Chemical analysis will be conducted and the results shared with C-Tech and GILDEMEISTER. Preparation of a solution that is suitable for use in GILDEMEISTER CellCube VRFB system is a priority for the Company. Developing expertise and a capacity for future commercial production of electrolyte is a priority for AVL. This opportunity has the potential to be a high volume, high margin business unit, providing benefits to shareholders and simultaneously lowering the overall price of VRFB in the Australian market, thereby enabling an increased uptake of VRFB systems to occur in the many niches offered in the Australian energy market. The pilot plant is expected to be completed and in operation in Perth before the end of 2016. First WA CellCube Sale In May 2016 AVL announced completion of their first sale of a CellCube energy storage system in Australia. VSUN Pty Ltd concluded the acquisition of a GILDEMEISTER CellCube FB 10-100 for installation at an agricultural property south of Busselton in Western Australia. The FB 10-100 can deliver 10kW of power and stores 100kWh of energy. It is a fully integrated containerised VRFB, and the first of its kind to be installed in Western Australia. The CellCube is being installed along with a 15kW solar PV (photovoltaic) system delivered by partner Sun Connect. Together, the system will allow the client to store their unused solar energy and use it when solar power is unavailable. The storage capacity of 100kWh means up to 10 hours of power can be provided. The client is expecting to be up to 90% self-sufficient for their power needs, but will remain connected to the grid. The CellCube has been delivered by GILDEMEISTER and as at the date of this report is being installed on site (see Figure 5). Installation of the first CellCube VRFB provides the Company with an opportunity to showcase the technology to potential customers in a typical Australian rural application. Figure 5: CellCube VRFB System on site at Busselton, Western Australia 13 Australian Vanadium Limited 2016 Annual Report NOWTHANNA HILL URANIUM PROJECT Nowthanna Hill is a clay and calcrete-hosted uranium deposit between approximately 1 metre and 7 metres beneath the surface of the Quinns Lake drainage. Historical exploration and resource drilling on MLA51/771 was completed by Dominion Mining Ltd and Defiance Mining/Acclaim Uranium NL. The mineralisation varies in thickness from 1 to 2 metres over a strike distance of approximately 2 kilometres (see YRR ASX announcement dated 20 December 2012). The uranium mineralisation is contained with the mineral carnotite (uranium-potassium vanadate). The extent of the shallow uranium Exploration Target as defined by Acclaim Uranium NL was modelled by Snowden & Associates in 1998 as follows: Lease Category Tonnes Grade MLA51/771 Indicated Resource 3,059,000 0.437 kg/t U3O8 Note1: This resource was estimated under JORC Code 2004 Guidelines Contained Tonnes 1,337 U3O8 1The information that refers to Exploration Results and Mineral Resources in this announcement on Nowthanna Hill was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since last reported and access to the Nowthanna Hill lease is not allowed during Native Title negotiations. Further drilling and resource work is required in order to validate the historical data, revise the Mineral Resource status, update mining parameters and compliance with 2012 JORC Code standards. However, the Mining Lease is still under application and work cannot begin until it is granted. Native Title discussions and negotiations have been ongoing for this lease application and have delayed exploration programs. The Company made progress during the year in resolving the Native Title issues so that the Mining Lease application can be granted. BRYAH BASIN GOLD/BASE METALS PROJECT During the year, the company was granted an exploration licence over ground in the area between the Fortnum gold mine and the Horseshoe Lights copper/gold mine in the highly prospective Bryah Basin in Western Australia. The licence, E52/3349 was granted in December 2015 and consists of 70 graticular blocks considered prospective for gold and copper mineralisation. The Company may seek to joint venture the ground after conducting a basic exploration review and first pass field reconnaissance. NORTHERN TERRITORY Cabe Resources Ltd, a 100% owned subsidiary held four tenement applications in the Northern Territory. All four tenement applications were withdrawn during the financial year. 14 Australian Vanadium Limited 2016 Annual Report DIRECTORS The names of the Directors of the Company in office during or since the end of the financial year and up to the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Name Vincent Algar Leslie Ingraham Brenton Lewis Brian Davis Position Managing Director Executive Director Non-Executive Chairman Non-Executive Chairman Appointed/Retired Appointed 29 April 2016 Retired 29 April 2016 The qualifications, experience and special responsibilities of each Director are as follows: VINCENT ALGAR BSC (Hons) Geology MAusIMM Mr Vincent Algar is a geologist by profession with over 25 years’ experience in the mining industry spanning underground and open cut mining operations, greenfields exploration, project development and mining services in Western Australia and Southern Africa. He has significant experience in the management of publicly listed companies, which includes the entire compliance, marketing and management process and encompasses the development of internal geological and administrative systems, exploration planning and execution, plus project acquisition and deal completion. Mr Algar was Managing Director of Shaw River Manganese Limited from 2006 to 2012 and was responsible for successful capital raisings, which raised more than $40 million for that company’s exploration and acquisition programs. He was instrumental in the $20 million acquisition of a 75.5% stake in the Otjo Manganese Project in Namibia in 2011. Mr Algar has worked on a wide range of commodities, most recently in base metals and uranium. During the past three years, Mr Algar was also a director of the following ASX listed companies: Nil. LESLIE INGRAHAM Mr Ingraham has been in private business for over 20 years and is an experienced mineral prospector and professional investor. He has successfully worked as a consultant for both private companies and companies listed on the ASX. Core competencies include capital raising, shareholder liaison and prospecting. During the past three years, Mr Ingraham was also a director of the following ASX listed companies: Nil. BRENTON LEWIS BBSc (Hons), MBSc Mr Lewis is an academic who has spent the past 20 years in the tertiary education sector. He has held management positions including Head of Department and Head of Post-Graduate Studies. He has published, taught and researched in areas including ethics and psychopathology. He has been a consultant to various health agencies including the Hong Kong Hospital Authority and the WA Health Department. He has served on numerous boards of management including academic and non-government organisations. During the past three years, Mr Lewis was also a director of the following ASX listed companies: Nil. BRIAN DAVIS B.Sc. Dip.Ed MAusIMM RPGeo (AIG) MAICD Mr Davis is a 40-year veteran of the resources industry and is the principal of exploration and resource development consultancy group Geologica Pty Ltd. During his extensive career he has focussed on commodities including gold, base metals, vanadium, iron ore, coal, rare earths and diamonds, both in Australia and overseas. During the past three years, Mr Davis was also a director of the following ASX listed companies: Nil. 15 Australian Vanadium Limited 2016 Annual Report COMPANY SECRETARY NEVILLE BASSETT Mr Bassett is a Chartered Accountant with over 30 years of experience. He has been involved with a diverse range of Australian public listed companies in directorial, company secretarial and financial roles. Interests in the shares and options of the company and related bodies corporate As at the date of this report, the interests of the Directors and executives in the shares and options of Australian Vanadium Limited were: Vincent Algar1 Leslie Ingraham2 Brenton Lewis3 Number of Number of Options Ordinary Shares over Ordinary Shares 692,307 5,571,129 25,478,774 7,778,600 10,000,000 2,694,650 1 Mr Algar also holds 5,000,000 performance rights. Refer to the Remuneration Report for further details. 2 Mr Ingraham also holds 5,000,000 performance rights. Refer to the Remuneration Report for further details. 3 Mr Lewis also holds 2,000,000 performance rights. Refer to the Remuneration Report for further details. MEETINGS OF DIRECTORS The number of meetings of Directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director were as follows: Board of Directors Number eligible to attend Number attended Vincent Algar1 Brian Davis Leslie Ingraham Brenton Lewis 1 4 5 5 1 4 5 5 1 Vincent Algar attended 4 meetings in his role of Chief Executive Officer and 1 meeting in his role of Managing Director. INSURANCE OF OFFICERS The Company has in place an insurance policy insuring Directors and Officers of the Company against any liability arising from a claim brought by a third party against the Company or its Directors and Officers, and against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct whilst acting in their capacity as a Director or Officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. In accordance with a confidentiality clause under the insurance policy, the amount of the premium paid to the insurers has not been disclosed. This is permitted under Section 300(9) of the Corporations Act 2001. ENVIRONMENTAL REGULATIONS The Group’s operations are subject to various environmental laws and regulations under government legislation. The exploration tenements held by the Group are subject to these regulations and there have not been any known breaches of any environmental regulations during the year under review and up until the date of this report. 16 Australian Vanadium Limited 2016 Annual Report CORPORATE INFORMATION Nature of Operations and Principal Activities The principal continuing activities during the year of entities within the consolidated entity were exploration for vanadium/titanium and other economic resources, the development of vanadium electrolyte production and the sale of VRFB systems. Corporate Structure Australian Vanadium Limited is a limited liability company that is incorporated and domiciled in Australia. The Company has prepared a consolidated financial report incorporating the entities that it controlled during the financial year as follows: Australian Vanadium Limited (formerly Yellow Rock Resources Limited) - - VSUN Pty Ltd (formerly Australian Vanadium Resources Pty Ltd) - Australian Uranium Pty Ltd - Cabe Resources Limited parent entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity OPERATING AND FINANCIAL REVIEW Operating Review A review of operations for the financial year is contained within this Directors’ Report. The consolidated loss after income tax for the financial year was $1,285,100 (2015: $1,434,013). Financial Position At 30 June 2016, the Group had cash reserves of $3,196,659 (2015: $1,813,074). The net assets of the Group have increased by $1,630,177. The increase is largely due to the following factors: the issue of 235,884,557 new shares at 1.3 cents per share via a rights issue to raise $3,066,500; ongoing exploration and evaluation of the Gabanintha Vanadium Project; initiation of the vanadium in energy storage strategy; incurring overheads and running costs consistent with operating a listed company; and remuneration of key management personnel essential to the continued success of the Group. Dividends No dividends were paid during the year and no recommendation is made as to dividends. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Company during the financial year are detailed in the Company’s review of operations. In the opinion of the Directors, there were no other significant changes in the state of affairs of the Company that occurred during the financial year under review not otherwise disclosed in this Annual Report. EVENTS SUBSEQUENT TO REPORTING DATE No matters or circumstances have arisen since the end of the financial year which significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in subsequent financial years, other than as outlined in the Company’s review of operations which is contained in this Annual Report. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Company will continue to pursue its principal activity of exploration and evaluation, and associated activities as outlined in the Company’s review of operations. The Company will also continue to pursue other potential investment opportunities to enhance shareholder value. 17 Australian Vanadium Limited 2016 Annual Report REMUNERATION REPORT (AUDITED) This report details the nature and amount of remuneration for each director and executive of Australian Vanadium Limited. The information provided in the remuneration report includes remuneration disclosures that are audited as required by section 308(3C) of the Corporations Act 2001. For the purposes of this report Key Management Personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report the term “executive” includes those key management personnel who are not Directors of the parent company. Remuneration Committee The full Board carries out the role and responsibilities of the Remuneration Committee and is responsible for determining and reviewing the compensation arrangements for the Directors themselves, the Managing Director and any Executives. Executive remuneration is reviewed annually having regard to individual and business performance, relevant comparative remuneration and internal and independent external advice. Remuneration policy The board policy is to remunerate Directors at market rates for time, commitment and responsibilities. The board determines payments to the 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 Directors’ fees that can be paid is subject to approval by shareholders in a general meeting, from time to time. Fees for non-executive directors are not linked to the performance of the consolidated entity. However, to align Directors’ interests with shareholders’ interests, the Directors are encouraged to hold shares in the Company. The Company’s aim is to remunerate at a level that will attract and retain high-calibre directors and employees. Company Directors and officers are remunerated to a level consistent with the size of the Company. The executive Directors and full time executives receive a superannuation guarantee contribution required by the government, which is currently 9.5%, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to Directors and executives is valued at the cost to the Company and expensed. The Board believes that it has implemented suitable practices and procedures that are appropriate for an organisation of this size and maturity. The Company did not pay any performance-based component of remuneration during the year. Remuneration Structure In accordance with best practice corporate governance, the structure of non-executive director and executive compensation is separate and distinct. Non-executive Director Compensation Objective The Board seeks to set aggregate compensation at a level that provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate compensation of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the Directors as agreed. The latest determination approved by shareholders was an aggregate compensation of $500,000 per year. 18 Australian Vanadium Limited 2016 Annual Report The amount of aggregate compensation sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Non-Executive Directors’ remuneration may include an incentive portion consisting of options, as considered appropriate by the Board, which may be subject to Shareholder approval in accordance with ASX Listing Rules. Separate from their duties as Directors, the Non-Executive Directors may undertake work for the Company directly including mineral related to the evaluation and exploration/evaluation and new business ventures, for which they receive a daily rate. These payments are made pursuant to individual agreement with the non-executive Directors and are not taken into account when determining their aggregate remuneration levels. implementation of various business opportunities, Executive Compensation Objective reward executives for company and individual performance against targets set by appropriate benchmarks; The entity aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the entity so as to: align the interests of executives with those of shareholders; ensure total compensation is competitive by market standards. link rewards with the strategic goals and performance of the company; and Structure In determining the level and make-up of executive remuneration, the Board negotiates a remuneration to reflect the market salary for a position and individual of comparable responsibility and experience. Due to the limited size of the Company and of its operations and financial affairs, the use of a separate remuneration committee is not considered appropriate. Remuneration is regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. If required, the Board may engage an external consultant to provide independent advice in the form of a written report detailing market levels of remuneration for comparable executive roles. Remuneration consists of a fixed remuneration and a long term incentive portion as considered appropriate. Compensation may consist of the following key elements: Fixed Compensation; Variable Compensation; Short Term Incentive (STI); and Long Term Incentive (LTI). Fixed Remuneration 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 having regard to the Company and individual performance, relevant comparable remuneration in the mining exploration sector and external advice. The fixed remuneration is a base salary or monthly consulting fee. 19 Australian Vanadium Limited 2016 Annual Report Variable Pay - Long Term Incentives The objective of long term incentives is to reward Directors/executives in a manner which aligns this element of remuneration with the creation of shareholder wealth. The incentive portion is payable based upon attainment of objectives related to the director’s/executive’s job responsibilities. The objectives vary, but all are targeted to relate directly to the Company’s business and financial performance and thus to shareholder value. Long term incentives (LTIs) granted to Directors and executives are delivered in the form of options or performance rights. LTI grants to executives are delivered in the form of employee share options or performance rights. Options are issued at an exercise price determined by the Board at the time of issue. The employee share options generally vest over a selected period. The objective of the granting of options or rights is to reward executives in a manner which aligns the element of remuneration with the creation of shareholder wealth. As such LTI’s are made to executives who are able to influence the generation of shareholder wealth and thus have an impact on the Company’s performance. The level of LTI granted is, in turn, dependent on the Company’s recent share price performance, the seniority of the executive, and the responsibilities the executive assumes in the Company. Typically, the grant of LTIs occurs at the commencement of employment or in the event that the individual receives a promotion and, as such, is not subsequently affected by the individual’s performance over time. Employment contracts of directors and senior executives The employment arrangements of the non-executive chairman and executive directors are not formalised in a contract of employment. Remuneration and other terms of employment for the Chief Executive Officer / Managing Director are formalised in an employment contract. Major provisions are set out below. Vincent Algar, Managing Director: Notice period required to be given by the Company or employee for termination of one month, except in the Annual base salary of $225,000 plus superannuation case of gross misconduct Payment of termination benefit on termination by either party equal to the amount in lieu of the notice period 10,000,000 performance rights that will each convert into one ordinary share upon the satisfaction of the following milestones: In respect to 5,000,000 performance rights: (i) upon the Company releasing a Mineral Resource Statement containing a 2012 JORC Code Compliant Resource; and (ii) the Company’s shares trading at a volume weighted average market price of greater than 1.9 cents per share calculated over 20 consecutive trading days on which the Company’s shares have actually traded; and In respect to 5,000,000 performance rights: (i) upon the Company releasing a Mineral Resource Statement containing a 2012 JORC Code Compliant Resource that includes Resources in the Measured Category; and (ii) the Company’s shares trading at a volume weighted average market price of greater than 3.0 cents per share calculated over 20 consecutive trading days on which the Company’s shares have actually traded. The performance rights expire on 2 February 2020 and contain standard terms and conditions relevant to lapse of entitlement or right to conversion on cessation of employment. 5,000,000 performance rights were converted into 5,000,000 ordinary shares on 19 August 2016 following achievement of milestones. 20 Australian Vanadium Limited 2016 Annual Report Details of remuneration for year Details of the remuneration of Directors and specified executives of Australian Vanadium Limited are set out in the following table. There are no other employees who are required to have their remuneration disclosed in accordance with the Corporations Act 2001. Short Term Benefits Post Share Based Employment Payments Salary & Fees Super- annuation Options & Rights Total Directors Vincent Algar1 (appointed 29 April 2016) Brian Davis2 (retired 29 April 2016) Leslie Ingraham3 Brenton Lewis4 Sydney Chesson (retired 26 November 2014) Total Directors Executives Vincent Algar1 (CEO up to 29 April 2016) David Lorry Hughes (resigned 18 November 2014) Total Key Management Personnel Year 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 $ 37,500 - 43,330 28,179 182,630 214,967 39,108 36,530 - 41,667 302,568 321,343 187,038 90,642 - 64,170 489,606 476,155 $ 3,563 - - 2,677 - - 3,715 3,470 - - 7,278 6,147 17,768 4,948 - 5,491 25,046 16,586 $ - - - - - - - - - - - - - - - - - - $ 41,063 - 43,330 30,856 182,630 214,967 42,823 40,000 - 41,667 309,846 327,490 204,806 95,590 - 69,661 514,652 492,741 Performance Based Remuneration % - - - - - - - - - - - - - - - - - - 1 Mr Algar was granted 10,000,000 performance rights on 29 May 2015, which may convert into ordinary shares upon the satisfaction of operating milestones. Refer to his employment contract details in this Remuneration Report for further information. 2 Mr Davis was granted 6,000,000 performance rights on 20 November 2015, which may convert into ordinary shares upon the satisfaction of operating milestones. 3 Mr Ingraham was granted 10,000,000 performance rights on 20 November 2015, which may convert into ordinary shares upon the satisfaction of operating milestones. 4 Mr Lewis was granted 4,000,000 performance rights on 20 November 2015, which may convert into ordinary shares upon the satisfaction of operating milestones. No other performance-related payments were made during the year. Performance hurdles are not attached to remuneration options if issued, however the Board determines appropriate vesting periods to provide rewards over a period of time to Key Management Personnel. Compensation options granted to Key Management Personnel No options were granted to Directors or executives during the year ended 30 June 2016. Shares issued to Key Management Personnel on exercise of compensation options No shares were issued to Directors or executives on exercise of compensation options during the year. Compensation options lapsed during the year No options previously issued to Key Management Personnel lapsed during the year. 21 Australian Vanadium Limited 2016 Annual Report Option holdings of Key Management Personnel Balance Granted as Options Remun- 1 July eration 2015 Options Exercised Expired / Cancelled Net Change/ Other Balance 30 June 2016 Number vested and exercisable Directors Vincent Algar Brian Davis Leslie Ingraham Brenton Lewis - 1,000,000 10,000,000 1,250,000 - - - - - - - - - - - - 692,307 (1,666,6681) - 1,444,650 692,307 692,307 - - 10,000,000 10,000,000 2,694,650 2,694,650 1 Options held at date of retirement. Mr Davis acquired 666,668 listed options through his direct and indirect participation in the March 2016 non-renounceable rights issue. Share holdings of Key Management Personnel Balance Received as Options Acquired/ 1 July Exercised (Disposed) 2015 Remun- eration Net Change/ Other Balance 30 June 2016 381,822 1,000,000 20,478,774 4,333,950 - - - - - - - - 189,307 1,666,668 - 1,444,650 - (2,666,6682) 571,129 - - 20,478,774 5,778,600 - Directors Vincent Algar1 Brian Davis3 Leslie Ingraham4 Brenton Lewis5 1 Mr Algar holds 10,000,000 performance rights which may convert into ordinary shares upon the satisfaction of operating milestones. Refer to his employment contract details in this Remuneration Report for further information. 2 Shares held at date of retirement. Mr Davis acquired 1,000,000 shares on-market in August 2015 and acquired 666,668 shares through his direct and indirect participation in the March 2016 non-renounceable rights issue. 3 Mr Davis holds 6,000,000 performance rights which may convert into ordinary shares upon the satisfaction of operating milestones. 4 Mr Ingraham holds 10,000,000 performance rights which may convert into ordinary shares upon the satisfaction of operating milestones. 5 Mr Lewis holds 4,000,000 performance rights which may convert into ordinary shares upon the satisfaction of operating milestones. All equity transactions with Key Management Personnel have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length. Loans and other transactions with Key Management Personnel There were no loans to or from, or other transactions with, key management personnel. 22 Australian Vanadium Limited 2016 Annual Report SHARE OPTIONS At the date of this report options were outstanding for the following unissued ordinary shares: 184,329,195 unlisted options expiring 31 December 2017 at an exercise price of 1.4712 cents each 235,884,557 listed options expiring 31 December 2018 at an exercise price of 2.0 cents each No person entitled to exercise these options had or has any right, by virtue of the option, to participate in any share issue of any other body corporate. AUDITOR Abbott Audit Services Pty Ltd continues in office in accordance with Section 327 of the Corporations Act 2001. NON-AUDIT SERVICES No non-audit services were provided by our auditors, Abbott Audit Services Pty Ltd during the year. AUDITOR’S DECLARATION OF INDEPENDENCE The auditor’s independence declaration for the year ended 30 June 2016, as required under section 307C of the Corporations Act 2001, has been received and is included within the financial report. Signed in accordance with a resolution of Directors. Brenton Lewis Chairman 13 September 2016 23 Australian Vanadium Limited 2016 Annual Report Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2016 Revenue 2(a) 290,005 200,247 Consolidated 2016 $ 2015 $ Note Exploration and evaluation expenditure Impairment of exploration and evaluation Depreciation Directors’ fees and benefits expenses Other expenses Loss before income tax expense Income tax expense Net loss for year Other comprehensive income (45,828) (328,484) (10,514) (3,371) - (4,344) (309,846) (327,490) 2(b) (1,205,546) (973,942) (1,285,100) (1,434,013) 3 - - (1,285,100) (1,434,013) Other comprehensive income for the year, net of tax - - Total comprehensive loss attributable to members of Australian Vanadium Limited (1,285,100) (1,434,013) Basic / diluted earnings per share 5 Cents (0.16) Cents (0.19) The accompanying notes form part of these financial statements. 24 Australian Vanadium Limited 2016 Annual Report Statement of Financial Position As at 30 June 2016 ASSETS Current Assets Cash and cash equivalent Trade and other receivables Total Current Assets Non-Current Assets Plant and equipment Exploration and evaluation expenditure Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Provisions Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated Losses TOTAL EQUITY The accompanying notes form part of these financial statements. Consolidated 2016 $ 2015 $ Note 6 7 8 9 10 11 3,196,659 1,813,074 180,151 274,623 3,376,810 2,087,697 11,749 15,120 14,498,230 14,170,808 14,509,979 14,185,928 17,886,789 16,273,625 214,099 242,750 11,638 225,737 225,737 - 242,750 242,750 17,661,052 16,030,875 12 64,621,753 61,706,476 - 22,544,306 (46,960,701) (68,219,907) 17,661,052 16,030,875 25 Australian Vanadium Limited 2016 Annual Report Statement of Changes in Equity For the year ended 30 June 2016 Consolidated Issued Capital $ Accumulated Losses $ Other Reserves $ Total $ Balance as at 1 July 2014 60,257,892 (66,785,894) 22,544,306 16,016,304 Loss for the year Total comprehensive loss for the year - - (1,434,013) (1,434,013) Partly paid ordinary shares written off (2,159,250) Securities issued during the year Capital raising costs 3,703,887 (96,053) - - - - - - - - (1,434,013) (1,434,013) (2,159,250) 3,703,887 (96,053) Balance as at 30 June 2015 61,706,476 (68,219,907) 22,544,306 16,030,875 Loss for the year Total comprehensive loss for the year - - (1,285,100) (1,285,100) Shares issued as consideration Shares issued on conversion of options 10,000 52,826 Securities issued pursuant to a Rights Issue 3,066,500 Capital raising costs (214,049) - - - - - - - - - - (1,285,100) (1,285,100) 10,000 52,826 3,066,500 (214,049) Reclassification of Reserve – lapsed options - 22,544,306 (22,544,306) - Balance as at 30 June 2016 64,621,753 (46,960,701) - 17,661,052 The accompanying notes form part of these financial statements. 26 Australian Vanadium Limited 2016 Annual Report Statement of Cash Flows For the year ended 30 June 2016 Cash flows from operating activities Payments to suppliers and employees Interest received Net receipts from other entities Expenditure on mining interests Consolidated 2016 $ 2015 $ Note (1,418,986) (1,227,915) 22,521 51,555 411,160 242,032 (48,628) (328,484) Net cash provided by / (used) in operating activities 6(a) (1,033,933) (1,262,812) Cash flows from investing activities Expenditure on mining interests Payment for property plant & equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Payment of capital raising costs Net cash provided by financing activities (396,158) (1,008,188) (109,867) (1,215) (506,025) (1,009,403) 3,119,327 3,703,887 (195,784) (96,053) 2,923,543 3,607,834 Net increase in cash held 1,383,585 1,335,619 Cash at beginning of the financial year Cash at end of financial year 1,813,074 477,455 6 3,196,659 1,813,074 The accompanying notes form part of these financial statements. 27 Australian Vanadium Limited 2016 Annual Report Notes to the Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements and notes represent those of Australian Vanadium Limited (the “Company”) and Controlled Entities (the “Consolidated Entity” or “Group”) for the year ended 30 June 2016. Australian Vanadium Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The Company is domiciled in Western Australia. The nature of operations and principal activities of the Group are described in the Directors' Report. 1(a) Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. 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. Material accounting policies adopted in preparation of these financial statements are presented below and have been consistently applied unless otherwise stated. The Group’s financial statements are presented in Australian dollars. 1(b) Adoption of new and revised standards In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. The adoption of these new and revised Standards and Interpretations has not resulted in a significant or material change to the Group’s accounting policies. The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2016. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies. 1(c) Statement of Compliance The financial report was authorised for issue on 13 September 2016. 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. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards (IFRS). 1(d) Basis of consolidation The consolidated financial statements comprise the financial statements of Australian Vanadium Limited (“Company” or “Parent Entity”) and its subsidiaries as at 30 June each year (“Consolidated” or “Group”). Subsidiaries are all entities over which the Group has control. The Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Investments in subsidiaries are accounted for at cost in the individual financial statements of Australian Vanadium Limited. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. 28 Australian Vanadium Limited 2016 Annual Report In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. 1(e) Revenue and other income Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before the revenue is recognised. Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset. 1(f) Cash and cash equivalents Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as described above, net of outstanding bank overdrafts. 1(g) Trade and other receivables Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. 1(h) Income Tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. 29 Australian Vanadium Limited 2016 Annual Report Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. 1(i) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. 1(j) Financial assets Financial assets within the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss are directly attributable as transactions costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. All regular purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace. (i) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in the statement of profit or loss and other comprehensive income. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the loans and receivables are derecognised or impaired, as well as through the amortisation process. 30 Australian Vanadium Limited 2016 Annual Report (iii) Available-for-sale investments Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of the three preceding categories. After initial recognition available-for sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models. 1(k) Exploration and evaluation expenditure Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied: (i) the rights to tenure of the area of interest are current; and (ii) at least one of the following conditions is also met: (a) (b) the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; or exploration and evaluation activities in the area have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence, or otherwise, of economically recoverable reserves and active and significant operations in, or relation to, the area of interest are continuing. Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortisation of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to development. 1(l) Impairment of assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 31 Australian Vanadium Limited 2016 Annual Report Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at a revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 1(m) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. 1(n) Share-based payment transactions The Group may provide benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). When provided, the cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black-Scholes model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Australian Vanadium Limited (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired, and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The amount charged or credited to the statement of profit or loss and other comprehensive income for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. 32 Australian Vanadium Limited 2016 Annual Report The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. 1(o) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 1(p) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company. The Group operates in two segments, being mineral exploration within Australia and the sale of VRFB systems. 1(q) Earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: • • costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and • other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. 1(r) Investments in associates An associate is an entity over which the consolidated entity 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. Investments in associates are accounted for in the parent entity using the cost method and in the consolidated entity using the equity method of accounting. Under the equity method, the investment in an associate is initially recorded 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 since the acquisition date. The consolidated entity’s share of post- acquisition profits or losses is recognised in the statement of profit or loss and its share of post-acquisition movements in other comprehensive income is presented as part of the consolidated entity's other comprehensive income. Unrealised gains or transactions between the Group and its associates are eliminated to the extent of the Group’s interests in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. 1(s) Plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Plant and equipment Motor vehicles - - 5 to 10 years 8 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. 33 Australian Vanadium Limited 2016 Annual Report (i) Impairment The carrying values of property, plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value. An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Impairment losses are recognised in the statement of profit or loss and other comprehensive income. (ii) Derecognition and disposal An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss and other comprehensive income in the year the asset is derecognised. 1(t) Significant Accounting Estimates and Judgments Significant accounting judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements. Exploration and evaluation assets The Group’s accounting policy for exploration and evaluation expenditure is set out at Note 1(l). The application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under the policy, it is concluded that the expenditures are unlikely to be recovered by future exploitation or sale, then the relevant capitalised amount will be written off to the statement profit or loss and other comprehensive income. Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: (i) Impairment of assets In determining the recoverable amounts of assets, in the absence of quoted market prices, estimations are made regarding the present value of future cash flows using asset-specific discount rates and the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. (ii) Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined from market value. 34 Australian Vanadium Limited 2016 Annual Report 2. REVENUE AND EXPENSES 2(a) Revenue Interest received R & D concession 2(b) Other Expenses Salaries and wages Superannuation Securities exchange and registry fees Rent and office facility expenses Legal fees Auditor’s fees Travel and accommodation Other corporate and administration expenses 3. INCOME TAX 3(a) Income tax expense Consolidated 2016 $ 2015 $ 27,855 262,150 290,005 51,555 148,692 200,247 295,840 198,678 28,393 63,783 79,818 26,285 13,500 79,369 618,558 1,205,546 18,178 68,918 62,893 77,275 17,500 110,241 420,289 973,972 The income tax expense for the year differs from the prima facie tax as follows: Loss for the year Prima facie income tax (benefit) @ 30% (2015: 30%) Tax effect of non-deductible items Deferred tax assets not brought to account Total income tax expense 3(b) Deferred tax assets (1,285,100) (1,434,013) (385,530) (430,204) 12,372 99,128 373,158 331,076 - - Deferred tax assets not brought to account arising from tax losses, the benefits of which will only be realised if the conditions for deductibility set out in Note 1(h) occur: 1,848,608 1,475,450 4. AUDITORS’ REMUNERATION Amounts, paid or due and payable to Abbott Audit Services Pty Ltd for: - audit or review services 13,500 13,500 17,500 17,500 35 Australian Vanadium Limited 2016 Annual Report 5. EARNINGS PER SHARE Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share is as follows: Net loss for the year Weighted average number of ordinary shares used in the calculation of basic EPS 6. CASH AND CASH EQUIVALENTS Cash at bank Short term deposits Consolidated 2016 $ 2015 $ Cents (0.16) Cents (0.19) (1,285,100) (1,434,013) No. No. 807,803,189 737,845,561 1,196,659 313,074 2,000,000 1,500,000 3,196,659 1,813,074 Cash at bank earns interest at floating rates based on daily deposit rates. Cash and cash equivalents for the purpose of the statement of cash flows are comprised of cash at bank and short term deposits. 6(a) Reconciliation of loss for the year to net cash flows from operating activities: Loss for the year Non-cash flows in profit/loss Depreciation Impairment of exploration and evaluation Share based payments Changes in operating assets and liabilities (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Increase/(decrease) in provisions (1,285,100) (1,434,013) 3,371 10,514 10,000 138,615 77,029 11,638 4,344 - - (26,902) 193,759 - Net cash flows from operating activities (1,033,933) (1,262,812) 6(b) Non-cash financing and investing activities There were no non-cash financing and investing activities during the year. 36 Australian Vanadium Limited 2016 Annual Report 7. TRADE AND OTHER RECEIVABLES Current GST receivable Other receivables Consolidated 2016 $ 2015 $ 43,802 136,349 180,151 109,015 165,608 274,623 Other receivables are non-interest bearing and generally repayable within 12 months. Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. 8. PLANT & EQUIPMENT PIant and Equipment At cost Accumulated depreciation Motor Vehicles At cost Accumulated depreciation Total At cost Accumulated depreciation 17,999 (11,185) 6,814 15,000 (10,065) 4,935 17,999 (9,247) 8,752 15,000 (8,632) 6,368 32,999 32,999 (21,250) (17,879) 11,749 15,120 8(a) Movements in carrying amounts Movements in the carrying amounts for each class of plant and equipment during the financial year: Balance at 1 July 2014 Additions Depreciation expense Balance at 30 June 2015 Additions Depreciation expense Balance at 30 June 2016 Plant & Motor Equipment Vehicles Total 10,032 1,215 8,217 18,249 - 1,215 (2,495) (1,849) (4,344) 8,752 6,368 15,120 - - - (1,938) (1,433) (3,371) 6,814 4,935 11,749 37 Australian Vanadium Limited 2016 Annual Report 9. DEFERRED EXPLORATION EXPENDITURE Expenditure brought forward Expenditure incurred during the year Impairment during the year Expenditure carried forward Consolidated 2016 $ 2015 $ 14,170,808 13,162,620 337,936 1,008,188 (10,514) - 14,498,230 14,170,808 The expenditure above relates principally to the exploration and evaluation phase. The ultimate recoupment of this expenditure is dependent upon the successful development and commercial exploration, or alternatively, sale of the respective areas of interest, at amounts at least equal to the carrying value. 10. TRADE AND OTHER PAYABLES Current Trade payables and accruals 214,099 214,099 242,750 242,750 Trade creditors are non-interest bearing and are normally settled on 30 day terms. Due to the short term nature of trade payables and accruals, their carrying value is assumed to approximate their fair value. 11. PROVISIONS Current Employee entitlements 12. ISSUED CAPITAL AND RESERVES 12(a) Issued and paid up capital Ordinary shares - fully paid Ordinary shares - partly paid Share issue costs written off against issued capital 11,638 11,638 - - 65,308,672 62,179,345 8,000 8,000 (694,919) (480,869) 64,621,753 61,706,476 38 Australian Vanadium Limited 2016 Annual Report 2016 Number 2016 $ 2015 Number 2015 $ 12(b) Movement in ordinary shares on issue (i) Ordinary shares - fully paid Balance at beginning of year 761,283,723 62,179,345 428,497,459 58,475,458 Issue of fully paid ordinary shares on conversion of options Issue of ordinary shares via Rights Issue Issue of ordinary shares in lieu of cash consideration 3,521,750 52,826 75,204,900 1,128,073 235,884,557 3,066,500 257,581,364 2,575,814 1,428,571 10,000 - - Balance at end of year 1,002,118,601 65,308,672 761,283,723 62,179,345 (ii) Ordinary shares - partly paid ($0.0389 unpaid) Balance at beginning of year 80,000,000 8,000 80,000,000 2,167,250 Issue of partly paid ordinary shares Call on partly paid shares cancelled - - - - - - - (2,159,250) Balance at end of year 80,000,000 8,000 80,000,000 8,000 Total issued shares 1,082,118,601 65,316,672 841,283,723 62,187,345 12(c) Terms and conditions of issued capital Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Fully paid ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Options and partly paid ordinary shares do not entitle their holder to any voting rights. 12(d) Share Options 258,325,968 unlisted options expiring 31 December 2017 at an exercise price of 1.4712 cents each At 30 June 2016, the following options over unissued ordinary shares were outstanding: • • 12(e) Performance Rights 235,884,557 listed options expiring 31 December 2018 at an exercise price of 2.0 cents each 20,000,000 performance rights which will each convert into one ordinary share on achievement of certain operating and share price milestones were granted to Directors during the year ended 30 June 2016. 12(f) Share-based payment reserve The share-based payments reserve is used to recognise the fair value of options issued. 39 Australian Vanadium Limited 2016 Annual Report 13. INVESTMENTS IN ASSOCIATES Investment in associate at cost Allowance for impairment Investment in associate at fair value Interest is held in the following associated company: Consolidated 2016 $ 2015 $ 2,550,000 (2,550,000) - 2,550,000 (2,550,000) - Country of Principal Activities Incorporation Shares Ownership Interest 2016 % 2015 % Carrying amount of investment 2016 $ 2015 $ Mineral Exploration Australia Ordinary 20 20 - - Name Unlisted: Apogei Pty Ltd 13(a) Equity accounted losses of associate are as follows: Share of associate’s loss before income tax Share of associate’s income tax Share of associate’s loss after income tax 14. COMMITMENTS 14 (a) Exploration Commitments Consolidated 2016 $ 2015 $ - - - - - - The Group has certain obligations to perform minimum exploration work and to expend minimum amounts of money on such work on mining tenements. These obligations may be varied from time to time subject to approval and are expected to be fulfilled in the normal course of the operations of the Group. These commitments have not been provided for in the accounts. The minimum expenditure commitment on the tenements is: Payable - no later than 1 year - between 1 year and 5 years 14(b) Operating Lease Commitments 244,280 503,880 748,160 167,816 - 167,816 Minimum lease payments payable for non-cancellable operating leases contracted for but not recognised in the financial statements: Payable - no later than 1 year - between 1 year and 5 years 39,945 - 39,945 60,000 39,945 99,945 The non-cancellable lease is for office premises. It commenced on 1 June 2015 and ends on 28 February 2017, with rent payable monthly in advance. 40 Australian Vanadium Limited 2016 Annual Report 15. CONTINGENT LIABILITIES It is possible that native title, as defined in the Native Title Act 1993, might exist over land in which the Group has an interest. It is impossible at this stage to quantify the impact (if any) that the existence of native title may have on the operations of the Group. However, at the date of this report, the Directors are aware that applications for native title claims have been accepted by the Native Title Tribunal over tenements held by the Group. 16. SEGMENT INFORMATION AASB 8 requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. The Board as a whole will regularly review the identified segments in order to allocate resources to the segment and to assess its performance. The Group has identified two operating segments for 2016 being: 1. 2. Energy storage - VSUN Pty Limited’s vanadium redox flow battery sales activities. Exploration – consisting of the Gabanintha Vanadium Project and other exploration projects, and Segment revenues, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and primarily consist of plant and equipment and project tenements. Segment Liabilities consist primarily of trade and other creditors and employee benefits. The following tables present revenue, expenditure and asset information regarding operating segments for the year ended 30 June 2016. Sales to External Customers Other Revenue Total Segment Revenue Total Segment Results Total Segment Assets Total Segment Liabilities Impairment of Assets Depreciation and Amortisation Interest Income Exploration $ Energy Storage Unallocated $ $ Total $ - - - - - - - 290,005 290,005 - 290,005 290,005 (223,584) (106,733) (954,783) (1,285,100) 14,549,138 58,959 3,278,692 17,886,789 20,042 (10,514) - - - - - - 205,695 225,737 - (10,514) (3,371) 27,855 (3,371) 27,855 41 Australian Vanadium Limited 2016 Annual Report 17. RELATED PARTY TRANSACTIONS 17(a) Subsidiaries The consolidated financial statements include the financial statements of Australian Vanadium Limited and the subsidiaries listed in the following table. Australian Uranium Pty Ltd Cabe Resources Ltd VSUN Pty Ltd 1 Country of Incorporation Australia Australia Australia Equity Holding 2016 % 100 100 100 2015 % 100 100 100 Principal Activities Mineral exploration Mineral exploration Development of vanadium battery opportunities 1 Formerly Australian Vanadium Resources Pty Ltd. 17(b) Director-related entities The Group engaged the following entities during the financial year for the following services on normal commercial terms: Nil 18. PARENT ENTITY DISCLOSURES 18(a) Summary financial information Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Equity Issued capital Reserves Accumulated losses Total equity Financial performance Loss for the year Other comprehensive income Total comprehensive loss 18(b) Guarantees Parent 2016 $ 2015 $ 3,376,810 14,509,979 17,886,789 2,087,697 14,185,928 16,273,625 225,737 225,737 242,750 242,750 64,621,753 - (46,960,701) 17,661,052 61,706,476 22,544,306 (68,219,907) 16,030,875 (1,285,100) - (1,285,100) (1,434,013) - (1,434,013) Australian Vanadium Limited has not entered into any guarantees. 18(c) Other Commitments and Contingencies Australian Vanadium Limited (parent entity) has exploration commitments and operating lease commitments as described in Note 14(a). It has no contingent liabilities other than those discussed in note 15. 42 Australian Vanadium Limited 2016 Annual Report 19. KEY MANAGEMENT PERSONNEL DISCLOSURES 19(a) Compensation of Key Management Personnel Refer to the remuneration report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s key management personnel. Director and Executive Disclosures Compensation of key management personnel Short-term personnel benefits Post-employment benefits Consolidated 2016 $ 2015 $ 489,606 25,046 514,652 476,155 16,586 492,741 19(b) Loans and Other Transactions with Key Management Personnel There were no loans to key management personnel or their related entities during the financial year. Other transactions with key management personnel are described in Note 17(b). 20. SHARE-BASED PAYMENTS 20(a) Share-based payments expensed No share-based payments were expensed during the year ended 30 June 2016 or 30 June 2015. 20(b) Summary of options granted as share-based payments No options were issued as share-based payments during the year ended 30 June 2016 or 30 June 2015. 20(c) Performance rights 20,000,000 performance rights which will each convert into one ordinary share on achievement of certain operating and share price milestones were granted to Directors during the year ended 30 June 2016. Refer to the Remuneration Report for the terms and conditions of the rights. 21. FINANCIAL RISK MANAGEMENT The consolidated entity’s principal financial instruments comprise receivables, payables, cash and short-term deposits. The consolidated entity manages its exposure to key financial risks in accordance with the consolidated entity’s financial risk management policy. The objective of the policy is to support the delivery of the consolidated entity’s financial targets while protecting future financial security. The main risks arising from the consolidated entity’s financial instruments are interest rate risk, credit risk and liquidity risk. The consolidated entity does not speculate in the trading of derivative instruments. The consolidated entity uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rates and assessments of market forecasts for interest rates. Ageing analysis of and monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts. The Board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified below, including for interest rate risk, credit allowances and cash flow forecast projections. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in note 1 to the financial statements. 43 Australian Vanadium Limited 2016 Annual Report 21(a) Interest rate risk The consolidated entity’s exposure to risks of changes in market interest rates relates primarily to the consolidated entity’s cash balances. The consolidated entity constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing positions and the mix of fixed and variable interest rates. As the consolidated entity has no interest-bearing borrowings its exposure to interest rate movements is limited to the amount of interest income it can potentially earn on surplus cash deposits. The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At the reporting date, the consolidated entity had the following financial assets exposed to variable interest rates that are not designated in cash flow hedges: Financial Assets Cash and cash equivalents (interest-bearing accounts) Consolidated 2016 $ 2015 $ 3,196,659 1,813,074 3,196,659 1,813,074 The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At the reporting date, if interest rates had moved as illustrated in the table below, with all other variables held constant, post-tax profit and equity relating to financial assets of the consolidated entity would have been affected as follows: Estimates of reasonably possible movements: Post tax profit - higher / (lower) +0.5% -0.5% Equity - higher / (lower) +0.5% -0.5% 21(b) Liquidity Risk 9,356 (9,356) 9,356 (9,356) 9,065 (9,065) 9,065 (9,065) The consolidated entity has no significant exposure to liquidity risk as there is effectively no debt. The consolidated entity manages liquidity risk by monitoring immediate and forecast cash requirements and ensuring adequate cash reserves are maintained. 21(c) Credit risk Credit risk arises from the financial assets of the consolidated entity, which comprise deposits with banks and trade and other receivables. The consolidated entity’s exposure to credit risk arises from potential default of the counter party, with the maximum exposure equal to the carrying amount of these instruments. The carrying amounts of financial assets included in the statement of financial position represents the consolidated entity’s maximum exposure to credit risk in relation to those assets. The consolidated entity does not hold any credit derivatives to offset its credit exposure. The consolidated entity trades only with recognised, creditworthy third parties and as such collateral is not requested nor is it the consolidated entity’s policy to securitise its trade and other receivables. Receivable balances are monitored on an ongoing basis with the result that the consolidated entity does not have a significant exposure to bad debts. There are no significant concentrations of credit risk within the consolidated entity. 44 Australian Vanadium Limited 2016 Annual Report 21(d) Capital Management Risk Management controls the capital of the consolidated entity in order to maximise the return to shareholders and ensure that the Group can fund its operations and continue as a going concern. Management effectively manages the Group’s capital by assessing the consolidated entity’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of expenditure and debt levels and share and option issues. The consolidated entity has no external loan debt facilities other than trade payables. There have been no changes in the strategy adopted by management to control capital of the consolidated entity since the prior year. 21(e) Commodity Price and Foreign Currency Risk The consolidated entity’s exposure to price and currency risk is minimal given the consolidated entity is still in the exploration phase. 21(f) Fair Value The methods of estimating fair value are outlined in the relevant notes to the financial statements. All financial assets and liabilities recognised in the statement of financial position, whether they are carried at cost or fair value, are recognised at amounts that represent a reasonable approximation of fair values unless otherwise stated in the applicable notes. 22. EVENTS SUBSEQUENT TO THE REPORTING DATE No matters or circumstances have arisen since the end of the financial year which significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in subsequent financial years, other than as outlined in the Company’s review of operations which is contained in this Annual Report. 45 Australian Vanadium Limited 2016 Annual Report Directors’ Declaration The Directors of the Company declare that: 1. the financial statements and notes set out on pages 28 to 45 are in accordance with the Corporations Act 2001 including: a. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and b. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of the performance for the year ended on that date, and; 2. 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. The Directors have been given the declarations by the Managing Director and chief financial officer pursuant to Section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Board of Directors. Brenton Lewis Chairman 13 September 2016 46 Australian Vanadium Limited 2016 Annual Report 47 Australian Vanadium Limited 2016 Annual Report 48 Australian Vanadium Limited 2016 Annual Report 49 Australian Vanadium Limited 2016 Annual Report Annual Mineral Resource Statement GABANINTHA PROJECT - MINERAL RESOURCE STATEMENT 1. A summary of the Mineral Resources at the Gabanintha Project as at 30 June 2016 is shown in Table 1 below. The updated Mineral Resource estimation was carried out by Australian Mining Consultants Pty Ltd (AMC), resulting in the estimation of Measured, Indicated, and Inferred Mineral Resources. All mineralised domains, are reported above 0.3% V2O5 for the low grade ore zones and above 0.7% V2O5 within the high grade zones. The Mineral Resource estimate consists of: 91.4 million tonnes at 0.82 % V2O5 containing 750,000 tonnes of V2O5; discrete high-grade zones of 56.8 million tonnes at 1.00% V2O5 containing 563,000 tonnes of V2O5; discrete low-grade zones of 34.6 million tonnes at 0.53% V2O5 containing 185,000 tonnes of V2O5, and combined Measured and Indicated Mineral Resources of 24.7 Million tonnes at 0.8 % V2O5 in low and high grade zones containing 196,000t V2O5. TABLE 1 GABANINTHA PROJECT MINERAL RESOURCES STATEMENT AS AT 30 JUNE 2016 JORC Resource Class Tonnes Million In situ bulk density High Grade Zone Measured Indicated Inferred Subtotal Low Grade Zone Indicated Inferred Subtotal TOTAL Measured Indicated Inferred TOTAL 50 7.0 4.3 45.5 56.8 13.4 21.1 34.6 7.0 17.8 66.7 91.4 3.73 3.29 3.67 3.65 2.39 2.48 2.45 3.73 2.61 3.29 3.19 V2O5 % 1.09 1.07 0.97 1.00 0.55 0.53 0.53 1.09 0.68 0.83 0.82 Fe % 43 41 42 42 24 25 25 43 28 37 35 TiO2 % SiO2 % Al2O3 % LOI % 12 12 11 11 7 7 7 12 8 10 10 10 12 12 12 27 27 27 10 23 17 18 8 9 8 8 19 17 18 8 16 11 11 3.4 4.6 2.8 3.0 8.7 7.0 7.6 3.4 7.7 4.1 4.8 Australian Vanadium Limited 2016 Annual Report 2. MATERIAL CHANGES AND RESOURCE STATEMENT COMPARISON A comparison between the 2015 and 2016 Mineral Resource Estimates for the Gabanintha Project is shown in Table 2 below. TABLE 2 GABANINTHA PROJECT COMPARISON BETWEEN 2015 & 2016 MINERAL RESOURCE ESTIMATES JORC Resource Class Tonnes Million In situ bulk density V2O5 % Fe % TiO2 % SiO2 % Al2O3 % LOI % ESTIMATE AS AT 30 JUNE 2016 High Grade Zone Measured Indicated Inferred Subtotal Low Grade Zone Indicated Inferred Subtotal TOTAL Measured Indicated Inferred TOTAL High Grade Zone Indicated Inferred Subtotal Low Grade Zone Indicated Inferred Subtotal TOTAL Indicated Inferred TOTAL 7.0 4.3 45.5 56.8 13.4 21.1 34.6 7.0 17.8 66.7 91.4 14.4 46.0 60.4 42.7 22.7 65.4 57.0 68.8 125.8 3.73 3.29 3.67 3.65 2.39 2.48 2.45 3.73 2.61 3.29 3.19 1.09 1.07 0.97 1.0 0.55 0.53 0.53 1.09 0.68 0.83 0.82 43 41 42 42 24 25 25 43 28 37 35 12 12 11 11 7 7 7 12 8 10 10 ESTIMATE AS AT 30 JUNE 2015 4.17 4.16 4.16 2.71 2.67 2.70 2.97 3.51 3.25 1.03 0.97 0.98 0.44 0.42 0.43 0.59 0.79 0.70 42 42 42 23 23 23 28 36 32 12 11 11 6 6 6 8 9 9 10 12 12 12 27 27 27 10 23 17 18 11 12 12 29 31 30 25 18 21 8 9 8 8 19 17 18 8 16 11 11 8 8 8 18 17 18 16 11 13 3.4 4.6 2.8 3.0 8.7 7.0 7.6 3.4 7.7 4.1 4.8 3.4 3.2 3.2 8.9 6.9 8.2 7.5 4.4 5.8 The material change in the Mineral Resource Estimate between 2015 and 2016 was due to an extensive RC and diamond drilling program undertaken by the Company during 2015. Most of the reduction between the earlier estimation and the 2015 estimation arose from adjustments to the model parameters for each classification. The Group is not aware of any new information or data that materially affects the information as previously released and all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. 51 Australian Vanadium Limited 2016 Annual Report GOVERNANCE ARRANGEMENTS AND INTERNAL CONTROLS 3. The Group has appropriate systems in place and suitably qualified and competent geological consultants to complete any resource estimation or review to the required standards as shown in the 2012 JORC Code Guidelines. The Quality Assurance, Sampling Systems, Assay Procedures, Data Recording, Interpretation Standards and Resource Estimation Methods and other parameters as set out in Table 1 of the JORC Code 2012 Guidelines are closely followed. The mineral resources reported have been generated by independent external consultants where appropriate who are experienced in best practices in modelling and estimation methods. The consultants have also undertaken reviews of the quality and suitability of the underlying information used to determine the resource estimate. In addition, management carries out regular reviews and audits of internal processes and external contractors that have been engaged by the group. The Company policy is that all steps are recorded during the resource drilling program and then the estimation stage. All results from field logs and assays to database entries and modelling data are validated, reviewed and checked by independent and qualified geological personnel. Competent Person Statement – Mineral Resource Estimation The information relating to the Gabanintha Project 2016 Mineral Resource estimate reported on page 50 is based on information compiled by Mr John Tyrrell. Mr Tyrrell is a Member of The Australian Institute of Mining and Metallurgy (AusIMM) and a full time employee of AMC (Australian Mining Consultants Pty Ltd). Mr Tyrrell has more than 25 years’ experience in the field of Mineral Resource Estimation. He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and in resource model development to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Tyrrell consents to the inclusion in the report of the matters based on the information made available to him, in the form and context in which it appears. Competent Person Statement – Exploration Results The information in this report that relates to Exploration Results is based on information compiled by independent consulting geologist Brian Davis B.Sc. (Hons), Dip.Ed. Mr Davis is a Member of The Australian Institute of Mining and Metallurgy (AusIMM) and the Australian Institute of Geoscientists (AIG). Brian Davis is employed by Geologica Pty Ltd. Mr Davis has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which is undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Davis consents to the inclusion in the report of the matters based on the information made available to him, in the form and context in which it appears. 52 Australian Vanadium Limited 2016 Annual Report 4. SCHEDULE OF INTERESTS IN MINING TENEMENTS AS AT 31 AUGUST 2016 PROJECT TENEMENT AREA EQUITY Gabanintha Gabanintha Gabanintha Gabanintha Gabanintha Gabanintha Gabanintha Gabanintha Gabanintha Gabanintha Gabanintha Nowthanna Hill Peak Hill TOTAL E51/843 E51/1396 E51/1534 E51/1576 P51/2634 P51/2635 P51/2636 P51/2566 P51/2567 18 blocks 1 block 8 blocks 10 blocks 171.85 ha 123.53 ha 175.16 ha 147.66 ha 111.66 ha MLA 51/878 3,563.0 ha E51/1685 MLA 51/771 E52/3349 15 blocks 301.0 ha 70 blocks 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% ANNUAL EXPENDITURE COMMITMENT $70,000 $15,000 $20,000 $20,000 $5,920 $4,480 $6,880 $4,960 $7,040 Application $20,000 Application $70,000 $244,280 53 Australian Vanadium Limited 2016 Annual Report ASX Additional Information Additional information required by the ASX Listing Rules not disclosed elsewhere in this Annual Report is set out below. The information is current as at 31 August 2016. 1. Analysis of numbers of equity security holders by size of holding: DISTRIBUTION OF EQUITY SECURITIES Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001+ Total Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001+ Total Listed Shares, Fully Paid Ordinary No of Holders 61 166 191 1,088 1,185 2,691 Number of shares 24,086 506,912 1,684,709 56,928,939 1,018,110,728 1,077,255,374 Listed 2 cent Options expiring 31 December 2018 No of Holders 13 25 16 139 226 419 Number of options 6,439 70,757 123,341 6,670,702 229,013,318 235,884,557 Unlisted Shares, Partly Paid Ordinary No of Holders - - - - 5 5 Number of shares - - - - 80,000,000 80,000,000 Unlisted 1.4712 cent Options expiring 31 December 2017 No of Holders 3 15 20 61 104 203 Number of options 2,950 40,324 169,311 2,470,060 195,506,550 198,189,195 Unmarketable Parcels There were 647 holders of less than a marketable parcel of ordinary shares. 2. Holders of more than 20% of the abovementioned unquoted securities are: UNQUOTED SECURITIES Unlisted Shares, Partly Paid Ordinary Unlisted Options, expiring 31 Dec 17 Exercise Price 1.4712c 10,000,000 - 28,000,000 28,000,000 RESTRICTED SECURITIES Holder Name Woolmaton Pty LtdLisen Zhang 3. There are no restricted securities or securities subject to voluntary escrow as at 31 August 2016. 4. There were no substantial holders as at 31 August 2016. 5. The Company’s Corporate Governance Statement is located on its website at: SUBSTANTIAL SHAREHOLDERS CORPORATE GOVERNANCE australianvanadium.com.au 54 Australian Vanadium Limited 2016 Annual Report 6. TOP 20 SHAREHOLDERS Name Mr Neale Parsons Jalein Pty Ltd Sunarp Pty Ltd Mr Peter James Muir Mr Michael Arendt Comsec Nominees Pty Limited Mr Neale Parsons Pershing Australia Nominees Pty Ltd Millcrest Pty Ltd 1 2 3 4 5 6 7 8 9 10 Woolmaton Pty Ltd 11 Mr Peter Champion + Mrs Lee-Anne Champion 12 Mr Charles Michael Higgins 13 14 Mr Brenton David Witcombe 15 16 17 Ms Sarah Mary Wall 18 Mr Brenton James Lewis 19 20 Mr Cal Douglas Tostevin Berne No 132 Nominees Pty Ltd <323731 A/C> ABN Amro Clearing Sydney Nominees Pty Ltd Toulon Pty Ltd Kelro Pty Ltd Total Total Remaining Holders Balance 7. TOP 20 LISTED OPTIONHOLDERS Name Mr Matthew Burford Mr Luke Kukulj ABN Amro Clearing Sydney Nominees Pty Ltd Mr David Gillam + Mrs Sade Gillam Mr Ziyin Fang Ms Sihol Marito Gultom Mr Scott Alan Malone Mr Yuen Wai Lee + Mrs Teresa Siew Ing Ung Mr James Stati + Miss Kathie Lee Fletcher 1 2 3 4 5 6 7 8 9 10 Mr Peter James Muir 11 Woolmaton Pty Ltd 12 Mr Raymond Andrew Hegarty + Mrs Zoe Elizabeth Hegarty 13 14 15 Mr Richard Tapner 16 Mr Martin Francis O'Duffy 17 Mr Neale Parsons 18 Mr Arthur John Dennis + Mrs Susan Jane Dennis 19 Miss Gay Vivian Cain 20 Mr Charles Michael Higgins Rilukin Holdings Pty Ltd P A Shakespeare Investing Pty Ltd Total Total Remaining Holders Balance Number of Shares 21,112,733 20,000,000 20,000,000 18,417,675 17,000,000 11,726,762 11,000,000 10,900,000 10,147,007 10,146,412 10,080,000 10,000,000 9,900,000 9,588,007 9,066,667 8,155,135 8,000,000 7,778,600 7,350,000 7,000,000 237,368,998 839,886,376 % of Shares 1.96 1.86 1.86 1.71 1.58 1.09 1.02 1.01 0.94 0.94 0.94 0.93 0.92 0.89 0.84 0.76 0.74 0.72 0.68 0.65 22.03 77.97 Number of Listed Options 13,100,000 9,000,000 8,139,998 7,200,000 6,000,000 6,000,000 6,000,000 5,940,000 5,000,000 4,604,419 4,186,732 4,000,000 3,912,695 3,892,276 3,500,000 3,000,000 3,000,000 2,940,000 2,600,000 2,500,000 104,516,120 131,368,437 % of Listed Options 5.55 3.82 3.45 3.05 2.54 2.54 2.54 2.52 2.12 1.95 1.77 1.70 1.66 1.65 1.48 1.27 1.27 1.25 1.10 1.06 44.31 55.69 55